The possible cancellation of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project will have no bearing on plans to raise the goods and services tax (GST), said Second Minister for Finance Lawrence Wong, stressing that both matters are not linked.
He was responding to Workers' Party chief Pritam Singh (Aljunied GRC), who asked if the HSR being scrapped would have any implications on plans to raise the GST from 7 per cent to 9 per cent.
"Mr Singh has tried to link the prospect of the HSR project being cancelled to the government announcement to raise GST," said Mr Wong. "But these are two separate matters."
The GST hike, due some time between 2021 and 2025, was never meant to finance lumpy investments in infrastructure such as the HSR, he said. Rather, it is one way to raise recurrent revenues to pay for ongoing needs such as healthcare, security and social spending, which are expected to drive government expenditure up in the years to come, he said.
"Therefore, the underlying rationale for the GST rate increase is not affected by the outcome of the HSR project," he said.
"Our population will continue to age. More Singaporeans will need support to care for their loved ones. Ultimately, the Government will require more recurrent sources of revenue to support these needs."
Meanwhile, Singapore's approach to financing infrastructure investments involves saving ahead and setting aside funds through initiatives like the Rail Infrastructure Fund, noted Mr Wong.
This is also done through borrowing by statutory boards and government-owned companies.
Mr Singh then asked if the Finance Ministry would consider lowering the Net Investment Returns Contribution (NIRC) to the government budget if the HSR is scrapped. The NIRC allows up to half of the expected long-term interest income from the reserves to be used in each year's Budget.
Mr Wong replied: "Again, I think Mr Singh is trying to link things that are clearly of no relationship at all."
He reiterated that infrastructure projects such as the HSR are financed separately through borrowing, saying this helps to "smoothen the expenditure of these projects over the longer period to better match the benefits of the projects".
Another issue he rebutted had to do with PUB's accounts. Mr Liang Eng Hwa (Holland-Bukit Timah GRC) had asked for a clarification on the national water agency's capital reserve.
This followed a video posted by the Workers' Party (WP) on its Facebook page in which it noted that PUB's capital reserve had gone up from $3 billion to $5.3 billion over the last decade. Mr Singh also referred to the issue in a speech in Parliament in May.
Mr Wong said the WP's interpretation of the capital reserve as a "hoard of cash surplus" was "completely inaccurate, and demonstrates a basic misunderstanding of accounting fundamentals".
Most of the funds are already invested in property, plant and equipment. This includes the upgrading of waterworks, water reclamation plant expansions and investments in water treatment process - "important investments to ensure a secure and sustainable water supply for Singapore".
Mr Wong also said that the capital reserve alone, in fact, has not been sufficient to cover the agency's infrastructure investments, and it has had to borrow from the capital markets, and will continue to do so.
"In short, there is no surplus cash in PUB. It is either ignorant or completely disingenuous to link the water price increase with the PUB's capital reserve, as there is absolutely no basis to do so," he added. "I hope this clarification will set the record straight. I also hope the Workers' Party will refrain from distorting the facts to mislead the public."
Mr Wong said he hoped WP would post his response on its Facebook page to correct the record.
In a Facebook post last night, Mr Singh acknowledged the WP video and text "creates the impression that the PUB hosts a $5.3b surplus". He added that he has asked for the video to be taken down, given Mr Wong's clarification. He also shared a video of the exchange in Parliament.
