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BUDGET DEBATE

MPs urge fiscal prudence as social spending increases

They caution against cultivating mindset of dependency, express reservations on Temasek's inclusion in govt's net investment returns framework

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MPs applauded the govt's left-leaning Budget, citing the Silver Support Scheme and other measures to mitigate inequality.

Singapore

IT'S hard to please the House.

Calls to help the less able are often heard in Parliament but on Tuesday, while lawmakers lauded Budget 2015's further step to the left, they fretted about fiscal prudence and sustainability as well.

Even as they praised the government's efforts to strengthen social safety nets, several Members of Parliament (MPs) also asked where the optimal point of balance would be, and wondered how quickly Singapore should ramp up its social spending.

Opening this year's Budget debate, Liang Eng Hwa (Holland-Bukit Timah GRC) began by applauding the government's further shift to the left - citing the Silver Support Scheme and other measures designed to help mitigate inequality. Nevertheless, he noted observers' worry that Singapore would become a welfare state, and that citizens would become less self-reliant.

"Will we lose our economic dynamism and soon descend into the sorry state that some European countries presently find themselves in? . . . What must remain unchanged is that we continue to uphold fiscal discipline and fiscal sustainability. We must not cross the red line of failing to balance our Budget within each term of government. And we ought to spend in accordance to necessity, in a targeted manner to those who need them," said Mr Liang, who proposed a regular review of fiscal sustainability, with additional scrutiny paid to spending schemes lasting longer than a decade.

Other MPs, including Jessica Tan (East Coast GRC), cautioned against cultivating a mindset of dependency where citizens come to expect a continued increase in expenditure. This is especially since the government projects overall spending to reach about 19.5 per cent of gross domestic product on average over the next five years, about one per cent of GDP higher than the revenues today.

Several of the 25 lawmakers who rose to speak also expressed reservations about Temasek Holdings' inclusion in the government's net investment returns (NIR) framework, which is already applied to GIC and the Monetary Authority of Singapore (MAS).

"It appears that we have come to rely more and more on past reserves to fund our spending . . . How will we know when we have gone too far, when we have crossed the line in fiscal prudence - that tried and tested principle that has seen Singapore through many economic crises?" wondered Foo Mee Har (West Coast GRC).

Questioning whether the government is "being too aggressive" in including Temasek in the NIR framework, Tin Pei Ling (Marine Parade GRC) asked: "Can we be certain that they will continue to perform well? Are we in danger of becoming overly-dependent on uncertain and unassured sources of revenue?"

Still, Workers' Party chairman Sylvia Lim said: "As the total size of our reserves is not published, I can only surmise that elaborate calculations have been done to ensure that the additional monies being channelled to fund the annual Budget are 'affordable'."

Affordability aside, Ms Tin still expressed anxiety over whether Singaporeans will take the NIR for granted and "fail to understand that it is something special and rare". She also said that controls may need to be set to prevent further rule changes in the NIR framework.

Hri Kumar Nair (Bishan-Toa Payoh GRC), meanwhile, flagged the opportunity cost involved in spending investment returns: "Every additional dollar spent today simply means more than a dollar less for the future . . . We are running out of levers to pull. After Temasek, there is no next."

He also asked Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam whether there are other potential sources of revenue on the table for consideration. Observers have long warned of an inevitable hike in the Goods and Services Tax (GST) rate, or the possible introduction of capital gains tax someday.

Both Mr Nair and Arthur Fong (West Coast GRC) highlighted how government spending will continue to increase, even if there are no new programmes - an unlikely prospect in itself.

Said Mr Fong: "As the path towards more social spending and 'topping up' has begun, we need to find other means towards topping up our state coffers as well . . . What we don't have is certainty of future revenues or revenue streams towards our state coffers to fund a certainty of programmes and a certainty of rising expectations."

Nominated MPs Randolph Tan and Chia Yong Yong also underscored the need to uphold the principles of fiscal prudence and sustainability, despite the desire to have more social safety nets. "By simultaneously drawing on surpluses, proposing a deficit and announcing a surprise rise in taxes on the high income, this Budget gives us timely reminder of the stark realities we face," said Prof Tan, a UniSIM labour economics professor.

Added Ms Chia to applause: "We have a Budget that has been praised (as) leaning to the left. But I would also argue that if we lean too much to the left, we will not have much left."

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