On Friday, June 5, 2020, Deputy Prime Minister and Finance Minister Heng Swee Keat delivered the Round-up speech for the Fortitude Budget.

He spoke extensively on the purpose behind the latest budget, the government's response to the Covid-19 outbreak, and responded to queries from several Members of Parliament (MP) during his speech.

• Helping Singaporeans retain jobs is a top priority, and although a rise in unemployment is unavoidable, the government will support all Singaporeans during the crisis.
• Coming up with the budget is not a straightforward task; some feel that the government has spent too much, while others feel the opposite.
• While the President has full information regarding the size of the reserves, it is unwise for this to be public information, as the reserves are a key strategic asset.
• Singapore has weathered many challenges since its independence. The nation will fight the crisis from a position of strength, and will emerge stronger from it.

Here, we reproduce certain extracts of his speech:

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By Heng Swee Keat

Mr Speaker, Sir, I thank Members of this House for your support and participation at this debate on our Fortitude Budget. We have spent many hours raising many points so I would not be able to address every point.

But I will take them up and my Ministry colleagues will follow up later. In rounding up this debate, let me start with sharing my perspective on the nature of this crisis, and the global and historical context.

COVID-19 is a global crisis of our generation. Within six months, WHO estimates that the Coronavirus has infected 6.4 million people, claimed over 380,000 lives, disrupted lives and livelihoods and closed borders worldwide.

Never before have we seen a global lockdown of this scale. The pandemic has exposed vulnerabilities in global supply chains, accelerated digitalisation and technological changes, and fragmented global markets.

Ms Denise Phua and several other MPs asked about the global outlook. The road to recovery will be long, as we deal with persistent economic impact on workers, jobs, and business. Beyond economic costs, there will be immense human and social costs.

The world took eight to 10 years following the Great Depression and Global Financial Crisis to recover to pre-crisis unemployment levels, and we should not be surprised that it takes as long, if not longer, to bounce back from the effects of COVID-19.

The First World War had a lasting impact on the employment prospects of a “Lost Generation” of youth in western economies, stripping them of a sense of hope and

direction.

There is now talk of a global “Lockdown Generation”, and fears that the youth of our time could have their skills, employability, and incomes permanently affected, even after the world recovers from the pandemic.

We must work to prevent a “COVID Generation” of workers and students in Singapore.

Over S$72 billion is spent on helping Singaporeans keep their jobs

Government interventions have become the cornerstone of the COVID-19 response, as populations look towards the one institution that can organise and mobilise. There has been a “flight to leadership”.

Administrations, regardless of where they sit on the political spectrum or their belief in government intervention, have responded with substantial support packages. Some have also stepped in to support distressed corporates, from airlines to car-makers.

We too have mounted a strong response, because lives and livelihoods are at stake. We are committing almost S$100 billion, or close to 20 per cent of our GDP, to our COVID-19 response.

Adding the COVID-19 response to our usual spending, the total size of our four Budgets stands at S$193 billion. This is more than double the size of our annual Budgets in preceding years.

In other words, we are looking to spend in one year what we would have done in two years or more in normal times. This is a very big commitment!

Beyond the size of headline numbers, what matters even more is whether resources are directed to the right areas, to enable our people and our economy to rebound faster and stronger. Design and implementation are critical.

The measures in our four Budgets have been designed to not only respond to the crisis, but to also enable Singapore to emerge stronger. The measures aim to protect lives and livelihoods; to deal with immediate concerns and to build for our future.

We have put our people at the centre of our Budgets. Our measures on protecting livelihoods centre on helping people to stay employed, and businesses to stay viable. The fortunes of workers and businesses are intertwined.

By keeping the economy stable, we strengthen social resilience. By investing in upgrading the skills of our people and transforming our businesses, the economy can recover more strongly.

This is why over S$72 billion, or close to 80 per cent of that S$93 billion for the COVID-19 response, is committed to helping our workers stay in their jobs, and supporting our businesses and their employees, which in turn support social resilience. As our Labour Movement firmly believes, a job is the best welfare.

The remaining goes to public health and social support measures, to supplement and strengthen the significant investments made and structural measures already in place.

Unemployment likely to rise above 100,000 in 2020

COVID-19 will take a lasting toll on the quantity and quality of jobs worldwide, despite countries’ best efforts to mitigate the impact.

The International Labour Organisation has estimated that COVID-19 could raise global unemployment numbers by “far higher” than 25 million.

This is worse than the 2009 Global Financial Crisis, which saw additional global unemployment of some 22 million workers.

For Singapore, the highest annual average number of unemployed residents on record was registered during the 2003 SARS epidemic, at 91,000 unemployed residents. The impact of the COVID-19 pandemic is widely expected to be more severe than SARS, with the number of unemployed residents potentially rising from around 73,000 in 2019, to above 100,000 in 2020.

The economic fallout of COVID-19 goes beyond unemployment numbers. Even those who keep their jobs may suffer under-employment and significant income loss.

This could lead to a vicious cycle where income loss reduces consumption, and affected businesses further reduce labour demand.

The human and social effects of unemployment and under-employment are no less debilitating.

For many of us, having a job means more than getting paid. Through our jobs, we are connected to the workings of the world and to other people, and we take pride in being a contributing member of society.

At a personal level, losing a job can lead to a loss of identity, confidence, and dignity.

This is why, when COVID-19 struck, our top priority is to provide fiscal resources to help workers stay in their jobs. The SGUnited Jobs and Skills package seeks to not only grow pathways to jobs, but also equip workers and their firms with capabilities for the coming years.

But despite our best efforts, we cannot possibly save every job. Many sectors were already facing disruption before COVID-19. For workers who are displaced, you have our assurance that if you make the effort, our tripartite partners will support you to tide through this difficulty.

Crisis budgeting is not straightforward

I have explained our immediate priorities to support jobs and livelihoods, and why we need to accelerate transformation. Let me now respond to Members’ comments on our approach to fund such measures through our four Budgets.

I thank many Members for recognising that Singapore’s fiscal response has been timely, comprehensive and decisive. And that it is commensurate with the widespread and unprecedented impact of the crisis.

Our strong response is projected to stabilise economic activity during this difficult period, and position Singapore for recovery.

Based on a recent study by MAS, our four Budgets are estimated to help our economy avert an average output loss of 5 percentage points, or S$23.4 billion per year, over 2020 and 2021. This is significant.

As Mr Alex Yam mentioned, some are of the view that we have spent too much, while others think it is too little. These contrasting views show that crisis budgeting is anything but straightforward.

These decisions have been made after careful deliberations, based on the best information available at the time. As the COVID-19 situation develops, we have continued to enhance and refine our schemes, as evidenced by our four Budgets.

Even then, let us stay vigilant – as I said at the outset, we are facing unprecedented levels of uncertainty across various fronts.

Mr Liang Eng Hwa, in opening the debate, highlighted a distinctive feature of the Fortitude Budget – that we are setting aside an additional S$13 billion in the Contingencies Funds.

Such contingency budgeting reflects both the unprecedented levels of severity, as well as uncertainty, of this crisis.

Mr Liang asked if the Government can provide an indication of how the funds may potentially be used.

As designed, the Contingencies Funds can be drawn upon if there is a need to do so. And as designed, we have not designated specific purposes for the Funds.

In sizing it, we have run some “what if” scenarios, including the possibility that we may experience a setback in our fight against COVID-19 or the global economy does much worse than currently expected.

So unlike our usual annual Budget, where we seek to provide as much details as possible, we are setting aside a sum to meet future events or circumstances that are possible, but for which we cannot yet predict with certainty.

This is indeed a special feature to allow us to respond swiftly to unforeseen developments. I thank Mr Liang for pointing this out.

Safeguards exist for the use of the Contingencies Funds

Mr Pritam Singh asked about the governance around the use of Contingencies Funds.

The use of Contingencies Funds is not new. We have used it every year to meet urgent and unforeseen needs. With greater uncertainties this time round, it is natural for us to cater for a bigger quantum.

The Singapore Constitution includes safeguards over its use.

First, the Government will need to seek President’s concurrence for drawing down the Contingencies Funds.

Second, these drawdowns must be replaced through a subsequent Supplementary Supply Bill or a final Supply Bill that have to be presented to and voted on by the Parliament, before seeking President’s assent.

This provides additional checks and balances over new spending from the Contingencies Funds. We will continue to ensure judicious use of the Contingencies Funds for urgent and unforeseen needs.

When the uncertainty subsides, we can reduce the amount set aside in the Contingencies Funds.

Several Members have also pointed out another exceptional feature of our Budgets this Financial Year – the draw on Past Reserves.

For most countries, borrowing is the only way to fund their large stimulus packages. This increases the risk of unsustainable debt financing, which has severe consequences for the economy in the long run.

Countries that have taken on significant additional debt to pay for their support measures will have to find ways to repay the debt and interest accrued.

Future generations will be required to shoulder this debt, in the form of higher taxes, higher inflation, or lower returns on their retirement assets.

Future generations will also be affected in other ways. In order to service debt repayment, there will be less fiscal room to invest in human capital or infrastructure. The “Lockdown Generation” in these countries will end up paying for this crisis a long way down the road.

Unwise to reveal the full size of reserves as it forms a strategic defence against threats

We are fortunate that in this hour of crisis, we have our national reserves to depend on. Our reserves allow us to deal with this crisis from a position of strength, and give us options in a period of uncertainty like this.

Our reserves are our rainy-day fund. Mr Vikram Nair likened our reserves to a “Golden Goose”, painstakingly built up since our independence.

Such prudence and discipline are not always appreciated. We have had vigorous debates in this House, on whether the Government could afford to spend more freely from reserves, instead of running budget surpluses.

Even as recently as January this year, before the Unity Budget was unveiled, many commentators inside and outside of this House speculated on how large our accumulated reserves would be.

Yet, it took us just three months into FY2020 to use up the accumulated surplus that we had built up over the current term of Government, since the start of this term of Government. Even that is not enough.

Mounting COVID-19 packages amounting to nearly S$100 billion, of which more than half is funded from the reserves is not a trivial matter, especially when our yearly budget is about S$80 billion.

The total of our four Budgets, including the COVID-19 packages, is more than double the size of our annual Budgets in preceding years. Our reserves are a limited resource, and we must not take them for granted.

Mr Faisal Manap and Mr Dennis Tan asked if the President was given information on the amount available in the reserves when the Government sought her in-principle support for drawing on them.

I am surprised that both Mr Faisal and Mr Dennis Tan had to ask. It is public information that under our Constitution, the President has access to information about the size of reserves.

Under Article 22F of the Constitution, in the exercise of her functions under the Constitution, the President is entitled to any information regarding the reserves.

In addition, on the MOF website, it is already mentioned that the President has full information about the size of the reserves.

In the process of seeking President’s approval, the Government has conducted two briefings to President and the Council of Presidential Advisers. These briefings covered the Government’s assessment of the global and local health and economic situations, the details of the measures, and the resources needed.

Ministers Gan Kim Yong, Chan Chun Sing, Lawrence Wong, Indranee Rajah, were with me.

In our system, the President is the custodian of our Past Reserves. She needs to concur with any draw, and her decision is made in full knowledge of why the draw is necessary, and the size of our reserves.

In fact, Members have also heard the President’s message in the Resilience Budget, delivered on her behalf by the Speaker, just before my Ministerial Statement then. We have a strict governance system scrupulously observed.

Now, some have also asked why the Government does not reveal the size of the reserves and let the public decide if we should use more.

As Mr Vikram Nair has noted, the size of the reserves invested by MAS and Temasek is public information. But the amount invested by GIC is not disclosed. As I had explained to Members of this House during my last round-up speech in early April – it is not in our national interest to reveal the full size of our reserves.

Besides being a buffer against crisis and providing investment return to supplement our annual Budget, our reserves also form our strategic defence against threats. And as a strategic asset, we will be diminishing its value if we disclose this for potential adversaries to use against us.

No responsible leader will lay bare their nation’s defence plan.

Singapore is fighting this crisis from a position of strength

Our circumstances have changed over the years, but the Government’s aspirations for Singapore have not. It is to be a place where our people, regardless of race, language or religion, can build a better life.

This is not the first crisis that Singapore has faced. Nor will it be the last. Past generations of Singaporeans have weathered numerous challenges.

What about our generation? How will we respond to this crisis of a generation? Each generation’s crisis, and response, is different.

The one constant is how we have persevered with fortitude and emerged stronger. This time, there will be huge uncertainties ahead. But we will continue to persevere, and we will once again emerge stronger.

We are fighting this battle from a position of strength.

We have a strong fiscal position. Our founding generation left us a legacy of a sizeable reserve, which we must continue to treasure and build on.

We have strong social reserves, supported by mutual trust, close partnerships, strong values, and a sense of mutual responsibility and support.

We will overcome this crisis with fortitude and solidarity.

We will emerge stronger, as an economy, as a society, and as one united, resilient and determined people.

Top image from Gov.sg's YouTube.