6 key points from debate on reserves spending as PAP Govt gives Opposition basic lessons on public finance


Use more of the reserves! Save less for the future! The next pandemic? A global financial crisis? The cost of fighting climate change? Who cares? Just spend!

This is in essence the Opposition’s short-sighted stance on how to use the reserves — Singapore’s key national asset. Never mind that the real incomes of Singaporeans have grown over the years. Never mind that Singaporeans enjoy one of the world’s lowest tax rates (and that we are not looking at a 13 per cent GST) thanks to how the PAP Government safeguards the reserves for you and your children. And never mind that the Government is already using half of the net return from the reserves to finance one-fifth of the annual Budget. As our First-Generation PAP leaders have predicted, the day when populist Opposition leaders eye our past reserves for short term political gains has come. 

In light of the latest Opposition attack on good fiscal sense during last Wednesday’s Parliament sitting (Feb 7), here is a short list of how the PAP stewards the reserves — cash and land alike — to benefit Singaporeans: 

1. A fair interest rate return on your CPF, risk-free

Your CPF will keep growing your savings, and keep giving you guaranteed funds for an adequate retirement. For a start, interest rates are pegged to the market. There’s 4 per cent minimum interest on Special, MediSave and Retirement (SMRA) accounts, plus an extra 1 per cent interest on your first combined $60,000 balance. This is no matter the economic climate. 

Source: CPF Board

“The Government is able to maintain CPF interest rates regardless of the interest rate environment, or the financial performance for our investment entities only because we have a buffer of net assets,” said Second Minister for Finance Indranee Rajah. 

Her clarifications came in response to Opposition allegations that the Government pays out less interest than it should. This is not the case: This Government looks out for Singaporeans’ prosperity. 

2. The Government grows the reserves to benefit Singaporeans today

Singapore’s schools, hospitals, public transport system and so many other public works are world-class. They are also value for money. The reserves help fund them.     

“[NMP] Mr Leong [Mun Wai] says all the time, ‘We are saving, we are accumulating, this is our money, you are not giving back to Singaporeans, and the time has come when you are over accumulating and saving too much.’ What is missing from that assertion is the recognition that when we take it and put it in the reserves, and it is invested by GIC [Government of Singapore Investment Corporation], 50 per cent of the projected income comes back every year into the annual Budget,” said Minister Indranee. 

“When it comes back into the annual Budget, it forms about 20 per cent of our annual Budget. Together with all the other revenue, it enables us to do all the things I talked about earlier – healthcare, education, transport, subsidies, CDC Vouchers, all of that.”  

And so, those assertions by NMP Leong? Simply inaccurate.  

3. The reserves will sustain us and our children when we grow old

“But wait!”, other Opposition members cry. “We need less resources for the future; there’ll be less people around since our Total Fertility Rate is declining!” 

Erm… Really let’s hold on a minute there. Especially since a good chunk of people reading this list will be a part of that future, and with grey in our hair and lines on our faces. We will need more resources for those times, and with fewer grown-up children around in the workforce, proceeds from the reserves will help heaps here. 

“A smaller workforce will have to support a larger, ageing population. We will need the additional resources to provide Singaporeans with greater healthcare and ageing support in their silver years,” said Minister Rajah. 

4. There must be sufficient reserves for difficult times 

Concurrently, these reserves need to be enough to last through difficult times. 

“We can never say for sure how much is enough, because we do not know what kind of crises we will face in the future, or how our investments will fare,” said Prime Minister Lee Hsien Loong.  

Hence the decades-long accumulation of the reserves. This prudence let there be enough funds for Singapore to weather the Great Financial Crisis and the COVID-19 pandemic about a decade later. And it will let Singapore weather whatever comes next, whether another ten years from now, or maybe sooner.   

“The PAP is convinced this is the right approach for Singapore. As long as the PAP government is in power, this is what we will do. If any other political party thinks that this is not the right approach, if they truly believe that we should dip into our reserves more, then bring it to the ballot box. Put it up front. Say you want to touch, you want to spend, you want to shift the rules. Don’t pretend that you’re just as prudent, only more kind-hearted,” said PM Lee to the Opposition.  

5. The size of the reserves is secret as a matter of national security 

Would you reveal your sure advantage — your ace in the hole — to everyone? Or would you keep it a secret because once it’s out in the open, everyone (and we mean everyone) knows; whether for good or for bad.  

Think about these disadvantages of disclosure and it is immediately clear why the PAP Government keeps the size of the reserves a secret — this safeguards our dollar against currency attacks and against leverage by powers who do not have Singaporeans’ best interests in mind. Ask any of the regional economies which had to defend their currencies against global speculators in the 1997 Asian Financial Crisis. 

Plus, transparency does not mean everything gets highlighted properly. Take how the Leader of the Opposition (LO) MP Pritam Singh (Aljunied GRC) during the debate harped on an August 2023 working research paper how people trust Opposition politicians more than the media on how to manage the reserves. What MP Singh conveniently did not disclose, though, is that respondents rated the PAP Government even higher than the Opposition. 

Source: Institute of Policy Studies

6. The Government considers land interest rates

But LO Singh did not stop there. He asserted that revenue from land sales would increase the size of Singapore’s reserves, despite there being repeated explanations that this is simply not the case: This is simply the physical asset of land being converted into the financial asset of cash. 

“When you sell the land for $100 million, you get back $100 million. Are you richer? You are not, because the land that was worth $100 million has left your hands. But what you have gotten is $100 million. Your reserves are neutral; your position is still $100 million. It is not new money; it is not new revenue; it is not new wealth. I had explained this in quite some detail in a very long parliamentary answer to a parliamentary question back in Nov 2022. We can check the Hansard. I encourage members to read that answer to the parliamentary question, which explains it in some detail,” said Minister Indranee. 

The Government then stewards the cash, investing it wisely for a better Singapore. 

PM Lee also spoke on the land sales topic, helping the Opposition do some basic mathematics. Effectively, interest rates exist, and all land sales need to consider them.  

“There is such a thing called an interest rate in this country. And if you add all those payments together and discount them, you’ll get the price of the land for freehold, at least in principle. And so, if you sell the freehold land, it’s one price, if you sell the 30-year lease, it’s another price. It’s shorter, but it’s only, you’re only selling those 30 years. And you get, in 30 years’ time, you have the chance of selling it again and again. And if you add up all those 30 yearly lease earnings, well, that should get you the freehold value,” he began. 

“So, if you sell the land once, and you want to spend the money now, you’re actually saying ‘I used to own this land. I rent it out. I collect rent every month or every year. Over the next 30 years, I will collect rent every month, I can spend it every month. But now I sell the land I collect 30 years of lease premium upfront. I spend it today’’,” he continued. 

“You’re cheating. You can spend it over the next 30 years, as Ms Hazel Poa suggests, it’s not an unthinkable proposition. You can put it away, you can invest it, spend the investment in returns, as we are doing, which is also sensible. But to say that you can take it forward and you can spend it, and don’t worry, because in 30 years’ time I’ll get it back. You tell your banker, ‘In 30 years’ time I’ll pay you back. Same dollar. I borrow $1 from you; in 30 years’ time I’ll give you back the hongbao.’ See what he says to you,” finished PM Lee.