Lawrence Wong
Singapore
“Sir, we will provide more information. I see the value of getting Ministries to put out more information, to share more about how their resources are being used and what outcomes they have achieved.”
“Sir, I agree fully with Mr Azhar that human capacity, human capital is critical. In fact, I would say the long-term potential of Singapore, how far we go really depends on us being able to maximise our human potential. That is key and that is why we have long invested in education. And it is not just about the investments.”
“Sir, we have been maintaining that commitment of 1% for some time now. I do not think it is about saying that we just have to do more and spend more. As many have highlighted, we want to ensure good outcomes from our R&D spending as well. So, we will continue if the outcomes are good.”
“This has never been the case. Temasek, when it started, was always very clear about its mandate from the very beginning – commercial, not doing national service, focused on commercial outcomes.”
“Sir, the MOF economists when they look at fiscal projections use Government's forecast of the economy, which is also published. We would typically use the mid-point of the range and then, of course, because these are in nominal terms, you have to factor for that. And the projections are done on those basis.”
“Sir, I was relieved that Mr Loh said he only has one question, but he asked the most difficult question. To answer the question, we will continue to monitor cost of living across all segments of society.”
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“The strong investor demand received during the inaugural Singapore sovereign green bond issuance also affirmed the market’s confidence in our framework and the green credentials of our projects, including the Cross Island Line. To provide transparency to investors and the public, the Government will publish annual reports on the allocation and impact of the green bonds, in accordance with the framework.”
“Prior to embarking on any development project, the Government undertakes a thorough review of the project's potential impact on various factors including the environment, traffic, public health and heritage, before a decision is made to proceed. The Government works closely with various stakeholders such as nature groups and other agencies to mitigate potential risks and impacts. This is undertaken regardless of whether the project is financed by bond issuance under the Singapore Green Bond Framework. The planning process for the Cross Island Line follows this approach. The impact of the Cross Island Line on the environment has been addressed previously in this House. Environmental Impact Assessments have been shared with the public and will continue to be shared when such studies are conducted for the Cross Island Line. Agencies will study views gathered during the feedback period and incorporate further measures where possible to mitigate potential environmental impact. The Singapore Green Bond Framework sets out additional requirements for projects financed using green bonds issued by the Government, guided by market best practices. This includes specific and stringent eligibility criteria for green projects. For instance, the Cross Island Line qualifies as a green project under the "Clean Transportation" category as it is an electric rail line with zero direct emissions. Our Green Bond Framework was independently assessed by an external reviewer to be credible, impactful and aligned with international standards. The framework and external reviewer’s report can be readily found on the Ministry of Finance (MOF)'s website.”
“More information can be found in MAS' Sustainability Report and the Sustainability chapters in GIC's Annual Report and the Temasek Review.”
“The European Central Bank intends to decarbonise its corporate bond holdings by tilting its exposure to companies whom they assess to be doing better in mitigating climate impact. This is part of its broader commitment to take into account climate-related financial risk in the Eurosystem's monetary policy framework. The Monetary Authority of Singapore (MAS) and the investment entities have integrated sustainability considerations in their investment processes across a range of asset classes, not just limited to corporate bonds. They consider climate risks in their investment strategies and calibrate these strategies to mitigate climate-related risks based on their investment portfolios. MAS will exclude from its portfolio the equities and corporate bonds of companies that derive more than 10% of their revenues from thermal coal mining and oil sands activities. It will also customise its equities benchmark to gradually tilt its portfolio towards exposures that are less carbon-intensive and more aligned with the low-carbon transition over time. GIC contributes to the global decarbonisation by investing in companies which develop solutions that help to accelerate the low carbon transition in the real economy and supporting existing companies in their transition towards more sustainable business practices. As part of Temasek's plans to achieve a decarbonised and carbon-efficient portfolio, some of the actions it has taken include investing in businesses and funds that support decarbonisation and engaging its major portfolio companies on their climate transition plans. While the Government does not prescribe individual investment actions, MAS and the investment entities will continue to emphasise sustainability in their investment strategies and processes.”
“Sir, the conversations and engagements around section 377A had started earlier, even before we started the Forward Singapore exercise. And it was a result of these engagements and conversations that led to the Government's announcement of what it hopes to do at the National Day Rally this year. So, we do not intend for section 377A and the issues around it to be a key part of our Forward Singapore platform, because these started after the conversations had already begun. But, of course, if there are views around society and our values and Singaporeans feedback this to us through our engagements and conversations, we will take in all of the feedback as part of the Forward Singapore engagements. Second, on the process and what we will do to put down and publish the conversations that we had with Singaporeans – whether it is a White Paper or whether there are other platforms – we will review and study what are the suitable platforms. We will not rule out having some mid-term milestones where we might very well decide to compile, consolidate some of the feedback and respond to them earlier, even before the end of the exercise. For example, we have the Budget next year. So, when we engage Singaporeans through Forward Singapore over the course of the next few months, we might very well use the Budget next year as an interim milestone where we can compile the views and feedback from people and then respond to them with some announcements without having to wait all the way till the end of the exercise. But, certainly, by the completion of the exercise, we will find suitable platforms in which we can pool together all the feedback, suggestions and ideas we have collated and make sure that these are adequately surfaced through appropriate means.”
“Some of these engagements will be held in our neighbourhoods and some in vernacular languages and different formats to better reach out to Singaporeans of different needs and preferences. These engagements will allow us to reflect on our values today and what we aspire to be in the future. They will sensitise us to the choices we have to make as a people, for ourselves, as well as the longer-term interest of future generations. Second, we will invite people to go beyond just giving views, to also co-develop and implement solutions and policies together with the Government. For example, approaches like Citizens' Panels and Alliances for Action (AfA) bring people together to deliberate on issues they feel strongly about and, after robust discussions with one another and experts, recommend policy ideas to the Government. Through AfA, stakeholders can also come together to take direct action in designing and implementing solutions. I welcome members of the public and organisations to register their interest to participate in these sessions through the Forward Singapore website. We plan to complete the exercise by the middle of next year. We hope to partner Singaporeans from all walks of life for this Forward Singapore exercise because everyone has a role to play, to build a better Singapore for all.”
“Mr Speaker, Forward Singapore is an exercise to refresh our social compact for Singapore's next bound of development. This involves reviewing our existing assumptions and ideas on making Singapore a better home for our people, to see whether they remain valid. It also involves generating new ideas and policy thinking to address our challenges and seize new opportunities. Since we launched the exercise in June, the response from Singaporeans in the many conversations with the 4G leadership team has been encouraging. We have received, from Singaporeans, many useful insights for policy formulations, suggestions of solutions and offers for action, all of which will help us build a better and stronger Singapore together. We have been working on three broad themes: how to create more opportunities for Singapore and Singaporeans; how to provide better assurances for Singaporeans in a more uncertain future; and how to strengthen our sense of solidarity as one people. Besides these three themes, we are also deliberating over the shared responsibilities that individual Singaporeans, families, communities and companies, should uphold as part of the refreshed compact, so that we can better tackle the challenges ahead and seize new opportunities for Singapore and for our people. Over the next few months, we will deepen our conversations and partnerships with Singaporeans. We intend to do so in two ways. First, there will be more engagements for people to offer their own views and ideas, as well as to hear from others. These will span a wide range of topics, such as how to strengthen employability and create good jobs, make our living environment even better, strengthen our bonds to Singapore and with one another, and environmental sustainability, amongst others.”
“The Government will provide funding to Town Councils to absorb the additional GST payable on Service and Conservancy Charges. This was announced six months ago by the Deputy Prime Minister and Minister for Finance in the Budget Statement delivered on 18 February 2022. Details of the additional support to the Town Councils were conveyed to them by MND on 31 August 2022.”
“The Government Financial Statements provide information on the Government Securities Fund, including a breakdown of the outstanding borrowings issued under the Government Securities Fund. Details are included in section 1 (VII) of the Government Financial Statements for the Statement of Government Securities Fund.”
“The Statement of Assets and Liabilities (SAL) records the Government's gross financial assets, comprising cash and investments, that are set aside in deposit accounts and funds that are established in accordance with the laws governing them. Government assets managed by GIC, as well as Government investments in Temasek, are recorded in the SAL, according to its basis of preparation.”
“The Government provided significantly more support to businesses in 2020 and 2021 due to COVID-19, than in 2019 before COVID-19. Table 1 below provides the breakdown for the past three years.”
“The Government remains committed to supporting Singaporeans who want to get married and have children, and will continue to review our policies and schemes to build a Singapore that is Made for Families.”
“The personal income tax relief cap was introduced to enhance the progressivity of Singapore's tax system. Today, we have 15 personal income tax reliefs, and each serves a worthy objective. But taken together, the total amount of reliefs claimed may unduly reduce the taxable income for a small group of taxpayers with high income. The current relief cap of $80,000 affects only 1% of our tax residents. For the remaining 99% of tax residents, their cumulative tax reliefs do not exceed the cap. Nine in 10 mothers who claim the Working Mother's Child Relief (WMCR) are not affected by the cap. Eight in 10 mothers who claim WMCR on two or three children are similarly not affected by the cap. Given that the total reliefs of the vast majority of working mothers do not even reach the current cap of $80,000, raising the cap to $100,000 would not be of assistance to them. Therefore, looking beyond tax reliefs, the Government provides a comprehensive suite of measures to support Singaporeans in parenthood. Many of these benefits have been enhanced over the years. These include: (a) Baby Bonus Cash Gift of up to $10,000; (b) Government contributions of up to $18,000 to the Child Development Account, comprising the $3,000 First Step Grant and up to $15,000 in Government matched co-savings; (c) $4,000 MediSave Grant for newborns; (d) Significant subsidies for education and healthcare for all children. For instance, all Singaporean children can receive over $180,000 of education subsidies by the time they turn 16 years old, including preschool; (e) 16 weeks of Maternity Leave, two weeks of Paternity Leave, and up to six days of paid Child Care Leave per parent per year; and (f) Concessionary Migrant Domestic Worker Levy.”
“Sir, that was exactly the point I was making just now in my reply, which is that we are looking and monitoring very closely at income growth of the different segments of society, taking into consideration the rollout of PWM, Workfare and all of these measures; and then looking at how higher inflation is impacting each of these segments. We fully understand that higher inflation disproportionately impacts the lower-income groups. Which is why our measures have already taken that into consideration and we give a lot more help to the low-income groups, both in our Assurance Package as well as in the cost of living package which we designed and rolled out in June this year. After taking all into consideration, we are monitoring, we are looking at the latest figures. And as I mentioned just now, if there is still a gap that some groups face, in terms of difficulties coping with higher inflation, even after taking into account all the different packages and measures, we will certainly consider doing more to help these families cope through these challenging times.”
“Sir, it is still too early to tell. For FY2022, for example, these are still early days and there will be revenue fluctuations from month to month as well as expenditure fluctuations from month to month. These things are not – you cannot just project a straight line every month and assume that it is a constant trajectory. So, we will continue to monitor closely. Our aim is not to accumulate a surplus. Let us be very clear about this. Our aim is to run a balanced budget over the medium term. That is our consistent fiscal policy. And should there be revenue upsides, I think that is a plus for us because if the economy does better than we had projected, we should take comfort that we are in such a situation rather than the reverse situation. At the same time, if the economic situation worsens, as we have said, we will be prepared to do more to support and help Singaporeans. We are monitoring this very closely. We are looking at Singaporeans' income growth across all the different segments and comparing with the higher inflation that they are experiencing to see where the gap is, after taking into consideration the transfers and help measures that we have provided. And if there is indeed still a gap, if there are still groups in Singapore facing pressures, then, we will certainly consider doing more to help them cope with this difficult period.”
“Sir, if anyone has a way of predicting property prices, please let me know. Frankly, no one I know can predict what property prices would be next year. And all the market observers never expected the property market to recover as strongly as it did. So, that is fundamentally always going to be a very difficult revenue item to predict because it depends on asset prices and asset prices are volatile and very hard to predict. The rest of the revenue estimates are based on GDP, largely related to economic growth – could be income growth as well as consumption growth. These are, I would not say, easier to predict, but less volatile than asset prices. But still, there is a high degree of uncertainty given how small and open Singapore economy is. If you look at all our economic forecasts of growth at the start of the year and you compare with the actual out-turn, even the best of professional forecasters do not get it right all the time, because Singapore's economy is just so small and open and subject to external demand fluctuations. So, these are the considerations we have when we look at economic forecasting as well as revenue forecasting. We will continue to see how we can do to improve. But I hope Members understand the inherent challenges because of our unique structure and circumstances.”
“We also need to accelerate our economic and green transformation and shore up our resilience in essentials like food and energy amid global economic uncertainty. As Members would remember from the Budget Statement this year, we expect our Government expenditure which now stands at 18% of GDP to rise to 20% or more GDP by 2030. And this is why I had introduced a slate of revenue measures in Budget 2022. These will provide us with the resources we need to meet our longer-term priorities in a responsible manner. We will proceed with these measures, including the GST increase as planned. But as I have assured Members previously, we will also ensure that the majority of Singaporean households will not feel the impact of the GST increase for at least five years, while lower-income households will not feel the impact for about 10 years. That was the assurance we gave in the Budget. We will uphold this commitment even with the inflationary outlook and will further enhance the Assurance Package if necessary. Sir, prudent management of our finances has been one of Singapore's strengths. It has allowed us to emerge stronger from COVID-19 and will allow us to continue to meet our collective aspirations and to seize every opportunity that comes our way. Let us continue to steward our resources responsibly and sustainably, and leave behind a stronger and more resilient Singapore for our future generations than what we had inherited from our forefathers.”
“And as announced at Budget this year, the Government will also spend about $9 billion on transitional wage support to businesses and Workfare enhancements, as part of our commitment to help workers achieve broad-based and sustainable income growth. Let me now address the second point which is on tax revenue in FY2021. We experienced revenue increase of more than 22% in FY2021 and this sharp increase is partly due to a lower tax base in FY2020 arising from the impact of the pandemic that year. But more importantly the increase was also driven by higher-than-expected collections of sentiment-based revenue. In particular, stamp duty collection accounted for the largest share of the tax revenue increase in FY2021. The property market has recovered at a much faster rate than many market observers had anticipated. But just as a bullish property market can provide upsides, there can also be downsides in a muted market, as past experience has shown. We therefore cannot rely on such sentiment-driven collections, which can fluctuate from year to year, as a stable and sustainable source of revenue to meet our rising recurrent expenditure needs. We have used the higher tax revenue in FY2021 to support new spending needs, including the enhancements to the Progressive Wage Credit Scheme, as well as to provide short-term relief for businesses and families. These include our COVID-19 support packages during periods of heightened restrictions last year and measures to help Singaporeans with cost of living support this year. Sir, our spending needs are growing, largely driven by higher healthcare expenditure as our population ages.”
“Sir, Members have asked whether tax measures can be deferred in view of two considerations. First, the concerns with inflation, and second, the increase in tax revenue in FY2021. I will address these two considerations in turn. First, the Government shares Singaporeans' concerns over inflation. Over the past decade, Singaporean workers have experienced real wage growth. Wages have exceeded inflation. We do not have real wage growth figures for 2022 yet, as the data will only be available later this year. But we know that inflation has gone up in this year and that is why the Government will continue to provide support for Singaporeans to mitigate the impact of higher prices. Besides the measures in Budget 2022, we had announced a $1.5 billion support package in June, with more support given to the lower-income and vulnerable groups. While we deal with these immediate cost pressures, we have also been working with employers and unions to help our companies and workers become more productive and competitive. This is important to sustain real wage growth over time. We will also continue to uplift the wages of lower-wage workers by expanding the Progressive Wage Model to more sectors and to raise the wages of lower-wage workers along with enhancements to their skills and productivity. To help businesses adjust in this challenging economic environment, the Government is providing a transitional support of up to 75% for employers to pay their workers progressive wages. That is an increase from the previous level of 50%. This was enhanced in June as part of the $1.5 billion package.”
“Mr Speaker, may I have your permission to take the Question Nos 35 to 37 together, as they are related?”
“MOF economists had done an update of the studies cited and the findings were published in the book, "Economics in Practice: Evidence-Based Policymaking in Singapore", in December 2021. We will continue to publish relevant papers and indicators on the MOF website. The Government also continues to monitor social and other trends, and welcomes researchers and academics to conduct additional studies to further our collective understanding. Researchers who require resources for their studies in this area can consider applying for research grants, such as those administered by the Social Science Research Council.”
“Whole-of-Government (WOG) Period Contracts and Framework Agreements are demand aggregation (DA) contracts that cater for common buys across agencies, by appointing a panel of vendors that agencies can choose to buy from. The aim is to improve the efficiency of the bidding and evaluation process, and enhance value-for-money via DA. The number of vendors on the panel of a WOG DA contract depends on the nature of the procurement contract. There are some panels with a single vendor as the vendor can sufficiently cater to agencies' needs for a particular product or service during the contract period, and there are also panels with more than 20 vendors appointed. Regardless of the number of vendors on the panel, all of them would have gone through a competitive tender process before being appointed to be the panel. In choosing a vendor from the panel, agencies should award to the vendor that best meets their requirements at a suitable pricing. The share of contracts awarded to each vendor is not a criterion that the agency would consider when it selects its vendor. Hence, it is not meaningful for MOF to set targets for the share of procurement awarded to vendors participating in WOG DA contracts. The WOG DA contracts are open to both large companies and SMEs in Singapore. The key consideration for being awarded DA contracts is not the size of the company, but their ability to deliver cost-effective services. Currently, SMEs make up approximately 75% of all vendors on the panels and are awarded more than 85% of the procurements through these contracts.”
“The GST Voucher (GSTV) scheme helps lower- and middle-income households defray their GST and daily living expenses. The number of recipients vary from year to year as the circumstances of individuals may change. About 88,000 Singaporeans who received GSTV – Cash in 2021 will not be receiving GSTV – Cash in 2022. This number includes individuals whose incomes have increased, who have moved to higher-value private properties, who have moved overseas, or who have passed on. At the same time, about 218,000 Singaporeans are newly eligible for GSTV – Cash this year. This is due to changes in their circumstances and the enhancements to the eligibility criteria as announced at Budget 2022. The Government expanded the GSTV – Cash Assessable Income qualifying threshold from $28,000 to $34,000. In all about 130,000 more Singaporeans will receive GSTV – Cash in 2022 as compared to 2021.”
“The Singapore Institute of Surveyors and Valuers (SISV) and the Institute of Valuers and Appraisers, Singapore (IVAS) have different areas of specialisation. SISV focuses on matters relating to the valuation of real estate and immovable property, while IVAS focuses on the valuation of businesses and intangible assets. The Appraisers Act provides for the licensing of appraisers for the valuation of real estate and immovable property, including land. As IVAS focuses on business valuation, which is not regulated under the Appraisers Act, it would not be appropriate to recognise the Chartered Valuer and Appraiser (CVA) designation that IVAS confers, for purposes of the Act.”
“Employee Share Options (ESOP) plans awarded or granted to an employee while he is exercising employment in Singapore is part of his employment income here. This is because such ESOP gains are gains derived by reason of his office or employment here. Like other employee benefits, an ESOP is considered part of the employee’s compensation package. Generally, ESOP gains are taxable in the year in which the ESOP is exercised. The difference between the market price of the shares on the day of exercise of the ESOP and the exercise price paid for the shares, constitutes the employee’s employment income, which is subject to personal income tax. If there is a moratorium imposed on the selling of shares after the ESOP is exercised, the difference between the market price of the shares on the day the moratorium is lifted and the exercise price paid for the shares, constitutes the employee’s employment income, which is subject to personal income tax. An employee should make an informed decision whether to exercise the ESOP, taking into account tax- and non-tax factors, including the future share price outlook. After exercising the ESOP, the employee then chooses whether, and when, to sell the shares. If he sells them at a higher price than the exercise price, these incremental gains, which are capital gains, are not taxed. Correspondingly, if he sells the shares at a lower price, the capital losses will not be tax deductible.”
“Our social support schemes are generally means-tested to ensure support is targeted. Various criteria are used for the means tests, and several of them do take into account family sizes. For example, we use Per Capita Household Income (PCHI) for certain schemes that are available to private estate residents, such as CHAS and Seniors Mobility and Enabling Fund (SMF). Annual value (AV) is currently used as a proxy for wealth and family support. While it is not a perfect measure, it remains a reasonable proxy for the financial resources available to the individual, including from immediate family members who reside with this individual. Where individuals miss the scheme criteria narrowly, we can consider appeals on a case-by-case basis. Not all support measures are means-tested. For example, in the recent $1.5 billion Support Package, all Singaporean households will receive a $100 Household Utilities Credit to provide support for utilities bills. Under the Budget 2022 Household Support Package, all Singaporean households also received CDC Vouchers to provide support for daily essentials. We will continue to review the criteria used for social support schemes for appropriateness and fiscal sustainability, while prioritising assistance to individuals with greater need.”
“Mr Deputy Speaker, Temasek and GIC have reported their performances in their annual statements. I am not sure where Mr Leong Mun Wai got "hundreds of billions of dollars" in returns, but the performance by Temasek and GIC have been published, we can find out what they are. In the end, regarding these performances, it is not so much whether they do well, or not so well on an annual basis, because what matters to us is the NIRC that comes into the Budget. And as we have explained time and again, that is not based on short-term investment performance, which can be up or down, depending on market volatility, but it is on the long-term expected real rate of return, which is determined and then applied, as I have mentioned just now, on the net asset base of MAS, GIC and Temasek respectively for us to work out the NIRC into the Budget. So, that is what matters for budgetary matters. When we work out next year's Budget in 2023, Members will see what is the NIR contribution. This framework has been worked out, I think it is something that is sound and it is something that we will continue to manage prudently and responsibly.”
“Mr Deputy Speaker, I should clarify first of all on the first question that, in fact, MAS' investment returns are part of the NIR framework. The NIR framework covers our investments by MAS, Temasek and GIC – three investment entities. The investments are largely in foreign currencies, they are in foreign assets. So, they will be converted, translated into Singapore dollars, into a net asset base, which is smoothened out. The smoothening formula for the net asset base computation, in a way, helps to moderate foreign currency effects. So, in fact, MAS' contributions through the NIR mechanism to NIRC is very much incorporated already into the present NIR framework. On the second question of the impact of interest rates on interest expenses, that is something that will happen. With rising interest rates, there will be implications for MAS' interest expense. But it also has an implication for MAS' investment income. On the expense side, MAS will have to spend more, perhaps, when it needs to borrow as part of money market operations to manage banking system liquidity. But on the investment side, over the medium term, rising interest rates will also help to raise investment income from our foreign asset holdings. So, taking both into consideration, over the longer-term, MAS should be able to manage the effects of rising interest rates on its financials.”
“Sir, I do not have the specific figures with me right now. I have explained just now that MAS' contributions are in lieu of corporate income tax and there is formula for it. It is based on 17% of the net profit for the year, after offsetting cumulative losses from previous years. On top of that annual contribution, in FY2019, we also introduced a smoothening formula so that the contributions made by MAS are paid in equal proportions over a period of three years. These are all based on a formula and MAS will publish every year in its annual report the contributions it makes to the consolidated fund based on these formulas.”
“This is why, since FY2019, the Government has smoothened the revenue volatility by requiring the annual contributions made by MAS to be paid in equal proportions over a period of three years. This means that even though MAS recorded a net loss for FY2021/2022, the Government will receive $1.1 billion from MAS, based on the contributions accrued for the previous two financial years, when MAS recorded net profits. The smoothening formula has helped to mitigate the impact of MAS' net loss on the Government’s Budget. Investment returns are inherently volatile reflecting market conditions. The Government has taken steps to ensure that this volatility does not unduly affect the Budget. It is neither responsible nor prudent for us to rely on windfall surpluses in any given year to fund our increased structural spending needs.”
“When inflationary pressures build up, as they have over the past year, MAS allows the trade-weighted exchange rate to appreciate faster. Negative currency translation effects do not have any bearing on MAS’ ability to manage the exchange rate; rather they are a consequence of MAS’ conduct of exchange rate policy. Next, let me, in my capacity as the Minister for Finance, answer the questions relating to the impact of MAS’ net loss on the Government’s Budget position. At the outset, let me clarify that MAS’ overarching mandate is to ensure macroeconomic stability. The Government does not expect MAS to deviate from this mandate in order to maximise its contributions to the Government. MAS contributes to the Government’s Budget in two ways. First, under the Net Investment Returns (NIR) framework, the Government can spend up to 50% of the expected long-term real return on the net assets invested by MAS, GIC, and Temasek. The NIR framework is designed to provide a steady, sustainable stream of income to help meet the Government’s expenditure needs. The NIR is based on the long-term expected returns of the three investment entities and therefore, is not affected by their short-term performance. MAS’ reported net loss in the last FY has no impact on the NIR that is available to the Government. Second, similar to other Statutory Boards, MAS makes contributions to the Government in lieu of corporate income tax. This is based on 17% of the net profit for the year after offsetting cumulative losses from previous financial years. In the case of MAS, the Government recognises that its contributions will vary considerably from year to year due to the combined effect of currency translation and investment returns on MAS’ balance sheet.”
“Sir, first, in my capacity as Deputy Chairman of MAS, let me explain the context of the net loss. The net loss of $7.4 billion reflected a currency translation effect, in other words the effect of translating the foreign currency value of the Official Foreign Reserves (OFR) into Singapore dollars. The negative currency translation effect is not relevant to MAS’ investment performance, which is measured in foreign currencies. It also has no bearing on the international purchasing power of the OFR, or on MAS’ conduct of monetary policy. For FY2021/2022, MAS made investment gains of $4 billion on the OFR. These investment gains were, however, outweighed by the negative currency translation effects of $8.7 billion arising from a stronger Singapore dollar. As MAS tightened monetary policy in October 2021 and January 2022, the Singapore dollar had strengthened against several of the foreign currencies in which the OFR are held. This meant a currency translation loss when the OFR were reported in Singapore dollar. The negative currency translation effect has no implication for the international purchasing power of the OFR. In fact, given the purpose of the OFR in safeguarding the international purchasing power of the Singapore dollar, it is the foreign currency value rather than the Singapore dollar value of the OFR that matters. MAS’ net loss in Singapore dollar terms also has no implications for its conduct of monetary policy. The aim of MAS' monetary policy is to secure low and stable inflation as the basis for sustained growth over the medium term. MAS, as Members know, conducts an exchange rate-centred monetary policy, managing the Singapore dollar against a basket of currencies of Singapore’s major trading partners.”
“Mr Speaker, may I have your permission to take Question Nos 4, 5 and 6 together, as they pertain to the $7.4 billion loss reported by the Monetary Authority of Singapore (MAS) in its financial statement and the impact of the loss on the Government's Budget position?”
“Since the Monetary Authority of Singapore (MAS) (Amendment) Act commenced on 21 February 2022, MAS can subscribe for Reserves Management Government Securities (RMGS) to transfer Official Foreign Reserves (OFR) not needed by MAS to conduct monetary policy and support financial stability, to the Government for longer-term management by GIC. As at end-May 2022, the outstanding amount of RMGS was S$122.6 billion, net of the RMGS redeemed by the Government. MAS’ OFR balance decreased by S$105.9 billion from S$579.2 billion as at end-February 2022 to S$473.3 billion as at end-May 2022,1 primarily, reflecting the above transfers to the Government to bring OFR closer to the optimal amount as assessed by MAS. This was partially offset by other factors, such as reserve accumulation through monetary operations and investment income.”
“The GST Voucher (GSTV) – U-Save provides HDB households with quarterly rebates to offset their utilities bills. As at 31 March 2022, about 6% of HDB households (60,673 households in total) have GSTV – U-Save balances above $20 (see Table 1 for breakdown by HDB flat type). A higher proportion of 1- and 2-room HDB households have GSTV – U-Save balances above $20, as such households receive more U-Save rebates and tend to have lower monthly utilities bills. $20 corresponds to around a quarter of their average monthly utilities bills. HDB households with U-Save balances can continue tapping on the rebates to defray their utilities expenses. Table 1: Number of HDB Households with GSTV – U-Save Balances above $20 (as at 31 March 2022)”
“Our social support schemes are generally means-tested. Various criteria are used for the means tests, and several of them do take into account family sizes. For example, we use Per Capita Household Income (PCHI) for certain schemes. This considers the overall financial resources of a household and the number of household members supported by that income. With regard to taxes, taxpayers staying with their parents can claim a higher Parent Relief of $9,000 per dependent parent, compared to $5,500 for parents living apart from them. Taxpayers with more children can also claim a higher total amount of Qualifying Child Relief. More broadly, the Government provides generous support for the healthcare and education needs of all Singaporeans, including those living in private properties. Our education and healthcare subsidies are given on an individual basis, so larger families receive correspondingly more help. The Government will continue to review the criteria used for its social support schemes to ensure that assistance is appropriately targeted at those with greater needs.”
“Mr Deputy Speaker, Sir, the items in the package are clear. I think we do not have to go through and reiterate those items. But we are not only enhancing or providing an additional support package in the areas that we had announced because we had also recently updated, some of our structural schemes, structural programmes that are helping the groups that Mr Edward Chia talked about. For example, we have recently enhanced our Home Caregiving Grant. Or for that matter, we have been continuing to update our subsidies and help for healthcare. Even as fees go up, healthcare costs go up, we continue to review and update these subsidies and programmes, including for the Pioneer Generation, for the Merdeka Generation. Even more recently, we had updated some of our structural schemes for Workfare and for ComCare assistance too. So, it is more than just what is in the package alone that is one off, providing targeted relief. We are also quite aware that there will be groups – the elderly, parents with special needs children – who will be finding it difficult to cope with higher prices. And for some of these groups, the way to go about helping them is not just a one-off relief, but to adjust our underlying funding for the various programmes to make sure that they keep pace with inflation and higher prices. This we will continue to do on a regular basis.”
“Thank you. Mr Deputy Speaker, we can put out these detailed estimates separately. I do not have the figures with me right now. Obviously, with the higher-than- expected inflation, there will be an impact on households and that is precisely why we had put in place this package. But we have, as I mentioned in my reply, been very careful to target the measures more for the lower-income and vulnerable groups, because they are the ones who will bear the greater brunt of higher prices. That is a key objective that we had sought to uphold in designing the package and I hope Members understand this. But we will continue to monitor the impact and where possible, we will put out more detailed figures to show the overall impact on household consumption and how the package that we have put in place can help households in the different income groups.”
“On hawkers who are impacted, particularly poultry sellers, MSE, NEA, SFA have been engaging them and helping some of them to adjust where possible to adapt to the situation, see if they can sell frozen chicken, for example, or see if there are other things they can continue selling in order to keep the business going. But for those who are truly impacted and are unable to adjust, we have existing help for them too – through ComCare, through the COVID-19 Recovery Grant – these existing mechanisms are in place. But, of course, the better way to help beyond these one time relief, is to make sure that they become more resilient over time and are able to adapt to future shocks. So, that is an ongoing process that we will continue to do, to build up the capabilities of our hawkers, of our SMEs, so that they themselves become more resilient and are able to cope with future disruptions.”
“Mr Deputy Speaker, on the first question, I understand the Member's question. It is going to be very hard to distill it into a set of indicators, where we say if these indicators and these thresholds are crossed, then, definitely, a new package would arise. But what I want to assure everyone is that we will monitor the situation very closely. We have already put out this additional package. The measures in this package, as well as the measures that were announced in the Budget will still be implemented in the months ahead, including the additional cash payout which I mentioned just now, up to $700 in August, the utilities rebates, CDC vouchers coming up soon. All of these are still going to be rolled out. We will have to take it all in totality, looking at external developments: whether there are new shocks coming up, global prices as well as local prices, taking into account the state of our economy as well, before we size, if the need arises, any additional package. As I had cautioned, too, given the state of our economy, that it is running above potential, if we were to give excessive fiscal injections, it may well end up being counterproductive and cause inflation to go up higher. So, we must always be mindful of this risk, recognising where the state of the economy is today and think very carefully about the need as well as the timing and scope and size of any future support, if the need arises. So, that is something we are committed to doing. We are monitoring closely and responding swiftly, if and when necessary.”
“But what we will try very hard to do is to provide short-term relief and in the process of providing that relief, we will also want to encourage businesses, families, individuals, wherever possible, to become more energy efficient, for businesses to become more productive, so that even as we navigate through the immediate crisis, we will emerge stronger, greener and more productive and therefore better prepared for the challenges before us in a new environment.”
“Sir, we had indeed enjoyed some fiscal upsides in our projections. On the revenue side, these are largely once-off upsides due to higher-than-expected collections with regard to property and vehicle transactions. These are sentiment-based transactions. We can in no way count on them to happen year after year and certainly, we cannot rely on them to fund our longer-term recurrent and structural spending increases. But we did enjoy this upside this year and on the expenditure side, it so turned out, fortunately, for us that Omicron was milder than we had expected and so we had some savings on the spending side. And that was exactly why – because of both the revenue and expenditure savings – we were able to mount this recent $1.5 billion package within our current budget, within our current means. So, we are fortunate in that regard but let us not count on these one-off instances to fund our longer-term structural spending increases. On the second point, we had designed the $1.5 billion package precisely to help lower-income households, families, workers, as well as the more vulnerable groups. And we were very mindful that there are people who rely heavily on their vehicles for a livelihood, which is why we provided specific help for them, targeted help through the NTUC U FSE Relief Fund, as well as for taxi drivers and private hire car drivers. So, that will be our approach, the general approach we take, as I have explained before. It will be very hard for the Government to shield businesses, workers directly from these cost increases which are externally induced.”
“Sir, in my Budget speech this year, I had highlighted that the Government expects government spending to increase largely because of our rapidly ageing population, with a large part of the increase driven by healthcare expenditures. Today, the Government is spending about 18% of GDP. By 2030, we expect this to rise to 20% of GDP, or maybe even more. And that is why I had also announced in the Budget, not just the GST, but a whole range of tax increases in order to ensure that we are fiscally sustainable in the medium term. So, the short answer to the question, what will happen if we do not have this GST increase, is simple. We will be at risk of a persistent structural funding gap, which will continue to widen year by year. And I do not think anyone wants this to happen in Singapore. It will be highly irresponsible for us to embark on this path. So, I hope all Members understand why we need to ensure a sound and sustainable fiscal position for Singapore in the medium term and the GST increase is part of this package of moves that we have to put in place to ensure that Singapore is in a strong position for the medium term. In the near term, there are cost increases, higher prices, lots of concerns and anxieties and we will do our best to deal with them. But we cannot keep neglecting the medium- and longer-term challenges either. On the second question, we fully recognise that the situation is fluid. For now, we do not expect a recession or a stagflation scenario next year, but things are unpredictable, volatile, there can be new shocks. So, we will continue to monitor the global and domestic environment very closely and if the need arises, the Government will adjust its approach and measures accordingly.”
“Mr Deputy Speaker, on the first question, the answer is absolutely yes. First, as I have said in my reply, we have done an update based on the latest inflation outlook. We are still able to assure today that our commitment holds, that the majority of Singaporean households will not feel the impact of the GST increase for five years and for the lower-income households, it will be 10 years. Of course, we recognise that the situation is highly fluid. Inflation can be much higher than we had expected and for longer durations too. So, we will continue to review the situation, and as I mentioned in my reply, if the need arises, we will enhance the Assurance Package to uphold our commitments. So, let there be no doubt about this. On the second point, we will certainly work closely with the tripartite partners to speed up the implementation of our Progressive Wage Model. We are doing our best on this front. The Government will do its part too, which is why in this latest support package, I had enhanced the Government co-funding share of the wage increase for lower-wage workers, so that we can encourage more businesses to implement the wage increases faster and the Government will bear a larger share of the increase to cushion the impact on business costs.”
“In Singapore, we have used a combination of monetary, fiscal and other policies to cushion our people from the extremes of global inflation, target help to those who need it most and help businesses adjust to higher prices, not just for today but for the medium term. With careful fiscal planning, we are able to mount further support, if the situation warrants it. By continuing with sound policies and earning our people's trust, we will turn challenges into opportunities. We will take care of those with less and support the vulnerable, while keeping our eye on the medium and longer term. This is how we will get through this together and come out stronger as one Singapore.”
“We should not push back the GST increase any further, as we will need the funds urgently to take better care of our growing number of seniors and to meet our rising healthcare expenditures. That said, we have already set aside the $6.6 billion Assurance Package to cushion all Singaporean households from the impact of the GST increase. As I had shared in the Budget, the majority of Singaporean households will not feel the impact of the GST increase for at least five years. And for lower-income households, the impact of the GST increase is delayed by about 10 years. Let me be clear, taking into account the latest inflation and the latest higher prices, this assurance still holds today. This is because we had designed the package with a buffer, precisely in case of higher inflation. We will continue to assess the adequacy of the Assurance Package as the inflationary outlook evolves. If need be, we will further enhance the Assurance Package to uphold our commitment. The Assurance Package and the $1.5 billion package are two examples of how we are monitoring the global and domestic developments carefully and ensuring our support measures, whether already announced or new ones, are adequate and fit for purpose. You have my word that if the situation worsens significantly, we will be prepared to do more, especially to provide targeted help for the lower-income groups, and we will continue to do so while living within our means and upholding prudence and responsibility in fiscal management. Sir, we must brace ourselves for a bumpy road ahead of us. We are confronting multiple crises. Governments and citizens around the world are facing the same problems of rising food and energy prices or uncertainties navigating economic challenges.”
“More importantly, I hope everyone understands that the challenges before us are not just about coping with higher prices. We must also adjust to major structural changes in our operating environment, including the threat of climate change, as well as greater geopolitical contestation between the major powers, all of which means that we are entering a more bifurcated, unpredictable and dangerous world. We will, therefore, have to accelerate our efforts to restructure and transform ourselves for this new environment. In particular, we must decarbonise our economy, learn to manage with fewer manpower resources as our population ages and strive for more inclusive growth in the years ahead. When designed well, the short-term relief we provide can also help us manage these structural issues. For example, as part of the $1.5 billion support package, I had enhanced the Government's co-funding share for this year under the Progressive Wage Credit Scheme (PWCS). This means that the Government will pay up to 75% of the wage increase of our lower-wage workers this year. And in this way, we are able to secure real wage growth for lower-wage workers, while cushioning the cost impact for businesses. Crucially, we must always ensure that we have sufficient resources to tackle our longer-term challenges and do so in a fiscally responsible and sustainable manner. And this is why the Government will need to go ahead with the GST increase as announced at Budget 2022. We had already anticipated the higher inflation outlook earlier this year and that is why, instead of a two-percentage point increase this year, I had decided to delay and stagger the GST increase over two steps – by one-percentage point from January 2023, and another one-percentage point from January 2024.”
“For now, as Minister of State Alvin Tan had said just now, we expect prices to pick up further in the coming months before they stabilise towards the end of the year, in line with the likely trajectory of global prices. At the same time, we continue to expect healthy growth across many sectors of the economy this year. The labour market is very tight and our overall unemployment rate is lower than pre-COVID-19 levels. On the whole, the economy is operating at slightly above potential. Under such circumstances, we had to consider carefully the size of any additional support measures by the Government, because excessive fiscal injections at this juncture can exacerbate inflationary pressures and easily become counter-productive. And that is why we had designed a package to provide more targeted relief for the lower-income and vulnerable groups, who are disproportionately impacted by the effects of higher prices. When you combine the additional measures in the latest package with the previously announced Budget measures, we are, in fact, providing comprehensive support for households and businesses throughout the year. For example, after putting together all the measures, about 1.5 million lower- to middle-income Singaporeans, including retirees, will receive a GST Voucher – Cash and Special Payment of up to $700 in August this year. All Singaporean households received $100 in CDC vouchers in May and will receive another two tranches of $200 each in CDC vouchers over the next two years. Households living in 4-room HDB flats will receive a total of about five months' worth of rebates on their utility bills for the whole of Financial Year of 2022, while those in 3-room flats will receive about seven months' worth of rebates.”
“6% from January to May, even as global energy prices went up by a more significant 27.5%. So, these examples illustrate how our monetary policy has helped to mitigate inflationary pressures in Singapore. The effects of MAS' successive monetary policy tightening moves are still working their way through the economy and will continue to moderate some of the externally-induced price increases. We are also closely monitoring the labour market situation. For now, we assess that the risk of a wage-price spiral remains contained. We have relaxed our border restrictions and the continued inflow of foreign workers should help to ease labour market tightness and moderate labour cost pressures. Next, let me touch on fiscal measures. Our approach is to provide short-term relief and to support longer-term economic restructuring. And that means our fiscal support must continue to ensure the right incentives for businesses to build their capabilities and become more energy efficient and productive. We had anticipated the higher prices earlier this year and, therefore, had rolled out more support for Singaporeans in Budget 2022. This included the Household Support Package (HSP) for Singaporean families, as well as the Small Business Recovery Grant (SBRG) for SMEs affected by COVID-19 restrictions. In my April Ministerial Statement, I brought forward the implementation of some of these Budget measures, including the CDC vouchers to May and the SBRG to June. Last month, I announced a $1.5 billion support package, in response to the more challenging global inflation environment in recent months, especially the sharp increases in energy and food prices. In formulating this latest support package, we have taken into consideration the latest economic and inflation outlook.”
“Sir, my response today will also cover similar Parliamentary Questions filed by several Members for subsequent Sittings. And if Members are satisfied with the response, they may wish to withdraw their questions after this session. First, let me, in my capacity as Deputy Chairman of the Monetary Authority of Singapore (MAS), explain how monetary policy helps to mitigate imported inflation and manage heightened inflationary risk. MAS aims to keep inflation low over the medium term, through its exchange rate centered monetary policy. When inflationary pressures build up, MAS allows the trade-weighted exchange rate to appreciate faster, thereby, helping to directly reduce imported inflation. As Minister of State Alvin Tan said just now, MAS has been pre-emptive in tightening monetary policy, in response to rising inflationary pressures. MAS has raised the appreciation path of the Singapore dollar nominal effective exchange rate (S$NEER) policy band three times in the past nine months – in October last year, in January and in April this year. In April, MAS also re-centered the mid-point of the exchange rate policy band upwards. The stronger exchange rate has helped dampen imported inflationary pressures, for example, while global food prices increased by 20.3% year-on-year in the first quarter this year, non-cooked food prices in Singapore rose by a more modest 3%. So, global prices increased by 20.3%, but in Singapore, by 3%. And more recently, over April and May, while global food commodity prices increased by an average of 21.7% year-on-year, domestic food prices increased by an average of 4.5% year-on-year. Meanwhile, energy-related components in Singapore's Consumer Price Index, which includes the cost of electricity, gas and petrol, increased by 13.”