Debate on Annual Budget Statement

Order read for Resumption of Debate on Question [19 February 2018],

"That Parliament approves the financial policy of the Government for the financial year 1 April 2018 to 31 March 2019." – [Minister for Finance.]

Question again proposed.

10.17 am

Mr Murali Pillai (Bukit Batok): Mr Speaker, Sir, being the penultimate speaker in this marathon Budget Debate stretching to a third day, there is always this pressure not to cover the same ground as the speakers who have gone before me. I had to revise my speech several times. I realised through the revisions, they have helped me better understand what is at stake in this year’s Budget. So, it is not all that bad being the second last speaker. I cannot speak for Mr Saktiandi Supaat though.

This House has heard impassioned pleas from hon Members on the focus areas for this year’s Budget. For instance, there have been clarion calls to further increase social spending to take care of less fortunate people and improve their social mobility, address more issues associated with the ageing population, and providing better opportunities for all, young and old.

At the same time, all hon Members have agreed that we need to ensure that the Budget is financially prudent. There are divergent views on how this can be achieved. It is important that we in this House try our best to build a consensus on at least the broad areas of strategy that this Budget represents. Everyone must agree that we should not dissent for the sake of dissent. So, what should be the framework for us Members to build this consensus? I will return to this question shortly.

But before that, I want to, first, deal with a point made by hon Member Ms Kuik Shiao-Yin in her speech yesterday. It may be useful to outline her speech first. She said the Government's decision to increase the Goods and Services Tax (GST) to 9% is justified as a pragmatic decision. She said the Government's decision not to raise the Net Investment Returns Contribution (NIRC) to above the 50% mark is also justified as a pragmatic decision. She further cites a report in support of the view that the Government is excessively prudent with its large Reserves. She then asked how much is then enough for us. She also said "every tilt towards the side of pragmatism is simultaneously a tilt away from the side of our ideals".

With respect, I do not see pragmatism on one hand and being true to our ideals on the other as binary choices giving rise to a zero-sum game. This kind of approach would give rise to polarising views which would make it harder for us to reach a consensus on what is the right approach to be taken in our Budget.

Let me explain by dealing with the example of Reserves that she raised in her speech. Ms Kuik asked how much is enough for us. From my perspective, no one can tell. In a financial crisis, the value of assets, especially those marked to market will shrink. We saw that in the Global Financial Crisis when the international bank shares dropped. We cannot predict with any certainty how much we need to overcome the next big crisis that will hit us. As an analogy, think of the Indian Ocean tsunami. Nobody predicted that. We can only make an educated guess.

Using the pragmatism/idealism dichotomy that she raised, what should the Government then do? Should it be idealistic, assume that the world is kind and, if Singapore, a small country with no natural resources, needs help to prop up its finances, it will get help, and it will be treated fairly, equally and equitably? With due respect, is this a realistic assumption?

Or should it be pragmatic, because it is a steward of 3.6 million Singaporean lives and that of their progeny, and ensure that the Reserves can be tapped to save us from the next crises whenever it may happen?

As a father who has a stake in the future of his children, I am clear in my mind what the Government should do. What is more important, I would respectfully suggest, is to appreciate whether the approach taken in this Budget is in keeping with our values. This is how I suggest we can forge a consensus as Members on the Budget.

I would like to quote former United States (US) Vice President Joe Biden, who said, "Don’t tell me what you value, show me your budget and I’ll tell you what you value".

Members of this House would recall the debate on the Government White Paper on Shared Values in 1991 in this House during the tenure of the second-generation leaders led by Emeritus Senior Minister Goh as Prime Minister. The first three shared values are: (a) nation before community and society above self; (b) family as the basic unit of society; and (c) community support and respect for the individual.

The Budget reflects these values. Investment in economy and infrastructure is needed to secure the future of Singapore as a nation. This is not growth for growth’s sake, as emphasised by Minister Heng. It is about making sure that our families remain intact and we and our family members enjoy a good standard of living.

There is also a healthy dose of idealism in this Budget. Just look at the plans that the Minister has suggested to take advantage of the opportunities within Asia and the Association of Southeast Asian Nations (ASEAN). At same time, the funding of the investments is done in a prudent way, which is also in keeping with our values in putting our nation first.

The GST is proposed to be increased in the next term of Government after carefully studying all other options. The hon Member for Aljunied, Mr Low Thia Khiang, said reference to this is a distraction and unnecessary. With respect, I fail to see how this can be so. We have already been committing to expenditure well into the 2030 and beyond. Surely, a responsible Government should also signal how it plans to raise the revenue for the same period.

Reserves are not being used to fund expenses. I endorse this forceful point that was made by hon Member Mr Christopher de Souza yesterday on the danger of using proceeds from land sales, which make up our Reserves, to fund expenditure. That is not to say Reserves cannot be used. The way the Budget is pitched, it represents a fair usage of Reserves and allocation of responsibilities between the present and future generations.

Borrowings for infrastructural developments are to be secured by guarantee, subject to the President's approval, which, in turn, is secured by the Reserves. Payment obligations on the loans would also fall on the future generations.

The 50% NIRC rate, in my view, represents a fair balance between ensuring a bright future as a nation and the present funding needs of the community. There is no loading in favour of one or another. This better represents our Asian values. Once we change this, it will be a slippery slope and there will be a tendency to adjust a higher percentage to accommodate for higher expenditure.

This is my answer to the hon Member Asst Prof Mahdev Mohan who suggested in his speech yesterday that the Government listen to views expressed by some Singaporeans that the NIRC rate should be increased. Mr Speaker, may I speak in Tamil, please.

(In Tamil): [Please refer to Vernacular Speech.] Yesterday, Asst Prof Mahdev Mohan spoke about the Government listening to the people's concern on raising revenue. I agree but this is not enough. There are several opinions on this. As such, the Government should consider and decide which approach will be suitable for the people, and then the Government should explain its decision clearly to the people.

(In English): Next, the concrete steps in providing greater support for families recognise the primacy of the family as the basic unit of society and the important role it plays in nation-building.

Finally, the programmes to support individuals, especially our seniors, are consonant with the values of community support and respect for the individuals. For these reasons, I support the Budget because it accords with our shared values.

Before I leave this point, I would like to return to an aspect of the speech Ms Kuik Shiao-Yin made in reference to JC and polytechnic students she spoke to, constantly using the word "uncertain" when asked to describe their future. If I were there at the discussion, I would acknowledge that, indeed, our future as a nation and as individuals has and will always be uncertain. This has been the case since 1965. We survived because we remained together, worked hard putting the nation before community and community before self.

I would point out that we are in a better situation than before because of a prudent and forward-thinking Government. I would highlight the importance of being resilient and the need for the students to be the best they can be for themselves, their families and our country. If our youths can accept this, we can be sure that we will have a strong future. Having said that, I have three observations to make on the Budget.

First, the Wage Credit Scheme (WCS). Minister Heng decided to extend WCS to overcome near-term challenges because, in his words, "Some firms remain concerned about business costs" even though our economy has picked up. We, therefore, will see a second extension of WCS which has been running since 2013.

Based on estimates, the Government would have committed up to $7.2 billion for this programme. For the period 2013 to 2015, it is about $3.6 billion; 2016 to 2017, it is $1.8 billion; and an additional $1.8 billion for the next three years.

In 2015, when the Government first proposed the extension of WCS in Parliament, concerns were raised in this House. The hon Member Assoc Prof Randolph Tan warned that WCS may land up in delaying the adjustments that businesses should make in order to complete restructuring. In other words, WCS should not unwittingly become a wage subsidy crutch.

The hon Deputy Prime Minister Mr Tharman Shanmugaratnam explained then that there is a need to adopt a phased approach whilst the foreign manpower policy is tightened and the labour market becomes tighter. Otherwise, there would be an impact on weaker businesses, especially startups. There is also a need to support those who are rejoining the economy and may need time to enhance their skills and increase their productivity.

I support this approach but, given that this is the second time an extension is being sought, I am of the view that the WCS criteria should be sharpened so that we focus on the firms which are concerned about business costs. I do not see why a muscular company, say, a Government-linked company or a listed company, can benefit from WCS in the same way as a small enterprise.

Also, the drivers for WCS, when implemented in 2013, were the need to improve productivity and the tight labour market. Productivity growth for 2017 is 4.5%, highest since 2010. Citizen unemployment rate for 2017, based on the Ministry of Manpower's (MOM's) preliminary figures, stands at 3.3%, better than in 2013 when it was 2.9%.

In light of the improved situation, why does the Government see a need to further extend WCS by another three years, which is a year longer than the first extension, which was for two years?

Second point, promoting partnership. Minister Heng Swee Keat identified the forging of strong partnerships as a third key enabler to capture future opportunities, especially in Asia and ASEAN in particular. He pointed out: "Competition is not the only driving force in our economy. Cooperation is also key."

He went on to identify platforms for partnership, such as Partnerships for Capability Transformation (PACT), Global Innovation Alliance, ASEAN Innovation Network, and announced the setting up of the Infrastructure Office.

I support the focus on capturing future opportunities in Asia and ASEAN to grow the Singapore economy. There is, however, a need to overcome the default mindset of companies which are used to competing with one another. This will not be easy. Also, PACT contemplates large organisations to partner small companies. This is not a partnership of equals. Recognising this, in a Business Times article published on 8 November 2016, Mr Lim Hwee Seng and Ms Bernadine Huang of PricewaterhouseCoopers (PwC), stated as follows:

"This scheme remains out of the reach of the smaller-scale small and medium enterprises (SMEs). More often than not, large organisations will choose to work with the bigger SMEs, and not the smaller ones. We suggest for PACT to be extended to allow bigger-scale SMEs to work together with smaller-scale SMEs and not just large organisations vis-a-vis SMEs."

How would the Government promote the forging of strong partnerships in these circumstances? In particular, how would it ensure that the smaller SMEs would benefit from PACT? This is especially important in the technology space where there are a good number of startups and small companies which could potentially benefit from venturing overseas in partnership with large organisations.

I note that the 2001 Economic Review Committee, in its report which was issued in 2003, a similar call was made. It promoted a cluster approach amongst companies venturing overseas, where larger companies lead a cluster of enterprises, including SMEs.

May I ask what has been the Government’s experience in promoting such partnerships? What lessons can we draw from the past?

Final point ‒ strengthening social safety nets for those in need. I am very heartened to note the concrete plans for Budget 2018 to build on the SG Cares movement. On the aspect of financial support for charities, I note that the total donations have increased from $2 billion in 2011 to $2.7 billion in 2017.

One big contributor is Tote Board, through its grant-making activities across sectors, such as Arts, Community Development, Education, Health, Social Service and Sports. In financial year (FY) 2016/2017, Tote Board approved disbursements of $459 million to these sectors. This amounts to about 17% of the donations. In the past five financial years beginning from 2012, Tote Board collected an average of about $150 million from casino entry levies per year, which is used to fund its grant-making activities.

Casino entry levies have not changed since 2010, not even adjusted for inflation over the past eight years. May I ask why this is so? Increasing the casino entry levy will enhance the safeguard to protect Singaporeans and Permanent Residents (PRs) from the ill-effects of gambling and, at the same time, allow charities to be better supported through Tote Board’s grant-making activities. With that, I support the Budget.

Mr Speaker: And finally, we have Mr Saktiandi.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, like what Mr Murali Pillai has mentioned, I think it is a great honour to be the last speaker. But I think Mr Murali has done great justice in terms of trying to wrap up some of the points made by other Members. I am not sure whether I should try and keep it brief or try to be on point.

Mr Speaker: Brief is always good.

Mr Saktiandi Supaat: But I find that the Budget takes a very detailed approach to the challenges that Singapore will face in the next five years and the Minister for Finance has scrutinised the various revenue platforms and carefully considered how best we should manage this against our expenditure, especially on building the infrastructure necessary for the future and the rising expenditure on healthcare and security. The hallmark of this Government has always been to plan ahead, including this time round, providing forward guidance on its fiscal plans.

Based on the past two days' debate, I think it has also led to a healthy discussion on our fiscal sustainability and reserve adequacy as well. This is an important issue to lay bare, in particular, for a small and open economy such as Singapore, as huge amounts of money move in and out of Singapore all the time. This is of benefit to us, especially as a financial centre, but it can bring with it risks that we need to buffer against, so as not to take risk leading to major job losses. And I think that is the penultimate key issue ‒ the job losses that might arise from this.

After yesterday's debate, I was looking at statistics overnight. For example, to put things in perspective, based on 2016 data, Singapore's foreign direct investment (FDI) stock is S$1.4 trillion. This is quite substantial. This is no fun and games. This is a huge amount. If there is a loss of confidence or catastrophe and, let us say, 30% only of the FDIs were to move out, it will wipe out S$400 billion. And we should note that the Monetary Authority of Singapore's (MAS') official foreign reserves are only $370 billion, and this is just 30% of the FDIs. "FDI", if I may define it, is actually the amount of investments by foreign multinational companies (MNCs) or multinational enterprises investing in Singapore. This S$400 billion is what actually leaves Singapore's shores, and we will need money to rebuild for jobs if this goes out. And I remind Members again that this is only 30% of the FDI amount.

So, we are fortunate to have a good team handling our Reserves. They have been able to secure good returns from year to year to supplement our Reserves. I must, at this point, congratulate them and the Ministry of Finance (MOF) for an excellent job.

The point made by Ms Kuik Shiao Yin in her speech yesterday about being pragmatic and shifting from pragmatism and moving away from idealism, I think is the point that I shared just now in terms of statistics. So, being pragmatic today is actually quite important so that tomorrow's kids can have a space to realise their dreams and ideals. That is an important point I want to share today from that perspective.

I am glad also with the Minister for Finance's assurance in his speech that we need to take the right approach to have future generations in part bear financial responsibility for infrastructure projects that are built for future needs.

At this juncture, Mr Speaker, please bear with me. I am trying to share a bit in terms of using a localised version of the island parable sketched by the late American economist Paul Samuelson of Massachusetts Institute of Technology to set the context about the overlapping generational issues that we face before my comments and questions later on.

Let us assume we have this island which is home to unusually tall rambutan trees ‒ Samuelson uses cocoa trees and I am using rambutan trees here to give a localised version ‒ and also hungry people ‒ one young and one old generation ‒ and little else. The rambutan trees are our surpluses and reserves, and the fruits are our returns from our reserves. The trees reflect the island's strong fundamental. So, the young among the people would climb the trees and pick the fruits. Take note that the fruit must be eaten quickly before it is spoilt by the hot weather. The older people are physically incapable to climb and pick the fruit. Neither could they buy fruit from the young, as they have nothing to offer in exchange. So, if the elders had saved the fruit from their youth, it would not work. The stockpile would have rotted with the passage of time. So, the solution: the young gives to the old the fruit they pick and, in return, the next generation will do the same for them when they, too, grow old. Thus, the young sort of pays it forward. This also serves as a link between two generations. The scheme works, Samuelson pointed out, only because “new generations are always coming along”.

I will pause at this moment and say this may be an oversimplified world I am painting, but the same core values and principles have been applied in Singapore. So, past and current generations always looking forward and thinking about the future and caring for the less fortunate.

In Singapore’s context, things have evolved with practical policies introduced in the past 50 years. Our young can acquire a durable asset, say, a Housing and Development Board (HDB) flat, and our Government buys reserve assets and can replant half the rambutan fruits or seeds to grow more rambutan trees. At a future date, they sell these to cash out and take care of themselves. Thus, when the young get older, they can rent or sell the HDB flat to the next generation. In most cases, this kind of saving and investing does far better to serve the people. Capital accumulation enlarges the economy’s productive capacity, thereby creating wealth. Saving and investing both store value and add to it, turning one rambutan fruit into a whole tree. Retirees can, therefore, expect to get more out of their investment than they put in, not to mention other long-term initiatives that we have already built up over the years, such as Central Provident Fund (CPF) and ElderShield, for future retirement and healthcare needs.

So, Mr Speaker, my first question is related to the fruits from the replanting of the rambutan trees. We should make sure we continue to plant more rambutan trees and not go down the path of eating too much rambutans. In fact, we should have a balanced diet ‒ our NIRC (or rambutans) ‒ when we can find other sources of food or tax revenue. After all, too much rambutans may not be good for us. We can get a sore throat. Besides, even when we take other sources of food from other plantations or trees, we have consistently taken care of those plantations with fertilisers and tender loving care by offsets and other measures to ensure all is well and more fruits can be produced in the future.

So, back to my first question to the Minster, will the trees continue to bear fruits at a rate we need? Can we and future generations continue to plant trees, even as some of the older trees wither and die? It would be good, too, if the Minister could say whether or not we can continue to expect such returns from the Government Investment Corporation (GIC), MAS and Temasek in the next few years or decades. If this is achievable, then perhaps there could be a chance for the proposed GST hike to be deferred to a later date.

I wholeheartedly agree that it is important to save for rainy days and keep a substantial Reserve. I am glad that the Government is looking at ways to address the overlapping generation usage of our future infrastructure, especially in the next economic phase of Singapore. This Budget is a good start. In particular, the issue is about optimal financing and that the user pays. Rather than just building up funds now for future infrastructure projects, I am glad that the Budget highlighted efforts to fund infrastructure projects by a debt structure to finance the construction of infrastructure. In principle, under such a debt structure, the cost of funding the infrastructure project should be amortised over time, so that each generation pays for the benefits they get from using the infrastructure project.

In our case, it may be useful to earmark a certain amount of Reserves or NIRC to use to “guarantee” the bonds or borrowings for an infrastructure project. To segment spending for infrastructure projects and other expenditures in our Budget explicitly would give taxpayers a better picture of where their money is going to, and how they will benefit from it. In fact, this is a feedback from one of my residents ‒ trying to give a better picture of where the money is spent and how you benefit and the usage of Reserves as well.

So, the key word here is “earmark” for the guarantee to lower the financing costs. But the returns from the infrastructure project must make sense. If future users cannot afford to pay, lenders can tap on that collateral and assume ownership of it. For example, in the context of the rambutan story, build a fence around one rambutan tree and use that as collateral to borrow money to construct the bridge to the next island, so that we can build more rambutan trees there, and not sell the rambutan tree. We can use the toll for the bridge to next island to eventually pay for the bridge. Most importantly, the future users of that bridge will pay for the bridge. No need to chop down the rambutan tree.

As mentioned in the Budget speech, borrowing arrangements for Statutory Boards and Government-owned companies which build infrastructure would form one part of the solution for funding large investments. However, contingent liability is a potential future issue that must be taken into account, given the unpredictable nature of the global economy and the financial markets. So, it is an issue and concern I have. Contingency liabilities could build up for future generations, affecting the ability to obtain funds in future. Does the Ministry see an issue in the build-up of contingent liabilities for future generations?

Moving ahead, we will also have to evaluate how a GST increase in the near future would impact on the lower-income and middle-income groups. If GST is to be increased, how much of it is expected to be ploughed back to reach those in need? Will more resources be pumped into existing assistance schemes to mitigate the impact of rising living costs? It would be prudent to explore means to collect the revenue efficiently, and quickly and fairly allocate it to reduce further inequalities.

Furthermore, as the Government moderates the pace of various Ministries' budget growth and looks out for ways to be more efficient and effective, there will be decision inflexion points with tradeoffs at the margins. I am concerned if some of the decision points and tradeoffs may lead to reduced spending in specific areas of education and skills training, in particular, the Institute of Technical Education (ITE) segment of the student population. They constitute about 25% of the post-secondary cohort each year and are a significant future labour force with key skillsets for us to be future-ready.

I have visited and met students and staff of ITE as part of the Council for the Development of the Singapore Malay/Muslim Community's (Yayasan MENDAKI’s) Future Ready Unit's efforts to enhance the awareness of the younger generation about being future-ready and to instill the importance of SkillsFuture and lifelong learning. Without a doubt, the Government has provided excellent support and resources to ITE.

In the last 25 years, ITE has made tremendous progress to provide skills training for full-time students and Continuing Education and Training (CET) skills upgrade for in-service workers. Recently, ITE had made further advancement by providing new upgrading pathways for its alumni and in-service workers through the programme called Work-Learn Technical Diploma (WLTD), which is a path towards higher certification through apprenticeship model.

Another ITE programme, which in my view is excellent, is the Global Education Programme (GEP). This programme provides ITE students with a holistic education by exposing them to new skills, global mindsets and perspectives, and a better understanding of the culture and lifestyle in other countries. It has proven to be life-changing for some of the students and is impactful, especially for those who come from humble backgrounds.

So, I hope the Government will ensure that the support for programmes like those in ITE and, for example, programmes like the ITE WLTD and GEP, will not be affected, and future demands for development resources will continue to be given to ITE. This is even more important in Singapore’s next phase of development where skills meritocracy is essential.

Another resource that I hope will not be affected are the financial assistance support for ITE students. More than 50% of ITE students qualify for some form of financial assistance and they generally come from diverse challenging backgrounds. The application and checks because of means testing can be very onerous for these families. So, the ITE schemes allow more direct assistance to the students and their families. I do hope that tradeoffs from the reduction in the budget growth do not lead to reductions in the ITE Opportunity Funds, for example.

Mr Speaker, this is a progressive Budget that seeks to prepare Singapore to cope with significant future expenditure growth. The Government is clearly seeking solutions to do so without putting too much burden on the current generation and these efforts should be lauded. I hope there will be no more rambutan trees being cut. Sir, I support the Budget.

Mr Speaker: After 54 speakers and a short detour on how speakers are rostered, Minister for Finance.

10.46 am

The Minister for Finance (Mr Heng Swee Keat): Mr Speaker, Sir, first, let me thank Members of the House for the thoughtful and wide-ranging debate over the past two and a half days. As you said, over 50 Members have spoken for more than 10 hours, and if I were to do a point-to-point discussion, it will take us beyond 10.00 pm tonight. So, in line with my Ministry's policy of limiting Ministries' budget growth to 30% of gross domestic product (GDP) growth, I shall try to keep it to about 30% of 10 hours. [Laughter.]

Mr Speaker: Thank you.

Mr Heng Swee Keat: I am glad that the Budget has sparked many thoughtful conversations among citizens and fellow Singaporeans. Many Singaporeans have shared their perspectives with me in the course of various consultations and engagements, as well as with the other Ministers. I am grateful for the feedback that has helped us to refine our thinking and ideas along the way. This is important because the Budget is not an accounting exercise. It is a strategic and integrated plan for the future, about how all of us can come together to achieve our shared aspirations.

As we learned in Our Singapore Conversation, many aspire for a home where we can make a good living and fulfil our potential, regardless of where we start in life; where we can live purposeful lives, and enjoy our silver years surrounded by the care of family and community; and where we feel assured that our aspirations and needs can be met.

This Budget is about how we allocate resources to achieve these aspirations, through: (a) a vibrant and innovative economy, with diverse opportunities for all; (b) a smart, green and liveable city that we can be proud to live in; (c) a caring and cohesive society where people look after one another, especially the disadvantaged and the vulnerable; and (d) a sound fiscal system that provides for Singapore’s needs in a fair and sustainable way.

Our Budget theme is "Together, a Better Future". I am glad that many Members agree that we can achieve a better future if we work together. I would like to cover three key themes in this debate. My Ministerial colleagues will talk about the respective issues under their purviews at the Committee of Supply (COS).

First, I will explain our approach to revenues and taxes, and why this is the sustainable, responsible and fair way to meet our future needs. Second, I will talk about the urgency of transforming our economy. Third, I will speak about how we can, together, build a more caring and cohesive society.

Let me start with our fiscal strategy. In this debate, two main questions have been raised: why do we need to spend more? What are the roles of taxes, Reserves and borrowing in meeting our revenue needs?

First, let me explain why we need to spend more. I explained in the Budget Statement that we face structural and sustained increases in expenditure in a number of areas – healthcare, security and other social spending.

Government healthcare spending is projected to rise by nearly 0.8 percentage points of GDP from 2.2% of GDP today to around 3% in the next decade. That is $3.6 billion more in today’s dollars. Why this rise?

First, we will spend more due to an ageing population. Already, Government subsidies for seniors' healthcare needs are more than six times that of a young person. From now till 2030, the number of seniors will double from about 450,000 to 900,000. This alone will increase healthcare spending significantly.

Second, the number of citizens who have chronic conditions is rising. Without taking action on diabetes, the number of diabetic patients aged 18 and above could rise from 450,000 in 2015 to 670,000 in 2030. We are working hard to arrest these trends.

Third, new medical technologies, new treatments, procedures, diagnostic tools and drugs can lead to a higher quality of life, but they could also cost more.

Next, annual security spending is also expected to rise by about 0.2 percentage points of GDP as we invest more to counter rising threats. The scale and magnitude of terror attacks around the world in recent years are signs that the terrorism threat has heightened. This threat has come closer to our shores, given the Islamic State of Iraq and Syria's (ISIS’) ambition to establish a caliphate in the region encompassing Singapore. As ISIS loses ground in Syria and Iraq, ISIS fighters’ return to Southeast Asia presents a serious threat to Singapore. The recent Marawi crisis in southern Philippines is a sign that extremist terrorism is now endemic in the region and may take many years before the security problem is rooted out. Around the region and at home, we have also seen more cases of self-radicalisation.

In addition, the range of threats has widened. In recent years, we have seen an increasing number of high-profile and damaging cyberattacks around the world, like the WannaCry ransomware incident, which affected computer systems around the world. With rising security threats and a wider range of threats, we will need to continue to invest in security to keep Singapore safe.

Preschool spending is expected to double in the next five years to $1.7 billion a year in 2022, an increase of about 0.1 percentage point of GDP from today. This is a vital investment in our future generations, ensuring that they have a good start in life. Two in three preschoolers will have a place in a Government or Government-supported quality preschool, up from one in two today.

Apart from these recurrent expenditures, we are investing in key infrastructure to build a better home and ensure we remain one of the world’s leading global cities. And we have to be prepared that expenditures could rise further than what we project now.

Healthcare spending, even in countries that are prudent like Japan and Germany, is around 10%-12% of GDP. New medical technologies could accelerate spending trends.

A sudden escalation in terrorist threats or geopolitical tensions could significantly increase the security spending required. A decade ago, we could not have predicted the rise of ISIS and the speed with which terrorism has spread and evolved around the world.

Our responsibility is to ensure that we make timely decisions and have enough revenues to meet our future expenditure needs readily, amid an uncertain future. In making the additional investment, we are doing so on a strong foundation. Government spending to date has achieved good outcomes.

Indeed, as Miss Cheryl Chan has noted, it is not about how much we spend, but how well we spend. We achieve very credible outcomes, with overall expenditures of about 19% of GDP in FY2018. This is less than half of what the OECD countries typically spend. We think carefully about how to design and organise our underlying delivery and funding systems and consider the roles of all stakeholders. Let me illustrate this in three areas: education, healthcare and law and order.

This is a chart showing how 15-year-olds from different countries do on the Programme for International Student Assessment (PISA) test for science, compared with how much the government spends on education. One group is the Nordic countries, which typically spend about 7% to 8% of GDP. Various OECD countries form a second group, around the OECD average. They typically spend about 4% to 6% of GDP. A third group comprises East Asian societies – Japan, Hong Kong, South Korea. They tend to spend less, with PISA scores on the higher end.

Where is Singapore? We spend about 3% of GDP and do well compared to other countries. The conclusion is the same even after we consider private expenditure on education, such as enrichment classes. It is not just in taking tests that our students do well, but other skills like collaborative problem-solving. And this does not capture the immeasurable character-building work that our schools do in cultivating traits in our students, such as perseverance, responsibility and valuing hard work.

The next chart shows healthy life expectancy against government and statutory healthcare spending. Countries to the right of the chart spend more of their GDP on healthcare, while those to the left spend less. The higher up a country is on the chart, the longer its residents live in good health.

Green points represent the younger societies, while red points are the more aged ones, and amber ones are somewhere in between. Many governments spend around 6% to 10% of their GDP on healthcare. As Members can see from the charts – 6% to 10%.

Compared to other countries shown on this chart, Singapore spends less on healthcare, yet achieves a high healthy life expectancy, higher than the OECD average. Even with population ageing, we expect to spend less than other countries with similarly aged populations.

Similarly, we are able to get effective outcomes for our spending on policing. We were ranked top in the 2017 Gallup Global Law and Order Index, which gauges people’s sense of personal security and their experiences with crime and law enforcement when living in their respective jurisdictions. This is despite our spending being at the lower end when compared to various jurisdictions. That said, Singapore must stay vigilant as a society and as a country.

How have we been able to achieve this so far? It is through a whole-of-society effort.

In education, we achieve good outcomes because we have invested in our schools and a dedicated corps of educators who believe in developing every child to their fullest potential. We have engaged parents who do their best for their children’s education. We have community groups, charitable foundations and individual donors who support students and families in need.

In healthcare, we are able to lead long and healthy lives because we have a well-designed healthcare system and dedicated healthcare professionals, with a system of incentives aimed at delivering value, rather than volume of treatments. We have citizens who take responsibility for their own health and strong families who look after their aged parents. And we have caring and dedicated voluntary welfare organisations (VWOs) that run many services in the community.

In security, we enjoy safety today, not only because we have built up robust and sophisticated systems and a strong corps of Home Team officers. It is also because we have National Servicemen and volunteers who serve with pride, and a united, law-abiding and vigilant community that stands against crime.

This is the power of partnership, and of a whole system that encourages everyone to take responsibility. It explains how a tiny country like Singapore with no natural resources can have world-leading outcomes with moderate levels of taxation and spending. This is the Singapore way and we must continue to build on this ethos. In particular, managing the cost of healthcare must be a whole-of-nation effort. We all need to do our part to keep healthcare cost growth sustainable.

In this respect, I appreciate the useful suggestions by Ms Sun Xueling on how we can be more efficient, effective and smart in spending. The Ministry of Finance (MOF) will elaborate more on how we are doing so at the Committee of Supply.

While we must instill prudence as a value in managing our resources, we must also appreciate that the major structural expenditure drivers that I have spoken of will entail billions of dollars of additional spending a year. The needs they address cannot be met by just squeezing more out of every dollar.

Having explained why we need to spend more, let me now talk about how we plan to finance this in a fair and sustainable manner.

Ms Tin Pei Ling and other commentators have asked if we could fund the increased spending for the future with a windfall surplus like the one we had in FY2017.

The surplus in FY2017 was largely due to one-off, exceptional factors that we do not expect to occur every year. The main increase came from an exceptional Statutory Board Contribution from MAS due to unexpected currency translation gains and investment gains from a global rally in equity and bond markets. The increase in Stamp Duty collections was generated by the recent property market pick-up.

We cannot fund our plans to secure Singapore’s future on the basis of episodic windfalls. If we are fortunate to have these occasional windfalls, we should do the responsible thing and save most of it for our future needs. We should not plan for our future in the hope that markets will always continue to move in Singapore’s favour. That is why we are reserving the bulk of the FY2017 surplus for future needs like the Mass Rapid Transit (MRT) development plans and ElderShield subsidies. The Government is also sharing some of the surpluses through the SG Bonus.

Let me explain at this point our approach to financing our needs. There are essentially three ways of doing so: raise taxes; borrow; or draw on our Reserves. Each of these ways serves a purpose; each involves risks and tradeoffs. We have decided on our approach only after deep and serious study – first, of our spending needs, followed by the options available to fund them.

Mr Louis Ng can be assured that in the process, many public officers from MOF, MOF agencies like the Accounting and Corporate Regulatory Authority (ACRA), Customs and the Inland Revenue Authority of Singapore, and other agencies spanning different policy and operational areas, debated the ideas rigorously with me and their own bosses. In the process, they pushed back on many ideas but also gave me fresh perspectives and feedback. They were certainly not afraid of speaking up or disagreeing with me or with the other Ministers for that matter.

So, let me now turn to the roles of each of these methods – taxes, borrowing and Reserves.

Let me, first, explain why we have decided to raise taxes. This is not an option that we have taken lightly. Not just because raising taxes is unpopular, but because the Government should, as far as possible, avoid taking people’s hard-earned money and deciding on their behalf how the money should be spent, unless it has to do so for critical social, economic or national needs.

Certainly, we should not shy away from addressing the need for taxes, where we see areas of collective need that can be better met by Government provision. These include areas like healthcare, supporting the elderly and retirees, investing in our people through preschools and SkillsFuture, and strengthening our security. As Mr Liang Eng Hwa reminded us, many Members in this House have fought for the Government to do more in these areas. But we should also consider the costs and how to fund them.

Looking ahead, we have needs that occur year after year. The responsible way for us to fund such spending is to raise taxes. As Er Dr Lee Bee Wah pithily reminded us, you do not fund recurrent spending needs by hoping to strike 4D. Or by borrowing with your credit card.

Each generation should strive to pay for its own spending through sustainable means, instead of drawing down more than is prudent from the Reserves or by borrowing and passing on the cost of current spending to future generations.

In particular, for the broad-based needs that I have mentioned, a broad-based tax like the GST is appropriate. As then-Minister for Trade and Industry, Mr S Dhanabalan, said at the Debate on the GST Bill in 1993, it is critical to have a “tax system that will make an immediate and direct connection between demands for public service and the private purse”. This is important so that we understand that whenever we increase demands for public services, we should also pay more. Mr Lim Biow Chuan gave us all a timely reminder that when the Government pays, it is the taxpayers who pay.

Let me now address some key questions that have been raised with respect to the GST increase and other tax changes: first, how we decided on the timing of the GST increase and its announcement; second, how we sized the GST increase relative to our needs; third, how we take care of our lower-income and ensure that our overall taxes and benefits system remains progressive; fourth, how the tax changes will affect our competitiveness.

First, there have been questions on the timing of the GST increase that I have announced. In planning our finances, we take the long view. We seek to understand major trends holistically and how they may affect Singaporeans. We assess carefully what we need to do in response and how we should find the resources to support our plans. This is how we had determined that we will need to raise GST sometime in the period from 2021 to 2025.

By announcing the GST increase early, we are being honest and upfront about our national needs and setting out what needs to be done. We are giving ample notice to citizens and businesses that we will need to raise GST. Members of Parliament (MPs), such as Mr Lim Biow Chuan and Asst Prof Mahdev Mohan, have spoken about why we need to do this, to set out a clear direction for the future.

I hope that it helps everyone to understand our shared challenges in the coming years. Indeed, we must have such important discussions about our future, well in advance. This is important because it is not just Government finances that will be impacted by trends like ageing, but individual citizens and their families. We must all prepare for what is to come. This will also help us to better determine an appropriate offset package that can help with the adjustment.

But we know that there are always uncertainties. That is why we have given a timeframe of 2021 to 2025 as to when this increase would need to take place. I would like to assure Members that, just as the decision to raise GST was not made lightly, the Government will exercise care in deciding the timing for its implementation. Before we move to raise GST, we will carefully assess the prevailing economic conditions as well as our needs at that point.

Second, let me address questions over how the GST increase is sized relative to our needs. As mentioned, a two-percentage point increase in GST rate is expected to raise revenues worth about 0.7% of GDP per annum. This estimated amount is before we account for the amount needed to fund the enhanced GST Voucher (GSTV). On the other hand, the expenditure drivers that I earlier mentioned – healthcare, security and preschools – already exceed this amount. These are serious commitments that we must budget for, and there are risks that overall spending could rise further.

So, the two-percentage point GST increase will not fully cover our expenditure needs, but only make the fiscal gap more manageable, in conjunction with other measures to manage expenditure. It is thus the prudent and responsible approach to raise GST in good time, instead of hoping for expenditure to fall.

Third, let me address concerns over the fairness and progressivity of an increase in GST. I understand that some are worried about the impact of a GST increase on the cost of living, not just among the lower-income, but also among many middle-income households. Let me assure everyone that we are mindful of the impact of tax changes on households, particularly the lower-income, and will help them to adjust while maintaining a fair and progressive system of taxes and transfers.

As I have mentioned in my Budget Statement, GST should be seen together with the rest of our taxes and transfers system, including the GST Voucher scheme. The Government provides structural GST offsets through the GST Voucher. This is a permanent scheme, an integral complement to GST. For the lower-income, we provide substantial offsets. This is a targeted way of making the GST package a progressive one. For retiree households, they also get significant GST offsets.

In addition, we have schemes and programmes to support the less well-off. This includes the Workfare Income Supplement and Silver Support. From education to healthcare and housing, our social programmes provide higher levels of support for the lower- and middle-income households than they do for the well-off, with lower-income households benefiting the most.

We also provide support for the middle-income. First and foremost, our approach to supporting the middle-income is to create good economic growth, as the best form of social security is a good job. Second, we keep the tax burden low, so that Singaporeans get to keep as much as possible of what they earn. Finally, in recent years, we have expanded the support for Singaporeans to take care of their children and aged parents, easing the burden on the "sandwich generation" which Mr Desmond Choo spoke about.

So, when you look at the overall balance of taxes and transfers, lower- and middle-income households receive significantly more benefits from transfers than what they pay in taxes. The middle-income group gets $2 in benefits for every dollar of tax that they pay. The lower-income group gets about $4 in benefits for every dollar of tax.

As I have mentioned in the Budget Statement, we will continue to absorb GST on publicly subsidised education and healthcare.

When we eventually raise the GST, we will enhance the permanent GST Voucher scheme to provide more help to lower-income households and seniors. We will also implement a transitional offset package, with lower- and middle-income households receiving more support, to help them adjust.

Mr Lim Biow Chuan and Er Dr Lee Bee Wah also asked if we intend to set up a Committee Against Profiteering (CAP) to combat any illegal profiteering due to GST hikes. When we last raised the GST in July 2007, most businesses did not use GST as an excuse to raise prices beyond the GST increase. The then-CAP looked into the complaints to manage profiteering.

Similarly, when we raise the GST to 9%, we expect businesses not to exploit the situation and use the GST as a cover to raise prices. If necessary, the Government is prepared to convene a similar CAP.

There have also been concerns that consumers may choose to shop abroad for daily products and there will be more attempts to evade GST. Today, we limit the value of goods that can be brought into Singapore for their personal use without GST. Customs and Immigration and Checkpoints Authority (ICA) officers enforce this, and we will continue to have an appropriate level of enforcement when the GST is raised.

While we have announced the GST increase this time, we continually consider all other taxes and sources of revenues to meet our expenditure needs. Some Members have asked if we are doing enough to tax wealth, and if those with higher income are contributing a fair share.

Dr Intan Mokhtar has suggested raising personal income taxes (PIT). We have raised PIT in recent years to further enhance progressivity. We increased the marginal tax rates for higher-income earners with chargeable income exceeding $160,000 and raised the top marginal rate from 20% to 22% for those with chargeable income exceeding $320,000. This took effect from YA2017. We also introduced a cap of $80,000 on PIT reliefs, taking effect from YA2018. Under the present PIT structure, about half of our workers do not pay personal income tax. Among those who do, the top 10% pay about 80% of our PIT revenue.

Any review of PIT rates must ensure that Singapore remains attractive. Just yesterday, Hong Kong has announced a reduction in PIT in their Budget. We will be moving in the opposite direction if we are to raise PIT when all jurisdictions are competing for talent, including our Singaporean talent. We will continue to monitor and review our rates but, for now, our view is that PIT rates are reasonable for us to remain attractive, given the intense global competition for talent.

Mr Ong Teng Koon and Mr Yee Chia Hsing suggested that we look closely at wealth taxes. Aside from taxing income, our current approach to taxing wealth is mainly through taxes on assets that cannot be tax-planned away easily, unlike other methods like estate duties. That is why we have enhanced our property tax regime in the last decade to make it more progressive, and to meet our spending needs. For residential properties, 86% of property tax collected comes from non-owner-occupied residential properties, and owner-occupied residential properties with an annual value of $30,000 and above.

In this Budget, we have made moves to improve the progressivity of our stamp duty regime, so that those who can afford a higher-value residential property pay more taxes on their purchase. I thank Mr Seah Kian Peng and Mr Yee Chia Hsing for their strong support for this move. On average, we collected about $8 billion in recent years from property tax and stamp duty. This is a significant proportion of our revenues. We will continue to review this area closely.

Mr Yee Chia Hsing and Ms Foo Mee Har suggested reviewing taxes on alcohol and gambling. We regularly review such duties and we will take these suggestions into consideration.

On the introduction of GST on imported services, Mr Thomas Chua mentioned the $225 billion worth of imported services reported by the Department of Statistics. I wish to clarify that this includes all business-to-business (B2B) services, and vastly overstates the imported services which we will introduce GST on. Our move to levy GST on imported services will not affect most businesses. This is because most businesses can claim full refund of the GST they incur on inputs that they procure for their businesses, including imported services. Thus, businesses affected by the GST on imported B2B services are primarily financial institutions and residential property developers which do not get such full refunds.

Mr Pritam Singh asked if this will yield additional revenues. We estimate it could yield additional revenue of about $90 million per year. But let us be clear that this is a move to defend our current revenue base from being eroded as more transactions move online.

Finally, let me talk about keeping our fiscal system pro-growth. Dr Intan Mokhtar has made suggestions to raise corporate income tax rates, particularly for MNCs and large firms. Let me elaborate more about our environment today. Around the world, there are significant changes and uncertainties in the global tax environment. There is ongoing discussion worldwide on international tax rules for combating tax avoidance under the Base Erosion and Profit Shifting (BEPS) project. In 2018, the US reduced its headline corporate income tax rate from 35% to 21%. It also made other changes to make it more attractive for US companies to invest at home. This may spur cuts in corporate income tax rates around the world.

Singapore must remain sensitive to these global trends that impact us. We are a small and open economy, subject to the full forces of competition in a globalised economy. It is important for us to remain a competitive and business-friendly location. In 2017, $9.4 billion of fixed asset investments and $6.5 billion of total business expenditure were committed. When the projects are fully implemented, about 22,500 jobs will be created.

The increase in GST is not expected to impact our competitiveness significantly, which is a concern raised by Dr Lim Wee Kiak. The future GST rate of 9% is not high by international standards as this chart shows. The OECD average is 19%. So, our new rate is less than half of that. Among countries in the region, many others have GST standard rates that exceed 9%. Some countries are also contemplating raising GST. Japan, for example, plans to raise its consumption tax rate from 8% to 10% in October 2019.

In summary, we have taken a principled approach to meet the general population's future needs through a broad-based GST increase, while ensuring that our overall system of taxes and transfers remains fair and progressive and is supportive of growth.

I have spoken at length on the first way of financing our needs through taxes for recurrent needs. Let me now move on to the second way, which is borrowing. Borrowing is a reasonable option for major long-lived capital investments with high capital expenses, because the benefits of these assets are enjoyed mainly by future generations, in fact, many years down the road. This is an option that we are pursuing for major long-term projects like Changi Terminal 5.

Ms Tin Pei Ling and Mr Saktiandi Supaat raised concerns on whether borrowing will result in unsustainable debt and interest payments and they have raised an important point. Indeed, we aim to live within our means. We should not over-borrow and burden future generations with unsustainable debt, as we have seen in other countries. The stark difference is that unlike some other countries, we borrow not to spend on recurrent needs like healthcare, education and security, but to invest in long-term infrastructure. Such long-term investments will continue to yield economic benefits and position Singapore well for the future.

We are strategically leveraging the strength of our financial position to optimise our borrowing. To reduce financing costs, the Government is considering the provision of guarantees to back borrowings by our Statutory Boards and Government-owned companies. The Government is consulting the President's Office and the Council of Presidential Advisors (CPA) on this proposal, including the details of how it will be structured. So, many of the points that Mr Saktiandi mentioned earlier on will be discussed in great detail.

This way, we can tap on the Government's triple-A credit rating and the strength of our Reserves without directly using it. This is how we are helping the current and future generations. We are able to do so only because we have planned our finances soundly and accumulated strong Reserves. We are one of only 11 countries in the world, and the only Asian country, which has a triple-A credit rating, which represents the solid foundation and safety net that our forefathers left for us. We do not and cannot take our credit rating for granted. I am glad that Members, like Mr Sitoh Yih Pin, Mr Liang Eng Hwa and Mr Ong Teng Koon, think that this is a sensible approach and recognise the value in this.

Now, I will talk about the third way we have been financing our needs, which is our Reserves. Our Reserves have been painstakingly built up over half a century by our Pioneers and previous generations. We have inherited this nest egg and must act as responsible stewards. That is why, over the years, we have carefully deliberated and developed a comprehensive set of rules to safeguard and manage the use of our Reserves. Our Constitutional rules protect our financial assets and land as past Reserves. As land sales convert physical assets into financial assets, the proceeds from land sales are rightly fully protected as past Reserves as well.

This principle of asset conversion is sound. It is irresponsible to mislead people that the principle suddenly does not apply when we use just, say, 20% instead of 100% of land sales proceeds.

Mr Pritam Singh made such a suggestion and if I may use an analogy: suppose our forefathers left us with five plots of land and, each year, we sell one plot, 20% and use that money. In five years, there will be no land left. So, that is the fallacy of using 20%.

Now, instead of using the proceeds of land sales, or any part of it, for spending, the proceeds of land sales are added to our Reserves, which are invested in a globally diversified portfolio. From the returns, we take 50% as NIRC to supplement our budgetary needs. This achieves a balance between supporting the needs of the current and future generations.

Today, contributions from Reserves are already the largest contributor to our revenues. If we did not introduce the NIRC framework, we would have had to double our PIT collection or our GST collection to raise the same amount of revenues.

And yet, some have suggested increasing the NIRC spending cap from the current 50% to 60% or using a portion of land sales proceeds for recurrent social spending. All this sounds very tempting. It seems relatively painless to do so compared to raising taxes. And you may be wondering why do I not take a painless way? But is it the right thing to do? Certainly not.

The rules on Reserves were debated and agreed in this House. We enshrined them in the Constitution. We deliberately introduced rules on land sales and the 50% NIRC cap so that we do not succumb to the temptation to draw more from our Reserves to fund current expenditure or eat into the principal sum.

To amend the rules as a first resort is ill-disciplined and unwise. This would defeat the purpose of enshrining the 50% cap in our Constitution. Moreover, if as soon as we need more money, the first thing we do is relax the rules, that is the surest way to change Singapore's basic orientation, from saving and building for the future, to living for today and letting tomorrow look after itself. We must not give in to the temptation to chip away at our strategic national asset.

Indeed, as many Members agreed, we should not over-rely on NIRC, which is already the largest source of our revenues. An over-reliance will hurt our ability to respond to changing circumstances in the future.

We are stewards of the Reserves for our future generations, as what our forefathers had been for us. It was thanks to the astute Dr Goh Keng Swee and other forefathers, who had the foresight of investing our Reserves in a long-term and diversified portfolio early, that Singapore has built up a nest egg.

Since then, each generation of Singaporean leaders has upheld that discipline of running balanced budgets, setting aside surpluses, having professional managers manage our Reserves for long-term gain. Our founding generations resisted the temptation to spend more from our Reserves.

What if Dr Goh and our other forefathers had said, "We are saving too much of our surpluses", "we should spend more on ourselves and leave less for our children and grandchildren"? Would we have this inheritance from which we are now benefiting so handsomely and debating how to use more of it? We would have nothing.

Today, the constitutional arrangements for the use of Reserves represent this discipline we have set for ourselves. As the Prime Minister said in 2008, it is about "our commitment to continue growing our Reserves, while allowing the Government to tap on part of the investment income for current spending". Deviating from these rules in a sustained way will put this critical balance at risk and may compromise the long-term health of our Reserves and the country. Be it NIRC or land sales proceeds, we must uphold the discipline in tapping on our Reserves in a sustainable way.

And to be clear, we prepare for the future not only within our own lifetime, but our children's and children's children. The average life expectancy of a Singaporean child born today is over 80 years. A lot can happen in such a lifetime. Just think about what the world has gone through in the last century.

In the first 50 years of the 20th century, a person would have lived through two world wars and the Great Depression, the advent of nuclear weapons and the establishment of the Bretton Woods system that governs the international financial order today, including the setting up of the International Monetary Fund (IMF) and the World Bank.

In the next 50 years of the 20th century, a person would have lived through the Vietnam War, the formation of ASEAN, major advances in technology, such as the space race and the Internet, the rise and fall of communism and the Asian Financial Crisis.

As we now come into the 21st century, we are moving from a unipolar world to a multipolar one, with growing tensions between major countries and concerns about global and regional stability. If anything, developments that we are witnessing today remind us that the future is ever-changing and uncertain, as recognised by Mr Liang Eng Hwa and Mr Henry Kwek. What is clear is that in the aftermath of a crisis, be it financial or geopolitical, there are usually many years of subsequent weak economic performance. Employment and economic output tend to fall for a sustained period.

For example, the US unemployment rate only recovered to pre-Global Financial Crisis levels last year. It took a decade. Unemployment rates in some European Union (EU) countries have not recovered even after 10 years.

In turn, with crises like these, Government revenues are likely to decrease, at the very moment when we need resources to support our people and economy, a view shared by Assoc Prof Randolph Tan. That is why our Reserves are critical to help us overcome such challenges, especially since we have no natural resources.

Ms Kuik Shiao-Yin raised the IMF's general guidance on reserves adequacy. IMF's guidance is meant to specifically address capital flight risk, which is the risk that the Singapore dollar deposit holders will switch out to foreign currency because there is a loss of confidence in our currency. That is but one of many scenarios which our Reserves have to deal with.

So, the examples I gave of the last century, and all the major events and the potential impact, should serve as a very important reminder about the role of our Reserves. Also, even major countries, very well-developed countries, whether it is the US or the EU, are not immune from financial or economic crises. In fact, ironically, the last global financial crisis originated in the most developed parts of the world. But its impact was felt all around the world.

So, however much that Singapore develops, however much the world develops, we must be cognisant and we must be prepared to deal with unforeseen events, to deal with crises which can have a very significant impact on Singapore and around the world. We need to be prepared for crises that go beyond just a currency crisis.

More importantly, we must have the humility to recognise that we can never predict what will happen in our lifetime, much less our children's lifetime, or their children's lifetime. So, what we must do is to give them the best chance of a better life, whichever way the winds of change may blow. What we have inherited from the past, we also owe to the future. That is our moral obligation.

Members of the House, what I have elaborated on is on the overall approach that we are taking to fund our growing needs.

I have listened carefully to the speeches of Members of the Workers' Party to see if they could offer an alternative approach. But as far as I can tell, the Workers' Party supports the thrusts that I spoke of. In fact, no one has asked the Government to cut back on any specific item. On the contrary, they have asked the Government to do even more. Assoc Prof Daniel Goh asked the Government to do more in many areas, like giving Silver Support to those living in large flats. Mr Dennis Tan asked the Government to enhance elderly care support. Ms Sylvia Lim spoke about inequality and what we must do.

It is easy to ask for more. Not a single one of the MPs, except Mr Pritam Singh, even mentioned what it would cost, nor how to fund it. In fact, not a single one mentioned about how much it would cost for each of the ideas that you articulated.

Only Mr Pritam Singh spoke about other ways of funding it. Mr Pritam Singh offered a few options. He suggested using revenues from land sales and increasing the NIRC cap. I have explained earlier, clearly, why we cannot, and should not, use this. He asked if we can rely on GST on imported services. I have explained that the yield is small, less than $100 million, and that we need to do this to protect our revenue base. He even suggested that through our Smart Nation efforts, we can increase tax collection from self-employed hawkers and taxi-drivers!

Mr Pritam Singh cannot be serious. Any serious-minded person will appreciate that not one of these is a viable alternative to a GST increase. These are distractions, and Mr Low Thia Khiang asked us not to be distracted, so I hope that you could have a discussion with Mr Low Thia Khiang. Instead of taking a principled stance, Mr Pritam Singh would rather withhold his support for the GST increase by adopting a "wait-and-see" posture.

It is easy to fall back on politically expedient options and pretend that they will solve our long-term challenges. But this is a dishonest and irresponsible approach. If we were to do this, future generations of Singaporeans could easily end up in serious deficit. Then, we will be having a very different conversation about our future.

I think the Workers' Party should come clean to the people. Do they want the Government to increase healthcare or social spending? Does the Workers' Party want the Government to increase healthcare or social spending, as all its various MPs have spoken, item by item? If yes, how does the Workers' Party propose to pay for the increase?

So, I am glad that Mr Low Thia Khiang, who is not here today, appreciates our longer-term challenges and the significance in positioning Singapore as a Global-Asia node. But I was puzzled that he characterised the GST debate as a distraction, and that he would rather debate this at election rallies. The Workers' Party MPs have been elected into Parliament! You are sitting in Parliament! Parliament is exactly the place to debate serious issues affecting our nation's future.

I have set out, as clearly as possible, why our spending needs will rise and the options for meeting these needs. All your MPs have spoken and said let us do even more. I have also given very clear notice, way in advance, of the need to raise GST. And I am prepared to answer your queries.

So, I really hope that the Workers' Party MPs, having run on a slogan of a First-World Parliament, is not just using attractive election slogans, with no real intent to take your Parliamentary responsibilities seriously.

I hope that when the elections come around, the Workers' Party will not turn around and use the GST to distract people from the longer-term issues that we face. These are serious long-term challenges that we should do our best to address and not take this as electioneering or as political play. We owe it to Singaporeans to do the right thing.

Ultimately, as many MPs and Nominated MPs have pointed out, our fiscal approach is about giving expression to our shared values. Embracing the virtue of work and responsibility, where each generation works, earns and contributes its share. And being good stewards of what we have been given today and doing our part to leave behind something better for our children and grandchildren.

This approach reflects who we are as a society, not one based on narrow notions of individualism, where each generation lives for itself and demands a chunk of the pie, but one based on notions of family and mutual support, where all generations take care of one another, and come together to build a better, stronger nation. As the Malay saying goes: "Serumpun bak serai, sesusun bak sirih" − we are not only stronger when we come together as one, we look good, too.

Another way in which we safeguard our future is to ensure that future generations of Singaporeans inherit a green and liveable city. With the introduction of a carbon tax at an initial rate of $5 per tonne of emissions from 2019 to 2023, we join many countries that have done the same to step up global efforts to address climate change.

Dr Lim Wee Kiak asked about helping businesses to reduce carbon emissions. We will set aside funds from 2019 to 2023 to support them in improving energy efficiency. This will help businesses lower their energy costs and potentially more than offset the impact of the tax. By taking early action, companies that improve energy efficiency and reduce emissions can become more competitive internationally.

There are many exciting opportunities in the cleantech sector.

When Deputy Prime Minister Teo and I visited the Energy Research Institute @ NTU (ERI@N) last year, we were very encouraged to see that our support for research and development (R&D) was enabling our researchers to do good work, like on perovskite cells, which Mr Leon Perera mentioned. These cells have the potential to be cost-effective in generating solar energy. These efforts will allow us to compete and collaborate with companies around the world that are making a big push on the green economy. Households can also do their part to reduce energy consumption.

I hope that these moves will foster a change in mindset and our energy consumption habits and evolve into a wider green movement that will make Singapore a cleaner, greener and even more liveable city, as Dr Teo Ho Pin mentioned.

The Minister for the Environment and Water Resources will share more on our efforts on environmental sustainability and the Year of Climate Action at COS.

While the announced increase in GST rate has received the most attention, let me remind everyone that the most critical challenge that we are facing is in transforming our economy. Growing our economy is not only the best way of ensuring strong and sustainable revenues, it is also the most important way for our people to realise their aspirations.

This task is growing more urgent by the day, as structural changes in the global economy and technological advances disrupt the status quo, as pointed out by Mr Ang Wei Neng. Our strategy is to position Singapore as a Global-Asia node of technology, innovation and enterprise, which Mr Lee Yi Shyan spoke about and supported.

This means fostering pervasive innovation throughout our economy. It means building deeper capabilities in our firms and our people; and it means forging stronger partnerships at home and abroad, to build scale and ride on the region’s growth together. As Mr Henry Kwek pointed out, ASEAN presents great opportunities, with over 640 million people and a GDP of over US$2.5 trillion.

I am glad that many Members, including Mr Sitoh Yih Pin and Assoc Prof Randolph Tan, agree with our strategies to position Singapore for the new global economy.

Members have raised thoughtful questions on the progress of our economic transformation and preparing our workers for the jobs of tomorrow. Let me address these in turn.

We are seeing encouraging signs of progress. In the recent Singapore Business Federation (SBF) National Business Survey, nearly three in four companies reported that they introduced new processes or training to improve efficiency. More than eight in 10 said that they had expanded their operations overseas, up from under six in 10 in 2016.

As Ms Foo Mee Har highlighted, we need to urgently press on with the implementation of our Industry Transformation Maps (ITMs) to achieve economic transformation. I urge all stakeholders – businesses, trade associations and chambers, the Labour Movement and Government agencies – to double down on transformation efforts and to communicate the importance and urgency of transformation to their members.

Some of our companies are developing know-how to move into higher value markets. Take Esco Group, for example. From a clean room supplier for MNCs in 1978, it has reinvented itself as a developer of innovative medical devices, such as the Miri Time Lapse System, which is used to improve the success rate of in-vitro fertilisation (IVF) procedures.

We have seen how companies in traditional industries are transforming their businesses through innovation. One example is LHT Holdings, which started off as a saw miller in 1977. With support from the Agency for Science, Technology and Research (A*STAR), it became the first company in Singapore to commercialise radio frequency identification (RFID)-tagged wooden pallets in local and overseas markets.

Our startup scene is also taking off. In 2017, about US$1.4 billion (S$1.85 billion) was invested in the local startup scene, more than 10 times the amount invested five years ago. This means more resources for our startups to scale.

One success story is PatSnap, which has developed innovation intelligence software that uses deep learning artificial intelligence (AI) to decipher global trends in innovation. PatSnap’s founder, Jeffrey Tiong, interned in the US as part of the National University of Singapore (NUS) Overseas College Programme. There, he found intellectual property (IP) due diligence extremely cumbersome. In 2007, Jeffrey set out to develop a platform that would make IP due diligence cheaper and simpler, with support from NUS Enterprise and some initial grant support from the Government. PatSnap now has over 4,000 clients in over 40 countries, tapping on engineering talent from all across the globe.

Another example is Multi-Currency Exchange and Data Acquisition (M-DAQ), a home-grown financial technology (fintech) firm headquartered in Singapore, which has developed cutting-edge foreign exchange solutions to process local currency transactions for some of the largest global e-commerce platforms. The company processes more than $3 billion worth of transactions per year from this line of business alone.

Behind these successes lie the spirit of innovation that Mr Azmoon Ahmad and Ms Chia Yong Yong spoke about. We must press on with our efforts to support a culture of innovation, as Ms Denise Phua reminded us of.

Internationally, people are paying attention to the increasingly vibrant innovation scene in Singapore. This year, Singapore climbed three places in the Bloomberg Innovation Index to become ranked as the third most innovative economy globally.

Google has substantial operations in Singapore, with more than 1,000 staff in functions, such as engineering and R&D. Just yesterday, in collaboration with the Nanyang Technological University (NTU), Alibaba opened in Singapore its first joint research institute outside China, to undertake research on AI.

These are encouraging signs of progress and we must build on this momentum.

Over the years, our broad-based schemes have built awareness about productivity and innovation. In 2016, about 85% of small SMEs in the Singapore Chinese Chamber of Commerce and Industry’s (SCCCI's) Annual Business Survey reported that they adopted productivity measures, such as automation, digitalisation and upgrading worker skills. In 2017, this increased to almost 93%.

We are making a push for firms to deepen their capabilities at every stage of growth through a comprehensive range of targeted support. Even so, we must always bear in mind that Government grants are meant to catalyse companies’ transformation and should not become permanent support.

Mr Murali Pillai and Dr Lim Wee Kiak asked about WCS. It is a transition scheme that we extended but will taper down. It provides temporary support for businesses that raise wages for Singaporean workers while they press on with efforts to transform and become more productive, as Mr Chong Kee Hiong mentioned.

We must continue to invest in our people to ensure that they are equipped with relevant skills to take advantage of new opportunities, as Ms Sun Xueling and Miss Cheryl Chan observed.

Arif Rahman has made good use of such programmes. After his GCE "O" levels, Arif took various odd jobs. Last year, he underwent a Tech Skills Accelerator Web Development Immersive boot camp. Today, he is a full-time front-end web developer at Indorse, a social network for professionals to showcase their skills.

The effort to upskill and reskill our workers requires close partnership among employers, the Labour Movement and the Government, as Mr Heng Chee How and Mr Patrick Tay highlighted. This tripartite approach is a key strength of our system.

I am happy to see our efforts to support workers gain momentum. The number of placements through Professional Conversion Programmes (PCPs) in 2017 is about 3,700, more than double the placements in 2016.

Even as we support Singaporeans in the pursuit of opportunities, we need to ensure that Singaporean workers remain sufficiently protected, as Mr Ang Hin Kee and Mr Ong Teng Koon spoke about. For those who are self-employed by choice, we aim to better address their concerns and challenges, for instance, in legal protection, social security and skills development. For those who would prefer regular employment, we are keen to help them do so.

The tripartite workgroup we formed last year has identified several key common challenges that self-employed persons faced. MOM has accepted the recommendations in the workgroup’s report which was released last week, and will further elaborate on their strategies at COS.

Mr Zainal Sapari and Dr Intan Mokhtar have brought up the situation of low-wage workers and suggested reviewing employer CPF contribution rates for older workers. We support low-wage workers by encouraging sustainable wage increases underpinned by regular work and productivity growth. We provide additional support for low-wage workers through Workfare and assistance for healthcare, housing and their children’s education. For older workers, we support their employability through the Special Employment Credit and Adapt and Grow programmes, and their training through SkillsFuture. However, in mandating higher CPF contributions for older workers and better benefits for low-wage workers, we must be mindful not to impose too many barriers to their employment.

Ms K Thanaletchimi and Assoc Prof Daniel Goh have brought up the concerns of women at work, and Ms K Thanaletchimi also spoke on flexi-work arrangements. The Minister for Manpower will share more about the various schemes to help our workers at COS.

Businesses have asked about the role of foreign manpower in Singapore. As Mr Melvin Yong and Mr Heng Chee How highlighted, our ageing population and shrinking resident workforce are major challenges. Economic growth will slow, unless our businesses make full use of this narrow window, before our workforce shrinks further, to redouble their efforts to raise productivity. At the same time, we need to allow for a calibrated inflow of foreign workers, especially in areas of critical shortages.

China, the world’s most populous country, launched its "Thousand Talents Plan" or "千 人 计 划" in 2008, to draw in the best talent from around world for strategic projects. Today, China has far surpassed its initial targets. For us to thrive, we must be equally strategic to develop our Singaporean talent and to draw in the right complement of international talent. As Ms Foo Mee Har observed, in this way, we can draw in the skills mix to support new industries that create better jobs for Singaporeans.

This is not the first time that we are making a major push to transform and upgrade our economy. All of us have a part to play: Singaporean workers, to continually upgrade their skillsets to be ready for the future; Businesses, to press on to innovate and build deep capabilities and partnerships; trade associations and chambers (TACs), to step up to encourage firms to do more, and do better together. As Dr Tan Wu Meng put it, we must move ahead boldly to safeguard our continued survival and prosperity. Let us have confidence, keep our eyes on the horizon, and move forward together.

All our efforts to steward our resources and grow our economy are ultimately about forging the kind of society we want. First, we need to stay cohesive and united as a society, with opportunities for all; second, we need to build a caring society, with people who are passionate about contributing to the common good. Ms Chia Yong Yong put it well when she said that Singaporeans should have "minds unafraid to dream", surrounded by a community with hearts big enough to accept failure.

Ms Jessica Tan, Mr Ganesh Rajaram, Ms Kuik Shiao-Yin and Mr Kok Heng Leun have talked about the importance of addressing inequality, fostering opportunity and enhancing social integration. I agree with them that we cannot allow social stratification and inequality of opportunity to erode our precious social harmony. Singapore must continue to be a society where everyone, regardless of background, has the opportunity to do well based on personal efforts and talent.

How we achieve this is inextricably linked to our economic strategy. As Ms Jessica Tan and Dr Tan Wu Meng have pointed out, diversified and broad-based growth creates opportunities for Singaporeans to pursue their aspirations, and this is the best way to help all Singaporeans progress in life. Rather than focus on how the pie is divided, we should grow the pie so that we can all enjoy a larger slice.

Mr Ganesh Rajaram shared a powerful story of how he was able to move up in life. Indeed, many in my generation were fortunate to benefit from our system of education and meritocracy. As our economy grew, and our society becomes more settled, the rate of mobility slows too, and we must redouble our efforts.

Our approach is to give Singaporeans a good chance of realising their potential at various stages in life. This starts from the early years. We are investing significantly in the early childhood sector to provide our children with more accessible, affordable and quality preschool. We started the KidSTART pilot in 2016 to provide children from low-income families with early access to health, learning and development support.

We ensure that all our students, whatever their family background and circumstances, have access to a quality education. The OECD PISA study found that about half of the 15-year-old Singapore students from the lowest quarter by socioeconomic status performed in the top quarter of students in all countries, after accounting for socioeconomic status. And that is the extent to which our education system and our parents' efforts have been able to uplift. So, in other words, our system and our collective effort have enabled them to surpass their international peers in a similar socioeconomic position in their own societies.

For students in the lowest 20% of households by socioeconomic status, half of them in the 1985 Primary 1 cohort progressed to post-secondary education. And this rose to nine in 10 for the 2000 Primary 1 cohort.

We are broadening pathways for success. Our students’ interests are diverse. Some have academic interests, some have more specific skills-based interests, others want to be entrepreneurs.

We have been systematically moving beyond fixed streams and excessive focus on examinations, towards enhancing the education system to nurture all talents and skills and the holistic development of every student. This has been the Ministry of Education's (MOE's) approach for many years. Budding entrepreneurs have programmes to support their interest, including the NUS Overseas College that Mr Jeffrey Tiong of PatSnap embarked on. We prepare our students to participate in the global economy through initiatives, such as ITE GEP.

Mr Saktiandi Supaat can rest assured that we will continue to invest in ITE and offer financial support to students in need. And beyond the schooling years, we are investing strongly in SkillsFuture. It gives everyone the opportunity to move into new areas of the economy in line with their aptitude and interests.

Ms Sylvia Lim asked about longitudinal studies on social mobility. MOF released two occasional papers in 2012 and 2015 on social mobility. We found that cohorts from 1969 to 1982 have, indeed, experienced good social mobility. There is also an ongoing longitudinal study on child cohorts being conducted by NUS.

But bridging the social divides is not just a matter of fostering opportunities and closing the income gap. As a society, we must be mindful not to allow invisible, intangible divides to fester. I agree with Mr Ganesh Rajaram that divides can only be bridged if Singaporeans work together to ensure that every child is equipped with perseverance, confidence and resilience to succeed.

As the Government, we also invest heavily in our common spaces. The hawker centres which are an integral part of our daily lives and our cultural heritage; the parks which bring us together in appreciation of our City in a Garden; and the HDB neighbourhoods which eight in 10 of our resident households call their home.

Apart from creating common spaces, perhaps the best way to bridge social divides is to nurture our common values, by building a caring society.

A good society is not just one where each of us is able to do well for ourselves. It should be one where we all feel a sense of responsibility towards one another, a spirit of caring. Just as we have achieved good outcomes in healthcare, education and security by working together, all of us play a part in building such a society.

It starts with strong families. Mr Gan Thiam Poh and Mr Darryl David spoke about the importance of mutual care and support within the family. Indeed, most of our seniors are able to count on their family for support. And we must strive to keep families strong. The enhancements to the Proximity Housing Grant will help to do so.

Mr Desmond Choo and Ms K Thanaletchimi spoke about the stress that caregivers face. Caregivers play a vital role in our society and deserve great respect for the support they give their families. We are committed to supporting caregivers. Besides the financial schemes that defray the costs of caregiving, we also offer tangible support to caregivers through respite services in some of our senior care centres and nursing homes, so that caregivers can rest and recharge. We are also expanding the Community Networks for Seniors (CNS), which will better link up different stakeholders with needs in the community. The Prime Minister's Office (PMO), MOH and the Ministry of Social and Family Development (MSF) will say more about Government support for caregivers at the COS.

Many Members, such as Dr Lily Neo and Ms Chia Yong Yong, spoke of the good work that our VWOs do in the community. We recognise the invaluable contributions they make and are encouraging more support for them, through the 250% tax deduction for donations made to Institutions of a Public Character (IPCs), matching grants for donations raised, and the Business and IPC Partnership Scheme (BIPS).

As Ms Joan Pereira, Ms Tin Pei Ling and Miss Cheng Li Hui have suggested, we will continue to review our policies to enable our seniors to contribute meaningfully, stay active and independent, and age with confidence. But no single stakeholder has the resources to meet the community's needs alone, to address the structural shift in our demographics, or to foster opportunities for all. The consolidation of senior-related services under the Agency for Integrated Care (AIC), and the continuing efforts to strengthen social service delivery through our Social Service Offices (SSOs) will enable us to do more with the resources we have, and better care for our seniors and vulnerable families.

As Ms Rahayu Mahzam said, the community's involvement in initiatives, like the Silver Generation Ambassadors programme and CNS, is necessary to strengthen our social support networks and last-mile delivery. That is why this Budget seeks to strengthen partnerships between the Government and the community, and to encourage a spirit of giving in every Singaporean. We want to foster a caring society through the SG Cares movement, bringing together individuals, informal groups, community organisations and corporates to partner one another, and better reach out to those in need.

Ms Denise Phua asked if we can encourage people to donate their SG Bonus. We are studying how to facilitate this and will provide more details later in the year. Everyone can be part of this ecosystem of giving, regardless of age or background.

I met Asyraf at an ITE graduation ceremony. Asyraf dropped out of school at Primary 4 as his mother was unwell and did not even sit for his Primary School Leaving Examination (PSLE). NorthLight School gave him a second chance, which he was determined to seize. He did well enough to move on to ITE, continued to excel, received a scholarship in 2014 from the Building and Construction Authority (BCA) and, in 2017, graduated from Singapore Polytechnic. Before National Service (NS), Asyraf went back to NorthLight School and volunteered his time by supporting the teachers in teaching Facility Technology, and by sharing his experience with his juniors. He is now on the NorthLight School Alumni Council, even while he serves NS. Asyraf shows us that anyone can give back. And as Ms Denise Phua and Mr Vikram Nair have reminded us, for those who have done well, it is even more important to think about how you can give of yourself to help others.

This partnership and spirit of working together is not just a good to have. It is the best way forward, towards a nation which shares a set of common values, and a better home for all of us.

Mr Speaker, Sir, it is not quite 10.00 pm yet but let me conclude.

As I said from the start, this Budget is about our future. Over the past two days and earlier this morning, this House has reaffirmed our vision for the kind of future we want.

Members have expressed support for measures to position our economy for the future, so that Singaporeans will have opportunities to pursue their aspirations, regardless of where they start. We have supported moves to foster a more cohesive and caring society so that we can better care for our elderly and the vulnerable amongst us. And there has been broad support for the fiscal measures to provide for our longer-term needs.

Such a future will not be ours unless we do the hard work for it and make preparations. As Mr Christopher de Souza put it, it starts with being rigorous and working on options that matter rather than being ideological. Ultimately, the test of what we do is whether it works.

Our success will depend on our unity of purpose and our collective spirit of enterprise and caring. We can only make it through this journey, if we work together.

It is by working together, that we have become one of the healthiest, best educated and safest countries in the world, while keeping our spending low. It is by working together, and pooling our resources, that we have built up a strong fiscal foundation and the Reserves to protect and provide for us through the ages. It is by working together and deepening partnership that we can build scale, create value and ride the growth of the region together. And it is by working together, and partnering one another as a community, that we can best reach out to and care for our fellow citizens in need.

Together, we have built, and are continuing to build, a nation that we can be proud of. We have made better lives for ourselves.

Together, let us make a renewed commitment to pass on a better country for our children and grandchildren – a country where a child is given the best start in life, no matter her parents’ background; where she can grow up in a green, safe and globally-connected city; where she can apply her talents in an economy full of exciting, fulfilling jobs; where she can live a long, healthy and meaningful life with many opportunities to give back to the rest of her community; and where she can have some assurance and protection from the vagaries of the world over the course of her life, through the financial provisions that we have made.

This is the kind of commitment that those before us made, so that we have a better life today and a strong foundation on which we can build our dreams.

This is the kind of commitment that I hope all of us, not just in the Government, not just in this House, but Singaporeans everywhere, will come together to make in this Budget to build a better future for all of us, and give our children the best chance of a better life.

This is how, together, we can ensure that Singapore will continue to thrive and prosper, generation after generation. Thank you. [Applause.]

12.14 pm

Mr Speaker: The Question is, "That Parliament approves the financial policy of the Government for the financial year 1 April 2018—". Yes, Ms Sylvia Lim.

Ms Sylvia Lim (Aljunied): Yes, Sir, I have clarifications for the Finance Minister. I have four clarifications for the Finance Minister. But before that, I would like to thank him for touching briefly on longitudinal studies. I will be taking this matter up further with MOE at the COS.

On the first clarification, the Finance Minister referred to Mr Low Thia Khiang's speech yesterday. I am sorry Mr Low is rushing to Parliament right now after attending to some family matters. And he mentioned that somehow, the Workers' Party was not being upfront because we did not want the Government to distract this debate by announcing the GST.

Now, if I heard him correctly, actually, his speech was focused on supporting the Government's accurate identification of the challenges going forward with becoming a Global-Asia node and so on. He did actually specifically say that it is fine for the Government to announce the GST hike, or intended hike, in advance of time and we can actually have a separate debate about it. His main point was that by doing it in this Budget, it distracts the debate from the other things that are being done in the Budget because everybody is focusing on this thing which is not even a Budget measure. So, that is the first thing. And of course, there was a bit of a cut and thrust about whether we should debate it at the election rally and we do welcome the early announcement because we think the voters should also make a decision on this.

The second clarification is about the Party position on the announcement of the GST – and I think Mr Pritam Singh may also elaborate on this further – about why it was said by him that we cannot support the announcement at this point in time.

Now, the Government itself is not definitive about when this is going to happen. It may be seven years from today. And, of course, we do note that in the run-up to the Budget discussion, there were some test balloons being floated up about the fact that the Government needs to raise revenue. And immediately the public seized on the fact that Deputy Prime Minister Tharman and perhaps other leaders had earlier said that the Government has enough money for the decade. So, the public pointed out, "Hey, you know, is this a contradiction?" And I rather suspect, myself, that the Government is stuck with that announcement. Otherwise, if the announcement had not been made, perhaps we would be debating a GST hike today.

Earlier on, Minister Heng also said that the Government has not made a decision on when, because it has itself to look at prevailing conditions, economic conditions and also our needs at that time. Fair enough. Similarly, I do not think we will be in a position to take a stand on that until the information is available at the relevant point in time. So, I think it is ridiculous for the Government to expect us, as a responsible Party, to support something when all the information is still not available and we do not have a crystal ball.

Related to that, I should clarify, in case anybody misunderstands, that it is our intention to support the Budget when the vote is called but this should not be mistaken as a support for this announcement of some possible GST hike in a later Budget. It should not be mistaken as such.

The third clarification, I think the Minister touched on why it is not prudent to use land sales as part of Government revenue. This is an issue that we have debated before. But the analogy he gave was, we have five parcels of land and if every few years, we sell one parcel, there will be none left. But I think the Minister can clarify that it is not quite like that. Land sales actually include many leases which do come back to the Government after the tenure of the lease. It is not a case of it being gone forever. Or even 10 years for the commercial leases.

Finally, my last clarification is, the Minister pointed out about the social mobility insofar as educational attainment of 15-year-olds in the performance of science in the PISA report to say that our poorer students are doing better than their poor counterparts in the OECD countries. I have filed a Parliamentary Question on this before. But I think the report also highlights that as far as equity is concerned, our poorer students seem to be further behind our richer students − the gap internally, domestically − compared to the OECD countries. So, is it not really comforting for our poorer students to tell them that they are doing better than their poorer counterparts in other countries when really, in their class, they are actually further behind them, on the average?

Mr Speaker: Minister.

Mr Heng Swee Keat: I thank the Member, Ms Sylvia Lim, for her question. First, on the first point about my reference to Mr Low Thia Khiang's point. Actually, when I was listening to him yesterday, I thought, I was very happy that he supported the point that I made, about making Singapore a Global-Asia node of technology, innovation and enterprise. He went on to talk about the various moves that the Government made over the years to look ahead and position Singapore to be able to meet new challenges and secure new opportunities because the world is changing very quickly.

So, he made a very good speech on our engagement, particularly with China. I was very surprised that towards the end of that very good speech, he then got distracted by this statement. He said: "Sir, the unfortunate thing about this Budget is that it is looking forward too hastily for future revenue streams by prematurely announcing the GST hike. This has become an unnecessary distraction from the vision articulated in this Budget, and is a real distraction causing the Government to lose its focus in getting buy-in for the vision".

This is, in fact, a real distraction because, in fact, if the Workers' Party truly believes that all the things you and your Members have advocated − spend more on this, spend more on this group, spend more on these others − and that you agree that all these will require new revenue measures, then why do you not just say that "Yes, we are very happy to support this so let's now talk about how we are going to position Singapore for the future." I will be very happy to discuss this with the Member, who can file a Motion, a separate Motion, to discuss that.

But bear in mind that this is a Budget Debate and if we do not talk about a tax increase, we do not debate the tax increase in this very forum, in this very session for the Budget Debate, then where else are you going to do it? And to suggest that you do it at the election rally is just a complete distraction. Right?

Does the Member want to be constructive and say that in any election we talk about serious things, about how we are going to position Singapore for the future, how we are going to create a better life for all Singaporeans? Rather than to seize on issues that will make people unhappy and say, "Oh dear, you know, the Government is going to tax you and all that and, therefore, you know, this is a bad move." You must square your position.

Does the Member accept, first and foremost, all that we said, that we do need to spend more, whether it is preschool, whether it is SkillsFuture, whether it is healthcare, whether it is revamping the economy, whether it is security? Do we need to provide for that? And if it is, as I said, very clearly, in today's debate, in my round up, I said that even the two-percentage point increase in GST does not fully cover the expected increase in healthcare expenditure. Is it not right for us to say that we know that there is one item that is definitely going up and we will not even have enough to manage that one item? Can we take one measure first, and look at how we can meet that?

So, Mr Pritam Singh's argument about "I can't support this at this point because it is so far away, I don't know your revenue pattern, I don't know your spending pattern and, therefore, I don't know what you can do and, therefore, I'm not going to support it."

I do not think it is a rigorous or an honest position. It cannot be, right? If you know, as an individual, that you do not have enough money to even pay for your basic meals, should you not provide for some of that? Never mind that I do not know what other things we have to spend on. I mean that, that is very simple to understand and I really do not understand why you want to create this… or I must know everything before I can decide on anything.

I think if I had taken that approach, if previous Finance Ministers had taken that approach, that I must know every item of expenditure before I can support you, before I know how much to raise, we would have been in serious deficit long, long ago.

So, I am very grateful that previous Finance Ministers, Governments and Prime Ministers, have been extremely prudent in making sure that when we know something is coming, do not avoid it, do not pretend that it is not coming and then mislead our people and say that "Therefore, without knowing, I cannot support".

The question for me is very simple, "Do you support all those increased spending? Or are you contradicting all your MPs' positions yesterday where everyone spoke about doing more? And if you do, then tell me how much is it going to cost? And even to fund a fraction of what you have suggested, where is the money going to come from, and would a two-percentage point increase help us in some ways? Do you disagree with the fact that our healthcare expenditure will go up and, if you do not disagree, then the question is how do we find the revenue sources to meet that?

So, that is the answer to your first question, and also your second question about why your Party's position, about why you cannot support at this point. So, now that I know that it is your Party's position, I am even more puzzled because I wonder why all your MPs, every single one of them, spoke about "let's do more". In fact, none of them had suggested that "No, no, no, you should cut back on this item or that item.” In fact, “Very good, whatever you do, double up, do more." So, the question is, if I accept all your proposals, I have to redo the expenditure sums again and look at what else we need to do.

So, I think that is quite a distraction. I hope Mr Low was not distracted somewhere.

Now, as to your point about the land sales, and why my five land parcel analogy is not a correct one. The basic fact is this: most of our land sales are of pretty long leases − 99 years; for industrial land, some 30 years, some 60 years. If you sell that land for 99 years, you are not going to get back that land until 100 years later. If you are rigorous about it, you really ought to be spending no more than 1% of that land sale proceeds even if you want to use land sales proceeds because that is what the land is worth for a year.

But for Mr Pritam Singh to say, "Oh, don't worry, let's take 20% of the land sales and, therefore, use that", is it not the equivalent? And you are not going to get the land back over the length of the lease. So, that stream, that upfront capital payment, ought to be considered over its lifespan and, therefore, it is not proper. Several MPs had spoken yesterday that even for building infrastructure, we should be considering lifecycle costs. So, I think we better do our financing properly.

Then, on the Member's point about the PISA score and the students, we are not saying that we have a perfect education system. In fact, there are many things which I am very happy that Minister Ng Chee Meng and Minister Ong Ye Kung are continuing to do, building on the works of previous Finance Ministers, to continue to raise —

Some hon Members: Education Minister.

Mr Heng Swee Keat: Sorry? Education Minister, yes. Did I say "Finance"? Oh okay. I am not hinting at any changes! I got distracted! [Laughter.]

Well, they continue to build on this good work. That all these changes have taken place for many, many years and the fact that our students are doing so well, it is really a tribute to our educators, our parents, to the many self-help groups. The numbers which I have shown are done by the OECD study, not just of PISA but, in fact, of various areas in which they are looking at our kids, including in areas like collaborative problem-solving. Our kids are ranked best in the world in this. We must give credit for this.

As a former Education Minister, I can tell you that the reason why collectively we are ranked so high, the very important reason is this: in every country, you can find one good school, one of the best schools which the elites would go to. In Singapore, if you look at the performance of students across our schools, you can see what a high average it is.

So, when I say "Every school, a good school", it is not just a feel-good thing. Because I really think that we must give credit to all our educators, to all our principals, to all our parents for the hard work that they put in so that, regardless of which school you go to, the child has the best chance of success.

Beyond the basic foundation as they move into post-secondary education, that we have many more pathways for them to excel. It is right and proper that we look at what have been achieved, rather than look at what has not been achieved and, therefore, pick on that one narrow area and discredit the work that has been going on by so many good people. [Applause.]

Mr Speaker: Mr Pritam Singh.

Mr Pritam Singh (Aljunied): I would like to thank the Finance Minister for his round-up speech and the additional figures that the Finance Minister gave. Sir, I have some questions for the Finance Minister. One of the hardest things I had to do with this Budget actually was to try and assess how a GST hike can be staved off, given the Government's Budget.

Just as a matter of perspective on the question of using our Reserves as a source of income, the Government's reliance on Reserves has quadrupled from 2006 to 2011, from about $2 billion to about $8 billion. Since then, to the upcoming financial year, it has doubled from that. So, when the Minister says that the Workers' Party is irresponsible and dishonest, I respectfully have to disagree with him on that account. With that as a preamble, I have five questions for the Minister.

First, in his Second Reading speech, when the Constitution was amended in 2015 to include Temasek in the NIRC framework, Finance Minister Tharman Shanmugaratnam said that Temasek's inclusion would increase the NIRC’s share of GDP from 2% to about 3% on average over five years. But today it stands at 3.4%. Does this tentatively suggest that the Government actually has more income from NIRC than it originally planned to have, with more likely to be realised in the future, in view of the fact that the NIR formula tends to smoothen out investment cycles? That is the first question.

The second question has to do with the point I raised in my Budget speech, which is whether there is any scope for raising NIRC from 60% to 70% for a short period of time to oversee large infrastructure spending, with the view to return this back to 50% on the condition that the revenues from such infrastructure must be returned to the past Reserves. This would free up more of the Government's Budget in the respective financial years for recurrent spending and this was one suggestion I put forward to stave off the GST hike, and I am not sure whether the Minister replied to that.

The third question is with reference to the NIRC portion of this year's Budget: how much in dollar terms of the $15.8 billion originated from the Net Investment Income (NII) component of NIRC, and NIR component respectively?

Fourthly, how does the Government determine which investment entity – MAS, Temasek or GIC – gets a larger component of land sales revenue for investment, in view of the different risk thresholds that each entity assumes?

Finally, is there a mechanism or basis by which the Government determines how much of the Reserves it requires to maintain the strength of the Singapore dollar? Is there a mechanism for that?

Mr Heng Swee Keat: I thank Mr Pritam Singh for his questions. The Member's first question, about the fact that our NIRC is, in fact, becoming an increasing source of revenue for the Government: that is correct. This number has been doubling; from $2 billion to $8 billion to $16 billion that the Member mentioned. So, in that regard, that is why I said, it is now the single largest source and, therefore, we should be careful in having a more diversified source of revenue.

The Member asked about whether the fact that the overall NIRC contribution is 3.4%, when the Deputy Prime Minister Tharman Shanmugaratnam has said that it is between 2% and 3% over the five-year period. Is it because we are getting more? Well, the markets have been doing better. But bear in mind one thing, the NIRC is about long-term investment. It is about long-term investment. And, therefore, we cannot work based on short-term fluctuations and decide that well, henceforth, in the future, we would have this 3%, 4%, 5% that we can rely on. It does not work that way.

I was at the MAS when the Global Financial Crisis happened. I can tell you that I spent many days and nights and weekends looking at the market and how it was going to affect us. I attended so many meetings among global central bankers, Chief Executive Officers (CEOs) of companies, of financial institutions, with finance ministers in the developed world and with major central banks. You find that none foresaw the problem. There were warnings about some of these by some analysts, but none foresaw the problem, and the impact was huge.

We must accept that there will be market volatility which you cannot predict. And it is not sound to build our finances on short-term fluctuations, whether up or down. That is why the NIR formula has a built-in way to smoothen these asset fluctuations. You do not want to have a situation where financial markets are doing very well, that the Government spends a lot more, and then when the markets go down, which is probably when we need the resources most, that you have very little to meet those needs. Let us be very careful about over-interpreting the number.

The Member's other comment about raising the NIRC contribution to 60%-70% for a short period for infrastructure, is this not another way of touching your Reserves, changing the formula, to use it and say, at some point, I would put it back? I do not see the logic of that argument. In fact, what we are doing, or what we are hoping to do, is that we want to have proper discipline and scrutiny of borrowing for infrastructure. That is why we are going to discuss with the President and CPA. We think that a proper way of doing this is to issue bonds in the market so that investors can scrutinise those numbers and see that these are viable projects. Then, seeking the approval of the President and CPA to provide a guarantee. So, again, there is another layer of check but, at the same time, that layer of guarantee allows us to access funding at probably a better rate.

So, we are using the strengths of the Reserves strategically but without touching the Reserves so that the Reserves can continue to be invested for long-term gains. That is the approach and, therefore, whether you are taking 50%, 55%, 60% or 70% for a short period of time, it sounds like it is a costless option. It is not. It cannot be done that way. The way that we are proposing is conceptually sound and financially sound.

The Member asked about how the land sales proceeds get to MAS, GIC and Temasek, and how do we divide that? We have a whole-of-Government Reserves Management Committee chaired by the Prime Minister and there we look at the risks and returns of different entities, the risks and returns across the different markets and allocate it for long-term gains, taking into account both the returns as well as the risks at the current market environment.

The Member's last question about the basis of the Reserves for the strength of the Singapore dollar, let me clarify. There has been a lot of misunderstanding on this point. Certainly, strong Reserves help us to anchor confidence. But MAS' needs in terms of what it does as a central bank is very different from almost all central banks in the world. All central banks in the world adopt an interest rate policy. Whether it is the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of Japan (BOJ), the central bank announces certain policy rates and then they undertake certain operations to get to that rate if they need to, but the announcement itself and the anticipation of the announcement have very major impact on the economy. That is how they conduct monetary policy. In our case, our monetary policy is centred on the exchange rate.

Again, I must give great credit to Dr Goh Keng Swee and his team very early on, for deciding on this most unusual way of dealing with our monetary policy. The reason is this: the exchange rate has a far bigger impact on the state of the economy than interest rates. We are a very open economy and, therefore, the exchange rate affects economic activity in a far more significant way.

The MAS regularly updates our trade numbers and updates our economic model to see if that remains valid. From looking at the studies that they have done, I am convinced that it remains the right policy: to have an exchange rate-centred policy to be able to manage the economy.

The Reserves are not just about maintaining the strength of the Singapore dollar. The MAS manages our official foreign reserves and it undertakes operations in the market in order to get to the desired band. It also makes policy announcements regularly so that the market is clear about the official assessment of the economy. The market may or may not agree and, in which case, you will see currency movements. But I must say that MAS has done a very good job over the years and so the market generally accepts MAS' policy announcements.

In terms of maintaining the strength of the Singapore dollar, the Reserves play a very important crisis role which was what was tested during the Asian Financial Crisis. When speculators were speculating on the positions of other currencies, they did not touch very much the Singapore dollar because they know of two very fundamental reasons. One, our finances are sound; that our fiscal policy at the various stages of the crisis is sound. And that is why I mentioned that we are one of 11 countries with a triple-A credit rating. All these firms who are doing credit ratings look at the numbers very carefully before they give us a triple-A rating. So, that is one important anchor.

Two, speculators know that should they try to attack the Singapore dollar, it is not just our official reserves that they have to contend with. We also have reserves that are invested in longer-term assets and that we will be able to mobilise, if we need to.

So, those are the very important defences that we have for the Singapore dollar, and the very fact that the Singapore dollar has risen is not just because of our monetary policy. The fundamental reason is that our economy has been doing better, that the real economy has got its position correct, that we have been upgrading and revamping the economy over the years and, therefore, the currency moves up, in order to play the equilibrating role.

Mr Speaker: Minister Shanmugam.

12.43 pm

The Minister for Home Affairs and Minister for Law (Mr K Shanmugam): Thank you, Mr Speaker, Sir. Can I seek a clarification from Ms Sylvia Lim who said that there was a trial balloon when the Prime Minister spoke last year, and because of the public reaction, the Government backed down but was stuck with this announcement and, therefore, this announcement has been made of a future GST increase. Can I invite her to agree that that is a thoroughly hypocritical and dishonest statement, and typical of the statements she makes in this House? Let me explain.

Would Ms Sylvia Lim agree that the Prime Minister first talked about a tax increase during the National Day Rally – I think it was in 2013? And that the Finance Minister talked about the tax increase in the Budget last year, a year ago? The Prime Minister, when he spoke about the likelihood of a tax increase late last year, referenced to the Finance Minister's statement earlier in the year. Does she not know all these facts?

If one, with some commonsense, puts those facts together with another set of facts, which is that Deputy Prime Minister Tharman Shanmugaratnam and the Prime Minister had said that the Government had enough funds for this term, if you put those two sets of Government positions together, is it not absolutely clear that (a) we do not need money for this term, and (b) we will need to raise taxes for the future?

Given that the positions have been consistent and Ms Sylvia Lim will also know that, for example, that when we first talked about GST, it was mentioned in 1986, but it came into force much later, in 1994.

So, given those sets of facts, would Ms Lim be prepared to withdraw the very serious allegations she makes, that this Government announces something late last year, trial balloon, public reacts, we quickly backed down, but we are stuck; basically, making an accusation that the Government is behaving willy nilly, dishonestly.

And if she will not withdraw those baseless suggestions, will she set out what the facts are for making the suggestion, whether she still stands by the suggestion, and repeats it?

Mr Speaker: Ms Sylvia Lim.

Ms Sylvia Lim: Mr Speaker, I would like to thank the Law Minister for his questions. I can understand why he wants to accuse me of various things, because he probably was not happy about past debates where I had disagreed with some of his legislative changes, and in typical fashion, he always accuses me of dishonesty, when, as far as I am concerned, I acted honestly.

Sir, the basis for my statement was that it is my belief that the announcements by the Government earlier on, that they had enough revenues for this term of Government, have now tied their hands as to when the GST increase can kick in.

One can look at the principles that our Government uses for budgeting, which are usually very conservative, and we also have heard the Finance Minister talk about the fact that we must be prepared for all contingencies, so, if those announcements had not been made, we may be facing a GST increase in this Budget Statement.

As to the chronology of events that the Minister recited, I do not have them on hand, I have to go back and check – to be fair to him – but this is my honest belief.

Mr K Shanmugam: Seeing what the facts are, as I have set them out, would Ms Lim agree that the suggestions are baseless, and are you prepared to withdraw that this Government behaved dishonestly?

Ms Sylvia Lim: Sir, I never said that the Government behaved dishonestly. I said that the Government is stuck with the announcement that they have enough money for the decade.

Mr K Shanmugam: The implication, based on what you have said, is that a trial balloon was floated with the obvious intention that a tax increase was going to be announced now, but because of the public reaction being so severe, the Government has backtracked and has changed its mind, and has announced it as a future tax increase. Is that not what you have said? And if that is not what you are saying, please say so clearly.

Ms Sylvia Lim: Sir, I clearly said that it was my suspicion. I clearly said that. You can check the Hansard. And it is my honest suspicion.

Mr Speaker: If Members can wait until I call them.

Ms Sylvia Lim: So, am I not entitled to have a view?

Mr Speaker: Minister Shanmugam.

Mr K Shanmugam: We now have confirmation that there was a suspicion. Does Ms Lim agree that it does not accord with the standards of a First World parliament and honest debate, for someone to come here and start talking about, "This is my suspicion", "I cannot back it up", "It is contrary to all the facts", "In fact, I have not checked the facts; now that you have recounted the facts, I'll go back and check. But I have my suspicions." Would she agree that that is contrary to the standards of a First-World parliament?

Secondly, I am not the only one to accuse Ms Lim of dishonesty. I think a phrase, a Latin phrase will be ringing in her mind: "suppressio veri, suggestio falsi ". Somebody very eminent, a High Court Judge, said that about Ms Lim.

Mr Speaker: Ms Sylvia Lim. Unfortunately, we do not have translators for Latin.

Ms Sylvia Lim: Mr Speaker, Sir, as far as I know, there is such a thing as parliamentary privilege. And if I recall earlier debates, even People's Action Party (PAP) MPs were encouraged to come to the House to convey even rumours, so that the Government has the opportunity to refute them. This is the value of this Chamber. I do not agree with the Minister that I am somehow not up to standards. This is what we as Members of Parliament have to do to get better clarity on matters of public interest. Of course, the Government can rebut our speeches robustly – that is fine. But I do not think I am disentitled to come to Parliament to advance honestly-held beliefs or suspicions.

Mr Speaker: Within limits. Minister for Finance.

Mr Heng Swee Keat: Mr Speaker, thank you. I want to thank my colleague, Minister Shanmugam, for reminding me that I have not answered this part of Ms Lim's question.

Ms Lim says that she is saying this on suspicion. I believe Ms Lim is a lawyer and also a Police Officer before. I, too, have been a Police Officer before. So, we both know that the first thing when we have a suspicion, is to go out and interview witnesses as part of our investigations. I want to present myself as your witness, because I have been working on this ever since I became Finance Minister.

I want to confirm that the statement made by Deputy Prime Minister Tharman: that we have enough revenues till this term of Government, is correct. We have done all our projections and that is an accurate and truthful statement.

If you were to look at circumstantial evidence, why did I not set a timeline for that? I said that it depends on the prevailing economic conditions, it depends on a number of factors which I will continue to carefully monitor. And that we must not get distracted with one-off events, one-off surpluses. I made that very clear in my Statement.

If, indeed, we were so short, would it not be the logical thing to say, "Let's do it now" and find some ways to do it? We did not. I said that it is between 2021 and 2025.

Having told Ms Lim that I have been working on this ever since I became Finance Minister to look at all our revenue projections and expenditure projections again and discussed with the Prime Minister and Deputy Prime Ministers – that the statement is correct. It is an honest assessment of our position, which remains accurate till today. That is why I did not have to do a GST increase now, in this Budget.

It was not a case of floating any trial balloon. If you remember, I said it at the last Budget that we have to look for revenue measures. I said it again at a constituency visit at Cairnhill-Moulmein a few months after that. Then the Prime Minister said it in November last year. So, on the basis of all the evidence that I am offering, will Ms Lim withdraw her comments?

Mr Speaker: Mr Sylvia Lim.

Ms Sylvia Lim: Sir, I have listened to the Finance Minister's response. I still feel that there is nothing wrong with what I have said. But I have noted his answer.

Mr Speaker: Are there any other clarifications? Ms Kuik Shiao-Yin.

Ms Kuik Shiao-Yin (Nominated Member): I thank the Finance Minister for the extended explanation he has given on taxes, borrowing and Reserves, I will definitely be referring to the Hansard when I prepare for future General Paper (GP) lectures.

I have a request and a clarifying question. The request is: can I request that slides be made available to the public and that MOF engage with youth educators, specifically for GP, Social Studies and Economics, to help them facilitate a deeper conversation with young people about this? Because I think it is a conversation that is going to come up again and again. Many teachers actually feel very inadequate at explaining this and may give a wrong understanding.

For the clarifying question, I understand that the full size of the Reserves can never be revealed for strategic reasons, but the absence of public information about the size of Reserves and the rate of return makes it quite hard for the average lay person, especially the educators, to have a meaningful conversation about it.

The problem with the vacuum of information is alternative narratives are filling the gap – some are obvious, deliberate misinformation and some are just different from the Government's story.

I read an Overseas-Chinese Banking Corporation (OCBC) Economist's suggestion that we could split the Reserves into two parts: one as a base for generating the NIRC that can be publicly disclosed; and the other that is used to deter currency speculations can be kept secret. I was wondering if the Finance Minister could give his take on this suggestion.

Mr Heng Swee Keat: I thank Ms Kuik for her questions. On the first request: can we make the slides and the information available to our people and our educators? The answer is, certainly. And if there are particular information or analyses that she thinks are useful, I would be happy to get my colleagues to work on that, because I think an informed discussion is important.

As to the second question, Ms Kuik understands the need for our Reserves numbers not to be revealed because it serves as a strategic asset. I hope she appreciates that, in a world of major currency transactions every day, even the size of our Reserves is tiny by international standards. It is tiny by the amount of transactions that are going on around the world every day. And we are an important financial centre.

So, the answer to the suggestion on whether we can split it into two parts: I have actually considered that, but I do not think it is sound because there will still be speculation as to how big that part is. Two, the MAS' official foreign reserves are actually in the data. It is publicly available as to how big the MAS' official foreign reserves are. A way of thinking about it is that that forms one part of it, but, as for the rest, should we look at it more? Should we reveal more? No.

Having gone through the Asian Financial Crisis – I was serving as Principal Private Secretary to Minister Mentor then – and I was looking at how various countries were managing their reserves and managing the currency speculators, it was the most important lesson for me as a young officer then. Never underestimate how the profit motive can destroy countries. It happened very, very swiftly and I have to say that, rather unfortunately, many of the countries that were very deeply affected, adopted policies that looked very good at that point in time. It seemed like they were doing the right thing, but the reserves were gone very, very quickly, and it took them years and years to rebuild them.

Having gone through the Global Financial Crisis when I was running MAS, I was even more concerned. We all thought that maybe only developing countries are vulnerable to financial crises. But when this crisis happened, it originated from the most developed economies in the world, amongst the most sophisticated financial centres, in the US, in Europe, and then it spread to all the rest of us. We, in Asia, were lucky that all those new products and new innovations had not had such a strong foothold yet, although they were coming.

Let us be very careful about dealing with finances, dealing with our Reserves, dealing with our global financial market. It is easy to suggest, "Let's do this, and that". But we really have to think through the implications very, very carefully, and we must continue to monitor how global financial markets are developing.

Even as I speak, new rules are being made; not only about global finances but about global taxation. And these rules are going to change. In my Budget speech, I spoke about how the centre of economic activity is moving towards Asia. I also added a line that the global order will change. I think Mr Low Thia Khiang hoisted that point.

Therefore, let us think very hard about all the things that we need to do and make sure that we provide sufficient buffer.

Mr Speaker: And on that the note, the Question is, "That Parliament approves the financial policy of the Government for the financial year —"

Mr Leon Perera (Non-Constituency Member): Sir, can I seek a clarification?

Mr Speaker: I am moving on. The Question is, "That Parliament approves the financial policy of the Government for the financial year 1 April 2018 to 31 March 2019." As many as are of the opinion say "Aye".

Hon Members say "Aye".

Mr Speaker: To the contrary say "No". Yes, Minister for Finance.

Mr Heng Swee Keat: Mr Speaker, Sir, this is an important Motion on a very important issue. And after the debate that we have in Parliament, the Workers' Party has not made clear its stance on the Government's financial policy. So, I either have a clarification from Ms Sylvia Lim now that she supports the financial policy of the Government, or I would ask for a Division, Sir.

Mr Speaker: Ms Sylvia Lim, would you like to respond?

Ms Sylvia Lim: Yes, Sir, I thought I made it clear earlier that we support this Budget, as far as the measures in the Budget go. But the GST announcement was an announcement which is not being implemented in this Budget. So, in accordance with the usual procedure, I do not think we are voting on the announcement; we are voting on the measures.

Mr Speaker: Minister for Finance, would you like to proceed with a Division?

Mr Heng Swee Keat: Mr Speaker, Sir, this debate is a debate on the financial policy of the Government, and I have articulated in this Budget the financial policy of the Government. Therefore, the financial policy includes the policy to raise GST in the coming years, between 2021 and 2025. So, I think I will ask for a Division, Sir.

Mr Speaker: Let me state my opinion on the collected voices. As many as are of that opinion say "Aye".

Hon Members say "Aye".

Mr Speaker: To the contrary say "No".

Some hon Members say "No".

Ms Sylvia Lim: Speaker, to make clear, we are unable to support the announcement on the GST hike.

Mr Speaker: For this particular Motion, we are voting on the Budget Statement. We either vote "Yes", "No" or "Abstain". So, we will proceed with the Division. Will hon Members who support the Division, please rise in their places?

More than five hon Members rose.

Mr Speaker: Thank you. Clerk, ring the division bells.

After two minutes –

Mr Speaker: Serjeant-at-Arms, lock the doors.

Question put, "That Parliament approves the financial policy of the Government for the financial year 1 April 2018 to 31 March 2019."

Mr Speaker: Minister for Finance, you have called for a Division, would you like to proceed with a Division?

Mr Heng Swee Keat: Yes, Sir.

Mr Speaker: May I remind Members to please sit at your designated seats. You should only start to vote when the voting buttons on your armrests start to blink. Members may now begin to vote.

Members are advised to check that their names are registered according to their vote indication when the voting results are shown on the display screen.

Mr Speaker: I will proceed to declare the voting results now. There are 89 "Ayes", eight "Noes", and zero "Abstentions". The "Ayes" have it.

Resolved,

"That Parliament approves the financial policy of the Government for the financial year 1 April 2018 to 31 March 2019."