During the Ministry of Finance Committee of Supply debate on Feb. 26, Workers' Party (WP) Member of Parliament Jamus Lim proposed setting up an independent fiscal council.

A fiscal council serves to provide assessments of fiscal plans and performances. It also evaluates and provides macroeconomic and budgetary forecasts.

Lim: Proposed for a Parliamentary Budget Office of Singapore

Such roles would already be performed by the Ministry of Finance to some degree, said Lim.

However, he stressed that the fiscal council is independent, and it only provides non-partisan advice about how various policy proposals will affect revenue and expenditure to Parliament:

"As such, the council would be available to scrutinise policy proposals offered by PAP backbenchers, as well as opposition parties."

Fiscal councils are not uncommon worldwide, especially in advanced economies. Some of the examples that Lim brought up are:

1. The Bureau for Economic Policy Analysis in the Netherlands
2. The Congressional Budget Office in the United States
3. The Parliamentary Budget Officer in Canada
4. The Office for Budget Responsibility in the United Kingdom

According to Lim, there is evidence that fiscal councils can improve fiscal performance, especially when they have legal and operational independence, are tasked with monitoring fiscal rules, and supported by a "robust media presence."

He added that such a council can be very useful at this point in time, when Singapore is running its largest budget deficit since independence, hence subjecting the fiscal effect of policy proposals to independent deliberations.

"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 S$20 million, and tasked with the mandate to score all major policy proposals formally advanced by Members of Parliament, for budgetary and macro implications."

The idea for such an office or council was also mentioned by WP leader Pritam Singh during his Budget debate speech.

Indranee: No need for additional fiscal monitoring institutions

In response, Second Minister for Finance Indranee Rajah said that many of the fiscal councils — which she referred to as Independent Fiscal Institutions (IFIs) — around the world were set up in response to the Global Financial Crisis in 2008 and 2009 with the main intent of preventing 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."

Indranee listed examples of Singapore's strong financial standing — our AAA credit rating, running balanced budgets in each term of Government, barring major crises.

She added that Singapore has a strong system in place to "scrutinise spending and debate budgetary matters, without incurring the costs of setting up additional fiscal monitoring institutions", including the annual Budget debate and the Estimates Committee of Parliament, which examines the Government's budget.

Indranee also brought up the Office of Budget Responsibility in the UK which had been criticised for "overly optimistic forecasts and has had to downgrade its forecasts several times since it was set up".

The budget office was also the reason for a heated debate between Indranee, Deputy Prime Minister Heng Swee Keat, and Singh during the end of the Budget debate.

You can watch the full Parliamentary sitting for Feb. 26 here:

Top images via MCI/YouTube.