Debate on Annual Budget Statement

Thank you, Mdm Deputy Speaker. I am wondering if I could obtain a clarification from the Member on what he feels that the revelation of reserves would necessarily be destabilising. And I will just point out a few reasons why I disagree.

The first is that revealing a target as well as reserves certainly could encourage destabilising speculation but it could also encourage stabilising speculation. If we were off our fundamentally determined exchange rates, we could encourage market participants to actually engage in speculative activity that would get us back onto our fundamental exchange rate.

This, in fact, was a point that was routinely argued by the inventor of the Basket, Band, Crawl (BBC) system, John Williamson for which we, MAS, subscribes to.

The second point I would like to point out is that actually, while it is convenient to argue that we have a distinct system in terms of exchange rate policy, by purchasing power parity, all exchange rate policy is in fact monetary policy. So, even though it is the case that we target explicitly the exchange rate, it will have implications for inflation and, hence, when other countries, as the Member has cited, such as Norway reveal that they have a certain amount of reserves and they are subscribers to an inflation targeting regime, it is not, in fact, distinct from our own exchange rate targeting regime.

Okay. I just want to share with you. I started off working in the MAS back in 1998/1999. The impact of the currency attacks can never be stabilising. It has ramifications on the economy. It has ramifications on jobs. But back in the Asian Financial Crisis, the impact on the currencies that were specifically attacked, like Thailand and even to some extent, other countries in the ASEAN region, was very significant; to the point that the currencies depreciated so much that it led to the ramifications and cascading effects on the economy.

So, what I saw in the Asian Financial Crisis, which was a perfect example of a speculative attack, led to economic ramifications that are not destabilising at all. That is from my own lived experience in 1998/1999; not theory. So, the theoretical element that you shared from a theory perspective that there can be destabilising impact of currency adjustments or misalignments – yes, that it can be stabilising – in theory, does not make sense, unless you are talking about misalignments in the long run, that eventually correct themselves in time. So, that is the first question.

No, I was pointing out that I did not think that they were distinct policies because all exchange rate policy is in fact monetary policy and I am wondering if you could clarify why you thought they were distinct.

Yes. Mdm Deputy Speaker, to answer the question about the difference between Norway's monetary policy and Singapore's monetary policy, they are very distinct.

I mentioned in my speech about the different economic context of Norway where it is a petrol-driven economy and where Singapore is a very trade-driven economy. The reliance of using exchange rate as a controllable intermediate target in the Singapore economy is very distinct from Norway which uses a policy rate in its central bank.

So, the important issue here when you are talking about reserves in this situation for Singapore, when Singapore uses the exchange rate as its policy tool, there is a direct intervention in the markets – using currencies spot to have an direct impact on the Sing Dollar. That is very specific because we target the exchange rate. If you look at Norway, Norway uses policy rate and its exchange rate is freely floated.

So, for Singapore's case, the very fact that we target, the intermediate target of an exchange rate has some impact in terms of our ability to directly intervene in the markets and thus run down on our reserves, on MAS reserves. So, there is a very direct impact from a policy perspective; and thus, ramifications on our ability to have a direct rundown on reserves.

In Norway's case, the policy target is totally different. It is using policy rates or interest rates.

Mdm Deputy Speaker, thank you. Rules of debate. It is, of course, up to the Member if he wants to give way. I just wanted to ask whether Mr Alex Yam could identify which Workers' Party Members made the points that he is suggesting so that they can rebut him later on in the course of the debate.

Sure, I will come to that.

But no one wants to say how much it would cost nor be the one to buy the ingredients and bake those cookies. That big elephant in the room, of course, is GST.

We cannot be constantly asking for more without being cogent of the cost. Funding from recurrent tax ensures that all that we are doing is sustainable.

With GST, we have also built in buffers for the low-income. Over and above that, as the hon Member Mr Saktiandi pointed out earlier, we also the GST Voucher Fund Act in March 2020, just under a year ago to cushion the impact of any GST increases for all Singaporeans both low-income and middle income families. With these, we also give time for incomes to catch up so that we can deal with long-term cost of living. The challenges that we face are many and varied, including an ageing society that will propel increases in many areas, including, most importantly, healthcare cost.

It is not just us that are facing these challenges. Hong Kong and Singapore are very similar cities with very similar traits at the end of the day. And they have just announced their Budget as well, just yesterday. But despite the similarities, our Budgets have taken very different trajectories.

Some commentators point to a future deficit in the Hong Kong spending plan. Andy Mukherjee of Bloomberg raised the point that Singapore's plan for an increase in GST is to ensure that we have enough recurring revenue to pay for permanent costs, such as healthcare. He compares these to Hong Kong and says, like Singapore, Hong Kong also has an ageing population, but they do not have a sales tax and has only been able to overcome its lack of steady revenue by fanning a gigantic real estate bubble. It is certainly a scenario we will not be able to stomach locally. Yes, there is always room to do more but raiding the cookie jar till it is empty does us no good, if we fail to top it up.

On the one hand, we may propose taxes, such as carbon tax. On the other hand, by equal measure, we oppose petrol hike, both of which achieve similar goals. These seemed to conflict with one another. A government, however, needs to be cognisant of the fact that there are costs to everything that we do, both in terms of our revenue streams, what more we can do for our people and, more importantly, also our popularity and our standing.

The Government is cognisant also of the fact that a policy like an increase in GST is unpopular but necessary because, ultimately, the responsibility of a responsible government is to do the right thing, even if occasionally unpopular. Populism and opportunism will, however, all but turn us into cookie monsters, always dipping into the cookie jar.

I am sure the Minister for Finance is open to many other suggestions on how we can fund these programmes and yet remain sustainable as an economy and balance our fiscal position. And if there is one that works as an alternative, I am certain it will take the biscuit.

Much has been said over the last two days by both sides of the House. Many new suggestions, all of which will cost us. The Minister for Finance has to decide which are for the long-term good of the country and which will take us to the next mile.

All of us have the good of Singapore at heart. We differ perhaps greatly on our ideas but, at the end of the day, we need to take responsible decisions to bring Singapore forward. With that, I support the Budget.

Thank you, Mdm Deputy Speaker and I thank the hon Member Mr Alex Yam for his comments. Just a couple of clarifications on his cookie jar metaphor.

He mentioned that when we draw upon the reserves or when we suggest that the rules governing the use of the reserves should be changed, this is akin to sort of taking cookies from the cookie jar. I think the Member is well aware that in 2008, I believe the Government itself, the PAP Government amended the rules governing the use of the reserves to create the NIR framework. And in 2015, those rules were amended again to include Temasek into that framework. Is it the Member's position or argument that those were really raiding the cookie jar as well, in 2008 and 2015? That is kind of my first point.

Secondly, it is really to ask the hon Member, is it the Member's view that any kind of deviation away from these rules that are currently entrenched in the Constitution, in the current rules, amounts to sort of raiding the cookie jar and becoming a cookie monster, even if those rules are slowing the slope of the growth of the reserves, but do not actually draw upon and pull down the reserves, but they merely slow the growth from this sort of a slope, for example, to this sort of a slope, for example? Is that being a cookie monster? That is my second question.

My third question would be really to ask, over time, over decades, as the absolute amount of reserves relative to GDP changes, does the Member not acknowledge that these rules should also evolve and change, and as society changes and the needs of society change and the opportunities to invest in our people, in the country change, should not those rules also be subject to change as well? I would just like to invite the hon Member Mr Alex Yam to agree with that general philosophical point.

Mdm Deputy Speaker, I thank the hon Member for his supplementary questions and clarifications. I agree, because that is what I made as a closing point in my speech. We all have the good of Singapore at heart. We may disagree with the route to get there.

But on the first point, yes, as we go along, we make adjustments, such as introducing the NIR. But as was described earlier, we put in measures to ensure that we never empty out the cookie jar, that the cookie jar exists for moments of need, such as these. And even at the current moment, where we would benefit certainly from being extraordinarily generous, we have decided on what is prudent to ensure that there is always something left over and, not only that, that where we have the opportunity, to top it back up.

So, it is a quite different scenario from introducing changes to rob the cookie jar. We have always ensured that we are prudent about it, that we make returns to it.

As things evolve, just as it has in the past, ideas can be considered and adjustments made. But always with the view that we think about the future and not just about the now.

Mdm Deputy Speaker, every Budget is a statement of intent on our social compact. Today, I would like to talk about how our social compact might look like as we emerge stronger, together from COVID-19.

First, on Healthcare, which is a top concern for Singaporeans, especially as we get older. Indeed, healthcare costs for us, as a society, are escalating. This year, the operating expenditure for health is estimated to be $17.4 billion, compared to an estimated $11.7 billion last year, and $10 billion in 2019.

This makes healthcare the highest Head of Expenditure in 2021, compared to third highest in previous years, after Defence and Education. A big reason for this is our on-going fight against COVID-19, with close to $5 billion allocated to the COVID-19 Package. And I think this $5 billion is absolutely vital ammunition, for testing, tracing and vaccination.

It bears reminding that there are already 2.5 million confirmed COVID-19 deaths around the world to date, with many more unreported. In Singapore, the toll is 29 deaths. The Government has done well in managing COVID-19 here so far, and the COVID-19 Package will give the Government the means to continue keeping all of us safe in 2021.

But beyond COVID-19, we might as well start getting used to healthcare being the highest expenditure item, and start getting used to numbers like $17 billion because, in due time, even with COVID-19 behind us, this would be our fiscal reality.

For this year, already, $0.5 billion more has been set aside – for more patient subsidies as three polyclinics open, for the ramp-up of Woodlands Campus, for recruitment of manpower into these new facilities, and for MediShield Life premium support, as well as other forms of grants and financial assistance to Singaporeans.

Within our social compact, the central question for the future of healthcare is this: How – and how much – would we, as a people, continue to care for one another, in sickness and infirmity?

One of my residents’ parent came to Singapore to visit before COVID-19 and could not go back home since last year. The parent declined in health, went in and out of hospital here, as a non-Singaporean and eventually passed on. The hospital bills came up to five digits, even in a C class ward. I think his experience shows vividly the real cost of healthcare, and the real difference that Government subsidies for Singaporeans, at the outset of care, makes.

And, so, subsidies must continue to be a central feature of healthcare here, in order to keep it affordable for Singaporeans, but the challenge is how might we, as a society, keep these subsidies going, for the maximum benefit of all Singaporeans? Let me make four points.

First, we have to try and contain cost per capita – in other words, the cost to care for each Singaporean, on average. This is a difficult task, as ever more tests and therapies rapidly become standard in care. So, we need to continue making tough decisions on standard versus non-standard therapies and care modalities.

Ultimately, we all want the best care for ourselves, and our loved ones. But we need to also keep a firm eye on value and effectiveness. And this would only work, if all of us, as a society, embrace this basic principle.

Even so, I think it is inevitable that costs per capita will rise, and this is my second point. One reason is the need to duly recognise healthcare professionals for their noble and very hard work. So, while I cheered at the plans to enhance salaries in public healthcare, we need to recognise that manpower is a key driver of healthcare costs and, ultimately, any salary enhancement must mean that subsidies and other financing tools must somehow keep up.

If we can all intuitively understand and support this, it will be a good example of how we, as a society, can continue to evolve our consensus and do what is right and fair.

All these, in turn, would mean that we need to raise more revenue. And this is my third point. Already, GST will increase, sooner or later. But GST, fundamentally, relies on a robust consumption base. This is why I support the Budget’s laser-sharp focus on investing in our economy: investing in recovery from COVID-19; investing in industry transformation; and investing in our people.

In his Budget Statement, the Deputy Prime Minister mentioned Xnergy, a local start-up in contactless charging. In fact, one of the co-founders of Xnergy is my resident, and I could sense the absolute energy as he talks about his team and his business.

For me, it is a glimpse into our economic possibilities, where Singapore is the place to create the future, for the world, yielding exciting roles for Singaporeans and, importantly, generating the means for us to better care for one another, as a society.

And, so, there is a direct link between our economic success and social objectives, and the economy must continue to be a basic parameter as we think and talk about our social compact going forward.

On this note, I like to ask: the Government projects that GST collections this year would recover 14.6% from last year, to roughly 2019 levels, and corporate income tax would grow 8% compared to 2019 before COVID-19, and even Net Investment Returns Contribution would go up 7.8% from last year. Can the Deputy Prime Minister clarify the basis for these projections amidst the severe economic contraction that we experienced last year?

My final point on healthcare subsidies is this. In the aggregate, we must keep the growth in total subsidies to a sustainable pace because, ultimately, things do add up.

This Budget draws on past reserves for a second year running. And as many Members have noted, eventually, we want to start replenishing our reserves. And so, we must be very prudent about how much our total outlay in healthcare subsidies should grow in the years ahead.

Now, if costs grow faster than fiscal revenue, then healthcare subsidies might need redistribution because, ultimately, the pie is finite. And some of us might get less subsidies, in order that those who need these the most can continue to get the right level of support.

At the same time, we should review how subsidies could also be redistributed across various settings of care so that we can further channel care to each right setting and enhance care continuity across settings.

I repeat the call I made in my maiden speech for the Government to invest more deeply in Intermediate and Long-Term Care (ILTC) so that we go beyond basic to dignified care for Singaporeans who need such care.

Our nursing homes ought to be more home than nursing. And I believe that we, as a society, support such a basic direction. But more subsidies for this sector may mean less subsidies for acute and specialist care in hospitals, for example.

And so, these are tough choices, but choices that we, as a maturing society, must continue to make. In short, to secure the healthcare dimension in our future social compact, I think we need to flatten the cost curve, keep a lid on total subsidies and, within this, distribute subsidies judiciously across means and settings, and, number four, create better health and care outcomes for all Singaporeans, and, five, all these on the basis of a sound economy. We need a refreshed consensus on how we can all lean in to make this happen.

Madam, let me speak next about strengthening social service delivery for Singaporeans with less in life. We have decided, fundamentally, that we will not impose a cap – a ceiling on our progress as a society – that the top, and the middle, will continue to grow as fast, and go as far, as they can.

Our central task, therefore, must be to do our level best to help the bottom, especially children at the bottom, to level with their peers.

For every tuition class, every sport, coding or other passion that their peers pursue because they can afford to, we have to help the young at the bottom level with their peers, as much as possible.

Therefore, I support the Government’s commitment to intervene actively and intervene more in early life. I support the additional $0.2 billion set aside for the Early Childhood Development Agency (ECDA), to further develop quality and affordable childcare for every Singaporean child, and I especially look forward to the expansion of KidSTART, so that more children at the bottom can get a holistic and sustained uplift, starting from early in life, even before birth.

At the same time, we need to double down on holistic support for the entire family at the bottom, so that we help parents and care-givers to do well, and do better, even as they continue to do their best for their children.

There is a whole range of needs – housing, jobs, food, physical and mental health – with complex interdependencies, and we need to coordinate more to address these needs.

So, I strongly support the planned expansion of Community Link (ComLink), from 1,000 families in the pilot phase, to 14,000 families, and, hopefully, to many thousands more eventually.

Just yesterday, I spoke to a CEO about corporate giving. I explained the gist of ComLink to him, and his first response was, "Oh, this is huge". So, his corporate instincts told him so immediately.

Indeed, this is huge. ComLink has the potential to be the platform that transforms our social service sector, the galaxy that lifts all agencies and partners up to a higher plane and pulls everyone closer together, with its gravitational force. And as a society, I hope we can all help make ComLink succeed quickly.

In Singapore, our approach has always been Many Helping Hands. In fact, we need more helping hands, going forward. But we also need one plan. Many helping hands, one plan, because, ultimately, it is about one family, the same lives.

Madam, an ever fairer and more just society in Singapore should be one that keeps progressing, keeps advancing, but one where we all find it in ourselves to look back, reach out, pull fellow Singaporeans along, and on a platform, an impact multiplier, that coordinates and weaves all our efforts together.

I hope this "social operating system" can become a core capability, at the whole-of-society level, for Singapore to emerge stronger. In this way, I think every Singaporean can have his or her shot to become the fullest version of himself or herself in life.

Madam, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.]  COVID-19 has allowed the world, Singapore and the individual to undergo a major change. In fact, we should capture the opportunity and transform.

In the area of healthcare, I fully support the move to raise the salaries of nurses and other healthcare workers. After all, salary cost is a key component of the healthcare industry. It will be worth pondering over how the framework of Government subsidies can adjust to it, and how we can rebalance the allocation of subsidies within the framework.

In terms of supporting vulnerable families, I hope that ComLink will be upgraded to become a platform for future community service operations, integrating community services and resources in a holistic manner.

In conclusion, I hope that our social compact will become stronger and stronger, and this is probably one of the fundamental meanings of emerging stronger in a post-COVID-19 world.

(In English): Madam, in Singapore, we say the best welfare is a job. In this light, a key part of our compact must also be about how we, as a society, could enable and sustain good jobs, and good salaries, for our lowest wage workers.

And to frame this properly, I think it is not so much about reskilling and pivoting these workers to new industries, but about helping them to do better within their sectors.

To this end, I agree that the expanded Progressive Wage Model (PWM), when conditions allow, would be a key plank. But at the same time, a big part of the basic equation here, I think, must simply be for all of us to recognise and pay more for low-wage workers' services.

It is such a stark paradox, but one that bears constant reminding that as the world went into lockdown last year, and as we entered our own circuit breaker, the workers that continued going to work, the workers that could not work from home, the workers that basically kept our world going were so often the low-wage workers providing essential services.

So, as a society, I think it is high time – high time as COVID-19 rages on – that, we, not the Government, but we – as consumers, as a people – do what is right, what is just, and show our willingness to pay a fairer level for our low-wage workers' services.

Madam, let me conclude.

We have an opportunity to shape the post-COVID-19 society that we want to be, transform our compact, transform how we commit to caring for one another.

COVID-19 has fundamentally upended how we value things in life, reshuffled what truly matters, and redefined how we look at the world, each other, and ourselves.

We can – we must – ride on COVID-19 to emerge as a society that is ever more vested in one another's success, where those with more are ever more willing to put in their treasures, talent and time for those with less, where the hallmark of success is to pay it forward, and to help others do well and be well.

In this way, we can emerge stronger, together, as a thriving democracy of deeds. Madam, I stand in firm support of this Budget. [Applause.]