Prime Minister Lee Hsien Loong challenged any political party who believes that Singapore should dip into its reserves more, to take their idea to the ballot box for Singaporeans to decide.
“Put it up front. Say you want to touch, you want to spend, you want to shift the rules. Don’t pretend that you are just as prudent, only more kind-hearted. Campaign in the next general election on this issue. Ask voters for a mandate to form the government, change our Constitution, dismantle the Second Key,” he said in Parliament on Wednesday (Feb 7).
Under the Constitution, the President holds the second key to the national reserves. The Government could tap on past reserves only if the President gives his approval.
Mr Lee was speaking on a motion brought by Non-Constituency MP Leong Mun Wai and NCMP Hazel Poa from the Progress Singapore Party (PSP). They had called on the Government to review its budget and reserve accumulation policies to reduce the financial burdens of Singaporeans while saving for future generations of Singapore.
Mr Lee said The People’s Action Party will convince Singaporeans that its long-term view on the reserves is the right way forward, that is, striking the right balance between present and future needs. “We are confident that we will win the argument, and we’ll be able to get Singaporeans to do the right thing,” he addd.
According to an Institute of Policy Studies (IPS) survey, Singaporeans have high confidence in the PAP government’s management of the reserves. It was accorded highest trust level (mean score of 7.26) for managing of the reserves. Specifically, nearly 70 per cent of the respondents preferred to maintain the status quo of formula to allot half of the net return on reserves for current use and the other half for future generations.
PM noted that the growing political pressure to use more of the reserves was not new, founding prime minister Lee Kuan Yew and his team had anticipated this, and that is why they had formulated a two-key system. He also recounted how Mr Lee’s colleagues had told him that he was trying the impossible in locking up the reserves, but Mr Lee disagreed and said he would try his best.
He said it is up to Singaporeans to prove that they are capable of being prudent well beyond the founding generation to protect our reserves.
“We are not ‘Ah Sia Kia’ (a Hokkien term that describes a rich man’s offspring). We are responsible. We are also forefathers one day of generations yet to be born,” he added.
PM reiterated how the PAP Government is elected not just to take care of the citizens today, but also to secure the future of the country, In 2001, when the PAP Government instituted the 50 per cent spending rule of the Net Investment Income (NII) and amended the Constitution, the former prime minister had reminded the House that at the end of the day, the Government owed its deepest obligation to the future, PM said.
“We must protect the past reserves. It’s our precious resource, our strategic advantage. It’s a great source of comfort and reassurance that if we run into a jam or find ourselves in a tight spot, which is bound to happen every so many years, and not so many years, we will have one extra card to play. We will not be destitute.”
To keep the system working, he stressed, Singaporeans need to have the “right instincts”. That would mean to save when possible, resist the pressure to use the reserves, and unlock them when they really must.
“Each of us must see ourselves as stewards and trustees, taking care of the interests of present and future generations. That is the way to keep to this discipline, to keep this rule, and to keep this system – with two keys – working well.
The Net Investment Returns Contribution (NIRC) now accounts for one fifth of government revenue, Mr Lee revealed. It is about 3.5 per cent of Singapore’s Gross Domestic Product. It is 1.3 times GST revenues. If Singapore did not have the NIRC out of the reserves, Singaporeans would have to pay more taxes, he added.
But it is a misconception that a specific number can be deemed “enough” when it comes to the reserves.
“We can never say for sure how much is enough, because we don’t know what kind of crises we will face in the future or how our investments will fare,” he said, citing the Covid-19 pandemic and possibilities such as war.
The PAP Government first tapped $4 billion of the reserves during the global financial crisis in 2008 to save jobs. When the Covid-19 pandemic hit, PM Lee noted, the Government drew down some $40 billion from the reserves which gave the Government the financial muscle to do what they needed to do without getting heavily into debt.
“We are beneficiaries of our forefathers, sacrifice and vision. But we are also trustees protecting this inheritance for future generations. It is not just for us. We have a responsibility to our children and our grandchildren. This is the ethos and the compact which generations of Singaporean have forged and it is one that in fact has been upheld across the aisle in this house.”
The motion which was amended called on the Government to ensure its current budget and reserve accumulation policies would always stay fiscally responsible and sustainable to help present-day Singaporeans reduce their financial burdens and improve their quality of life, while planning and providing for future generations of Singaporeans.
The motion was eventually passed with all four proposed amendments, though PSP and WP MPs objected to the amended version.
