Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
The complete record
Every one of 2,416 lines we hold for Tharman Shanmugaratnam, in date order, each linked to its source. Free to read, in full, without an account. Page 9 of 49.
“Mdm Speaker, I would like to thank Mr Liang Eng Hwa, Prof Randolph Tan, Mr Pritam Singh and Ms Foo Mee Har for speaking in support of the Bill. They raised some fair questions and, indeed, these are questions which we have thought through very carefully − first in 2008 when we introduced the NIR framework and again now, when we are amending the framework to include Temasek. There are basically three sets of issues. First, how much should we be spending and how do we spread the benefits from our reserves across generations? It is a basic question of equity − equity between generations. It is a question of our obligations to current and future Page: 76 generations. So, that is the first set of issues. The second question is, having decided on the appropriate balance between spending today and spending tomorrow, how do we ensure that we do not veer from that intended balance or inadvertently overspend beyond that balance? The third question has to do with our investment entities themselves − Temasek and GIC in particular. How do we ensure that their strategies are not compromised or shaped by this NIR framework? Let me address each of these briefly in turn. First, the question of balance between spending today and spending tomorrow, what is the right balance? Our NIR framework aims to achieve a fair and judicious balance between today's needs of Singaporeans today, tomorrow's needs of today's generation of Singaporeans and the interests of future generations. Our reserves are basically an endowment, an endowment built up over 50 years. We should get some of the benefits of that endowment today. But we should also ensure that future generations of Singaporeans benefit from that endowment.”
“The framework commits us to sustaining the value of our reserves and to achieving a fair and judicious balance between the interests of today and tomorrow: a balance between spending for today's needs and saving for the future needs of today's generation and generations to come. Mdm Speaker, I beg to move. Question proposed. 3.55 pm”
“It would require the government to aim for budget surpluses in normal times so as to reduce its debts over time. The Swiss moved earlier with a similar constitutional amendment that requires the government to plan for structurally balanced budgets. Switzerland's debts are much lower Page: 64 than most other European countries but they want to avoid rising debts. In all these cases, governments are trying reduce the future burden of debts on their government budgets. They want to avoid rising debt servicing costs, which squeeze out other spending, including essential spending. Our starting point is very different. The Singapore Government's balance sheet is in a net asset position, not a net debt position. Far from having to raise taxes or cut spending to pay for debts, our NIR framework provides us with a stable stream of revenue for the Budget each year well into the future. That is the privilege we have, because of the prudent fiscal policies the Government adopted when we were a young nation, when our population too was young and the economy was growing quickly. We ran Budget surpluses in good times and did not seek to spend surpluses just because the money was there. We invested the reserves prudently and built up professional capabilities in global investing. The approach that we have taken in the past has put us in a position of strength now, as our population gets older and as growth slows. A transition of Temasek to the NIR framework will provide the Government with added fiscal resources to make the critical investments in capabilities and infrastructure that we need for the future. But the amendments introduced today do not alter the commitments we made when we introduced the NIR framework in the Constitution in 2008.”
“The other amendments in the Bill relate to technical changes to the names of Government companies currently listed at Part II of the Fifth Schedule as well as the removal of obsolete references to Fiscal Year 2000 in Article 142. These technical changes are not material. Mdm Speaker, we are not alone in our approach of writing rules into the Constitution to bind current and future Governments to the practice of fiscal sustainability. We were an early adopter with the Constitution being first amended in 1991 to protect the reserves through the institution of the Elected Presidency. This was followed by two rounds of amendments in 2001 and 2008 to set out clear rules limiting Government spending of the investment income from our reserves. Since then, several other countries have introduced similar measures to institutionalise fiscal prudence. It has caught on since the Global Financial Crisis especially. To give some examples, Germany made a constitutional amendment in 2009 requiring government to run budgets at, or close to, structural balance every year. To stick to this fiscal rule, the Germans are having to cut back on spending and have introduced new taxes. As a result, Germany's debt-to-GDP ratio has fallen by more than 6 percentage-points since its 2010 peak to reach 75% at the end of 2014. Spain, which has much higher debts at about 100% of GDP, introduced a balanced budget constitutional amendment in 2011. It will be binding from 2020 onwards. But Spain has already begun painful adjustments. The UK is another example. Its government debt is still above 80% of GDP despite the sharp reductions in public spending in recent years. The government has now proposed a "Charter for Budget Responsibility".”
“First, in healthcare, where we have strengthened support for both lower- and middle-income Singaporeans and are expanding the capacity of our healthcare system to cater to a progressively older population. Second, in human capabilities, where we are making a major investment in our people through SkillsFuture, while spending more to strengthen education from the pre-school to the tertiary levels. We are also investing in R&D and innovation as the basis for future growth of our enterprises. And thirdly, in our transport infrastructure, where we are already investing in a much larger and better public transport system. We will also be developing Changi Airport T5 and Tuas sea port for the long term. Each of these major investments will benefit all Singaporeans, not just a particular group. It will also bring benefits for our economy and our society for many years to come. The enhancement to our revenues through the inclusion of Temasek in the NIR framework and our other revenue measures will benefit Singaporeans today and tomorrow. I will now describe the relevant amendments to the Constitution. I can be brief because the main change is simple. The Bill seeks to amend article 142(4) of the Constitution to include Temasek's net assets in the definition of the "relevant assets" from 1 April 2016. Currently, the relevant assets are defined only for GIC and MAS. Page: 63 The term "relevant assets" is the asset base upon which the relevant entities' expected long-term real rates of return are applied, in order to derive the amount of NIR contribution that can be taken into the Budget. "Relevant assets" refers to the net assets managed or owned by the respective investment entities, less the liabilities of the Government, which includes borrowings such as SGS and SSGS.”
“There were also no established methodologies for projecting expected returns for a portfolio like Temasek's, given its investment approach of taking concentrated stakes and making direct investments. The Government is now ready to apply the NIR framework to all three investment entities. We have worked with Temasek to develop a methodology for projecting its expected returns. We have also had the benefit of the experience gained from implementing the NIR framework with GIC and MAS. Having gone through the Global Financial Crisis, which dramatically shifted the global outlook and both consensus and expert views of future returns, we are assured that the NIR framework and the processes we have in place are Page: 62 sufficiently robust. Including Temasek in the NIR Framework will provide the Government with additional fiscal resources in the years to come. We estimate that it will increase the total NIR contribution to the Budget from about 2% of GDP on today's framework to about 3% on average over the next five years under the enhanced framework. The enhancement to the NIR framework is not the only change in our revenues. We have also made, as Members know, changes to our domestic taxes. Our first move was to make our property tax regime more progressive and to increase property tax rates at the higher end. We also increased personal income taxes for those in the top income brackets in this year's Budget. Together these enhancements to our revenues come as we embark on the next phase of our nation's development. We are making critical investments in the coming years in three key areas.”
“It reduces the volatility of Government spending based on investment income, as the expected long-term returns do not hinge on the state of the markets from one year to the next. It hence enables better fiscal planning. These are the three technical features in how the NIR framework enables and caps Government spending. But they reflect the more fundamental commitments that we have made through the framework. We are committing ourselves to sustaining the value of the nation's reserves over the long term, so that the reserves provide a defence against crises encountered by our children or any future generation of Singaporeans. We are also committing to a fair balance between the interests of today and tomorrow – between meeting immediate needs, the future needs of the current generation of Singaporeans – and importantly, the interests of our future generations. The NIR framework provides a significant stream of income for today's spending – already about 2% of GDP, in fact it is slightly more than 2% today, on the Government Budget – but also seeks to ensure a broadly similar stream for decades into the future. When the NIR framework was introduced in 2008, it was intended to be applied eventually to the expected returns of all three of our investment entities – GIC, MAS and Temasek. We proceeded with GIC and MAS first. We had deferred Temasek's inclusion when the NIR framework was first introduced and indicated that we would review this after some years of implementation. Temasek's investment strategy was still evolving then, having only begun to invest in more geographies and sectors in 2002.”
“Mdm Speaker, I beg to move, "That the Bill be now read a Second time". The Constitution (Amendment) Bill before the House seeks to include Temasek Holdings in the Net Investment Returns (NIR) framework from Fiscal Year 2016. The current framework that governs Government spending of investment returns from Temasek is based on the actual dividends received from Temasek. The amendment to the Constitution would shift the Government's spending to one based on the expected long-term real rate of return on Temasek's net assets, including both realised and unrealised capital gains. I had announced the Government's intention to make this change and why we are doing so now, when I addressed the House earlier this year in Budget 2015. We debated the proposed change. Several Members spoke on the proposal and were in support of it. We are now proceeding with the formal amendments to the Constitution to implement the change. The NIR framework was introduced in the amendments to the Constitution that Parliament passed in 2008. It has three main features. First, the NIR framework caps Government spending at 50% of investment returns. This 50% cap had in fact been introduced when the Constitution was amended in 2001 and was retained in 2008. Second, Government spending under the NIR framework is based on real returns instead of nominal returns. This ensures that the value of our reserves is not eroded over time because of global inflation. It preserves the international purchasing power of our reserves. Thirdly, the NIR framework is based on expected long-term returns. The expected returns include both realised and unrealised capital gains. They, hence, do not depend on Page: 61 whether investments are divested and capital gains realised. This is an important feature.”
“Since the Government announced its plans to introduce the Singapore Savings Bond (SSB), there have been suggestions for charities, Page: 127 Institutions of a Public Character (IPCs) and other not-for-profit organisations, like trade unions, to also be eligible to purchase SSBs. The SSB is intended to provide retail investors with a safe and flexible option to save for the long term. Therefore, the SSB has features, such as the small minimum investment amount and non-transferability, which were designed with individual savers in mind. Organisations like charities, IPCs or unions that are interested to invest in Government securities are currently able to invest in conventional Singapore Government Securities. The returns on SSBs are based on those of conventional Singapore Government Securities, and both securities are guaranteed by the Government. There is no limit on the amount of conventional Singapore Government Securities that can be held by institutional investors. Organisations can also consider other safe fixed-income products, such as bonds issued by Statutory Boards. The main difference is that the SSB can be redeemed with the Government before maturity for the full principal amount and no penalty. The added protection against capital loss is intended to encourage individuals to save, notwithstanding concerns about immediate liquidity needs, which organisations are in a better position to plan for.”
“Mdm Speaker, I beg to move, "That the Bill be now read a Third time". [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Third time and passed. (proc text)] Page: 49”
“Mdm Speaker, I beg to move, "That the Bill be now read a Second time". The purpose of this Bill is to make provision in accordance with Articles 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act 2014. The additional sums have been presented as Supplementary Estimates, which have been considered and approved by the House as Paper Cmd 2 of 2015. Mdm, I beg to move. [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Second time. (proc text)]”
“Mdm Speaker, I beg to move, "That the Bill be now read a Third time". [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Third time and passed. (proc text)] Page: 48”
“Mdm Speaker, I beg to move, "That the Bill be now read a Second time". In accordance with Article 148(1) of the Constitution, Heads of Expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in the Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet the expenditure in the Financial Year, 1 April 2015 to 31 March 2016. The Heads of Expenditure and the sums that may be incurred in respect of each Head are shown in the Schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the Financial Year, 1 April 2015 to 31 March 2016, as contained in Paper Command No 1 of 2015. The Supply Bill, when approved, will empower me to issue warrants authorising expenditure up to the amount for each Head as shown in the Bill to be paid out from the Consolidated Fund and Development Fund. Mdm, I beg to move. [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Second time. (proc text)]”
“Mdm Speaker, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." [(proc text) Question put, and agreed to. (proc text)] [(proc text) Resolutions accordingly agreed to. (proc text)] Page: 47”
“Mdm Speaker, I beg to report that the Committee of Supply has come to certain resolutions. [(proc text) First resolution reported – (proc text)] Page: 46 [(proc text) "That the sum of $76,912,394,500 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Main Estimates for the financial year 1 April 2015 to 31 March 2016, contained in Paper Cmd 1 of 2015." (proc text)] [(proc text) Second resolution reported – (proc text)] [(proc text) "That the sum of $30,788,559,800 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Development Estimates for the financial year 1 April 2015 to 31 March 2016, contained in Paper Cmd 1 of 2015. (proc text)]”
“Mdm Speaker, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." [(proc text) Question put, and agreed to. (proc text)] [(proc text) Resolutions accordingly agreed to. (proc text)] Page: 10”
“Mdm Speaker, I beg to report that the Committee of Supply has come to certain resolutions. [(proc text) First Resolution reported, (proc text)] [(proc text) "That the sum of $761,893,800 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Supplementary Main Estimates of Expenditure for the financial year 1 April 2014 to 31 March 2015, contained in Paper Cmd 2 of 2015." (proc text)] [(proc text) Second Resolution reported, (proc text)] [(proc text) "That the sum of $168,614,200 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Supplementary Development Estimates of Expenditure for the financial year 1 April 2014 to 31 March 2015, contained in Paper Cmd 2 of 2015." (proc text)]”
“I am not the Danish Finance Minister and I do not want to get into a detailed discussion on Denmark. But let me assure the Member that they realised that their early decision made in 1979 to allow for early retirement was a mistake; they realised that it is going to impose a cost on the individual as well as the rest of society and they are phasing it out. For those workers who are already benefiting from it, it is not being phased out. But for future workers, it is being phased out. And that is the trend that is being taken in several societies. Every society is trying to find a way in which the pension age, the pension drawdown age, as well as the retirement age, can move up. And it is not as if it solves all our problems. Some individuals will be in difficulty, because all pension schemes have to deal with trade-offs in retirement. Some individuals will be in difficulty and we have to find ways of helping them. But do not compromise the basic features of the system. Find ways of helping them. And in Singapore, we can do it, we can help them. [(proc text) Question put, and agreed to. (proc text)] [(proc text) Resolved, "That Parliament approves the financial policy of the Government for the financial year 1 April 2015 to 31 March 2016." (proc text)] Page: 59”
“In Denmark, it took 30 years before they reversed course, and with great political difficulty, but they are doing it with both opposition and government agreeing that they have to do it. So, when it comes to Page: 58 flexibility and choice, we should make haste slowly.”
“Mdm Speaker, I thank Mr Gerald Giam for that clarification. Let me say once again, and I did not mean this rhetorically, it is not a crazy idea. But it would be unwise to move in this direction, because we do have to learn from the experience of other countries that have introduced it. There is something in human nature that none of us fully understands. We will always place more emphasis on what we can get early. We will take advantage of an option to get something early, even if it is at the expense of what we need later on. And that has been the experience in Denmark, Finland and in several other countries that have had to reverse course. So, it is not a crazy idea. It is just that we have to be honest about the risks and find ways to help people address their needs, because I agree there is a need. Life is unpredictable, as the Member said. If you are medically unable to work, we will make sure that you are able to draw on your CPF. Find every way in which we can help people stay at work and save for longer, because the monumental challenge that we face in every maturing society, every ageing society, is helping retirement savings stretch throughout life. It is a huge challenge. And we are doing it through the CPF system as well as through the Government Budget, with the advantage of an AAA government that gives assurance that this will be continued. That is the big challenge. So, the Member has not proposed a crazy idea at all. But as Ms Chia Yong Yong has said – what was the term – she has great unease about it. I think basically, we have to take lessons from the rest of the world. And we only learn what happens many years after we have introduced schemes.”
“So, our strategies, both economic and social, must evolve as the environment around us changes, as the competition changes and as our own society changes. But at the end of the day, it is not just about the economic and social strategies of the Government, it is not just about what we do from one Budget to the next. It is not just about seizing new economic opportunities and strengthening social security. Most importantly, it is about how we relate to one another as people, the respect we extend to every citizen for the effort that they put in and the care that we extend to one another. As Mr Lee Kuan Yew said nearly two decades ago, "We cannot measure our happiness just by our GDP growth. It is how our families and friends care for each other, how we look after our old and nurture our young. They are what make for a closely-knit society, one we can be proud to belong to." Mdm Speaker, I thank you. [Applause.]”
“We should be honest about it, join together and stick to the courage of the conviction that this is the right path for Singapore. Mr Zaqy Mohamad spoke about the commitments we make in our National Pledge and how the Budget reinforces these commitments, not just this year's Budget, but what we have been doing in recent years – "to build a democratic society, based on justice and equality, so as to achieve happiness, prosperity and progress for our nation". These values and aspirations are what we started with, but achieving them is continuous work in a changing environment and with a changing society. They are the values we started with. But achieving them is continuous work and we have got to live up to these values with each new generation. Page: 56 The context in which we now strive to build our future is entirely different from what it was 50 years ago. Our competition is no longer regional but global, as Mr Low Thia Khiang himself acknowledged. It is no longer regional competition. If you read the first Budget speech – Mr Liang Eng Hwa mentioned Mr Lim Kim San's speech – he spoke about Indonesia, about Malaysia. It was about the region and how we earned our place in the region. The competition is now global, it is Asia-wide, it is emerging countries around the world and it is the most advanced countries. We can no longer prosper and progress through hard work alone. Our people have to master deep skills in every field and our enterprises have to bring new ideas to the market and, as Mr Lim Swee Say said, "fly east and chase sunrises". Our society is also becoming more diverse in its aspirations and its needs. Important change. It is a more diverse society, with a greater need to temper disparities in life as our economy matures and as our people get older.”
“We are starting from a strong position. Because when our society was young and growing, we practised fiscal discipline. We kept our expenditures trim. Our social expenditures were basically, education, housing and healthcare. We kept social expenditures trim and built up fiscal savings in our first few decades whilst other countries did the opposite. The experience of the advanced countries was that when they were young and growing, they built up their social benefits, in fact, with unfunded commitments, and they are now paying the price. Our position is exactly the reverse. In our young and growing years, we built up our Reserves which now give a lasting benefit for today's generation and future generations. We have a steady stream from our NIRC which will be sustainable well into the future, as I have explained. The rules on the Reserves ensure that the Reserves will not be depleted and will benefit both current and future generations. We have prepared ourselves in advance and that must remain the way in which we plan for our Budgets in the decades to come. With the change to incorporate Temasek in the NIR framework and the other tax changes I have introduced, in particular, the increase in the personal income tax rate, we will be in a good position for at least the rest of this decade. Mdm Speaker, let me now conclude. This Budget concludes the major initiatives of recent years to empower Singaporeans at each stage of their lives. I thank the Workers' Party for its support for all the major thrusts of the Budget. And I trust you will have the courage to take the same position and extend the same support during the elections. These are good programmes and they are important programmes for our future.”
“The question of how Silver Support would be funded came up. Mr Ang Wei Neng and Mr Liang Eng Hwa asked this question. First, let me clarify that this is unlike the Pioneer Generation Package. In the Pioneer Generation Package, we were setting aside funds for a special cohort of Singaporeans who built our country. It is defined by when you were born, not defined by how old you are now and in the future. This is a special cohort of Singaporeans. And it is a commitment made by today's Government. That is why we decided to set aside the funds today from the revenues that we have in this term of Government, to fund the entire cost of the Pioneer Generation Package. The Silver Support Scheme is different. Like Workfare, it is a permanent scheme for today and tomorrow's retirees, for our future generations of retirees, and it will be funded out of our annual Budget. And that is why we have sized the Silver Support Scheme the right way, both in terms of coverage – avoiding the mistakes seen elsewhere where coverage is extended to everyone – and we have also sized it right in terms of the extent of benefits. Not just for fiscal reasons, but to ensure that we preserve the ethic of family support and community support. We have built the Silver Support Scheme and its future funding requirements into our fiscal planning. The sums will grow over time as more Baby Boomers retire. Page: 55 But the far bigger driver of our social expenditures is that of healthcare spending. That is the big driver of future expenditures – besides transport expenditures which I spoke about, particularly over the next 10 years. The driver over the next 10 years and beyond is healthcare expenditures. And that is inevitable because our society is getting older. But we have a real strength in our system.”
“So, even as wages go up in future, we will still have Workfare and we will still seek to redistribute incomes to the bottom 20% to 30%, even as wages go up. We have to temper inequalities. Silver Support, likewise, will remain a permanent scheme even as living standards go up in retirement. It is not about tackling absolute poverty or helping those who are the neediest. For that, we have Public Assistance and we have, besides Public Assistance, our social network on the ground, or the SSOs. Silver Support is a redistributive scheme. So, it is not that 30% of our elderly has no other source of support. This is an attempt to temper the Page: 54 inequalities through life. I was heartened by the fact that most Members reiterated the importance of the values of personal responsibility and family responsibility. We look after our children when we raise them and our children look after us in our older years. That is a critical part of the Singapore ethic. And Members emphasised that we have got to retain the ethic. Amongst elderly HDB households with children, close to eight in 10, in fact, are able to rely on their children for regular financial support. This is what the survey showed. And a substantial proportion of those in the bottom 30%, in fact, get support from their children. They also get Government support. Outside of Silver Support, there is other Government support. Significant transfers, in fact. Amongst the bottom 30% of retiree HDB households – the bottom 30% that we are targeting for Silver Support – an individual retiree receives, on average, about $640 a month today from the Government in subsidies and transfers. This is through the GSTV, through CHAS, through the other Government subsidies in healthcare and other areas, and through ComCare.”
“5% and Workfare of 10% to 30%, depending on his income. If it is a worker earning $1,000, basically, it is a 40% top-up that the Government is giving through Workfare and the Special Employment Credit – a very significant incentive to help them. That is why our re-employment rates are high and increasing. For those who are unable to work due to medical conditions, we have to be sympathetic, and we already allow them to apply for early withdrawal of their CPF. That is important. Thirdly, we must remain as supportive as possible through our schemes on the ground, through our Social Service Offices (SSOs), so that individuals and families in financial difficulty get help. So, that is our approach: help people gain their rewards from home ownership; help them stay in the workforce by providing additional support, making sure that all of us give them the dignity they deserve when they remain at work; help people who are unable to work for medical reasons and, for them, there is a special scheme in CPF; but very importantly, help people on the ground through our social network and the various other Government transfer schemes. Let me go on now to the Silver Support Scheme which, again, is not something that we are introducing just for now but must be sustainable to the future. There has been very good support from Members for the Silver Support Scheme and some have asked questions about how it is going to be funded, how sustainable it will be and so on. Silver Support and Workfare are the fourth pillar of our social security system. They aim at supplementing incomes so as to mitigate inequalities. And I have to emphasise again that it is not about tackling absolute poverty. It is about mitigating inequality.”
“In Germany and Denmark, it is barely 20% of those in the bottom quartile who own their homes. In our case, it is a vast majority, over 80%. In Hong Kong, less than 50% of those in the bottom 20% of income earners own their homes. We are in quite a unique situation and that is a real strength of our system. Typically, someone living in a 3-room flat would have $300,000 in housing equity today. We have provided options and continue to make sure that the options are available to them, friendly to them, to help them unlock part of the equity in their homes if they wish to. Mr Mohd Ismail Hussein has asked for more to be done in this regard and Mr Vikram Nair has suggested what, in effect, amounts to a reverse mortgage scheme, which we have studied carefully and the Minister for National Development will address at the COS. And it is not just about them being able to unlock equity in their homes, it is about saving on rental costs which are a major burden in retirement in most advanced societies. So, that is a starting advantage, a major advantage – home ownership. But we want to provide maximum support for individuals to continue working while they can, at a different pace if they wish. We have facilitated employment of older workers through re-employment legislation and we are providing substantial support through Workfare and the Special Employment Credit. It is not often recognised how powerful that support is. Page: 53 For someone above the age of 65, or, let us say someone at 65, who is a low-wage worker earning, say, between $1,000 and $1,500, the Government is, effectively, paying 20% to 40% on top of what the employer is paying – through Workfare and the Special Employment Credit; the Special Employment Credit of 11.”
“And their whole priority has been to encourage people to work for as long as possible, to save more wherever possible and to defer drawing down on their pensions so that they have enough savings to last through their retirement years. That is the way in which the mature societies are moving – encouraging people to work more, to save more and to defer payouts where possible. Indeed, in countries like the Netherlands and some of the Nordic countries, they have gone a step further than the norm. The norm is to link the pension age to the retirement age. But in those societies, they have gone a step further. They are now linking it automatically Page: 52 to life expectancy. So, as life expectancy goes up, the pension age and retirement age will automatically go up. They have agreed on a formula and it is now automatic. They have gone further. We are not planning on that move ourselves, but these international trends illustrate the challenges that all maturing societies face. We should recognise the challenges honestly and not take positions for their populist appeal, when we know fully that putting such proposals into practice will merely set us back in tackling the larger challenge of ensuring adequate payouts throughout the retirement years. But we do have to find every way of helping Singaporeans in their 50s and early 60s to get by and support their families, especially if their children are not yet in the working years. We do have to help them. Fortunately, the majority own their homes and have fully paid up their loans by the time they are 65. In Singapore, 90% of our elderly households own their homes and even amongst our lower-income households, the vast majority own their homes; very different from other societies.”
“5 years or so back to 43 years. So, they are extending the minimum contribution period you need to 43 years, before you can have an early payout – which very few people would qualify for. The UK has also gone against the grain, allowing retirees to take out their retirement savings early. Previously, they had mandated everyone to put their monies in an annuity – it is a bit like our CPF LIFE where you can choose your annuity. Now, they allow the retirees to take it out, partly because the annuities in the market were offering very poor returns, far poorer than what we offer on the CPF. It is probably a political gesture, largely a political gesture – they have allowed retirees to take their money out early and do what they want. And it has been viewed negatively by experts. The Organisation for Economic Cooperation and Development (OECD) has warned that this is detrimental to both retirement income adequacy and incentives to work, and has urged the UK to make a move back to the annuity system. The reasons are the same all over the world. It is good to offer choice, but part of the human predicament all over the world is that we will all place greater priority on what happens today and the benefits that we can get today, rather than what we get well into the future. And we all underestimate how long we will live. It is true all over the world. It is true in Japan, it is true in Europe, it is true in UK. People place more priority on what they get today than well into the future and they underestimate how long they will live. That is the human predicament. These countries face the same challenges of rising life expectancies like we do, except that, in our case, it is even longer life expectancy than most.”
“In fact, at that time, because they were having a bit of an unemployment crisis, the real aim was to persuade older workers to get out of the workforce and make way for younger workers. Then, the pressures of an ageing population began to take hold; it put great pressure on the pension system's financial sustainability. And the weaknesses of allowing for that early payout became known over time. So, in 2006 and then 2011, they passed reforms to reverse course, aimed at phasing out this early retirement option with early payouts. It was supported by the opposition and the government at that time. They have had changes in the government and the new government that has come in has stuck to the reforms because the early option was the wrong move for the individual and the wrong move for the rest of society which would have had ended up paying a higher burden. That was what it amounted to. It was a wrong move for the individual and the wrong move for the rest of the society. Page: 51 The Finnish are another example, very similar example. They introduced it and they have had to reverse course. The French, more recently, just two years ago, 2012, made a concession for some workers to get an earlier payout from age 60. They went against the grain, but only for some workers – those who started work at 18 years old and had made a minimum contribution of almost 42 years into the system – a small group. Even for this group, they realised, just two years later, last year, that it was a mistake. They are going to face growing pension deficits and they realise that this was actually a mistake in helping individuals prepare for their retirement. They now have to take steps to reverse the decision and they are bringing the minimum contribution period up from 41.”
“It is not a perfect system. It avoids the big disadvantages of the major schemes that we see in the rest of the world, but it has some significant advantages. It is fair, it is sustainable and it takes the risk away from individuals who cannot bear that risk. Not a perfect system, but it is working quite well and it is internationally recognised by the experts as one of the better systems around. The WP Members of Parliament have suggested further flexibility. In addition to the option of the 20% withdrawal at age 65, they suggested an option of earlier payouts starting from age 60. Looked at in isolation, any proposal for flexibility appears reasonable. When we look at each proposal in isolation, it appears reasonable to provide more choice and flexibility. However, there is a real risk in offering this flexibility that we have to be honest about. It is not a crazy idea, but it is an unwise one because there is a real risk when we offer this flexibility. It has been tried in other countries. In fact, everywhere it has been tried, the result has been that those who take up this option of early payouts, end up less prepared for retirement. Less prepared because they stopped work earlier, or less prepared because they will have lower payouts through the rest of their lives. The upshot of it, or the real outcome, is that the rest of the society eventually has to take on a larger responsibility to support them, as Ms Chia Yong Yong had reminded us. The countries that had tried introducing this option of early payouts are now reversing course. It had been tried. Denmark was an example. They introduced it very early on. In 1979, they introduced such a scheme. They called it the voluntary early retirement scheme.”
“To illustrate how significant the Government's role in this aspect of collective responsibility is in the CPF, if we consider a young worker today, taking advantage of all our schemes in the CPF, all the enhancements we have made, a young worker, someone who is at the 10th percentile of incomes today, by the time he retires at age 65, he would have received $200,000 of Government support in his CPF – through Workfare, through the Housing Grant. And I am not counting the interest earned on the Housing Grant; just the original Housing Grant, Workfare and extra interest, it is $200,000 over the course of his working career till 65. Not a small sum. When Mr Gerald Giam described the CPF system as a defined contribution scheme – that is the way it is referred to sometimes theoretically. But it is, in fact, not just an individual savings scheme. It is a scheme that comprises the individual's savings and significant injections of Government support. It is individual and collective. We have further enhanced the system by providing additional flexibility as recommended by the CPF Advisory Panel, while keeping its basic strengths. Keep it fair, keep it sustainable. The CPF Advisory Panel has recommended allowing for the flexibility of a 20% lump sum withdrawal of retirement savings at the payout eligibility age. Quite an important recommendation. We had to think very hard about this because we know there is a trade-off in retirement payouts. If you take out 20%, you get lower payouts for the rest of your life. But we decided that this was the right approach to provide a degree of flexibility. And, on top of this, in the Budget, we are enhancing interest for lower balance members, starting Page: 50 from age 55, to help them accumulate their balances in their retirement years.”
“The whole purpose of the CPF is to avoid the major disadvantages seen by the two schemes that I spoke about, whilst incorporating some of their advantages. It is progressive, like most of the collective pension schemes. But it is financially sustainable, unlike the collective pension schemes. It places no investment risk on the individual, unlike the defined Page: 49 contribution schemes of individual retirement accounts. Let me emphasise this, that the reason why the CPF system is both progressive and sustainable, which is a rarity, is because the transfers that take place in the CPF are essentially from the Government Budget, not through transfers from one generation to the next, or promises made to the current generation which, eventually, have to be funded by the next generation. It is transfers that are achieved mainly through the Government Budget and the Government has an AAA rating. That is the strength of the CPF system. It is sustainable, it is progressive, but it achieves its progressivity through transfers from an AAA-rated Government. That is why we retain the whole system of fiscal discipline, prudence and planning for the future that keeps the CPF system both progressive and sustainable. How do we inject this support? Through Workfare, which is a very significant infusion into the accounts of lower-income workers. Through housing grants for the lower- and middle-income member. Through MediSave top-ups which are now a permanent feature for the Pioneer Generation. MediSave top-ups throughout their retirement years. And through extra interest on smaller balances. In each of these areas, in each of these elements' of progressivity, there has been an enhancement, a significant enhancement since 2007.”
“The pluses are that they are financially sustainable because what payout you get depends on what you put in. It does not depend on intergenerational transfers. The big disadvantage is that the investment risk is borne by the individual and this risk can be substantial. We have learnt, especially over the last 10 years, that the risk is substantial on the individual. I explained this in Parliament last year about how, in general, the investment returns in these individual retirement accounts in the UK and Europe have substantially under-performed the market averages. Firstly, because they do not time their investment well, they make wrong investment decisions or they are poorly advised. And, secondly, because of the timing of their retirement because of the luck of when they retire. If you retire during a crisis, you just have much lower retirement payouts for the rest of your life, compared to someone who retires during a boom. The CPF is neither of these two approaches – collective pension scheme or individual retirement account. It is both individual and collective. It is, first and foremost, built on individual savings and responsibility. First and foremost. But there is a strong element of collective responsibility built into the CPF scheme. The Government provides support through the Budget to lower-income members and provides assurance to all. And through CPF LIFE, we are pooling risks to support one another in the face of life's uncertainties throughout retirement. There is a collective responsibility that is built into the CPF system, both through the Government and through members pooling risks in retirement through CPF LIFE.”
“They also involve redistribution, which is done in two ways. Typically, there is a minimum level of benefit which helps the low-income group. That involves a transfer within the state pension scheme – a transfer from the higher and middle-income groups to the lower-income group within the pension scheme. Secondly, there is a transfer across generations, in particular, from the younger working population to the current elderly. These are pay-as-you-go schemes, where the benefits of today's elderly are funded by the contributions of today's working population. There are some advantages to the collective pension schemes because they provide some certainty to the retiree and involve some necessary redistribution to the lower-income group. But there are major disadvantages in the way these schemes have been run, because the benefits have been made more generous over time and they can no longer be afforded Page: 48 by the current working population as I spoke about earlier. Countries are making major reforms, one after another, to cut back on the future benefits of today's working populations because of unsustainable benefits that have been promised previously. People who start work today have to contribute more, but will receive less benefits compared to current retirees. As a result of this unsustainability, there is a shift in most countries away from the emphasis of collective pension schemes towards individual retirement accounts. But the individual retirement accounts still remain quite small, compared to the collective pension schemes. They are a small layer on top of what is really a system of collective pooling of contributions – mainly through the state and, sometimes, through the employer. The individual retirement accounts, too, have their pluses and minuses.”
“There are, basically, two main types of retirement savings systems. The first are collective pension schemes, where everyone pays taxes or regular contributions into a common pool while working, in return for a promised regular payout in retirement. They are usually state-run, some are employer-run, but they are basically collective pension schemes. Everyone pays into the common pool and they are assured of a certain payout in retirement. That is one type of system. The second type of system is individual retirement accounts, not collective. Individual retirement accounts where an individual puts his savings into an individual retirement plan and he or she draws on their own account in retirement. People have to choose how their monies are invested and they take the investment risk. In the US, they call this the 401(k) schemes. In Hong Kong, the Mandatory Provident Fund (MPF) scheme is designed that way. It is purely individual retirement accounts, you choose your investments and you take your investment risk. The Australian Superannuation system is another example. Within the industry, the first type of scheme that I have spoken about, the collective pension schemes, are often known as defined benefit schemes because the benefits are determined in advance and they are not linked strictly to your contribution. And the second type, the individual retirement accounts, are called defined contribution schemes, because the benefits are not known, they depend on investment returns, but your contributions are what are known in advance. Those are the two schemes. Both have their pluses and minuses. The collective pension schemes promise individuals a regular payout throughout retirement without them bearing investment risk.”
“If anything, by focusing on expected long-term returns, we ensure that in no time in the future does the Government put pressure on our investment entities to sell assets, realise capital gains, and pay more dividends. It keeps their investment strategies independent of the spending rule of the Government. The natural question that arises, of course, is that if the Government is spending on the basis of expected returns which will not year-by-year be matched by actual returns, where then does the Government obtain the funds, the cash flow for NIR to go into the Budget? This is a liquidity management issue and not to do with the spending rule and not to do with the investment strategies of the investment entities. It is a liquidity management issue which I had addressed in Parliament when we first introduced the NIR framework. I will not go into the details again, but we have a variety of sources of liquidity and cash flows that will enable us to manage the Government's liquidity needs independent of the investment strategies of the three entities – Temasek, GIC and MAS. Let me assure Members that what we are doing does not change their investment strategies in the least. I go on now to the second important issue related to sustainability, which is the CPF system and Silver Support. Let me first explain – and this is quite important – how the CPF system is different from the main systems that we see abroad, the commonly known systems abroad. In particular, how we have tried to avoid the major disadvantages of these other systems, whilst being able to take some of the advantages. It is a very important feature of the CPF system. We are actually a system that is quite different from the main systems that Page: 47 we see abroad.”
“There are two ways in which we achieve this stability over time: first, we are spending based on expected returns, rather than actual returns, which can be volatile; and secondly, we also smooth our asset base. Page: 46 For instance, there is a boom in asset markets, a boom in asset prices and the value of our Reserves go up, the value of the asset base goes up. We do not spend on the basis of that boom in asset prices. We smooth the asset base, so as to discount the latest changes in prices. If there is a boom in asset prices, it does not mean that you spend the same increase in NIR, because you do a smoothing of the asset base. These are rules we have written in that help ensure there is a fair balance between current and future generations. There have also been some questions, understandably, in the media about whether bringing Temasek into the NIR framework will impact Temasek's investment strategy. The same question can be asked about GIC and the Monetary Authority of Singapore (MAS). Let me assure Members that this will not be the case for Temasek, just as it is not the case for GIC and MAS. The NIR framework provides a formula to work out how much the Government can spend from Reserves. That is what the NIR framework is about. It is not based on actual returns, but on the expected long-term real rate that we expect our investment entities to earn within the framework. It is about the expected real rate of return from each of our investment entities, and not based on actual returns. It is not a dividend policy in disguise that determines how much cash Temasek has to pay the Government each year.”
“The first has to do with the Net Investment Returns (NIR) framework and the use of Reserves. The second is the CPF system as well as Silver Support. Several Members raised questions about the sustainability of our system of drawing income from Reserves, and about making sure that we are not disadvantaging future generations. The NIR framework, in fact, underlines our commitment to preserve the value of our Reserves and to allow it to grow with the economy over the long term. It allows the Government to tap on part of the investment returns for current spending, and it strikes a fair balance between present needs and the interest of future generations. We had put a lot of thought into it when we moved the constitutional amendment in 2008. It is about striking a fair balance between present needs and the interest of future generations. It ensures that we spend from our Reserves in a disciplined and sustainable way. First, by spending at most 50% of expected long-term returns, which means at least 50% are kept in Reserves. Second, by spending based on real returns, not nominal returns, so that we preserve the international purchasing power of our Reserves. Otherwise, if we have high inflation globally, and you earn higher nominal investment returns and you spend more on that basis, what you are doing is reducing the real value of your Reserves for the future. We have also provided stability in the NIR, by spending based on expected long-term returns, not actual returns. This recognises that actual returns will be more volatile than the long-term expected returns. And we smooth our asset base. This is an important point.”
“Except in crises, when we have to go to the President to get his permission to draw on Reserves. We have written it into the Constitution, so that it is enshrined in our political culture, no matter who is in government. Mr Hri Kumar and Mr Arthur Fong also voiced concerns about the Budget deficits that we are running in recent years. Let me clarify that the Government Budget has been in a healthy position. For this year, as I have explained, the deficit is almost entirely due to funds being set aside for future investments. It is not a deficit due to spending exceeding revenues. It is a deficit because we are setting aside funds that we have earned in this term of Government, for the future. And until this year, during this term of Government, we have not recorded a deficit in any year before setting aside funds for the future. For example, the small deficit we ran last year would have been a significant surplus, had we not set aside Page: 45 money for the Pioneer Generation Package. Essentially, what we have been doing is prudent budgeting. We have had a temporary surplus in revenues, particularly because of the revenue boost from the property cycle. And rather than spend those revenues in the current term, which is what some other governments do when they get a bonanza in revenues, they spend it, we have set it aside. And that should remain the way we go about fiscal planning in the future. When we have a temporary boost of revenues, and we know the cyclical reasons why our revenues exceed our spending, set it aside for the future; do not spend all of it immediately. That way, we avoid "feast and famine" in our spending. Let me now go on to two major issues that arose in the debate that relate to sustainability.”
“Interest payments on debt are going to increase by almost 2% of GDP over the next 10 years. Second, the entitlements they have promised are also growing because people are getting older. If you add those two things together – the interest payments on debts and their entitlements which are a fixed item of their budget – it results in less being left over for the rest of spending. They have to cut back on spending on the future, on fostering opportunities. They have to cut back. And if we look at it at the state level, California and other states, a very significant cutback on education spending – inequitable. This is true for most of the advanced countries. An OECD report stated, forthrightly, "governments will have to make tough choices of about how fair it is to ask current workers to pay taxes to support pension payments of a level that they themselves won't enjoy." Current workers have to make higher contributions for pension payments that they are not going to enjoy, but which current pensioners will enjoy, including pensioners who are not poor. We have to avoid these basic political flaws. We have to avoid them. I am glad Members have raised caution and have asked the right questions which we have to keep asking as we move along. We have to make sure that, as Mr Liang Eng Hwa says, we never cross the red line of failing to balance our Budget within each term of Government. Mr Hri Kumar also spoke on this matter. Ensure sustainability, ensure we never run down our Reserves. This is why we have written rules into our Constitution. We have gone further than most other countries – by writing the rules into the Constitution to prevent the Government from running a cumulative deficit within its term of Government.”
“With each electoral term, each party and each government coming into power has increased social spending and increased spending particularly on the elderly. It is vote buying. But the system is now unsustainable and they are paying the price. Unfortunately, the ones who are paying the price are the young and the lower-income group. Spending in the UK in the last few years has been cut for children. Between 2009 and 2012 – I do not have the more recent data, but it has been intensified austerity – real spending per child in early education and childcare fell by 25%. Spending was also cut on programmes to subsidise early education and childcare for disadvantaged children – a significant cut, more than 30% cut. It was not as if it was to help poor retirees, because the whole weakness of the system was in extending benefits to everyone, including the upper middle-income group and the rich. The rich get generous pensions, they get winter fuel allowances, free transport. Even the Conservative government today is committed to preserving those benefits for the elderly rich and the upper middle-income groups at the expense of the young and the poor. That is how inequitable it is. We have got to sustain a fair and inclusive society for generations; not one election at a time. The US faces the same situation. It has lower taxes than in many European countries, but it has the same basic flaw of looking at things short-term. What has happened in the US now – and the Obama Administration has recognised this – is that they are severely Page: 44 constrained in investing in their future. The reasons are, first, the interest payments on the debts they have accumulated are going to grow as a share of their budget.”
“Because one of the lessons we have learnt from the policy interventions in the more mature societies is that lasting improvements in society are not easy to achieve. It is certainly not just a matter of putting in more Government resources. Our real task is to find ways to help people, not just by providing them with more resources, but helping them to rebuild family lives, making sure they have got empathetic teachers, mentors, community volunteers, and helping them to build circles of friends and peers around them, people with a positive and aspiring outlook on life. We have made our system more progressive, as part of our efforts to build a fair and inclusive society, but we should never forget that it rests on this compact of personal and collective responsibility. As Ms Jessica Tan put it, we must preserve our Singapore ethic of Page: 43 work, effort and responsibility, and collective responsibility for the community. I think that sums it up. Let me now talk about a critical issue, which is sustainability. Fairness is not just about what we do today – how we distribute taxes and benefits, who takes what share today. It is not just about the current generation. We must build a fair and inclusive society for today's generation, our children's generation and generations in the future. That is the difficult task. There are countries more progressive than us. There are countries that have achieved a very high degree of transfers and redistribution. It is worth watching them and how they changed over time. How their values changed and, also, whether they had been able to sustain what they are doing. The whole experience of the UK, Europe and, to some extent, the US, has been one of building up unsustainable social welfare systems. The UK is a very good example.”
“Avoid a zero-sum game and get a compact where personal and collective responsibilities reinforce each other. We have had a thoughtful debate on this issue. As Ms Chia Yong Yong said, if we lean too much to the left, we will not have much left. As Mr Karthikeyan said, if we lean too much to the right, too, then we may not be doing the right thing. There is truth in both views. Mr Seah Kian Peng noted the polarisation of views in the US, the polarisation between "red" and "blue" views. Very serious problems, because they are looking at problems through red lens or blue lens alone. We have to avoid looking at problems through the lenses of the left or the right alone because there are truths on both the left and the right. These are the truths that we learned from 50 years of experience in social policies all over the world, particularly in more mature societies. We cannot solve problems if we leave it entirely to the market or the natural workings of society. It would lead to widened income gaps that reflect not just people's different abilities and efforts, but also the advantages and disadvantages in the backgrounds they start with. It will sap the morale of our society if we just leave it to the market to sort things out. Neither can we think that social policy interventions alone can create a fair and cohesive society, without a culture of personal responsibility in the family – in education, at work and in saving for our future. It will not create a fair and inclusive society, and it will sap the vim and energy of our society at every level. We need some humility. In every society, we need some humility as to what works in social policy. Take truths from both the left and the right, but we must have some humility.”
“It is in how we strengthen the values that undergird and sustain a fair and inclusive society. It is not how much we are doing, but how we do it, and whether what we are doing helps to strengthen the values and the habits that sustain a fair and inclusive society. At the heart of it all, we are seeking to build a stronger social compact for the future, a compact where personal and collective responsibilities go hand-in-hand. That is at the heart of what we are doing. We are seeking to build a stronger social compact, where personal and collective responsibilities reinforce each other and go hand-in-hand. Our approach is quite different from the cradle-to-grave welfarism that was developed over 50 or 60 years in many of the advanced countries. Our approach is about empowering people and aspirations, and rewarding responsibility throughout life. That is our approach. It is quite different from cradle-to-grave welfarism. It is about encouraging and empowering people to learn at every age, to work, to take second or third chances and to make meaningful contributions through our careers, whichever the job; helping people to own a home and whether as a breadwinner or homemakers, to raise the next generation and helping everyone to make the most of life even in our senior years. It is also about developing a broader culture of responsibility in our society. It is not just about everyone doing their part, rich or poor, but also about being able to count on one another. And those two things go together. We are able to count on one another, now and Page: 42 in the future, only if everyone plays their part, if everyone plays their responsible role. Our whole approach, therefore, has been to avoid a zero-sum game between personal and collective responsibilities.”
“When you add it all up, the benefits they get for the dollar of tax the middle-income group pays are less than ours. I will show Members another chart which compares us to some other countries. The US is the lowest tax country amongst the advanced countries, generally. Their effective income tax for the persons in the middle-income group is about 17%, relatively low, compared to many other advanced countries. In Singapore, it is close to zero for those in the middle. In the US, it is about 17% – lower than the Scandinavian countries. Page: 41 In the US, when you look at their sales taxes – they do not have a national GST, but they have sales taxes at the local level – they are about 4% to 11%. The US has somewhat lower taxes at the most. In the US, you get about $1.30 back for every dollar of tax you pay. Finland is about $1.30 as well. UK, slightly more. And in Singapore, it is about $1.70. We are a low tax regime. We try to keep the burden of taxes of the middle-income group, in particular, low. We target our benefits in healthcare and education, in every area, to support the low-income group and the middle-income group. We target it. In general, everyone co-pays for what we are getting, so that we know that nothing is for free. We co-pay, we keep taxes low, and the net benefits are ones which the middle-income group gains from. So, that is worth highlighting. Let me go on to explain what this adds up to in terms of our thinking, values and philosophy. We have tilted our system deliberately to help our lower- and middle-income groups. In the last five years, there has been a significant tilt. The Government is playing a more active role in redistribution. But the key to building a strong society is not just in how much we are doing to redistribute.”
“It is a progressive system. Then, I should add that we have also shifted significantly in the weight being placed on structural transfers, permanent schemes, as distinct from temporary schemes that we are able to afford when the Budget is in good shape. Ninety percent of our transfers in recent years comprised permanent schemes. The system is not just about redistributing from the rich to the poor. It is also about the middle-income group, very importantly. The middle-income group in Singapore are net beneficiaries of our system. There has been a very significant increase in the amount of benefits that the middle-income group has got over the last 10 years. For every dollar of tax paid by the middle-income group, they now get $1.70 back. In fact, a bit more than $1.70 back. For every dollar of tax paid and you add up all their taxes – income tax, what those who happen to own a car would pay, add all the taxes, property tax and so on – for every dollar of tax they pay, they get $1.70 back in benefits. This is real data that refers to the middle 20% in our society, Singaporeans. It has gone up significantly over the last 10 years. It is a fair system. The benefits that our middle-income group gets are not like what you see in the Scandinavian countries, the UK or many other advanced countries. Some of them have ‘free' healthcare, ‘free' tertiary education, "free" many things. But they are paying for it. It is not free. It is never free. In most of these societies, with Scandinavian countries being the classic example, their tax systems are not typically progressive. They rely mainly on the value-added tax (VAT) and high income tax for everyone, to be able to flow back the benefits. Everyone is paying for the free benefits that they are getting.”
“This tax deduction, the 250% tax deduction, has meant a tax loss to the Government of about $120 million per year from 2010 to 2014. But it led to a gain for the charitable sector of about $870 million a year. The Government lost $120 million but it led to a gain for the charity sector of over $870 million per year. If we take it all together, this has been a set of major moves – at every stage of life, strengthening our policies, providing greater assurance and opportunities – in education, at work, in healthcare, in retirement. Let me show how it all adds up in our system. When you take all the taxes that people pay and all the benefits that they receive through our different schemes, how does it add up? It is basically a progressive system and one that has become more progressive. Where the higher-income households contribute the bulk of the taxes and the lower-income households receive the bulk of the benefits. It is also one where the middle-income receives more benefits than it used to. Let me show that very briefly with the slide. We take the top 20% of households: they pay 55% of all taxes, when you add up income tax, property tax, GST, car taxes, maid levies Page: 40 and so on; they pay 55% of all taxes and they receive 12% of the benefits. If you look at the middle 20% of households, they pay 11% of all taxes and they receive 20% of all benefits. When I say, "middle 20%", I mean those between the 41st and 60th percentile. They pay 11% of all taxes and they receive 20% of all benefits. And the lowest 20% of households pay 9% of all taxes, mainly through the GST. Everyone contributes, and the low-income group contributes through the GST and a few indirect taxes, but mainly the GST. They pay 9% of all taxes, but they receive 27% of all benefits.”
“Last year, through the Pioneer Generation Package; this year, through MediShield Life, which would be heavily subsidised for the lower- and middle-income group; and by the significant expansion of capacity which Members are familiar with – all around the island, primary care, acute care, step-down care; very significant expansion of capacity. Page: 39 Next, we will be rolling out the Silver Support Scheme to provide a further supplement to personal savings and family support. Silver Support, like Workfare, will be a way of tempering inequalities through life. Finally, we are doing more to encourage the community to take responsibility and to step in. In Budget 2011, we had a major initiative – the Community Silver Trust Scheme. We put aside $1 billion, for dollar-for-dollar matching for voluntary contributions to voluntary welfare organisation (VWOs) providing intermediate and long-term care, which includes helping the disabled. It was a major scheme and, I should add, in relation to Dr Teo Ho Pin's question that the Community Silver Trust provides matching grants for the National Kidney Foundation (NKF) and for VWOs providing kidney dialysis. More recently, we have launched the Care and Share SG50 movement. It was rolled out in 2013 and we have extended it this year. Again, it provides dollar-for-dollar matching for a whole range, a very broad spectrum, of social service sector VWOs. We have enhanced our tax incentives for donations, which Members have welcomed. Mr Seah Kian Peng spoke about this. We introduced a 250% tax deduction in 2009 and had good results, which is why we have extended it for another three years, quite apart from this year having a 300% deduction. Mr Seah, in fact, asked about the revenue implications of this tax deduction.”
“SkillsFuture is, itself, a major force of social mobility. It is not just an economic strategy. Fourthly, we have also taken significant moves to temper inequality. Workfare was a major step, which started in 2006 as a temporary scheme, we made it permanent in 2007, and we enhanced it in 2010 and 2013. We will continue to review it in future so that even as wages go up over time, we would still want to use Workfare to redistribute and temper inequality. Workfare is not about alleviating absolute poverty; it is about mitigating inequality even as incomes rise. We have to mitigate inequality. For the lowest-paid workers, the Progressive Wage Model is now working its way, first, through the cleaning industry, and we are moving on to the security industry. We focus on industries where outsourcing is prevalent and which are prone to cheap-sourcing as a result of outsourcing practices. That is what we are focused on. We have also introduced a permanent Goods and Services Tax (GST) Voucher scheme. Again, it is a redistributive device: a permanent GST Voucher scheme to help lower-income households. So, that is the fourth set of initiatives – tempering the disparities in life. Fifth, we are giving greater assurance in old age, so that our elderly can make the most of life. First, at work, we introduced a Special Employment Credit – quite a unique scheme by international standards – to help our older workers keep their jobs or find new jobs and to stay employed and continue to contribute and take pride in contributing, which is what Singaporeans want to do. Beyond work, we have made very significant shifts in healthcare, first, by enhancing subsidies not just for the lower-income group but the middle-income group.”