PSP’s Leong Mun Wai counters DPM Heng’s argument against using entire NIR for Budget 2021

Non-Constituency Member of Parliament (NCMP) Leong Mun Wai took to Facebook on Monday (1 Mar) to question Deputy Prime Minister Heng Swee Keat’s rebuttal that there will be a lack of fiscal resources in the future if 100 per cent of Net Investment Return (NIR) is used to support the 2021 Budget.

“If NIR or Net Investment Return is at $39.2B, why did DPM Heng strongly refute my claim that there is no lack of fiscal resources in the foreseeable future. If the entire NIR is used in the budget, it will more than cover our basic deficit of $31B and gives a surplus of $8.2B for FY2021,” said Mr Leong, who is a member of the Progress Singapore Party (PSP).

He added, “Under the professional management of MAS, GIC and Temasek, our total financial assets of $1.35T should be able to earn the same level of NIR consistently in the long term after taking into account the short-term financial market volatility.”

Explaining his point further, Mr Leong noted that Singapore’s total financial assets will continue to grow, even without the NIR, due to two factors.

The two said factors are the country’s land sale revenue and further accumulation of foreign reserves from Singapore’s large capital account surplus, the NCMP said.

“Even without the NIR, the total financial assets will continue increasing because of two factors: One, our land sale revenue of about $10B to $15B a year — $11.2 billion for FY2021 — and two, the further accumulation of foreign reserves from our large capital account surplus.”

“Recent experience has shown that regional uncertainties have triggered even more capital inflow into our country,” he noted.

While speaking in Parliament last week, Mr Heng, who is also Finance Minister, said that the reserves should not be treated like a “gold mountain”, in response to Mr Leong’s suggestion to use the entire returns from investing the reserves.

“If we adopt (Mr Leong’s) suggestion, one day even this mountain will be eaten up completely… We have a responsibility to future generations,” said Mr Heng.

Under the NIR framework, the Government can spend up to 50 per cent of long-term expected real returns, including capital gains, on its relevant assets.

Mr Heng also went on to state that the Net Investment Return Contribution (NIRC) was already the Government’s largest single source of revenue — above corporate income tax, personal income tax or the goods and services tax — and that this happened due to years of fiscal discipline and did not happen by chance or good fortune.

“If we had succumbed to the temptation to spend more, we would not have built up our reserves. And without reserves, we could not have been able to generate this stable and recurrent source of revenue today,” he explained.