A 15-year-old student wrote to the Straits Times forum earlier this week, stating that he agrees with the criticism by Senior Minister of State for Finance and Transport Chee Hong Tat of the Workers’ Party (WP) for its opposition to the goods and services tax (GST) increase.
Ezekiel Tan wrote, “The WP has repeatedly called for using more from our national reserves to find social programmes. This is unsustainable, as our reserves are finite.”
He added, “Singapore’s reserves are meant to tide us through extraordinary circumstances when the nation faces potentially dire consequences, like the expected draw of $42.9 billion between 2020 and 2022 from Singapore’s reserves to tide the nation through the Covid-19 pandemic.”
“As Singapore reopens, further draws on our reserves must be avoided.”
“This would allow us to rebuild our reserves to the level of what past generations left us. We have to ensure that significant funds remain to protect future generations.”
Tan goes on to state that this would ensure that Singapore stand ready with adequate resources should any major event occur that requires significant governmental funding.
“We must avoid drawing on our reserves for now, even if it means raising the GST.”
WP’s alternative proposal is to slow down growth of reserves, not draw on its principle
The forum letter drew the attention of Mr Leon Perera, Workers’ Party (WP) Member of Parliament for Aljunied GRC, where he made a Facebook post to respond to Tan’s point of drawing down of reserve.
Mr Perera noted that WP’s alternative revenue-raising proposals do not draw down on reserves principal.
“Our proposals merely slow the rate of growth of those reserves. If this is wrong, then was the PAP government’s change in 2008 to slow reserves growth similarly wrong? To argue that the rate of GROWTH of reserves should not change regardless of the size of those reserves relative to GDP and regardless of the needs of society represents a dogmatic fiscal ultra-conservatism.” wrote Mr Perara.
He added that the need to invest in Singaporeans should be placed ahead of a dogmatic insistence on maintaining the same rate of reserves growth at all costs.
Is there a need to hoard on our reserves?
Raising an amendment to the motion, “The State of Economy” back in 1988, former WP Secretary-General J.B Jeyaretnam asked a question of whether Singapore should keep to the pace in which it builds its reserve as he argued on the inadequacies of measures by the Government to assist Singaporeans during the recession back then.
Late Mr Jeyaretnam asked, “But the question is: having built up our reserves to the amount of $22.7 billion, is it necessary that we should continue at the same pace?”
14 years later, Mr Perera from the same party, echoed the same question during the Parliamentary debate on the GST hike in November, where he referred to the speech by fellow WP MP, Mr Louis Chua, who noted that Singapore drew down S$50 billion from its reserve in the crisis of a generation, during COVID-19 pandemic.
“How large is that as a proportion of the reserves? I am not asking that as a question, I know the Government’s position on that. But by most estimates that have been in circulation, it is a very, very small fraction. So, it begs the question, how much is enough?” asked Mr Perera to the Deputy Prime Minister and Finance Minister Lawrence Wong.
“And we are at this stage as a society. When we are at this level, this quantitative level of financial reserves. And given that it was 15 years since the framework was last revised, does the Minister and the Government not acknowledge that it behooves us to work on these options at this point in time?”
In response, Mr Wong argued against Mr Perera and WP’s philosophy on the slope of the growth in reserve, saying that they are basically asking to use more of the past reserves and leaving behind less for the next generation.
He claimed that had Singapore’s forefathers thought in the same line of thought, taking 20% more of Net Investment Returns Contribution (NIRC) for themselves, the Government would not just be talking about a 9 per cent GST, but will be talking about an 11 per cent GST.
No answer to whether reserves declined after the drawdown or the exact value of the reserves
At the same debate on GST, Mr Louis Chua asked Mr Wong in terms of the NIRC contribution:
“is it wrong to say that increasing the NIRC contribution rate will not result in a decline in revenue? I think an example would be, as I shared in my Budget speech this year, where even if we put into context the drawdown of $43 billion in our reserves for the COVID-19 packages, our reserves today are still higher than they were five years ago.
Mr Wong responded to Mr Chua by giving a non-answer, saying:
“On NIRC, I have also explained our position on NIRC. I have said that, going forward, we anticipate that NIRC, which contributes about 3.5% of GDP to our revenue today, we think that is likely, over the longer term, to keep pace with economic growth. NIRC will keep pace with economic growth, we think, but this has not taken into consideration the potential for our expected long-term real rate of return to be reduced because of all these structural challenges that we have just been talking about – climate change, ageing population, geopolitical tensions.”
During the Budget 2022 debate in March, Non-constituency Member of Parliament Leong Mun Wai questioned Second Finance Minister, Ms Indranee Rajah, if she could accept that the Singapore reserves are at S$1.4 trillion as the figures were published by a Government agency.
However, Ms Indranee avoided answering the question by saying that if the figures are publicly available, then she does not need to confirm them.
So what we have from the non-replies from the two Ministers, is that the PAP government did not confirm or deny that the reserves are not lower than what it was before the drawdown for the pandemic budget and that Singapore might be having a reserve of S$1.4 trillion.
A sensible response to public policy or a blind parroting of narrative
In any case, one would wonder if Ezekiel had ever looked at the past figures of the Singapore reserves before he wrote that there was a need to rebuild Singapore’s reserves to the level of what past generations left Singaporeans.
The total reserves of the Monetary Authority of Singapore (MAS) are reported to be at S$399 billion as of November this year. This does not include the amount held by the two sovereign wealth funds, Temasek and GIC.
That Mr Jeyaretnam was not corrected in Parliament for stating that the reserves in 1988 were S$22.7 billion and that it matches with the data from the International Monetary Fund.
Can Tan be considered right in saying that Singapore needs to “rebuild to the level of what past generations left us” when in 2022, MAS’ reserve by itself has grown to the size of S$399 billion or the publicly announced figure of S$1.4 trillion for the reserves?
Or maybe the 15-year-old is simply parroting what the PAP ministers and MPs have said and regurgitated by state media without any critical thoughts or fact-checking?