While speaking at the Ministry of Finance Committee of Supply debate on 26 February (Friday), Workers’ Party (WP) Member of Parliament (MP) Jamus Lim called on the Government to think about setting up an independent fiscal council in order to improve all major policy proposals for budgetary as well as macro purposes.
He explained that fiscal councils are made of agencies staffed by professional civil servants whose job is to evaluate policy proposals in order to offer budgetary implications. They are independent, and are expected to give non-partisan assessments of the predicted effects of policy on revenue and expenditure.
“As such, they serve as trusted public institutions that can help score reform ideas and proposals, to help ensure the economy’s commitments to sustainable public finances,” he explained.
As for the functions of fiscal councils, Mr Lim said that they offer public assessments of fiscal plans and performance, as well as evaluate and provide macroeconomic and budgetary forecasts.
While such roles may already be carried out by the Ministry of Finance (MOF), fiscal councils would provide advice that are non-partisan and are able to scrutinise policy proposals by the policymakers.
“In contrast, the fiscal council will provide advice—the key word here is advice, as they do not possess any formal power to determine the budget—to the whole of Parliament, at their request.
“As such, the council would be available to scrutinize policy proposals offered by PAP backbenchers, as well as opposition parties,” he noted.
In his speech, Mr Lim also pointed out that fiscal councils are common worldwide, especially among advanced economies. Some of the examples he provided include the Netherlands’ Bureau for Economic Policy Analysis, the Congressional Budget Office in the United States, the Parliamentary Budget Officer in Canada as well as the United Kingdom’s Office for Budget Responsibility.
He also stated that the former WP MP Low Thia Khiang also raised a proposal to create an independent office of budget responsibilities during 2017’s Committee of Supply debates.
“This proposal builds on that, detailing the functions of the proposed agency and its service to the full legislature, and the underscore the distinct macro-fiscal environment today,” said Mr Lim.
If that’s not all, the MP for Sengkang GRC also pointed out that there is evidence showing that fiscal councils can improve fiscal performance, particularly when they are given legal and operation independence, are tasked with monitoring fiscal rules and are supported by a robust media presence.
Mr Lim added that such a council can be very useful at this point of Singapore’s economic evolution, given that the country is running its largest budget deficit since independence.
“I propose that the Ministry of Finance consider the formation of an independent fiscal council, the Parliamentary Budget Office of Singapore, seeded with an initial $20 million, and tasked with the mandate to score all major policy proposals formally advanced by Members of Parliament, for budgetary and macro implications,” he concluded.
MP Indranee Rajah rejects the need for additional fiscal monitoring institutions
In response to Mr Lim’s proposal, Second Minister for Finance Indranee Rajah expressed that many of the fiscal councils, which she addressed as Independent Fiscal Institutions (IFIs), around the world were created in regards to the Global Financial Crisis in 2008 and 2009 with the intention to prevent future fiscal crises.
“However, the context in Singapore is very different. The ills which led to the need for IFIs in other systems are not present in our system and we continue to keep a very strict eye on our fiscal prudence,” she said.
Ms Indranee also pointed out Singapore’s strong financial standing, which include its AAA credit rating, running balanced budgets in each term of Government and barring major crises.
She went on to state that Singapore currently has a strong system to “scrutinise spending and debate budgetary matters without incurring the costs of setting up additional fiscal monitoring institutions”, such as the annual Budget debate and the Estimates Committee of Parliament, which checks the Government’s budget.
The Second Minister also pointed out that the Office of Budget Responsibility in the UK has been criticised for “overly optimistic forecasts and has had to downgrade its forecasts several times since it was set up”.
