Our pioneers set out to build a high-quality living environment, even when they had to attend to pressing economic and security challenges. They left us a legacy of a clean, green and liveable environment.

In the same spirit, we must plant the seeds to secure a better future for generations to come.

As a low-lying island nation, rising sea levels threaten our very existence. What can we do?

First, we must continue to support global efforts to combat global problems as a responsible member of the international community. This year, we will update our commitment to the Paris Agreement and take a further step to chart our vision for a low-carbon, sustainable future Singapore.

Second, we must manage our transition to a low-carbon, low-emissions economy. We must turn our carbon constraints into a strength, just like how we have turned our water vulnerabilities into an area of strength with radical innovations in Newater and desalination. We will do more to develop new ideas and solutions. We are committing close to $1 billion for research in urban solutions and sustainability. The research will focus on renewable energy, cooling Singapore and carbon capture, among others.

More broadly, we have to manage our greenhouse gas emissions, by putting in place the right incentives, tax structures, and regulations. We introduced a carbon tax in 2019, and supported enterprises in improving energy efficiency.

The domestic transport sector contributes a significant amount of greenhouse gas emissions. Vehicles with internal combustion engines, or ICEs, contribute to pollution. Many major cities have set ambitious goals to phase them out. For both public health and climate change reasons, we should progressively phase out the use of ICE vehicles towards cleaner alternatives, such as hybrids and electric vehicles (EVs). Our vision is to phase out ICE vehicles and have all vehicles run on cleaner energy by 2040.

To promote this, we will have three measures in this Budget.

First, we will enhance incentives to encourage the adoption of cleaner and more environmentally friendly vehicles. For cars and taxis, I will provide an EV Early Adoption Incentive. Those who purchase fully electric cars and taxis will receive a rebate of up to 45 per cent on the Additional Registration Fee, capped at $20,000. This incentive will be implemented for three years, from January 2021. We will also revise the road tax methodology for cars to better reflect the current trends in vehicle efficiency from January 2021. This will lead to an across-the-board reduction in road tax for EVs and some hybrids.

Second, we will expand the public charging infrastructure for EVs. Today, there are about 1,600 charging points islandwide. By 2030, we aim to deploy up to 28,000 chargers at public carparks islandwide.

Lastly, the Government will take the lead. We will progressively procure and use cleaner vehicles to do our part for the environment.

Here, we are placing a significant bet on EVs, and leaning policy in that direction because it is the most promising technology.

The transition towards EVs will have a major impact on tax revenues. Fuel excise duties today yield around $1 billion per year, and are significant contributors to government revenues. They are also a form of mileage tax, which discourages excessive driving and thus helps to reduce road congestion.

But EVs do not pay fuel excise duties. Therefore, we will need to update our vehicular tax structure to preserve these two considerations.

Ideally, we would like to implement a usage-based tax on EVs. But the technology to do this properly on EVs is the Next Generation ERP System, and distance-based charging using ERP is still several years away. In the interim, we will impose a lump-sum tax that will be built into the road tax schedule for EVs to partly account for the loss in fuel excise duties.

This will be phased in over three years starting from January 2021, with the full quantum implemented by January 2023.

The Government alone cannot address the threat of climate change. We have to foster a climate of change in our community where everyone makes conscious decisions to lower our carbon footprint.

To encourage households to purchase energy-efficient household appliances, we will introduce incentives to help lower-income households with the cost of these appliances.

To make sustainable living a key feature of our HDB estates, we will have a new HDB Green Towns Programme. It will have three key focus areas: reducing energy consumption, recycling rainwater, and cooling our HDB towns.

The risk of rising sea levels remains significant. PM mentioned at the National Day Rally last year that climate change adaptation might cost $100 billion or more over 100 years. This is a major fiscal outlay - so it is right and prudent that we set aside resources for this.

I will set up a new Coastal and Flood Protection Fund, with an initial injection of $5 billion. I will top it up subsequently whenever our fiscal situation allows. We must have the resolve to deal head-on with the existential threat of rising sea levels. Our food security may also come under threat, as imported supplies come under strain from climate change or geopolitical tensions.

In uncertain times, there are many calls on our Budget. However, we cannot take our peace, prosperity and stability for granted.

Securing our home remains a high priority in our Budget and must be funded adequately. It is imperative that we continue to invest in our external, internal, cyber and data security, to keep Singapore and our families safe and secure.

We must also be prepared to deal with cyberthreats, as digitalisation becomes more pervasive.

As we embark on initiatives to realise our Smart Nation ambitions, we must continue to enhance our cyber capabilities.

I will set aside $1 billion over the next three years to build up the Government's cyber and data security capabilities, to safeguard citizens' data and our critical information infrastructure systems.

FISCAL SUSTAINABILITY

As we lay out our plans for our economy, people and environment, we must ensure these plans are fiscally sustainable, so that we have the resources to deal with future needs and challenges.

Revenue flows are difficult to project accurately - we can end up having more, or less. In this term of government, we happen to have more, mainly due to exceptional statutory board contributions from the Monetary Authority of Singapore, and increased stamp duty collections.

But we must not count on such revenue surprises to keep happening. We must anticipate long-term spending needs and be disciplined to raise revenues ahead of time, so we can continue to provide quality public services to all Singaporeans.

At the same time, we must be mindful of the uncertainties and downside risks to our revenue. There are ongoing discussions to revise international tax rules under the Base Erosion and Profit Shifting Project, and we are actively participating in them.

Our fiscal strategy must also be equitable. Major long-term infrastructure is lumpy, and requires hefty upfront investments. But once built, they benefit many generations of Singaporeans.

Borrowing for such developments allows us to distribute the cost equitably across current and future generations, without the need for sharp increases in taxes.

However, we must remain disciplined about our use of borrowing. We should continue to pay for recurrent needs, like healthcare expenditure, through recurrent revenues such as taxes. Our fiscal discipline has helped us to be among a select group of countries with a triple-A credit rating. This, in turn, lowers the borrowing costs of enterprises and households, and promotes a virtuous cycle of economic growth.

We must also maintain our fiscal posture and leave enough to deal with unexpected shocks and longer-term challenges. The Constitution requires us to run a balanced budget over each term of government. We are being prudent to preserve fiscal buffers, to ensure that we have the wherewithal to stand our ground and bounce back quickly if the tide turns against us.

This is how we have been able to respond decisively to fight the Covid-19 outbreak, and support Singaporeans and our workers, and, at the same time, be able to set aside an Assurance Package for GST to help Singaporeans in the years ahead.

The accumulated surpluses at the end of the term of government becomes part of our past reserves, which are invested. Today, the Net Investment Returns Contribution from our reserves is the biggest component of our revenue. This is remarkable for a country with no natural resources of any kind.

For FY2020, our Budget position will be more expansionary. On the whole, we expect an overall deficit of $10.9 billion, or 2.1 per cent of GDP. With our fiscal prudence since the beginning of this term of government, we have sufficient accumulated fiscal surplus to fund the overall deficit in FY2020. There is no draw on past reserves.