PART II KEY ISSUES | 67 BUDGET DEBATE ROUND-UP SPEECH 2009 KEY ISSUES 3. There were many issues raised but they are all ultimately about whether this is 1. Mr Speaker, Sir*, I thank all the MPs who the right Budget for the times. have offered their views and ideas in what has been a very stimulating In particular, whether the Budget is debate, and most of all for supporting of the right size to address the crisis; this Budget. second, whether it is directed at the right objectives and whether we 2. I have listened to every speech; in the have designed the measures right, one instance which I missed, which is for maximum impact, and they will Ms Irene Ng’s speech, I read it after. therefore be effective in helping Members raised many issues and I would Singapore through the crisis; and third, not be able to address all of them in this whether the Government is making the speech. This is the customary practice right move in tapping on past reserves each year. Many Members have raised to fund part of the Package. I will issues which rightfully belong to the respond to the various issues raised in Committee of Supply’s debate and the debate, under these three broad they will be taken up there. With regard themes. to MOF, some issues like Government efficiency (which was raised by Mr Baey Yam Keng) and environment-related tax issues (which Mr Edwin Khew raised) will be taken up during the COS. * Delivered in Parliament on 5 February 2009 by the Minister for Finance Mr Tharman Shanmugaratnam. BUDGET DEBATE ROUND-UP SPEECH 2009 68 | RIGHT SIZE: A FORCEFUL PACKAGE A. RIGHT SIZE: A FORCEFUL estimated at 1.8% of GDP for 2009. PACKAGE Germany’s package amounts to 1.25% of GDP in 2009 and another 0.5% of GDP A.1. First, is this the right size? All governments next year (in 2010). China’s package of are now focused on fiscal policy over four trillion yuan will be spread interventions to try to support their over a few years, and is therefore economies. It is a severe recession, and estimated to be about 2% to 3% of GDP we are seeing continuing momentum of for this year. The UK’s £20 billion fiscal the decline, week by week literally. So, package amounts to 1% of GDP in there is a consensus internationally now 2009. Taiwan’s NT$500 billion economic that fiscal responses have to be larger stimulus package, equivalent to about than in normal cyclical downturns, and 4% of its GDP but implemented over four further, that they must be focused on years, translates to about 1% of GDP speedy implementation so that a real each year. impact can be felt in 2009. The package we are implementing is large, timely and A.3. The deficit we will run is not just large front-loaded so as to have a significant compared to others. What we are impact this year. The basic deficit of 6% of doing is also different from that in GDP is a major injection of Government most other countries, because they money into the economy. On top of will have to borrow to fund their this, the Special Risk-Sharing Initiative deficits. Their taxpayers will have to (SRI) will help sustain bank lending to bear the burden in future. Singapore our companies. The quantum of loans does not have to borrow. As Prof. that we are extending is not included Koo Tsai Kee, Mr Gautam Banerjee, in the basic deficit of 6% of GDP. It is on Mr Ong Ah Heng and Mr Christopher de top of that. Souza and others have all emphasised, this is our key advantage in Singapore. A.2. Our Resilience Package and the fiscal We have designed our package so deficit resulting from it are in fact very that the measures could be rolled out large compared to most other countries. quickly - in 2009 itself - to achieve broad- In the US, the Obama administration is based impact across the economy. seeking to get an $885 billion package approved by the Senate. However, in A.4. In particular, the Jobs Credit was its current form, less than 30% of the designed to put money in the hands package will be implemented within the of all businesses quickly, and to be first year. By some estimates, not much simple to administer. We had, in fact, more than 20%. Its impact is therefore considered giving a rental credit in BUDGET DEBATE ROUND-UP SPEECH 2009 RIGHT SIZE: A FORCEFUL PACKAGE | 69 combination with the Jobs Credit. But by more than 50%, from $8.7 billion to it would have slowed implementation, about $14 billion. I am sure Mr Inderjit because a rental credit would have Singh does not expect us to take in all required declarations by companies of his proposals, but I use this to illustrate and subsequent verifications. It is much the point. speedier to implement the Jobs Credit, and at very low administrative cost, A.6. With a basic deficit of 6% of GDP in because it is based on readily available FY2009, we believe that this is the right CPF data. We therefore decided to Budget for the times. To do more along do away with the rental credit, and the lines of some of the proposals, increase the Jobs Credit to 12% of wages including some of the meritorious - so that the total impact and benefit to proposals, that have been raised in this businesses would be roughly the same House, would mean having to do less as if we gave both credits, but delivered of some of the measures that we are much faster. Likewise, for GST credits implementing in this Budget. And that is and the WIS Special Payment, both are the fundamental point in the design of given out in the form of cash and put any Budget. money quickly into the hands of every Singaporean. The first cash payments will A.7. Our package is a large intervention in one be made in March this year. year. It already factors in a continuing decline in the global economy this year. A.5. So, when Members consider the We predicted growth of -2% to -5% for other measures that they wanted the 2009 before this Budget, and that is still Government to have taken in this our projection for the year. Some MPs Budget, we first have to bear in mind have asked for an off-budget package that this is already a very large Budget, this year, even before this Resilience much larger, in fact, than most other Package has been passed. Having countries are putting in place. Some of just debated and not yet passed the the suggestions proposed by the MPs do Resilience Package, we should not be have merit. But we cannot implement thinking of further measures in the near every meritorious proposal without future. Of course, the Government will carefully considering what we are able track events closely and, depending on to afford. For instance, if I were to take how things develop, we are ready and all of Mr Inderjit Singh’s proposals, it able to do more over the course of would have cost an additional $5 billion. the recession. Our mindset should be This is a ballpark estimate but probably for a long campaign and not a quick not far off. It would increase our deficit downturn to be cured overnight. BUDGET DEBATE ROUND-UP SPEECH 2009 70 | RIGHT OBJECTIVES: DIRECTING RESOURCES FOR MAXIMUM EFFECT B. RIGHT OBJECTIVES: to focus on three key objectives, aimed DIRECTING RESOURCES FOR at helping Singaporeans where it MAXIMUM EFFECT matters most. First, jobs for Singaporeans. This is the first and key objective and B.1. So, that is the first theme - have we sized it is about helping businesses so that the Budget right? Is this the right impact, they can preserve jobs to the maximum especially the right impact for this year? extent possible in this recession. And it is. Second, are we focused on the right objectives? Are we directing The largest part of the package, resources for maximum effect? The therefore, comprises support for key decisions we have had to make businesses through the Jobs Credit and in this package are which objectives SPUR, through the many tax measures, to focus on and where to put the most through the SRI to sustain bank lending resources, so that we get the maximum to companies, and through our bang for the buck. It is important for Government spending initiatives, which us to focus our resources on the key will create demand for our businesses. objectives, and design our policies such We are also creating jobs through that the best multiplier for the economy substantially expanded Government can be achieved. This means that hiring 18,000 jobs. That is the first some areas have to get less. If you want objective. Ultimately, it is about jobs for your key objectives to be achieved, Singaporeans, working primarily through they have to be forceful. This means support for the business sector. that other objectives, the secondary objectives, have to get less. Trying to Second objective - direct help for be as comprehensive as possible will households. We are helping households dilute the impact of the package, directly, with something for everyone, and those who need it the most, both but more for the lower and middle- amongst businesses and households, income groups. would get less. Third objective - confidence in the future.