S'pore has to 'avoid political flaws of other nations

S'pore has to 'avoid political flaws of other nations

Singapore does not want to pay the price of committing to more long-term social spending than it can afford.

To balance the Budget across the generations, the Republic has to avoid the "political flaws" of other advanced countries, said Finance Minister Tharman Shanmugaratnam.

"We've got to sustain a fair and inclusive society for generations, not one election at a time," he said towards the close of the Budget debate yesterday.

Mr Tharman gave the example of Britain, where "with each electoral term, each party and each government coming into power has increased social spending".

"It's a vote buyer," he said, adding that the young and the poor there have borne the brunt of spending cuts now that the nation's welfare system has become unsustainable.

But Singapore's position is "exactly the reverse", he explained. Instead of building up social benefits with unfunded commitments in its growing years, Singapore has "kept social expenditures trim" and built up its reserves.

In fact, it is unconstitutional for the Government to borrow from future generations. Although it may run a deficit in a given year, each five-year term of Government cannot run a net deficit. For these reasons, permanent social spending such as the Silver Support Scheme is sustainable, and Singapore's fiscal planning "fair (to) current and future generations", said Mr Tharman.

His comments came as MPs queried how future Budgets would be balanced, noting the introduction of the Silver Support Scheme, which will cost about $350 million in the first year.

In Parliament on Tuesday, Mr Liang Eng Hwa (Holland-Bukit Timah GRC) had questioned whether the Silver Support Scheme would "balloon" into a much bigger spending commitment as the population ages.

Mr Tharman assured MPs that the government Budget has been in a "healthy position".

And in a nod to a number of MPs who had called for prudent budgeting, he said this year's $6.7 billion deficit "is almost entirely due to funds being set aside for future investments".

He emphasised: "Until this year during this term of government, we've not recorded a deficit in any year before setting aside funds for the future."

In Parliament on Tuesday, Mr Arthur Fong (West Coast GRC) noted that the Government has budgeted for a deficit in four out of the seven years from 2009.

Mr Hri Kumar Nair (Bishan-Toa Payoh GRC) noted that the Government has relied "significantly" on the national reserves to finance spending since first drawing on them in 2000.

Mr Tharman told the House that Singapore "will be in a good position for at least the rest of this decade", after the change in the Government's spending rule that will include expected investment returns from Temasek Holdings, as well as other new tax changes such as the rise in personal income tax rate for top earners.

marilee@sph.com.sg


This article was first published on Mar 6, 2015.
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