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Both the Workers' Party (WP) and the Progress Singapore Party (PSP) have painted a "false, distorted misleading" picture of Singapore's reserves, that it is being accumulated at the expense of the current generation, Finance Minister Lawrence Wong said in parliament on March 2.

Speaking at the Budget debates on March 2, Wong added that the two opposition parties had assumed that present fiscal rules had resulted in an accumulation of more reserves "than is necessary."

Wong added, "But that is not the case. Our reserves are growing but the size of our economy, the challenges we face and the complexity of needs are growing even faster."

Is it the right thing to turn to the reserves each time we need more funds?

Wong said that both the WP and PSP had suggested spending more from the reserves to meet rising expenditure.

The minister asked, "It is tempting to turn to our reserves each time we need more funds. But is this the right thing to do?"

Wong then noted that the Leader of the Opposition, Pritam Singh, had highlighted how the reserve's fiscal rules were amended in the past, to make the point that these rules could be "easily" amended again at present, to adjust the percentage that Singapore spends from the Net Investment Returns Contribution (NIRC), as an example.

Currently, the government is allowed to spend up to 50 per cent of the expected long-term real returns (including capital gains) from the net assets invested by the country's investment entities (GIC, Temasek and the Monetary Authority of Singapore).

Wong said:

"We have enshrined fiscal rules in our Constitution, to instil discipline in the government to spend within our means and maintain a fair and equitable balance between taking care of our needs today, and saving for the future needs of today's generations as well as for the generations to come.

As we have explained before, we last amended the net investment returns (NIR) framework in 2015. That was to include Temasek into the framework and this was done after a robust and thorough debate in this house. We should not, at the first sign of need, push for changes in the rules, just to take the easy way out and to avoid having to raise taxes to meet our growing recurring expenditure needs. That will not be the responsible thing to do."

Requests for more information about the reserves are "red herrings"

As for the argument about "insufficient information" concerning the reserves or to make fiscal projections, Wong said that a lot of information had already been published on the reserves, such as the key drivers of expenditure.

"What we do not disclose is the size of funds managed by GIC so as not to reveal the full size of our financial reserves. It is not in our national interest to do so. Our reserves are our strategic defence against threats. If we disclose this information, we will be making it easier for potential adversaries to use it against us."

Wong said he had explained why healthcare and social spending will increase as a percentage of GDP in the coming years, as a result of Singapore's demographic projections.

In addition, taxes are expected to "broadly" keep pace with the country's GDP.

"So there is clearly a structural funding gap as our spending needs rise," Wong added.

Wong then said that he could not help but feel that "persistent requests" for more information were "red herrings" that distracted from the key problem at hand: strengthening Singapore's various tax measures to meet the structural growth in expenditure in the coming years.

In response, Singh said that such questions by the opposition about revenue and expenditure projections could not be dismissed as "red herrings" given that these projections are present in many jurisdictions such as Hong Kong, which has a medium-range forecast up to fiscal year 2026/27.

"You've got assumptions, of course, you're projecting into the future. So it can't be perfect, and I think people will give the government buffer and leeway for that. But that's incredibly important."

The WP leader further posited that producing such information could help reduce the prospect of individuals mischaracterising positions, and result in a more fruitful debate.

Here, Wong said that he accepted Singh's point and said that he was not attempting characterise the call for additional information unfairly.

He said that he was sharing his feelings about the repeated requests for informations as "perhaps distracting us from the real issues". He added,

"I accept Mr. Singh's clarification and I assure him, you have my commitment that we will continue to put out more information as much as possible in order to provide for more informed debates. And I hope he also takes what he said seriously that the opposition will also exercise leeway in recognising that these projections in the outer years are inherently fraught with a great deal of uncertainty especially for a small little open economy like Singapore."

Risk for reserves are "tilted on the downside"

The minister also highlighted that the risks to Singapore's reserves are "tilted on the downside."

Singapore has withdrawn S$37 billion from the past reserves in the previous two years and is continuing to do so this year to keep up public health defences, he said.

Responding to questions about returning the sums that have been withdrawn, he replied:

"Well, we are in a better position now but we are not out of the woods yet. And I would say we will not be able to put back what we have drawn down from the past reserves anytime soon."

Wong then noted that WP MP He Ting Ru had suggested that by saving for the future, Singapore is discounting the needs of the current generation.

He responded:

"This is not so. Our fiscal policy, including our reserves protection framework, keeps faith with all generations current and future. We have drawn on past reserves to protect the lives and livelihoods of the current generation throughout crises.

We are also tapping on the NIRC to fund many programs for the current generation, from the young to the old, and especially for the Merdeka and the Pioneer generations. At the same time, we need to consider the needs of the future generation. Do we really want to leave our next generation with fewer resources in a more uncertain and volatile world?"

If predecessors had focused on spending instead of saving, GST would have to rise to 11 per cent

The minister gave the following example:

"To illustrate, if we were to have just 20 per cent less NIRC than today's levels — which could easily have happened if our predecessors had focused on their own spending and did not think it necessary to have a carefully designed reserves protection framework — our GST would now need to increase to 11 per cent instead of 9 per cent to make up for the funding gap. So drawing more NIRC now means that our children and next generation will end up paying more taxes."

Wong also cited a "less hospitable" world for small states, rising sea levels, global warming and increasingly frequent public health emergencies as the future challenges facing Singapore.

"So what about us now? What should our attitude be? I say we continue to husband our reserves, keep faith with the generations after us and ensure that they too will always have access to this rainy day fund to meet any emergencies and importantly, a steady stream of income for their future needs."

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