Budget 2020: Mr Heng, more DPM than Finance minister
Updated: Mar 1
By Bertha Henson
ILLUSTRATION: LIANG LEI
One hour into his wrap-up speech on the Budget statement, I wondered if Mr Heng Swee Keat was wearing his finance ministry hat. He appeared to be rallying Singaporeans to be united in the fight to contain the Covid-19 virus outbreak, singling out people and groups for praise. It is more usual for finance ministers to plunge into the nitty-gritty in response to MPs’ queries on the Budget.
Then he announced the pay bonus for frontline workers and the pay cut for office-holders, MPs, senior public servants and even the President. I thought to myself, wah, such a big announcement to make. Clearly, the first among equals in the 4G leadership is showing that he is not just Finance Minister, but Deputy Prime Minister.
But his two-hour speech, bolstered by two vacuum flasks of something to quench his thirst and contained in two black files, would disappoint those who thought specific answers would be forthcoming. Except for announcing that the Jobs Support Scheme to defray 8 per cent of salaries for three months would be brought forward to end May instead of the proposed July, Mr Heng was content to let the other ministers fill in the details when their ministries’ budgets came up for scrutiny over the week.
To those who wanted to know if more measures would come should the outbreak be prolonged, he said the State had the “fiscal resources’’ to take action and that he would not hesitate to ask the President to turn the second key to unlock the reserves if he had to. It’s too bad no one asked him just how much accumulated budget surpluses remained in the G’s hands during this term of government. Those who wanted some glimpse of future measures didn’t get it.
Mr Heng dwelt instead on two big concepts which hadn’t really captured the attention of the House in two days of 57 speeches: the need for the GST to go up from 7 to 9 per cent and the importance of keeping the reserves intact.
MPs who touched on the GST did so briefly, mainly to express relief that the rise would not happen next year. Ms Foo Mee Har (West Coast GRC) went a bit further to suggest that other revenue-raising channels be looked at while NMP Mohamed Irshad wanted to know when it will go up and whether this will be in two stages (Mr Heng didn’t specify time but did indicate that it would go up in one shot as firms would be making just one administrative change). Workers’ Party chief Pritam Singh (Aljunied GRC) stuck to his party line about the GST being a regressive tax. Even so, he was more focused on asking the Finance ministry for numbers and its projections on how it decided on a 2 per cent rise, given that it could already promise a $6 billion GST buffer for households.
The debate on the GST hike, raised as a possibility a few years ago, has cooled somewhat, but it seems that Mr Heng felt the need to justify the hike even though it would happen only between 2022 and 2025, which would be the next term of Parliament.
He did this by referring to increased healthcare spending over the years as the population ages. It will grow by one percentage point of Singapore’s GDP by 2030. This would still not be as high as the projected increase in healthcare spending for OECD countries, but it must be paid for somehow. Because such spending is “recurrent spending’’ as distinct from lump sum expenditure, it is best funded by a consistent broad based tax.
He gave more details on the $6 billion GST assurance package and GST vouchers. With such help in hand, he said most households won’t feel the impact of the rise for at least five years while the lowest income group would be completely covered for at least 10 years. That was how much the package was tilted to help the most vulnerable group in Singapore.
What was interesting was that for the first time, Parliament also heard some “net’’ figures. The GST rise is supposed to bring in about an extra 0.7 per cent of GDP, but after accounting for the various buffers and offsets, what was the G getting? He didn’t give numbers but said that the bottom 40 per cent of resident households are estimated to account for less than 10 per cent of the net GST borne by all households and individuals.
Foreigners residing in Singapore, tourists, and the top 20 per cent of resident households are estimated to account for over 60 per cent of the net GST borne by all households and individuals.
While GST on its own is a regressive tax, the overall tax system has been designed so that the rich already pays more, he said. This was done gradually in recent years through capping personal income relief, increasing the top marginal tax rate and raising additional buyers stamp duty for those who want to own more properties.
He showed Parliament this chart to make his point.
Another large chunk of his speech was about the reserves. Again, almost no one in the House suggested raiding the reserves and almost all MPs were effusive about the government’s fiscal prudence (even as they asked for more). NCMP Leon Perera made mention of it in the context of slowing the rate of increase in reserves. He didn’t elaborate but presumably he was suggesting that not all accumulated surpluses be put into the reserves at the end of every term of Parliament.
Nevertheless, Mr Heng reiterated the importance of keeping reserves which can be used to tide over difficult periods, like the $150 billion unlocked to guarantee bank deposits in 2009 and the $4.9 billion to fund the resilience package in 2010 at the height of the Global Financial Crisis. Both sums have since been returned to the reserves, even though the G didn’t have to do so.
The current Budget is being financed without the need to tap on past reserves. In fact, earnings from the reserves amounted to $17 billion, which is even bigger than the GST revenue ($11 billion) or income tax collection ($12 billion).
While most developed countries have to tax their citizens to service debt, Singapore was in a unique situation of being able to spend the earnings from the reserves and keep taxes low.
Rather animatedly, Mr Heng, who used to head the Monetary Authority of Singapore, said: “Tell me – in which other country are citizens able to reap the benefits of past savings in this way? So let us never forget that what we have inherited is very unusual, and very precious. Let us be responsible, and steward this properly for our future generations.’’
I found his explanations useful although he stopped short of giving the numbers that Mr Singh asked for. I also found it intriguing that he should be raising points which MPs didn’t. Which leads me to the next question: Are MPs doing the job of reflecting people’s opinions even if they aren’t political palatable?
Right at the beginning of his speech, Mr Heng noted that “many Members of this House have asked if we are doing enough, particularly for businesses in the sectors directly affected and those feeling the knock-on effects.
“On the other hand, some economists have wondered if we are doing too much.’’
In the two days of speeches, only two MPs came close to making such impolitic remarks. Ms Cheryl Chan (Fengshan SMC) noted that Singapore’s support packages for seniors and vulnerable groups were getting larger and larger and wondered if this was fiscally sustainable and indicated the makings of a welfare state. Mr Teo Ser Luck (Pasir Ris-Punggol GRC) who was the last speaker to join the debate on the Budget Statement, warned against having too many grants and schemes such that there is a “welfare state for business’’. He wondered if businesses were being cushioned and detached from reality, and whether they would be competitive if they ventured abroad.
Related story: Budget 2020: Politically suicidal questions
I thought they were good questions. As someone brought up on a diet of meritocracy and fiscal prudence, I found it hard to understand why so many MPs saw the need to ask for more and more, sooner than later, and for more and more people. (We will be incurring a $10.2 billion deficit for goodness sake!) Their wish-lists contradict all the high-sounding virtues they spout about being careful with money and resilient in the face of pressure.
I am sure more such appeals will be heard over the week. And the worst part is, it won’t be considered populist.