Measures to Reduce Overly Conservative Budgeting

Parliamentary Question by Mr Leon Perera:

To ask the Deputy Prime Minister and Minister for Finance whether measures are being adopted to reduce instances of overly conservative budgeting or budgeting approaches which tend to under-state the eventual real surplus on Government accounts.

Parliamentary Reply by Deputy Prime Minister for Finance, Mr Heng Swee Keat:

The Ministry of Finance takes budget marksmanship seriously as part of its work in ensuring sound financial management. The accuracy of budgeted estimates for Operating Revenue (excluding Net Investment Returns Contribution) and Government Expenditure (excluding Special Transfers) is tracked as part of the Ministry of Finance’s Key Performance Indicators, published in the annual Budget documents.

Overall, the variances of our projections have been within a reasonable range. From FY2014 to FY2018 (revised), the average variance between our eventual outturns and forecasts was under 3% for revenues, and under 2% for expenditures. These are comparable to those in Hong Kong, Korea and New Zealand, where average revenue and expenditure forecast variances range from 2%-6% and 1%-3% respectively for the same period. 

Forecasting is an inherently uncertain exercise, in particular for a small and open economy like Singapore. The more significant differences from our past projections have tended to be driven by revenues that are influenced by economic volatility and market sentiments. In FY2017, for example, there was an exceptionally high Statutory Board Contribution from MAS (+$4.6 billion) and Stamp Duty (+$2.2 billion). The former was driven by unexpected investment gains from a global rally in equity and bond markets. The latter was the result of an unexpected pick-up in property market transactions. 

When there were unexpected surpluses, we have deployed them for the public good, saving them for anticipated spending needs and sharing some of the surpluses with Singaporeans. For example, arising from the unexpected surplus from FY2017, we set aside funds in a Rail Infrastructure Fund to support plans for future MRT development. We also announced a one-off $700 million SG Bonus to share the surpluses with Singaporeans. 

Our approach to budgeting is a prudent and citizen-centric one.  We plan for sufficient revenues to meet the needs of our people across each term of Government.  Any surpluses are invested to yield long-term returns.  Up to half of these returns on our net assets are then channeled into future budgets to meet growing needs in areas from education to healthcare, support for our seniors, and keeping our home safe and secure.