Leong Mun Wai

Opening Speech on the Motion on Public Finances

Opening Speech on the Motion on Public Finances

Mr Speaker Sir, I beg to move,

PUBLIC FINANCES: That this House calls on the Government to review its current budget and reserve accumulation policies in order to help present-day Singaporeans reduce their financial burdens and improve their quality of life, while continuing to save for future generations of Singaporeans.

Last November, during the debate on the cost-of-living motion raised by the Workers’ Party, I attributed a large part of the rising cost of living problem to the policies of the PAP Government.  

Today, I will delve deeper into the Government’s budget and reserve accumulation policies to justify what I have said. 

The Singapore government had put in place a good reserve accumulation system started by the late Dr Goh Keng Swee to facilitate the accumulation of the huge reserves we have today.

However, because our reserves are not accumulated from natural resources, there is a cost to accumulating our reserves, which comes from sacrifices made by Singaporeans. 

For example, much of the Land Reserves came from acquisitions of land from Singaporeans at below market price during the 1970s and 80s while the Financial Reserves are accumulated through the investment of land sales proceeds, government surpluses, and the CPF balances of Singaporeans.

Whatever the Government has accumulated in surpluses or reserves, these are the People’s money, these are not the Government’s money.  

The cost of accumulating reserves is tolerable when our economy and incomes were growing rapidly. However, as our economic fundamentals change, there comes a point when the welfare of present-day Singaporeans will be hurt if we continue accumulating reserves at the same rate as we are doing now.

We are of the view that the Singapore of today has gone past this point.

The cost-of-living crisis that we are facing now, in addition to growing social inequality, increasing mental health issues, and declining total fertility rate, are examples of social ills that have resulted from our economic policies.

Today, it is not unreasonable for Singaporeans to expect the Government to focus less on accumulating reserves and do more with our financial resources to address these social ills. 

However, over the years, when it comes to reserves, the PAP Government’s approach has been to tell Singaporeans that one, that there is no such thing as too much reserves, two, that the reserves can only be used in absolute emergencies, and three, that Singaporeans cannot be told how much we have accumulated in the reserves because of national security reasons. 

PSP believes that this approach does not do justice to the fact that the reserves are accumulated from the blood and sweat of Singaporeans.

There is a cost to accumulating reserves.  Singaporeans deserve to have a greater say over how much we are accumulating in the reserves, how we are using the reserves today, and how much we are leaving behind for future generations of Singaporeans.   

In today’s debate, we will first discuss the size of our Past Reserves and why it need not be a secret.  Then we will examine how we can moderate the rate of reserve accumulation marginally to care for and motivate present-day Singaporeans while continuing to accumulate more reserves for future generations of Singaporeans.

It would be befitting for me to emphasise again at this point that PSP is making proposals with neither the intention to, nor with the effect of “raiding our reserves”. That has never been our approach and mindset towards this issue, and neither do our proposals have that effect. In this light, I hope that this debate can be focused on the substance of our proposals.

What is the size of our Past Reserves?

Mr Speaker, during this debate, we will be referring to the Financial Assets in the Past Reserves as the “Financial Reserves” and the Physical Assets in the Past Reserves as the “Land Reserves”. 

During the Budget debate in 2021, DPM Heng Swee Keat said that no responsible leader would reveal the size of the reserves.

PSP disagrees. We believe a responsible leader should reveal the size of the Reserves for the following reasons. 

First, as the collective owners of the reserves, Singaporeans deserve to have access to precise information about our reserves, the returns, and how it is being invested and managed. 

A clear statement by the Government on the size and performance of our Financial Reserves every year would go a long way to facilitate proper discussion on our taxation and spending policies and to quash fake news about the insolvency of our CPF, the size of our external debt and the performances of GIC and Temasek.

There may be no real necessity for the public to know the full extent of our military capabilities. But Singaporeans would need a clear idea of the size and performance of our Financial Reserves as a reference point to have a constructive public debate on the Government’s taxation and spending policies.

Secondly, the most effective defence against currency speculation lies not in the confidentiality of the size of our Financial Reserves, but in MAS ensuring that the value of the Singapore dollar is in line with our economic fundamentals.

Third, there is no national security threat arising from disclosing the size of the Financial Reserves because this can already be estimated using publicly available information, such as the Government Financial Statements.

Even though the Ministry of Finance has claimed that “Government’s total financial assets as reflected in the Government Financial Statements do not represent the size of our national reserves”, my colleague, Ms Hazel Poa will show the House later that we can estimate our Financial Reserves to be about $1.2 trillion simply by deducting the relevant liabilities from the financial assets.

While the size of the Financial Reserves can be estimated, an official statement is still important to put all Singaporeans on the same page. 

How our reserves will continue to grow

The $1.2 trillion figure for our Financial Reserves is not a static number. It will continue to increase over time from five sources of growth.

1) Official Foreign Reserves (OFR)

OFR will continue to grow as long as there is more money flowing into than flowing out of Singapore

For example, from the end of 2019 to the end of 2022, even during the Covid pandemic, MAS had accumulated new OFR from large excess foreign inflows amounting to about $250 billion.

This is more than six times the amount the Government has drawn down to fight the pandemic, or more than two and a half times the total Government expenditure in a normal year.

There was so much OFR accumulated in recent years that the Government had to set up a new mechanism, the Reserve Management Government Securities, in January 2022 for MAS to transfer excess OFR to GIC.

2) CPF balances

Ms Hazel Poa will explain in detail how the growth and investment of our CPF balances contribute to the growth of the reserves.

3) Net Investment Return

Currently, the Financial Reserves generate Net Investment Return (NIR) of about $50 billion a year, of which half is kept in the Financial Reserves and half allocated to the Budget for spending in the current year, which is known as the NIRC.  As our Financial Reserves increase and make positive investment returns over time, our NIR and NIRC are also expected to increase in tandem.

4) Land sales revenue

The revenue from all land sales goes directly into the reserves. I will be discussing this further later in my speech.

5) Government budget surpluses

Any surpluses of the Government go directly to the reserves.

In summary, although not necessarily known and accepted by most Singaporeans, it is transparent to the financial markets, that Singapore has approximately $1.2 trillion of Financial Reserves which is still growing every year and generating higher and higher investment returns each year amounting to $47 billion in FY2023. 

It’s because of this strong financial position that PSP has opposed the GST and property tax hikes in 2023 and 2024.

When PM Lee was interviewed for the CNA documentary in August last year, he said that “the biggest misconception which people have is that there is such a thing as enough”, and that he doesn’t know how much reserves is enough.

PSP’s response to this is that we are of the view that we may have reached this “point of enough” if we are raising taxes when Singaporeans are facing a cost-of-living crisis, for the sake of maintaining the current rate of reserve accumulation.   

PSP disagrees that we continue to accumulate reserves at the same rate when it hurts the welfare of present-day Singaporeans. 

The accumulation of reserves comes with costs and benefits. For too long, the Government has over-emphasised the benefits while downplaying the costs.

How can the Past Reserves be better deployed?

Mr Speaker, after ascertaining the size of our Financial Reserves, we are now in a better position to discuss how the budget and reserve accumulation policies can be tweaked to produce better economic outcomes for Singaporean. 

In the past few years, PSP and WP have suggested various ways by which  the Government can deploy more reserves to ease the burden of  Singaporeans today without compromising the welfare of  future generations. 

First, there is a general consensus that we should not touch the principal of the Past Reserves.  For example, if the Financial Reserves is $1.2 trillion, we should leave that alone. 

Secondly, both PSP and WP have made different but reasonable suggestions on ways to continue growing the reserves but at a slower rate.

For example, we have suggested that part or all of the land sales proceeds should be allocated to the yearly budget for spending. Given that land is only sold as leasehold, land sales are a recurring source of income which can be used for current spending.

Both PSP and WP have also asked for a larger share of the Net Investment Return (NIR) of the Financial Reserves to be allocated to the yearly budget instead of raising taxes.  Currently, 50% of the NIR is allocated to the budget as the Net Investment Return Contribution (NIRC).  WP has suggested to increase the share of the NIR from 50% to 60% for the NIRC.

The Government has rejected all these proposals and continues to adhere to its stance that the allocation of 50% of NIR as NIRC to the budget is fair to present and future generations. 

This brings us to the very pertinent question, which is whether present-day Singaporeans are really enjoying the full benefit of the NIRC?

Upon deeper examination of our budgetary policies, we can see that not every dollar spent in the Budget has been used on spending in the current year.

Part of the Budget goes towards the Endowment & Trust Funds for future spending and another part goes towards making up the HDB’s deficit from land costs which goes to the reserves. This is equivalent to not enjoying the full benefits of the NIRC during the current year.

Let me first explain in more detail the contributions to the endowment & trust funds.  

The Government has said that the Budget is in deficit and will continue to be so because of the increasing expenditure for the ageing population.   However, is the Budget really in a structural deficit?

Our Budget has about $100 billion in operating revenues which does not include the NIRC.  Total expenditures which include both operating and development expenditures slightly exceeds the operating revenues by about of $3 to $5 billion.  So the Budget should be in a big surplus after taking in the NIRC which is $23.5 billion in FY2023.  

However, a deficit is normally reported in the Overall Budget because the Government transfers a large part of the surplus budget resources arising from the NIRC each year to many endowment & trust funds that are intended to fund long-term spending. 

In 2019, MOF reported to the Estimates Committee that there were 23 such funds. There are probably more now.

It is not easy to keep track of the balances and expenditures of these funds because only 11 funds set up by legislation are reported in the Government Financial Statements. The other funds are reported in the financial statements of statutory boards. 

Capital transfers to these funds are accounted for as current expenditures in the budget although most of these transfers are not spent in the current year.

Based on the budget figures from FY2012 to 2020, the total capital transferred to the endowment & trust funds is equivalent to about 64% of the total NIRC allocated to the budget in that period. In FY2023, the transfer equalled 72% of the NIRC. 

As a result, about $51 billion has been accumulated in the 11 funds listed in the Government Financial Statements by the end of FY2023. These funds are classified by MOF as endowment funds and non-endowment or trust funds.

For endowment funds, it is stipulated by law that the capital transferred is locked up and cannot be spent. Only the investment income can be disbursed. There are 5 such funds reported in the GFS, and the total capital locked up is about $23 billion.

For the non-endowment  or trust funds, the capital, together with the investment income, might be drawn down to meet expenditure needs over multiple years long into the future, even though the capital has been expensed off the budget in the year of transfer. 

Between FY2018 to 2022, the actual net annual spending for the 11 funds accounted for less than 10% of the total assets of the funds. 

The Government has argued that the creation of endowment & trust funds is a more prudent measure to ensure that future expenditures are fully costed and paid for upfront.

However, there’s no need to do that in the case of the GST Voucher Fund because future GST voucher payments can be offset by GST revenues in the same year.  As expenditures and costs are matched, what’s the rationale to lock up $9 billion in the GST Voucher Fund now.

The regular top-ups of the funds also show that not all future expenditures can be accurately forecasted from the start.     

Hence these endowment and trust funds, especially the 5 endowment funds where the capital is locked up, can also be seen as a second set of reserves that are being set aside for specific purposes.

When money is being transferred from the current-year budget into these endowment & trust funds, we are essentially transferring money back into the reserves.

If we are too conservative and allocate too much money for future expenditures in the current-year budget, this could potentially mean a shortage of resources for other expenditures and lead to tax increases that are larger and earlier than actually required.

PSP will suggest a more efficient way of deploying the surplus budget resources arising from the NIRC later.   

How is the Land Reserves accounted for? 

Next, we examine how the payment of land costs for public housing has led to a heavier tax burden for Singaporeans.   

We have said that the Financial Reserves are valued at about $1.2 trillion as of end-March 2023.  The Land Reserves, on the other hand, are valued only when it’s sold.

No land cost is paid for land used by the State for schools, hospitals, and other public infrastructures.

But when land is sold for public housing and commercial use, the user will pay a market cost of the land, which goes directly to the Financial Reserves.

Our main point of contention relates to the Government charging land cost for public housing since 1985. 

Since 1985, HDB has been required to pay the market cost of the land into the Financial Reserves when it gets land from the Government to build HDB flats.  In FY2022, the HDB paid about $5.39 billion of land cost to the Financial Reserves. 

The total cost of the HDB flats comprise the land cost and construction cost.   When the land cost is high and increasing all the time, HDB cannot charge the full cost to the buyer in order to maintain affordability.  As a result, HDB is saddled with large deficits which amounted to $5.38 billion in FY2022. 

Incidentally, the HDB’s deficit is almost equal to the land cost paid in FY2022. 

The HDB deficit created by paying land cost into the reserves is not only paid by the HDB flat buyers but also all of us taxpayers whenever we pay any tax.  It is a heavy and unnecessary financial burden on Singaporeans which can be avoided if the land cost is waived for public housing.  

Hence, while the reserves increase over time, this comes at the price of more taxes and smaller BTO flats for Singaporeans. We must ask ourselves: is this what we really want for ourselves and for our children and grandchildren?

PSP’s proposals

Mr Speaker, the Government has tied up a lot of financial resources from the budget and in the reserves to the detriment of the financial well-being of Singaporeans today.

Through today’s debate, PSP hopes to convince this House that our resources in the Budget and the reserves should be deployed more fairly to present-day Singaporeans while we continue saving for future generations.

In this regard, PSP proposes two changes pertaining to the deployment of the NIRC and the charging of land cost to public housing. 

PSP’s first proposal is that no further Endowment & Trust Funds should be created and no further top-ups should be made to existing Endowment & Trust Funds.

We propose to consolidate surplus Budget or NIRC resources in an omnibus Budget Surplus Fund for future spending for Singaporeans, instead of breaking these resources into many endowment and trust funds.

Long-term expenditure needs should then be funded each year directly out of this Budget Surplus Fund. The investment returns on the assets in the Budget Surplus Fund should also be retained in the fund.

This approach has several advantages.

First, it will ensure that surplus budget or NIRC resources will always be used promptly for the immediate spending needs of Singaporeans.

No capital will be left idle and capital that is not used remains in the Budget Surplus Fund and not transferred back to the Past Reserves. 

Secondly, Parliament can have better oversight over one omnibus Fund as compared to more than twenty different  funds managed by different Ministries, statutory boards, and other agencies.

The Parliament can be informed of the expenditures of the Fund at the beginning of each fiscal year, just like any expenditures in the Budget. 

The Parliament can be given long-term spending projections of the Fund from the MOF and better ensure that future expenditure for all social causes are fully costed and provided for upfront.

With an integrated view of all the fiscal resources available, Parliament will be in a better position to support tax increases of the Government if required. 

PSP’s second proposal is to waive the land cost for public housing owned by Singaporeans for the sole purpose of occupancy under the Affordable Homes Scheme. 

Under the Scheme, a Singaporean still pays land cost plus accrued interest when he sells his HDB flat.  Assuming the very unlikely scenario that all Singaporeans don’t sell their HDB flat, waiving land cost for public housing may slow down the accumulation of Financial Reserves by up to $5 billion a year. 

Even so, this is a small price to pay to ensure that every generation of Singaporeans can afford a HDB flat and also retire in the same flat with enough retirement income. 

In addition, the Affordable Homes Scheme will eliminate the HDB deficit, releasing substantial resources back into the Budget and reducing the tax burden of all Singaporeans especially the middle-class Singaporeans.

The two PSP’s proposals do not reduce our Past Reserves although it may marginally slow down the future rate of reserve accumulation.  On the other hand, they are expected to produce very substantial benefits for Singaporeans. We urge the Government to study our proposals and report the results to this House.


Mr Speaker Sir, in conclusion, there is no need to keep the size of our Past Reserves a secret when the size of the Financial Reserves can be derived from publicly available information. 

The Government should accept this and release an official figure of the full size of the Financial Reserves so that Singaporeans can properly discuss our Budget, taxation, and reserve accumulation policies.

PSP has estimated that our Financial Reserves is about $1.2 trillion.

I have also explained that there are five main sources of growth for our reserves which will enable it to continue growing  by tens of, or even hundreds of billions, dollars a year.

This provides us with the fiscal space to relax the pace of our reserve accumulation marginally by perhaps a few billion dollars a year to waive the land cost for BTO flat pricing and to deploy the surplus budget and NIRC resources more proactively to delay and reduce the necessity to raise taxes. 

These are the kind of policies that will greatly reduce the financial burden and improve the quality of life of present-day Singaporeans while continuing to save for future generations of Singaporeans.   

Sir, I beg to move.  

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