According to the Straits Times news report “Parliament: Bill introduced to include more of Temasek’s contributions in Govt revenue” (May 12) – “The Constitution of the Republic of Singapore (Amendment) Bill, introduced in Parliament by Senior Minister of State for Finance Josephine Teo, will allow the Government to include Temasek as a contributor to its Net Investment Returns (NIR) framework.

The framework, set up in 2009, allows the Government to spend up to half of the long-term investment returns on the net assets managed by the Monetary Authority of Singapore (MAS) and GIC.”

As to “A constitutional change was sought on Monday to make Temasek Holdings a bigger contributor to the Government’s coffers, as Singapore prepares for more social and infrastructure spending” – it all sounds well and good that we are including Temasek’s returns to spend more on social spending.


Increase in social spending?

However, the real acid test may be whether and how much do we increase social spending?

The three main pillars of social spending which significantly affects the lives of Singaporeans – are our spending on public housing, CPF and healthcare.

Arguably, as long as the current system and policies remain unchanged –

… the most expensive public housing in the world, with an estimated 60 per cent of the price of HDB flats being charged to land costs

… our CPF being entirely from the contributions of the residents

… and annual Medisave contributions exceeding annual total public healthcare spending and total withdrawals from Medisave for medical expenses and premiums

– then, from a cashflow perspective – the Government is still not spending a single cent on HDB, CPF and healthcare.


Include returns, but will actually spend more?

As an analogy – if your uncle who is managing your money says that he will allocate more of the annual returns from your money to help you with your living expenses, but then increases your living expenses at the same time without actually spending more to help you – are you really better off?


Arbitrary special transfers?  

As to “The Government is projecting a deficit of $6.7 billion for this year” – by making huge arbitrary special transfers to Endowment and Trust Funds every year – the NRI can and has been literally wiped out by such special transfers. The end result being an apparent primary Budget deficit, in spite of  negligible increase in overall social spending and “zero” (cashflow perspective) spending on HDB, CPF and healthcare.


Special transfers wipe out NRI?

For example, in Budget 2015 – the special transfers to Endowment and Trust Funds is projected to be $6 billion plus another $16.52 billion (transfers of $1.52 billion to the Revolving Fund and $15 billion to the Development Fund).

Thus, literally wiping out the estimated NRI of $8.94 billion.

Under IMF fiscal reporting guidelines – special transfers to Endowment Funds should not be booked as an expenditure, as only the interest from the Endowment Funds are actually spent annually in the future.

To illustrate this further, similarly, for Budget 2014 – just the one special transfer to the Pioneer Generation Fund was already a whopping $8 billion, against the NRI of $8.55 billion, when the first year’s expenditure under the Pioneer Generation Package was only estimated to be a few hundred million.

Win battles lose war

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