Marksmanship and forecast skills
Budget surplus of $6.4b comes under vigorous debate
Loh Chee Kong and Lin Yan Qin
IT WAS called a "happy mistake" and even "pleasantly embarrassing"
by some.
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While a few Members of Parliament (MPs) felt the Government's
unexpected $6.4-billion surplus — an "astronomical difference" from
its earlier forecast of a $700 million deficit — would hurt its
credibility, others said it should be commended for turning the
expected hole in the budget into an "astonishing surplus".
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The question many had, though, was how the forecast went awry — and
was the Goods and Services Tax (GST) hike last June, on hindsight,
warranted? Should the Government also be doing more to help
businesses and Singaporean households plagued by inflation?
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Yesterday, as Parliament reconvened to debate the Budget, the
spotlight fell on the eye-popping surplus that Finance Minister
Tharman Shanmugaratnam attributed largely to the unforeseen
property bull run, with state coffers boosted spectacularly by
stamp duties.
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Ang Mo Kio MP Inderjit Singh described the $7-billion swing from
deficit to surplus as a "pleasantly embarrassing" outcome for the
Finance Minister, who had "defended very strongly the
2-percentage-point GST increase last year, citing reduction of
Government income from other sources".
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"In light of the booming economy, which should have been visible by
mid-2007, the Government could have made the late decision to hold
off the GST rise by a year or two," Mr Singh said.
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Workers' Party chief Low Thia Khiang said the large surplus
vindicated his argument last year that the Government could have
afforded the Workfare Income Supplement scheme — cited as another
key justification for the GST hike — without upping the tax.
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"Was the Government too conservative in its initial forecast
because it wanted sufficient reasons to justify the GST hike?" he
asked.
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Like Mr Low, Nominated MP Gautam Banerjee suggested that the GST be
put back at 5 per cent "as soon as is practicable and until such a
time that there is a real need to increase government revenue from
indirect taxation".
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But others, including Hong Kah MP Amy Khor, said the Government
should be commended for a job well done. She added: "It is this
far-sightedness and prudence, as well as the many timely and astute
policies implemented, that have played a major role in bringing
about such a large surplus."
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For Mr Banerjee, executive chairman of auditing giant
PricewaterhouseCoopers Singapore, the issue lay more in whether a
better job could be done with forecasts.
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The Finance Ministry's key performance indicators, he said, should
give more weight to "realistic preparation of estimates", than be
"unduly weighted towards prudence".
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Nominated MP Eunice Olsen, who noted that one of the ministry's
KPIs was its "Budget marksmanship", asked "why did the Government
not anticipate revenue figures more accurately, especially when it
is in control of various factors such as immigration
numbers?"
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In an ironic observation, she noted that Hong Kong, too, was
expected to announce on Wednesday a surplus four times higher than
initially projected — after public outcry forced its legislature to
scrap a proposed sales tax, a fact that might spur critics of
Singapore's GST hike.
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"There are worrying voices on the ground that say it would be hard
to believe the Government the next time it says more revenue is
needed for spending," Ms Olsen said, adding that such sentiments
are "often accompanied by references to the billions of dollars"
the Government of Singapore Investment Corporation spends on buying
stakes in foreign banks.
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As to some Singaporeans' disappointment with Budget goodies dished
out, Yio Chu Kang MP Seng Han Tong said the media had created
unrealistic expectations by asking various quarters for their
Budget wishlists. In fact, the Government "should stop the practice
of giving out surpluses during the Budget".
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But other MPs, such as Pasir Ris-Punggol's Michael Palmer, called
for more direct aid for Singaporeans to cope with inflation.
Businesses, too, needed more help, in the form of tax relief on
rentals, as a cushion against the rising rental costs, he
added.
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To keep property prices in check, Mr Singh said the Government
should have better managed the property bubble.
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It should have, for example, staggered the construction of the two
Integrated Resorts or released the land for the Business and
Financial Centre in Marina Bay earlier.
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He also suggested the Government scrap its land sales programme and
put in place permanent anti-speculative measures, to have a more
responsive supply while curbing speculation.
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Mr Shanmugaratnam had said a sustained economic growth would be
Singapore's most effective tactic against inflation.
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But Mr Singh felt the "growth-at-all-costs" economic model had
exacerbated the imported inflationary pressures. "I'm not sure how
it can help. A 'grow-as-fast-as-you-can' policy is inflationary in
nature."
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In all, 19 parliamentarians spoke yesterday. The debate continues
today.
Budget surplus of $6.4b comes under vigorous debate
