Mr Chua Kheng Wee Louis (Sengkang): Mr Speaker, as the final Budget for this term of Parliament, I thought it would be interesting to share some trends I have observed over the past four years.
Let me first begin, however, by stating the obvious: that the projected surplus of $6.8 billion for FY2025 was wildly unexpected, and this on the back of a huge increase in the projected surplus in FY2024, from $0.78 billion as initially put forth last year, to the revised figure of $6.4 billion.
Contrast this with a poll of private sector economists in Singapore in an article run by The Business Times with a headline that goes, “Budget 2025 may run generous deficit of up to $6.6 billion after FY2024 surplus.” The combined fiscal surplus of $13.2 billion for FY2024 and FY2025 was also surprising in the context of questions in Parliament towards the end of last year.
In September 2024, I asked for an update on the current cumulative fiscal position of the current term of Government, where Prime Minister Lawrence Wong shared that FY2024 is still ongoing, but the overall fiscal position is estimated to be $0.78 billion. The combined fiscal surplus of $13.2 billion for FY2024 and FY2025 was also surprising in the context of the sizeable $41.6 billion in top-ups to endowment and trust funds in these two years.
We can say that, look, these are resources set aside to meet real needs in the future, but it does not take away the significance of these surpluses that are generated within just these two years alone. Put another way, the amount drawn down from our Reserves to combat COVID-19 amounted to about $43 billion. It was previously said that we have drawn on our Reserves equivalent to over 20 years of past Budget surpluses. We have used a generation’s worth of savings to combat a crisis of a generation. Yet, the amount of additional resources we can set aside for endowment and trust funds in just these two years alone is close to $42 billion. In fact, it is closer to $72 billion over the last four years. And let us also not forget that Singapore’s way of accounting differs from international norms, such as that of the International Monetary Fund (IMF), the most notable of which is the exclusion of land sale proceeds amounting to $25 billion in FY2024 and estimated at $19.4 billion in FY2025.
Higher than expected surpluses are also not a recent phenomenon. FY2021 was estimated to record a deficit of $11 billion but ended up as a surplus of $1.9 billion. FY2022 was estimated to record a deficit of about $3 billion but ended up a surplus of $1.7 billion. FY2023 estimated to record a deficit of $0.4 billion and although the deficit was wider than expected at $2.5 billion, this was after setting aside an additional $7.5 billion for the Majulah Package Fund, without which, FY2023 would have seen a $5 billion surplus instead.
I do not deny that uncertainty is a fact of life and, yes, revenues and expenditures can go up and down with the economic cycle. The point of all these observations, Mr Speaker, is that if the Government consistently collects more than it needs and runs huge surpluses year after year, it leads one to question the wisdom of raising the tax burden on Singaporeans, such as via the higher GST and the urgency in implementing them, especially as many are struggling with high inflation rates and the cost of living in the past few years.
On this note, last year, I touched on the importance of structural changes instead of one-off handouts. Cost of living concerns are front and centre of Singaporeans’ minds, and any additional support to tackle cost pressures are no doubt welcomed by many. This year appears to be the year of vouchers, be it in the form of CDC Vouchers, Climate Vouchers or the new addition to our list of vouchers, SG60 Vouchers.
Given the record surpluses that the Government is enjoying, it is only right and appropriate that this is being shared to Singaporeans who have also contributed directly to the Government coffers. With the General Elections around the corner, it is only natural for Singaporeans to be cynical where these are seen as election handouts tied to the political cycle rather than the economic cycle.
Therefore, I believe that, firstly, it is important to put in place structural levers in our system, as opposed to relying on one-off schemes, which may be politicised, incur a lot of administrative costs and resources to operate on the part of the Civil Service, and create much unnecessary uncertainty on the part of Singaporeans.
Secondly, it is also important to direct our resources to those who need them the most, rather than broad-based handouts to everyone. I am sure many Members have seen the viral video where Prime Minister Lawrence Wong’s Budget 2025 speech announcing the CDC Vouchers is being juxtaposed against an election rally speech by Minister Chan, where he put it quite elegantly, “If we give everybody the same – rich or poor – how are we helping the poor?”
Take the CDC Voucher scheme, for example. While I am sure many Singaporeans appreciate cash handouts amid the cost-of-living crisis, the CDC Voucher scheme evolved from one aimed at helping Singaporean lower-income households defray their cost of living in 2020 to one where all Singaporean households are eligible for the same amounts. The amounts given have also varied quite significantly over the years, and it remains a question whether the scheme will be a permanent one and, if so, whether all households will continue to qualify, and just how much are the vouchers going to be worth?
On personal income tax, I note the tax rebate worth 60% of tax payable, or up to $200, was introduced in Year of Assessment (YA) 2025, similar to YA 2024, where it was 50% of tax payable, but capped at $200, and also in YA2019. Should this be a recurring feature of the annual Budget, this would effectively raise the tax threshold from the current first $2,000 of chargeable income. The move is, however, abandoned as part of the SG60 package. Instead of a run-off rebate, we are better off raising the bottom brackets of marginal resident personal income tax rates and increasing the tax-free threshold for the first $20,000 of chargeable income to reflect inflation over time. This was what I raised in a PQ back in 2022, and also in my Budget 2024 speech last year. This is especially so when, based on my estimates, close to 80% of resident taxpayers would only receive the $200 tax rebate cap and does not sound as generous as the 60% headline rebate level highlighted.
Next, I would like to now focus on how the Government can implement structural reforms to our CPF system to enhance the retirement adequacy of Singaporeans, an issue that I have frequently raised, and would only grow in importance due to our rapidly ageing society. This is also a topic which I have repeatedly pleaded with the Government to take urgent action, as there are significant opportunity costs with the Government’s inaction.
How should one save up prior to their retirement? A recent DBS report provided several ballpark figures based on one’s spending habits and lifestyle. For instance, a retiree who has a conservative lifestyle with a monthly expense of $1,600 would require approximately $550,000 in savings by retirement. On the other end of the spectrum, should a retiree seek to enjoy an aspirational lifestyle with a monthly expenditure of $4,000, they would need approximately $1.3 million in their nest egg. Meanwhile, someone aiming to enjoy a balanced lifestyle with $2,800 in monthly expenses would need to accrue $950,000 in retirement savings.
No matter one’s preferred lifestyle, I am sure most, if not all Singaporeans would like to kick back and enjoy as they enter their retirement years. However, many Singaporeans face difficulties in building up a sufficient retirement nest egg for them to do so. According to a 2024 Oversea-Chinese Banking Corporation Limited (OCBC) survey, only 35% of the Singaporeans surveyed were on track with their retirement plans, while only 60% of respondents were working on their retirement plans. This is largely attributed to financial difficulties, such as increased household expenditures and debt repayments, that hinder them from saving up for their retirement.
In a recent Parliamentary reply, the Manpower Minister also noted that 52% of all CPF members have at least $60,000 across their combined CPF balances. While the percentage goes up to 74%, if you only consider active CPF members, I am sure we all will agree $60,000 is a very low bar to cross. While I have been going on like a broken record, I hope we can urgently implement the Lifetime Retirement Investment Scheme (LRIS), which was first accepted by the Government back in 2016. This is also something which I have been repeating in each of the last four years so that we can better support Singaporeans’ retirement needs.
For sure, CPF returns are guaranteed by the Government, but is it sufficient in today’s context? Yes, CPF members have the option today to enhance their returns via the CPF investment scheme, where members can invest their Ordinary Account (OA) and Special Account (SA) balances in a selection of investment products by external providers.
But can we assume that everyone is confident and capable of making sound investment decisions? I, therefore, read with interest a recent interview by Lian He Zao Bao with Prime Minister Lawrence Wong, where he, too, noted that the Government has been studying the scheme for some time, and I quote, “The challenge is, can such a fund produce returns that are better than the very generous risk-free guaranteed returns that the Government already provides? And would it still have some volatility which would expose CPF members to financial market risk, especially when they retire?” I have three simple answers to this question posed by the Prime Minister.
First, this has already been studied extensively by the CPF Advisory Panel about a decade ago, and they have, in my view, given a considered solution with the LRIS.
Second, think about the difference to the amount of Singaporeans’ retirement funds almost a decade on. Had we implemented such a scheme back then, for example, Endowas, an investment advisory firm, which is approved under the CPF investment scheme, highlighted in an advertisement that from 2014 to 2024, “We are looking at 7.99% potential returns yearly for an 80:20 equities and bonds portfolio, compared to 2.5% interest earned yearly if left invested in the CPF Ordinary Account.”
Third, if the Government is not confident that our investment entities, be it Temasek or the Government of Singapore Investment Corporation (GIC), can over the long term produce better risk adjusted returns that are better than CPF returns, then we are in serious trouble, and the NIRC framework ought to be thoroughly re-examined.
So, I hope that the Government is cognisant that the longer the delay, the higher the opportunity cost and the real cost to Singaporeans’ retirement savings.
Finally, let me touch on the issue of inequality. I believe the deepest divisions in our society today is not based on race, language or religion, but based on socio-economic status. If we do not take a concerted effort to address this issue head on, as we have done with racial and religious harmony, these divisions will only deepen over time.
In this 2025 Budget Statement, Prime Minister Lawrence Wong mentioned that income inequality after Government taxes and transfers is at its lowest since 2000. Indeed, if measured by the Gini coefficient, after accounting for Government transfers and taxes, income inequality appears to be trending down. This is however, on the back of various short term and one-off transfers, such as the GST Assurance Package, CDC Vouchers and other temporary grants. Are these sustainable and expected to persist?
Moreover, much can be said about how median and average household incomes have been growing over the years, but there are several interesting statistics which I wish to highlight from the latest key household income trends report published by SingStat.
After more than a decade since the Progressive Wage Model, which was launched in Singapore, our minimum wage equivalent, the Local Qualifying Salary (LQS), there still appears to be a significant number of households whose household income is less than the equivalent of what is estimated to be the average living wage per worker of $2,990 per month, as estimated in a study in 2022. Putting aside households with no employed persons, as this could include retirees, there continues to be an estimated 17,600 households earning less than $1,000 a month, 61,500 households earning $1,000 to $1,999 per month, and 57,100 households earning between $2,000 and $2,999 per month.
Based on the average household size today, this group of locals represent close to half a million people. Can we truly say that all Singaporeans will be able to adequately pay for just their basic needs?
Let us also contrast this with the other end of the spectrum. From 2014 to 2024, the total number of resident households in Singapore has grown by close to 263,000, from 1.2 million households in 2014 to 1.46 million households in 2024. When we break down this growth by monthly household employment income, the household income group that saw the largest increase over the same period is those earning $20,000 and over, jumping by close to 158,000 households from 2014 to 2024, far surpassing any other income group.
Behind the Gini coefficient statistics lies a stratified reality where we are seeing a widening income and wealth disparity in our society. Therefore, beyond income in inequality, we must also address wealth inequality, which has widened in recent years. Based on the UBS report from 2024, across 29 major countries covered by the report, Singapore saw the highest growth in wealth inequality from 2008 to 2023, increasing by nearly 23%. To quote from the same report, in markets where average wealth growth strongly exceeds median growth like Singapore, it appears that much of the rise in wealth has benefited the upper-income brackets.
Even as we welcome family offices and high net worth individuals to our shores, we must also explore bolder policies, such as stronger minimum wage frameworks, further enhancements to wage supplements and more aggressive redistributive measures on a sustained basis. We should also examine how wealth taxes can play a greater role in narrowing the gap and ensuring a more equitable distribution of resources.
Beyond income and wealth, we must also look at other forms of inequality: educational access, job opportunities and social mobility. While we have taken steps to improve the inclusivity in our education system, more must be done to ensure that every child, regardless of background, has a fair shot at success. And this begins all the way in primary school, where it should not matter as much as today who your parents are and what school they went to in determining primary school placements. Allow me to conclude in Mandarin, Mr Speaker.
(In Mandarin): First, when the Government has consistently been collecting more than it spends year after year and generated substantial budget surpluses, Singaporeans cannot help but to question the wisdom and urgency of the tax increases, such as raising the GST, during a period of high inflation and cost of living.
Secondly, I hope the Government can implement structural reforms to our CPF system. Many Singaporeans are deeply concerned about whether they will have sufficient retirement funds. Given our rapidly ageing society, this issue will become increasingly important. I hope we can expedite the implementation of the Lifetime Retirement Investment Scheme (LRIS), which the Government first accepted in 2016, to allow Singaporeans who desire higher investment returns but lack the financial knowledge to participate.
Finally, I believe that the most serious divide in today’s society is not based on race, language or religion, but on socioeconomic statuses. I hope we can address this issue head on and explore bolder policies, such as strengthening the minimum wage framework, further improving wage subsidies and continuing to implement more proactive redistribution measures. Otherwise, this divide will deepen over time.
27 February 2025
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=budget-2570
Mr Speaker: Mr Louis Chua.
Mr Chua Kheng Wee Louis (Sengkang): Speaker, just one clarification, but a bit of a long one. I mentioned the point about the top-ups to endowment and trust funds, about how just in these two years, we can set aside close to about $42 billion. I mentioned, not in the context of earnings management of companies, but how if you look at it in the context of transparency and the matching principle, in the sense that if you look at these top-ups to the funds, they are to meet our spending needs in the future, similar to how if you look at our SINGA expenditure, our development expenditures, these are also spendings that are meant for longer-term needs and purposes.
But in the sense that if you have the spending made from the endowment and trust funds, we get a lot less granularity versus the regular expenditures. I mean, those who go to the Budget website can see the whole full Heads of Expenditure under the different Ministries, under different spending categories. So, in that context, under the whole premise of greater transparency and the matching of the expenses against the periods in which they are incurred. Would the Prime Minister be able to share the rationale behind this?
Mr Lawrence Wong: Mr Speaker, the funds that we have set up are for specific purposes. They are well-established. We highlight what they are and if there is a need for more information on the spending and expenditure associated with each of these funds, we will take a look at how we can put out more information.
28 February 2025
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=budget-2573
Office of the Leader of the Opposition 