The Budget Arithmetic Puzzle by Leong Mun Wai

NCMP Leong Mun Wai 梁文辉 has done a simple breakdown of #SGBudget2021. While the budget has allocated a large amount of national resources towards alleviating the effects of COVID-19, Mr Leong believes not enough has been done to halt the continuous rise of living, healthcare and education costs.
Mr Leong asserts that as long as Singapore continues to succeed financially, more can be done to return the fruits of Singaporeans’ labour to Singaporeans themselves.

Here is Mr Leong’s post on facebook reposted here with his permission.

Every year, the Budget is an arithmetic puzzle. Even financial professionals like me have problems piecing everything together because you have to go beyond the smoke screen and look for the detailed data, which are often incomplete.

However, I do get a sense of the overall picture and I am going to share my understanding here.

1. The ST’s headline of $107B plan refers to the total expenditure, which comprises of $82B of operating expenditure to run the government, $20B of development expenditure and $5B of financial transfers to help Singaporeans.

2. As the total operating revenue is estimated to be $76B ($2B higher than pre-Covid level in 2019), the basic budget deficit is the difference between $76B (Revenue) and $107B (Expenditure) which is $31B.

3. It is the Government’s policy to use only half of the investment returns for spending every year so that the other half is retained in the reserves. The half used in the budget is called the Net Investment Return Contribution (NIRC).

4. Including the NIRC from our $1.35T in financial assets which is $19.6B (meaning our Net Investment Return for 2021 is estimated to be $39.2B), the overall budget deficit becomes smaller by reducing the shortfall of $31B (Deficit) by $19.6B (NIRC) which gives a final deficit of about $11B.

5. If 100% of the Net Investment Return (NIR) of $39.2B is used, there will actually be no deficit in 2021.   So the NIR provides a very strong financial base for us.   Even the $52B drawdown to fight the Covid-19 only equals to about one and a half years of our investment returns.   There is little damage done to our overall financial reserves and position even when we are fighting the worst crisis of a lifetime to date.

6. Needless to say, we are not encouraging reckless spending but are raising awareness that we do have the resources to help our Singaporeans do better. So let’s see how much of the 2021 Budget is additional help for Singaporeans. The direct benefits to qualifying Singaporeans are as follows:

Job Support Scheme$2.9B
SG United Jobs and Skills Package, SG Growth Initiative$1.5B
Covid-19 Recovery Grant$0.4B
Singapore Rediscover Vouchers$0.2B
Household Support Package (GST vouchers, special etc.)$0.9B

7. Overall, Budget 2021 has touched on the right pressure points especially in the continuing effort to help Singaporeans upgrade to participate in our economic transformation through research, innovation and enterprise (RIE), tide over Covid-19 via the additional household support, and the enhanced focus on sustainability.

8. However, many of the key budget measures are short term, ad-hoc payouts which do not tackle the root cause of the problem. Middle-class Singaporeans continue to feel stressed because the rising housing, healthcare, education costs are still there.

9. Further, the measures for economic transformation are from the old mold which had proven to be not successful despite having spent about $80B on economic transformation mainly through A*Star and Enterprise Singapore in the past two decades, a sum that is far greater than the Covid-19’s drawdown. More of the same may still not work.

10. I will comment further on these points in my speech during the Budget Debate from 24-26 Feb 2021.

Taken from:

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