Budget debate

Heng: Need to safeguard reserves, as past leaders did, so future generations benefit

Deputy Prime Minister and Minister for Finance Heng Swee Keat undertaking a post-Budget visit to the Parkroyal on Kitchener Road on Feb 25, 2020.
Deputy Prime Minister and Minister for Finance Heng Swee Keat undertaking a post-Budget visit to the Parkroyal on Kitchener Road on Feb 25, 2020.ST PHOTO: LIM YAOHUI

Tapping Singapore's reserves and the investment returns from these funds would be the easy way of paying for future spending, Deputy Prime Minister Heng Swee Keat said yesterday.

But the responsible thing to do is to steward this money properly for future generations, he added.

Mr Heng noted that the Net Investment Returns Contribution (NIRC) - the returns from Singapore's invested reserves - continued to be the top contributor to government coffers last year, accounting for $17 billion or 3.3 per cent of gross domestic product.

Most advanced countries use about 2 per cent of their GDP to service accumulated debt, he said.

"In most advanced countries, citizens today pay for the spending of the past generations. In Singapore, it is the reverse," he said. "Citizens today enjoy the benefits of the savings from the past, thanks to the foresight and policies of our founding generation of leaders and people."

He was responding to suggestions that the Government should tap national reserves to fund future spending, instead of raising the goods and services tax (GST).

Mr Heng noted that today, NIRC is more than personal income tax collections at $12 billion, and GST collections at $11 billion.

"So, if we did not have the NIRC, even doubling personal income tax, or doubling the GST rate to 14 per cent, would still not be enough."

"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," he added.

 
 
 
 

On Thursday, Workers' Party Non-Constituency MP Leon Perera asked if Singapore could slow the rate of growth of its reserves, releasing more funds to invest in its people and companies.

Mr Heng replied that in 2015, a constitutional amendment was passed to add Temasek to the Net Investment Returns framework. This resulted in a significant increase in NIRC, which was used to develop capabilities for future growth, among other things.

He added that today, at $17 billion, the NIRC is able to cover almost the combined budget of the Ministry of Education and the Ministry of Trade and Industry.

"More importantly, our reserves give us the confidence - as a small country with no natural resources of any kind - to deal with the ups and downs in the world."

He cited how during the 2008 global financial crisis, then President S R Nathan approved the provision of $150 billion from past reserves to guarantee bank deposits in Singapore from Oct 2008 to Dec 2010. There was no bank run.

The money remained untouched and was returned to past reserves.

In 2009, Mr Nathan approved another $4.9 billion draw to fund the Resilience Package. A year later, after the economy rebounded, the Government decided to return the money used to the past reserves.

"It did not have to, but did so, to maintain the discipline that has allowed this unusual move in the first place," said Mr Heng.

This year, the Government has not had to tap on the past reserves. "It was the same spirit of prudence that allowed us to have enough surplus this term to provide the fiscal support for our economy and our people," he added.

"But if the situation deteriorates significantly and calls for us to tap our past reserves, I will make a case to the President to seek her approval to do so," he said.

Mr Heng stressed that the Government has a responsibility to future generations and must safeguard their interests. "So, let us continue to keep the discipline, and keep the faith and promise to future generations of Singaporeans, by stewarding our reserves well in our time."

A version of this article appeared in the print edition of The Straits Times on February 29, 2020, with the headline 'Heng: Need to safeguard reserves, as past leaders did, so future generations benefit'. Print Edition | Subscribe