By Terry Xu
Mr Hri Kumar Nair, PAP Member of Parliament for Bishan Toa Payoh GRC held a Central Provident Funds (CPF) forum at Thomson Community centre on last Saturday, 14 June 2014 for his residents as well as members of public who were interested in taking part in the discussions. In the forum, the participants to the forum was divided into various discussion groups and discussed about the concerns of residents and the various proposals of how CPF can be improved.
In the video recorded by Trinity Chua from The Independent.SG, we see Mr Hri Kumar making this following comment.
So you can have a minimum sum of $30,000 as what we had, provided you accept the payout would be much more lower. So the question which is real, the real question in this debate, is what do we do with a large number of people?
I’m not talking about a small number, a large number of people who will not be able to survive on 300 dollars a month. If the rest of society says, then we will help them foot their expenses then that is our system.
Then we go into a system where by everyone pays more taxes and people will not be happy.
Is Mr Hri Kumar using the silent majority card to say that most of society would not support welfare for the aged? Or fear mongering that Singaporeans have to pay more to support better payouts for fellow citizens just as how the Medisheild Life scheme is modeled upon. Like what is stated by the lady in the video who retorted Mr Hri Humar’s comment, Singaporeans do pay a lot of hidden taxes in the form of COE, ERP, GST and whatever not.
So before we go into asking how exactly giving money to old folk will bring Singapore to financial ruins. Let us ask this question on top of Mr Hri Kumar’s question.
Exactly how much is the minimum one to have in order to survive in Singapore, based on the bare minimum expenses and fundamental rights of an individual?
If you are uncertain how much that is in Singapore dollars, you are not alone.
Singapore has so far refused to come up with a poverty level for Singaporeans. Prime Minister Lee Hsien Loong is quoted to have said, “To say as an ideological matter that ‘I must have a proper definition, and I want to reduce this group to zero’ – I think we have moved beyond that point and I don’t think that a definition will help us to improve our schemes,”
On the contrary, by having a poverty line would undoubtedly improve our various schemes especially when it comes to CPF.
Where is the poverty line (level for subsistence living)?
On 25th August 1986, Mr Lee Yock Suan, Acting Minister for Labour announced the CPF Minimum Sum to be set aside at age 55 is $30,000 for subsistence living after age 60 and the scheme was implemented on 1st January 1987. He said in his speech,
The sum of $30,000 is arrived at after careful study. This amount, set aside by a member at age 55 plus interest earned, will provide him with a regular income of about $230 per month from age 60. The income will be available for about 20 years depending on the interest rate.
As inflation and rising standard of living will inevitably force up the cost of living, in time to come the $230 per month will have to be adjusted so that it continues to provide sufficient income for subsistence living. The minimum sum of $30,000 will also have to be adjusted accordingly. This figure will be reviewed every three to five years to ensure that the real value of $30,000 is retained.
Based on how the scheme was sold to the government back in 1986, the crux of the minimum sum debate is how much one needs to survive in Singapore, or meeting the amount for subsistence living. Unless the scheme has deviated from its original purpose, the subsistence level or poverty line regardless how you call it is crucial in determining how much does one’s money have to be retained in the CPF. In 1986, $230 was the said amount for the minimum amount one needs to survive.
How much has $230 in 1986’s value grown since then? Taking a modest monetary inflation rate at 2.1 per year, the compound effect of that value to 2014’s value is $411.57.
So moving forward to today in 2014, has this amount of subsistence living inflated to $1200, way beyond how our currency value has increased? After all, this is the amount one would expect to get from the monthly payout if one meets the minimum sum of $155,000.
Singapore will collapse with a welfare system
Mr Hri Kumar and the others seem to insinuate that Singapore has no spare cash to pay for our old folks, and they have to dip into their savings to last them through their golden age despite having to play a part to building Singapore to its present glory.
Sidestepping on how much a failure has the pension system been to ensure good returns for the people. Is, having a welfare system for the elderly Singaporeans that scary, as what Hri Kumar has put it out to be? If Singapore does come up with a poverty level of say, $500 per month, then the government could look at just topping up the old folk’s monthly expenditure based on the difference between the level of subsistence and the minimum sum monthly payment.
But how much would it cost? No one knows for sure, we can’t simply dismiss an idea just because someone or some parties decide to spread some rhetoric that the country will go into financial ruins just from spending on social welfare and people will abuse the system
But get this right, the amount is based on the bare minimum one would have to spend to buy food and other necessity expenses, since when anyone said anything about luxury expenses?
Singapore has no excessive budget, or do we?
According to the Singapore government’s budget statement in 2013 (the link no longer works), the government’s budget surplus was SGD 3.86 billion (SGD 3.61 billion before Net Investment Return Contribution (NIRC) and top ups to endowment and trust funds) for 2012.
But according to the “Monthly Digest of Statistics Singapore” (also cannot be found anymore) published by the Department of Statistics (DOS), the same is reported as SGD 36.26 billion (Table 14.1 on page 77 in the section on Public Finance). This would represent almost 12% of GDP in 2013. (see more)
If we refer to the June 2014 monthly digest of Singapore statistics,
The cash budget surplus for FY2012 has been revised to 25.3 billion. A far cry from the said situation of the country with no excess. (At the same time, can we have a more detailed explanation as to how and why the Budget surplus for FY2012 has been revised from the original of $36.1 billion to $25.3 billion?)
Dr Vivienne Wee from AWARE gave this speech earlier this year about the budgeting process of Singapore. One issue she brought up was that there was no transparency in how the ministries are being taken task on how they spend their budget or whether the figures to have benefited the citizens said in parliament were fulfilled by end of the parliament fiscal year. We do get to know the final adjusted expenditures from the records but whether or not, people of Singapore benefited from the spending, no one knows for sure until someone decides to ask a question in parliament.
And even though the figures projected in the budget presented in the parliament are always close to deficit, but in reality, every year Singapore sees a significant surplus in its revenue due to overestimation of expenditure and underestimation of revenues.
Take some time to hear what Dr Wee has to say about the Singapore budget.
Now the biggest part of Singapore’s national budget is the defense budget. The estimates for the defense budget in 2014 is $12.1 billion dollars (see more), in comparison the Ministry of Health is estimated to spend 689 million dollars. That’s a staggering difference of 11.4 billion dollars. Why the stark difference in emphasis on government spending? And how is the military spending all these money?
Perhaps I could share some insights as to how the military spends its money by sharing my short personal experience. I was an army regular working as a communication technician for 5 years before moving on to work in two companies which happened to sub-contract jobs from Singapore Technologies, Electronics, which the military eventually outsourced most of the maintenance work to.
One of the jobs was to perform annual maintenance on radio sets sent in by the military. Due to certain incidents that involved claims from the military, I got to know from the management that the army pays $400 for each radio’s maintenance every time they are sent in, $800 for repair work.
The second job which involves the navy could offer even more insights into the spending but due to the possible implication of Official Secret Act, I cannot reveal the details.
I was paid about $2,700 per month when I was working as an army regular doing the same job as expected of me at ST Electronics and if we are not disturbed in our work, for us to complete 40 radio sets in maintenance is no problem at all.
So 40 radio sets for $2,700 per month or $400 each for probably 40 sets a month. You work the maths from my first job and think about how prudent is the army spending? I don’t know for sure, and I am not sure if I want to risk any defamation lawsuits by making any assertions.
No budget, or just unwilling to do so
If we estimate the number of elderly folks in Singapore to be about 500,000. Even if we are talking about giving them a modest sum to tide them over retirement at 500 dollars a month, how much would that cost? 500,000 x $500 x 12, that’s about 3 billion each year. And at this point, we are not talking about paying everyone an amount to profit from, but at least to guarantee a decent level of living.
$3 billion out of the revised budget surplus of $25.3 billion is a mere 11.8 percent. Any politician who feels that paying for our elderly’s retirement is robbing the country’s reserves, please voice that out, and we will put you on record on behalf of the voters.
Singaporeans needing to pay more to afford more welfare scheme? Don’t even get me started on how the government has yet to justify the 2% increase of the Goods and Service Tax in 2007 by helping the needy with the insignificant amount that they are paying each year as compared to the amount in returns from the 2% GST increase and the high criteria set for those who wish to obtain the aids.
So I suppose I can ask at this point, is Singapore really out of money to spend on our senior citizens to have a dignified retirement despite having years of surpluses in billions, or is the government just simply unwilling to do so?