Singapore Budget 2018: Stress on prudence as ministries' budget growth cap is cut

The rate at which ministry budgets can expand is to be further reined in, in a move to emphasise the need to be prudent with spending.

From April 1 next year, ministries' "block" budgets can grow only at 0.3 times gross domestic product (GDP) growth, down from the current rate of 0.4, Finance Minister Heng Swee Keat said yesterday.

Last year, a permanent 2 per cent downward adjustment was announced to the budget caps of ministries and organs of state.

Under block budgeting, each ministry is given budget caps for a medium-term period, which are allowed to grow at a rate pegged to GDP growth, subject to periodic reviews. Within the cap, each ministry decides how best to allocate its budget, which encourages ministries to strive for cost-effectiveness.

The latest measure comes as Singapore faces higher healthcare and infrastructure costs in the years ahead. Infrastructure spending will double from $8.5 billion in FY2011 to hit an estimated $20 billion in the upcoming financial year, while healthcare spending is set to have expanded from $3.9 billion to an estimated $10.2 billion over the same period.

Mr Heng said that Singapore has been able to get good value for its money, delivering good outcomes in areas like healthcare and education, which are highly ranked internationally.

The estimated overall government expenditure in the new financial year, at 19 per cent of GDP, is leaner than that of most developed countries, he pointed out.

But Singapore must continue to carefully manage expenditure growth, and "get the best value for every dollar we spend", he added.

Agencies are already taking steps to become more efficient and effective, said Mr Heng. For example, the Land Transport Authority's East Coast Integrated Depot - a four-in-one rail and bus depot - has achieved significant cost and land savings. The project, targeted for completion in 2024, will contain three train depots and one bus depot within a 36ha site, freeing up 44ha of land, an area the size of 60 football fields.

Emerging technologies can also be tapped, he added. In 2016, for instance, Nanyang Technological University and JTC Corporation developed a robot which can inspect buildings for defects, reducing manpower and time needed by 50 per cent.

Singapore University of Social Sciences economist Walter Theseira said that ministries can better manage their spending by evaluating programmes for cost-effectiveness.

For instance, the SkillsFuture credit scheme, which gives $500 in credits to Singaporeans aged 25 and older to pay for training courses, can be reviewed to see if the subsidies provided are meeting national needs.

"Some people who take up the subsidies do not end up working in the industries that they take courses for, or have the wrong idea of what the training can achieve, which may not be the best use of public money."

Yuen Sin

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A version of this article appeared in the print edition of The Straits Times on February 20, 2018, with the headline Singapore Budget 2018: Stress on prudence as ministries' budget growth cap is cut. Subscribe