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Tharman debunks myths on the surplus, reserves and CPF
THE Singapore government is not "squirrelling away" savings into the reserves and denying citizens of the benefits, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam on Wednesday.
Instead, it is practising - and benefiting from - prudent long-term budgeting, which has resulted in increased investment returns. This, in turn, has afforded higher government spending, which has benefited the present, pioneer and future generations.
Speaking at the close of the People's Action Party's (PAP's) East Coast group representation constituency (GRC) rally in Simei, he said: "I didn't intend to talk about this under the East Coast skies, but I notice that there have been several speeches in the last week about how there's this wonderful money available from reserves which can be used to expand our social spending ... I thought I'd better just address the points quite squarely."
He first tackled the idea that the government was actually making a very large surplus, and "hiding it away" in the reserves. He pointed out that statistics showing a surplus include the monies that the government gets from selling land - monies which it is barred from using by the Constitution; these funds must be put into the reserves, where it can earn an income.
"This is simply prudent, long-term budgeting. It doesn't mean we're hiding money in reserves; it means that we will draw continually on the reserves, every year, by using the income on reserves.
"This way, you will never have a government that will go and sell land quickly, particularly when there's a property boom, in order to get money and spend more," he said.
He stressed that the decision to disallow any spending of land sales monies has meant much higher investment income going into each year's Budget. This year, for instance, Singapore had a net investment returns contribution of S$9 billion - S$4 billion of which came from reserves attributable to land sales.
"Had we spent it before, we would not now have this S$9 billion ... So it's not just about benefiting our great- great-great grandchildren. Today's generation, including today's older generation, is benefiting from this prudent budgeting. And it is a way in which we're fair to this generation, but making sure that this same fairness extends to our children's generation and for all future generations. Stick to prudent budgeting. It is fair," said Mr Tharman to cheers.
He next picked up on the idea that the government was making excess returns on top of what it paid the Central Provident Fund (CPF). Earlier in the week, Singaporeans First secretary-general Tan Jee Say had said: "GIC invested our CPF funds and they got 6 per cent returns every year for the last 20 years - but they gave you only 2.5 per cent. So where did the difference of 3.5 per cent go to? They kept it, and boosted their surpluses."
Without referencing Mr Tan's speech directly, Mr Tharman explained that GIC does not manage only CPF monies, but also surpluses from the sale of land and many years of early government surpluses.
"If it were simply managing CPF monies, it would not be investing long-term and taking significant risk in order to earn higher returns ... Because it's managing significant government monies for the long-term, GIC takes higher risk in order to earn higher returns. What happens to the returns? Fifty per cent comes back into the Budget for spending," he said, adding that the system was fair.
Earlier in his 40-minute speech, Mr Tharman - himself the lead minister for Jurong GRC - outlined three major shifts Singapore was making. They are:
- Rebalancing between economic and social policies;
- Helping citizens maximise their potential throughout life; and
- Moving from a top-down government to one that listens, engages, and leads.
East Coast GRC, the PAP's worst-performing GRC that won in the 2011 general election, is expected to be one of the most hotly-contested constituencies this time around. The PAP is facing the Workers' Party (WP) in a straight fight there.
Its team is led by Manpower Minister Lim Swee Say, and comprises Senior Minister of State for Trade and Industry and National Development Lee Yi Shyan, Minister of State for National Development and Defence Mohamad Maliki Osman and two-term backbencher Jessica Tan. All four spoke at Wednesday's rally, with Mr Lim focusing on employment issues, and Mr Lee, on economic growth.
The WP slate is led by Gerald Giam, who was a Non-Constituency Member of Parliament (NCMP) in the previous parliament; his other team members are sociologist Daniel Goh, research and consultancy firm chief executive Leon Perera and ex-librarian Mohamed Fairoz Shariff.
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