SINGAPORE — Member of Parliament Associate Professor Jamus Lim recently wrote to the forum on local Chinese media, Lianhe Zaobao, to explain why the Workers’ Party’s position on the Singapore reserves is not equivalent to “leaving debts for future generations”.
The WP MP for Seng Kang GRC was replying to a forum writer, Lin Wenqing who had written a letter entitled, “Do not leave debts for future generations” on 15 November.
Mr Lin in his letter expressed his belief that Singapore is able to support citizens in difficult times such as what they are facing now because of the financial policies it adopts.
Noting that Asst Prof Lim had been against the 2 per cent hike in Goods & Service Tax (GST), Mr Lin suggests that WP’s counter proposals for the use of the Singapore reserves or government loan to finance the assistance packages are methods that would harm future generations.
Mr Lin further points to WP’s proposals to lower land costs for the building of public housing — in a manner that he describes as cutting one’s own flesh — as the misappropriation of the national reserves and sparing no concern for future generations.
Asst Prof Lim in his letter on 18 November, noted that Mr Lin might have misunderstood the policies put forth by him and his WP colleagues in Parliament.
“Neither I nor the Workers’ Party have ever suggested using borrowing to finance aid packages. Rather, my suggestion in Parliament for borrowing — when interest rates were low — was always for the purposes of investment.” wrote Asst Prof Lim.
He highlighted that the Government itself went ahead with such borrowing.
“In 2021, the Government passed the Significant Infrastructure Government Loan Act, allowing the Government to issue bonds to borrow up to $90 billion for major infrastructure projects lasting at least 50 years. These bonds are called Singapore Government Bonds (SINGA) bonds.”
As to the proposal to reduce land cost and build HDB flats, Asst Prof Lim explains that WP’s proposal is to incorporate the first 10 years’ of lease value for all leased land into the Budget.
This is how the government currently handles land with land leases of 10 years or less, wrote the WP MP.
“Furthermore, while the Workers’ Party has suggested alternative strategies for raising revenue, we should emphasise that altering the net investment reserve contribution (NIRC) is only one of the levers we have offered.”
“If altering this ratio amounts to irresponsibly reducing future reserves as some have suggested, then this claim would apply as well to the government, which increased the Net Investment Return ceiling in 2008, to the present level of 50 per cent.”
Asst Prof Lim points out slowing the rate of growth of reserves does not amount to “raiding the reserves” or “harming future generations”.
“It is like saying that reducing the number of meals someone eats from 6 to 5 times a day amounts to going on a diet.” wrote Asst Prof Lim.
Asst Prof Lim concludes his letter with an illuminating point, which is, in light of the largest drawdown of the Singapore reserves to deal with the COVID-19 crisis, the Government has been unwilling to state unequivocally that the reserves are not smaller today than before the pandemic.
If the reserves are smaller than it was before the pandemic, then it can be said that it is not sustainable for the government to rely on the drawing of the reserves to fund its expenditures.
But if the contrary is true, then the troubling question arises as to why the need to increase the GST and not tap the reserves to fund expenditures.
GST Would Have To Increase To A Higher Rate If More Reserves Were Spent In Past
On 21 November, Mr Chee Hong Tat also wrote to the Lianhe Zaobao forum to respond to Asst Prof Lim’s letter.
Mr Chee who is Senior Minister of State for Finance, wrote that it is regretful that Asst Prof Lim continues to repeat the inaccurate assertions made by him and his colleagues in Parliament.
He argues that the basic premise behind the WP alternative proposals to the 2 per cent GST hike, is to use more of the Past Reserves.
Mr Chee noted that the Government now uses up to 50% of the investment returns from the Past Reserves as revenues for the annual budget and that this revenue stream will only keep pace with economic growth over the medium to longer-term.
He goes on to state that WP is mistaken in its claims that there is no harm in spending more from Singapore’s reserves or investment returns, as GST would have to increase to a higher rate of 11 per cent instead of 9 per cent had more reserves been spent in the past.
