Mr Speaker, what caught my attention about the Budget speech was the Minister for Finance’s characterisation of the Budget as a first step to renew and strengthen Singapore’s social compact towards a fairer, more sustainable and more inclusive society. The Workers’ Party agrees with this important direction in pathfinding the way forward for our little red dot. Workers’ Party Chair and Member of Parliament for Aljunied GRC, Ms Sylvia Lim, will speak further on this, with inputs on inclusivity and innovation in her Budget debate speech tomorrow.
However, there are aspects of the Budget that are of concern to us. We disagree with the decision to raise the Goods and Services Tax, especially at this time, and the Workers’ Party Members of Parliament who speak after me will put forward alternative ideas for revenue generation.
I will outline the Workers’ Party’s position on the GST and briefly introduce the areas that Workers’ Party Members of Parliament will speak on. Then I will share my views on the main prongs of the Budget.
The WP’s position on taxation
First, the GST increase. While the GST hike was anticipated, it comes at a difficult time for our people. Inflation is on the upswing and prices are high. Supply chain disruptions are having an outsized impact on people’s purses. There is real concern on the ground that the announcement to raise the GST will lead to price rises across the board. In fact, some price rises have already occurred, with speculation that these were in anticipation of a GST hike.
The Workers’ Party’s position is that the Government need not raise the GST. There are other options for raising revenue. A Straits Times column last month discussed the urgency of rebuilding public finances in the face of Budget deficits and the drawdown of reserves. The GST was held up as being one of the largest and most stable revenue sources, difficult to replace with any other kind of tax. The impression created by the article and similar arguments was that raising the GST is the only viable option for financing offset packages for the needy and healthcare and to balance the Budget. We disagree that there are no other options.
The Workers’ Party has previously raised several proposals in this House, both on taxes as well as adjustments to the reserves framework. These options do not constitute a raiding of the reserves, as the PAP enthusiastically and inaccurately portrays. We have supported the call for fiscal prudence as a principle of governance. But we also believe that the judicious use of progressive tax measures can achieve wider societal goals in Singapore.
Within this term of Parliament, we have proposed a wealth tax and raised the prospect of more progressive corporate tax policies. We have also supported the carbon tax.
The Government, for its part, has not rejected further wealth taxes outright but spoke of the difficulties of implementing some of these tax measures. These will have to be proactively explored, particularly in view of the limited impact of some measures announced in the Budget, which had been characterised as a tax on wealth.
For example, on the additional registration fee, or ARF tier, for luxury cars announced by the Minister for Finance, a senior manager of a large car dealership which includes luxury vehicles in its stable, was asked if the higher ARF would curb spending on high-end cars. He was quoted in the Business Times as saying “It is possible, but I think there’s still enough wealth going around”.
As the Government continues to explore wealth taxes, the Workers’ Party’s view is that a distinction needs to be made between different types of wealth taxes. We should recognise the legitimate accumulation of wealth through effort and tangible business activity, especially that which creates jobs for Singaporeans. Even as there remains scope for wealth taxes, the values of entrepreneurship and equitable reward for hard work can, nonetheless, be recognised and even promoted through tax rebates or relief for such individuals. However, wealth accumulated through capital appreciation should be dealt with differently and taxed accordingly in the name of a fairer and more inclusive society.
The Workers’ Party has also previously asked if we can tweak the reserves framework and the way reserves contribute to our Budget. We have proposed including a portion of land sales into recurrent revenue and also an adjustment of the NIRC allowed for recurrent spending to be raised to 60% from the current 50%. The Government has disagreed with these reasonable suggestions.
In 2001, then-Prime Minister Goh referred to the reserves as a golden goose. The Workers’ Party remains of the mind that we can continue to grow the golden goose, but at a slower rate. The impending population bulge for our seniors portends stress lines for our healthcare needs and our welfare system. The Minister projected that, starting from current levels of healthcare spending and assuming increases at a similar rate in the next 10 years, the Government could be spending $27 billion on healthcare yearly by 2030, compared to $11.3 billion in 2019.
But the fact is that our population is getting older and living longer. While it is responsible to ensure that wastage is minimised as far as possible, our healthcare needs will likely be on an upward trajectory.
For the very Singaporeans whose energies contributed to the reserves and who have played their part to fatten the golden goose, spending for them in their golden years and at their time of need should not even be a question. Moderating the growth of the reserves also improves intergenerational equity and accounts for the changing needs of Singapore and its people.
It must be noted that the Government has shown, over time, that they are of a similar mind. At the 2001 National Day Rally, then-Prime Minister Goh said that the reserves must be protected and fattened. However, changes to the reserves scheme have been implemented by subsequent PAP Governments. The 2008 change of the Net Investment Income to Net Investment Returns (NIR) with the immediate conclusion of up to 50% of NIR contributions from MAS and GIC and the inclusion of Temasek in the NIRC formula in 2015 were all deliberate moves. These changes have made the NIRC component the largest source of revenue for the yearly Budget from around $2 billion in 2006 to close to $22 billion for the upcoming financial year.
This number will only continue rising. This is despite the fact that the Government’s adjustments have slowed the rate at which the reserves grow. Here, I ask that the Government not rule out changes to our Budget framework. Just as we should not kill the golden goose, we should also not fatten the golden goose at the expense of the people’s well-being.
On the necessity of a GST hike, the Workers’ Party has also made the point that the Government should lay out its revenue and expenditure projections for the rest of the decade. This is so that the necessity of a GST hike can be considered properly and with greater introspection. We note that the Government has resisted the publication of such revenue and expenditure projections, but the publication of such information is not unusual in other jurisdictions.
Just last week, on 23 February, the Hong Kong government issued its budget statement. At Appendix A, the Hong Kong budget includes a medium range forecast of its revenue and expenditure positions for each subsequent year up to fiscal year 2026 to 2027, with assumptions laid out.
Can the Minister tell us why MOF does not make such medium-term forecasting a part of our public-facing budgetary process? And, more specifically, does MOF have such projections at least up to five years in the future? And what is the hesitation in publishing these projections? Doing so would allow the public to have an in-depth insight as to the need to raise GST and the sustainability of public finances in the years to come.
The question of projections with respect to public finances must also be considered in the context of the absolute necessity of raising the GST at this point in time. For example, a Business Times article today advanced the view held by market watchers that Singapore could potentially make a net gain in terms of revenue from the global move to introduce a standardised minimum corporate tax rate.
Even so, it is of little doubt that the GST has been put to good use by the Government to finance spending. But after more than two decades, its drawbacks remain. The GST is a regressive tax that hits lower-income earners harder. And this fact has been recognised since the GST was introduced in the early 1990s. My colleague, Sengkang GRC Member of Parliament, Ms He Ting Ru, will speak more about the GST.
Like now, the concerns back in the 1990s were about the average Singaporean worker who was vulnerable to increases in the prices of necessities. Today, with offset packages targeting low- and middle-income Singaporeans, it is the middle-class that is particularly anxious. In spite of the headline-grabbing GST offset package announced at this Budget, there is an anxiety as to how much prices will rise in future over the period the offset package would cover.
In addition to the concerns about spikes for specific CPI items, there are also concerns about minor price hikes across the board that will hurt cumulatively, not too different from the analogy of the frog in a pot of gradually boiling water. Should the aggregate of price rises be significant, the impact of the additional offsets may not be as optimistic as highlighted in Annex F2 of the Budget Statement for 3-room and 4-room HDB households where the enhanced Assurance Package is estimated to offset the GST hike of 11.8 and 7.9 years respectively.
As Singaporeans well know, no offset package lasts forever. The Government expects that, in time, Singaporeans will internalise the GST hike.
At this Budget debate, the Workers’ Party will raise additional alternative proposals to raise revenue so as to stave off the GST hike. In particular, Sengkang GRC Members of Parliament, Louis Chua and Jamus Lim, would explore other levers for revenue generation. Apart from the reserves framework, the alternatives proposed are not inconsistent with the principle that recurrent expenditures should be backed by recurrent revenues.
What continues to weigh heavily on Singaporeans today is the rising cost of living, including for the middle-income or sandwiched class.
Cost increases in electricity, gas and transport were thrust upon Singaporeans last year and over the last few months. Energy prices continue to rise. The enthusiasm with which the Government spoke of the electricity retail market in 2018 as a means to manage the cost of living has become decidedly more muted with the exit of multiple retail players. In December, the electricity tariff for households was raised by 0.6% and there was a recent revision of household refuse collection fees which took effect last month after a previous hike in 2017.
A TODAY article from late October last year quoted the Monetary Authority of Singapore (MAS) predicting that food, preschool and healthcare costs may go up this year. In view of the current economic outlook, it is safe to say that this is a foregone conclusion.
According to data released by the MAS and MTI last week, the headline consumer price index (CPI) remains at what it was last December at 4%. CPI data from last month show that utilities and other fuels rose 11.8% compared to a year earlier and transport is up 12.7% year-on-year.
Lower-income Singaporeans, working Singaporeans and middle-class Singaporeans are all being hit very, very hard.
There is also a pattern of increasing public transport fares over the last three years, as shown in information from the Public Transport Council. While adult card fares were alternatingly increased and reduced between 2014 and 2017, they were raised by six cents in 2018, a further nine cents in 2019 and then another three to four cents in 2020. While measured in cents, these increases are by no means small to many who have to incur these costs every day, not as a luxury or as discretionary spending, but as an unavoidable expense simply to get to work and back.
About three weeks ago, Comfort taxis announced an increase in fares by 8%. Just last Friday, all the other taxi companies announced that they would follow suit. All these and the other inevitable price hikes to come over the next five to 10 years will blunt the impact of the GST Assurance Package, to say nothing of the psychological impact of the package’s reduced effectiveness against a backdrop of rising prices.
Committee against Profiteering
The Workers’ Party’s position on the GST notwithstanding, I welcome the announcement of the formation of a Committee Against Profiteering to address concerns that some businesses could use GST as a cover to raise prices. I would like to raise a few issues relating to the Committee.
First, in order for this Committee to be effective, the public should be clearly informed as to what evidence they would need to file a complaint with the Committee. Otherwise, it would be a case of the word of a person against that of a business.
Second, at a time when inflation due to the supply chain crunch is a real concern, some businesses may have good reason to raise prices or a legitimate reason to raise prices. For example, because of the rising price of raw materials and not under the pretext of the GST hike. This may cause misunderstanding amongst the public about resorting to the Committee to investigate the price hikes. But if rising business costs are due to supply chain woes, then prices should correct in time and even fall as the supply chain crunch eases. If they do not, then it would be legitimate for the Committee to inquire why this is the case.
Third, the Committee should look into the businesses that move to raise prices before the GST hike is introduced. It should not rule out looking into complaints of such pre-emptive price rises that try to bypass the Committee’s terms of reference. SMEs, hawkers and sole proprietors should be allowed to respond to the Committee if they have been falsely or unfairly accused of raising prices.
Finally, the Committee should closely track price rises at heartland shops where many Singaporeans purchase food and essentials. Minister of State Ms Low Yen Ling has written to me to nominate one Member from the Opposition benches to sit on this Committee. I have extended this invitation to our Parliamentary colleagues from the Progress Singapore Party and Non-Constituency Member of Parliament Ms Hazel Poa has agreed to sit on the Committee.
Broad remarks on the Budget
Let me now move to topics other than the GST.
The Workers’ Party is of the view that the Budget is broad-based in providing assistance to individuals and businesses to address both immediate as well as short- to medium-term concerns. Specifically, it provides a useful transitional support such as the Small Business Recovery Grant to businesses in eligible sectors that have been hit hard by COVID-19. One input we have is to ask the Government to actively consider appeals from businesses that fall outside the eligibility criteria on a more flexible and case-by-case basis as far as possible.
We also support CPF transition offsets to help phase in the raising of employer and employee CPF contribution rates for senior workers. This raising of rates is vitally important in supporting the retirement adequacy of senior workers.
What was not fleshed out in significant detail was the Minister’s commitment that the Government intends to refine how Employment Pass applications are assessed to increase certainty and transparency for businesses. Even while it is a given that Singapore will always be open to foreign talent, we must always prioritise Singaporean talent who represent the Singapore Core. If a Singaporean can do the job or be trained to do the job, the Government should not inadvertently make it easier or more convenient to resort to hiring foreigners. I hope Minister will share more details of the Government’s thinking on the new EP framework in his wrap-up speech.
The Budget also renders important support to businesses to ensure that our workers at the lower end of the salary spectrum will see meaningful salary increments.
In this regard, I hope the Minister for Finance can consider moving more decisively to ensure that Singaporean workers who take home less than $1,300 can rely on the PWM Credit Scheme to raise their wages immediately. With the PWM Credit Scheme as announced by this Budget, I would argue that this can be achieved forthwith instead of waiting for all PWM sectors to be rolled out incrementally before the low-wage situation for these workers is addressed. Let me explain.
Assuming that we want to provide immediate relief to the 32,000 full-time Singaporean workers who earn less than $1,300 with a generous $400 a month wage hike for 13 months each financial year, a back-of-the-envelope calculation shows that it would require about $167 million year to significantly uplift the well-being of these lower-income workers. This sum would constitute 8% of the $2 billion set aside under the Progressive Wage Model Credit Scheme and only 9.2% of the $1.8 billion that the Government has committed each year over the next five years for this scheme. I hope the Government is persuaded to move quickly on this even as discussions on PWM sectors are ongoing. As they already earn very low salaries, these 32,000 workers can and should be supported with higher wages immediately.
A second intervention I would suggest for low-income workers amongst us concerns the changes to the Workfare Income Supplement.
The Finance Minister has introduced a new minimum income criteria of $500 a month. There was no such criteria in the past. The Minister has said that the policy intent of this is to encourage part-timers and casual workers to take up regular full-time work.
However, this new criteria will penalise part-timers and casual workers significantly. There are legitimate reasons why Singaporeans take up part time or casual work. Some may be caregivers who do not have the flexibility to take up the full-time work. Others may not be able to stand for eight hours a day, for example, in a food and beverage setting for various reasons, including their advanced years. For some individuals, full-time work can be gruelling; for others, retraining is easier said than done. Yet some others simply cannot find full-time work in the limited areas they are qualified for and take what part-time or casual work they can find.
According to the MOM Labour Force, Singapore 2021 data set, there were 46,600 residents who earned less than $500 a month last year. The new criteria will deny the work for Workfare Income Supplement to these workers.
I would urge the Minister for Finance to remove this criteria so that our most financially vulnerable workers can benefit from Workfare.
The Workers’ Party believes that the Government can move the needle for these low-income earning Singaporeans in a decisive way. It would be consistent with the philosophy of this Budget: “Charting our way towards a fairer, more sustainable, and more inclusive society” to alleviate the financial stress of our most vulnerable Singaporeans.
In his Budget speech, Aljunied GRC Member of Parliament, Mr Faisal Manap, will speak on other segments of Singaporeans who continue to be left behind because their plight has not been adequately addressed.
Next, the carbon tax. Singapore’s net carbon emission goal, as part of our green transition, recognises the important shifts that are taking place across the globe. The Budget announcement of a carbon tax of $50 to $80 per tonne of emissions by 2030 is consistent with a commitment to mitigate the climate emergency. Hougang Single Member Constituency Member of Parliament Mr Dennis Tan will focus on Singapore’s transition to the green economy in his Budget speech.
More generally, Workers’ Party Members of Parliament have made several interventions and suggestions during the debate on the climate Motion in this House last month, covering subjects such as greenwashing, just transition and accelerating EV adoption, amongst others.
I note the Finance Minister’s commitment to provide U-save rebates to the cushion the impact of the carbon tax on households from 2023. Going by the Government’s own calculations taken in a linear way, it would follow that a carbon tax of about $ 75 per tonne could potentially increase utility bills by $ 2 a month. However, unlike the new tiers for personal income tax, the upper end property taxes and ARF hikes for luxury cars announced at the Budget, the Minister did not reveal the absolute quantum of revenue the carbon tax is projected to bring in up to 2030.
The Government should reveal these figures. This is not only for the purpose of showing how the carbon tax revenue would be utilised to support decarbonisation, this information will allow meaningful debate to take place on the funding for these decarbonisation measures and whether and how cost of living pressures for the average Singaporean could be further alleviated through the carbon tax.
Before concluding, I am reminded that in Singapore “A”s are not usually given for effort but for outcomes. With this Budget position as a first step in renewing and strengthening Singapore’s social compact, the Government should reveal how it reports on initiatives that were previously announced and whether they met their goals. The new social compact ought to require a report card that goes into far greater detail than the bi-yearly Singapore Public Sector Outcomes Review.
Let me explain using the Industry Transformation Maps or ITMs as an example. A transition is taking place from the original ITM to ITM 2.0, which is now dubbed the ITM 2025. I wish to ask if there is it is a report card of what has been achieved by the initial ITM, especially for deliverables where Singaporean workers are supposed to benefit.
In previous exchanges in this House, notably in 2020, we received assurances that Singaporeans are benefiting and are prioritised in such efforts to generate quality jobs so there was no need to worry. To-date, however, we do not have a detailed data set, sector-by-sector of how many jobs were generated by ITM 1.0 since its inception in 2016, 2017 and how many of those jobs went to Singaporeans and at what wage levels?
The ITM 1.0 roadmap set out to develop new and redesigned jobs with better wages provide more overseas opportunities and more strongly support Singaporean workers’ upgrading and skills deepening. Without numbers, however, it is hard to tell whether these broad and lofty goals were achieved. The overall picture maybe rosy with rising wages and low unemployment maintained. But the precise deliverables of the ITM have to be followed up upon, to know whether outcomes have been meaningful or whether alternative approaches to improve outcomes should be considered.
A significant goal of the ITM was to further the interests of Singaporean workers. To this end, the timely reporting of ITM 2025 outcomes should be made a key objective of this Government. When I asked for specific figures for the first ITM outcomes and what it has achieved for Singaporean workers, MOM stated that more time was needed before we could obtain the full data.
Surely, enough time has passed for such data to be available, as the planning for ITM 2025 is well underway? If such data is released, it can ameliorate the persistent angst surrounding competition between Singaporeans and foreigners over job opportunities.
Further, making such information accessible will help Singaporeans better understand the overall economic landscape so that they can develop their skills in specific industries. This is really about empowering the Singaporean worker to make informed choices surrounding their economic future in line with the nation’s.
In this regard, the announcement of further adjustments to foreign manpower policies announced by the Finance Minister is instructive. The value proposition for businesses to hire Singaporean workers ought to become more compelling, given the anticipated increases of S Pass qualifying salaries and separately, foreign worker levy hikes announced in the Budget.
With the minimum qualifying salary for new S Pass holders increasing from $2,500 to $3,000 this September and further increases already forecasted for September 2024 and 2025, it would be useful for the ITM framework to proactively track, disclose and identify which are the ITM sectors are more reliant on S Pass holders and where there could be opportunities for Singaporean workers. Businesses will also benefit from this information as they can be incentivised to redesign jobs to attract Singaporeans.
The same expectation should be set aside for the large taxpayers’ dollars set aside for national plans like the Research, Innovation and Enterprise 2025 Plan where $25 billion has been allocated from 2021 to 2025. The outcomes of such initiatives should be a major feature of the new post-pandemic social compact where the Government seeks to renew between citizens and the Government. My colleague, Aljunied Member of Parliament Mr Leon Perera will explore the national goals the Government should focus on aggressively, including poverty alleviation, inequality and social mobility. Ready access to data on outcomes of Government initiatives, including multi-year ones will greatly support all three prongs that Mr Perera will advance.
To conclude, COVID-19 was and remains a generational crisis. But it has also proven to be a priceless opportunity to reflect on the robustness of our social compact and the live reality of Singaporeans, particularly at the lower- and lower to middle-income levels. It is also an opportunity to reflect on our values as a people. How much do we value the efforts and contributions of those around us, regardless of social economic class or nationality? How does the Singapore system recognise the effort and labour of those who work with their hands like our conservancy and landscape workers, or those who invest their lives in looking after the needs of others or nurturing future generations of Singaporeans, such as our teachers and our nurses? What about our artists and sporting talents? And what about the foreign workers in our midst? Their living and working conditions must be a priority for not just their well-being, but our well-being too. I say for our well-being too because caring for others establishes the standards we set for ourselves on the type of people we wish to be.
While COVID-19 has been debilitating for the economy and for many families, from a community perspective, it reminded us of the nurse, the teacher, the cleaner, the security guard, the bus captain and so many others who continue working to keep Singapore on an even keel. The efforts of these Singaporeans make my colleagues in the Workers’ Party and I proud to the Singaporeans. These times have shown the resilience of our people, a subject my colleague, Aljunied GRC Member of Parliament, Mr Gerald Giam will peg his Budget speech upon.
The Workers’ Party notes the broad thrust of the Budget and supports the call of greater fairness, sustainability and a more inclusive society, a philosophy that comes with much promise of the future. However, the Workers’ Party will object to the Budget as we disagree with the decision to raise the GST.
28 February 2022
2 March 2022: LO’s clarifications for Finance Minister
Mr Speaker: Leader of the Opposition.
Mr Pritam Singh (Aljunied): Thank you, Mr Speaker. I would also like to thank the Finance Minister, particularly for the acknowledgement towards the Workers’ Party for coming up with alternative revenue proposals for the Government’s consideration. And we did so, of course, knowing that since the decision to raise GST was announced a few years ago, circumstances have changed.
COVID-19 was unanticipated, of course. And core inflation right now is at its highest level in nine years. I think the prices of goods and services are not a point I need to repeat. Minister would know, thanks to CPI information from MAS and MTI that price pressures will impact Singaporeans particularly at the low- and middle-income levels.
This is even as the question is important with respect to raising the GST at this time. The Minister made some brief points about it. He had thought about it carefully. But I think the question remains: is this a reasonable thing to do in these circumstances? That is the first question.
And I think the point arises more acutely when you take into account what market watchers have said about the OECD Base Erosion and Profit Shifting (BEPS) 2.0, which may well result in corporate tax revenue gains for Singapore. And I think this is a point that has been raised at the start of the week, coinciding with this Budget debate.
To that end, my question is: can I ask what are the Government’s current estimates, given that there is an implementation deadline of 2023 for BEPS? What is the range of estimates of the net impact of Pillar 1 and Pillar 2 on our corporate income tax revenues? Surely, MOF would have prepared itself for these various scenarios. And can I confirm that MOF does not have these various scenarios planned out?
This really brings up the other point the Minister raised about red herrings. That, somehow, when the Opposition asks for revenue and expenditure projections, these are red herrings. But it cannot be so. Because, as I have mentioned in my Budget speech, it is something that many jurisdictions do. Hong Kong has a medium range forecast right up to fiscal year 2026/2027. They have got assumptions, of course. You are projecting into the future, so, it cannot be perfect and I think people will give the Government buffer and leeway for that. But that is incredibly important and that is precisely why the Workers’ Party put forward different revenue streams.
The Minister rounded off at the end about the importance of information, facts. I completely agree with him. But would not this approach to make a call for information and characterising it as a red herring; but instead just producing that information lead to the outcome that the Minister himself speaks of and reduces the prospect of individuals mischaracterising positions which, one could argue, has also been done in the course of this debate. I think there were arguments made in the extreme which were not put forward by Workers’ Party (WP) Members of Parliament. I do not think anybody suggested raising personal income tax for the upper tier up to 42% to make up for the GST hole. That was not done. But it was, nonetheless, characterised as an Opposition idea. So, I think it is a case of what is good for the goose must be good for the gander. And this is something I hope can actually be alleviated through more projections of what the Government needs, how much it is going to collect, because this will result in a more fruitful debate.
In the course of my Budget speech, I did make a point about the revenue that the carbon tax will bring in. I hear the Minister’s point. He said it in the beginning, when he opened the debate. He is saying it now. He does not expect carbon tax to bring in new sources of revenue. But still a debate has to be had. What are those numbers? Particularly, when you look at utility prices, utility bills for average Singaporeans, which the Minister says in his speech are going up. I believe he used a 2030 timeline. But if you follow it in a linear fashion, that is $12 by 2030 – an increase.
So, those numbers should really be brought forward by the Government so that we can debate these and talk about how people both at the lower- and middle-income levels can be supported in a better way.
I think the Minister raised a number of other points. We spoke about the various levers. The other WP Members, of course, will chip in and make those clarifications with the Minister. But Mr Louis Chua is not here today. He will be happy to come into this debate, I can assure you, but he is self-isolating, just to be on the safe side. I think he was COVID-19-positive yesterday but it was a false positive. So, I think better for him to stay away. But he will definitely come back to this in the course of what happens with BEPS and actually what are those projections that the Government is working with vis-a-vis its impact.
A number of other points, like I said, I will let the other WP Members come in. But I think there is a useful question to ask about the reserves. We have had this exchange in this House a number of times on our position on the reserves. I do not think it is an accurate reflection to say that, first instance, you look at, turn to the reserves. That is not true.
And we have really made the Government’s own approach informed in this House as to how it also takes a certain approach to change how it deals with the reserves mechanism, at quite short intervals – 2008, 2015. We are entering a decade where circumstances are changing quite significantly. The Minister himself recognised in his Budget speech that, I believe, there is a review of even healthcare resourcing at paragraph 239: “We are thinking through this healthier SG strategy carefully. It will entail a review of our resourcing approach and healthcare financing schemes as well as the need for upstream investments and preventive healthcare.”
So, clearly, the other numbers that were in his speech about potentially where we could be with healthcare expenditure if we do not keep it in check, may not really be what will eventually be the outcome, because there is a review going on.
Mr Speaker: Mr Singh, this part is really for clarification. So, I will allow preamble and, as Leader of Opposition, I am prepared to allow you some leeway. But let us keep to the point.
Mr Pritam Singh: Mr Speaker, I take the point.
Mr Speaker: And before I end, just a reminder to the rest of the Members, this is meant for clarification. So, if you have some preamble, I would allow it, but please limit that time.
Mr Pritam Singh: Obliged. Speaker, I will not abuse this.
Let me just then come to the point before I hand it over to the other colleagues of mine to make clarifications. It was previously said that we have drawn on our reserves equivalent to 20 years of past Budget surpluses. This was the Government position vis-a-vis COVID-19. “We have used a generation’s worth of savings to combat a crisis of a generation.”
My colleague, Mr Louis Chua, asked Deputy Prime Minister Heng, in his capacity as Finance Minister previously, after accounting for the draw, where would our reserves be, compared to five years ago and 10 years ago? And he made the point that this really was not answered and he put the question to Finance Minister Lawrence Wong. After having a better fix on the number, $42.9 billion drawn on Past Reserves, where would our reserves be today, as compared to five years ago? Is it higher or is it lower? I think that is a question that can be answered in one word.
Mr Lawrence Wong: Sir, I thank the Leader of the Opposition for these comments and questions. There are few of them and I will take them in turn.
First, on the increase of GST. It was a very difficult decision for all the reasons I have explained: recognising, on the one hand, the concerns that Singaporeans have about higher prices but, on the other hand, the urgent and very pressing revenue needs we have to address. That is why I highlighted that I decided, eventually, to delay the GST and to stagger the increase over two years.
I suppose Mr Singh’s point is that even that is not enough.
And I can understand that some people might feel and be concerned that even that delay and that staggering are not sufficient to address concerns, especially in light of the recent developments in the external environment. And that is why I mentioned just now that the best way to deal with this is: firstly, if, indeed, inflation turns out to be more persistent and higher than expected – which may happen – we will deal with that decisively and separately, and we have the tools and resources to do so. How? Well, we have monetary policy to deal with inflation; secondly, we are able to take a series of actions to better secure our energy supplies; and, thirdly, we can help households and businesses directly. We have the resources to do so. And, if the need arises, we will not hesitate to take all of these actions. So, that is the first assurance we have for everyone.
The second assurance is that, even setting aside additional measures and actions, we have already done a lot. And I have been trying to explain that. Look at the significant help that is on the table today: household support package this year, plus Assurance Package and the GST Vouchers, both of which have been enhanced, combined together, and both being rolled out this year before the GST goes up. A lot of help, which will, for most households, delay the impact of the GST increase by five years or more.
So, the two taken together, I think should assure everyone that we are not doing this in a cavalier manner at all. We considered it very, very carefully before we decided to proceed. And making sure that we are taking all the necessary actions and steps and have contingency measures in place to take care of the concerns of every Singaporean. That is number one.
Second, on projections, numbers and data, I accept Mr Singh’s point. I was not attempting to characterise it unfairly. I was sharing my feelings about these repeated requests for information as perhaps distracting us from the real issues. But I accept Mr Singh’s clarification and I assure him that he has my commitment that we will continue to put out more information, as much as possible, in order to provide for more informed debates.
And I hope he also takes what he said seriously, that the Opposition would also exercise leeway in recognising that these projections in the outer years are inherently fraught with a great deal of uncertainty, especially for a small, little, open economy like Singapore where so many external events can never be predicted with any degree of certainty. So, very often, we do not even project GDP beyond the year. So, when you talk about outer year projections for the economy, for fiscal projections, there will be a very cone of uncertainty around these numbers. And we, therefore, want to make sure that if we were to provide any figures, we do not inadvertently mislead people, cause people to have the wrong impression. And I seek the Leader of the Opposition’s understanding, too, that in putting out such figures in the future, we may very well get it wrong, because there is a lot of uncertainty when we project into the outer years. But he has my commitment that we will continue to see how we can improve the data and information that we put out.
Third, on the reserves, I have explained our position and why changes in the rules done hastily, we think, are not wise, are not prudent and will come at the detriment of the next generation. If we have to change any rules, we will have to seriously consider them very, very carefully. But if we make any tweaks in parameters, more land sales, more NIRC, what it basically means at the end of the day, is that our future generations will be the ones to have to carry the burden. They will have to pay more in taxes in the future. That is what it comes down to. And they will have that much less to deal with any future emergencies, which we all know, will come at a more frequent rate in the coming years.
So, all I say is, let us have a care about this. And I do not think it is prudent to make this change now, in place of raising the GST or other tax changes, which we can and should do.
As for the quantum of reserves, I have actually mentioned that in my speech. I said that our reserves are growing. We would not be able to tell you what the actual figure is, for the reasons I have explained. It is not in our national interest. But as I have said in my speech, our reserves are growing.
But our economy, our needs, the complexity of our needs and the magnitude of the challenges we face are growing even faster. What is more important when you drill it down is, are we accumulating more than necessary?
And the answer is no. How do we know that this is the case? Because our NIRC, as I mentioned before, we project will continue to grow at a rate that keeps pace with economic growth. That is how we know that we are not over-accumulating. Whatever we are getting from NIRC today at 3.5% of GDP, on average over the past few years, we do not expect that to continue rising as a share of GDP. It will keep pace with economic growth.
And as I mentioned in my speech, even that, we cannot be sure that we can achieve that. But if we are able to do so, it will already be a significant achievement because of all the headwinds that we are facing in the global investment environment.
I think I have answered all the questions from Mr Singh, Sir.
Oh, sorry. One more question – BEPS. For BEPS, again, this is one of those things. We have been studying this very carefully. And, as I mentioned, just now on Pillar 1, the rules are still being fine-tuned. It is not over yet. It is still being discussed.
Yes, there is the pronouncement of 2023, but I do not know for a fact that this will happen in 2023 because many details are still being worked out. So, that is one of the reasons why I mentioned I hesitate to put out any figures at this stage.
But taking the earlier point about putting out more information for a more informed debate, we will go back and think about whether we might provide a range of estimates about what the impact of BEPS 2.0 might be for both Pillars 1 and 2. I would say it would range from neutral to perhaps some increase, but we will have to look at the figures. We will provide some figures, hopefully, to help everyone get a better sense of what it might be.
What is more important, especially the point I mentioned, which is that even if Pillars 1 and 2 combined, yield us additional revenue, we will very likely have to reinvest that revenue back into ensuring we remain competitive and attract our fair share of investments.
Why? Because the reality is competition for investments is not going to go away just because of BEPS 2.0. In fact, it will get even more intense, and it will intensify in other non-tax areas, which we will therefore have to fund and have resources ready for. So, even if there is a plus from BEPS 2.0, I am in fact, not confident that that additional revenue will help us with our social spending needs, and especially not for our healthcare spending needs, which will continue to rise very sharply.
Mr Speaker: Mr Singh.
Mr Pritam Singh: I thank the Minister for the reply. I think it just reinforces the point that I have been trying to make about the alternative revenue streams that the Workers’ Party came up with in the course of this debate, knowing that there are quite fundamental changes taking place worldwide where we need a better fix on what the revenue situation will be.
I think the Minister missed out one question that I also put in my speech about the carbon tax and the estimates that the Government has with its increase at the tiers up to 2030. I think those numbers would be appreciated. Even though I take Minister’s point, as I mentioned in my earlier clarification, that he does not foresee this to be a revenue generator, if I can put it that way. But I think this is something that we should have a debate about, in good time.