Budget 2012-Part OnePublished: 23rd February 2012
Lack of Transparency
As usual the Budget presented to us by this government is a model for opacity. Overall it allows only a very limited picture of the government’s true financial position. Specifically the budget as presented does not follow globally accepted and followed standards as set out by IMF standards for data dissemination. These standards are known as the Special Data Dissemination Standards. This lack of transparency does not serve Singaporeans well. Therefore as we go through the presentation in the Budget we will contrast it with the standards that the IMF sets out for government budgets in the Government Finance Statistics Manual (2001).
The Reform Party has to question the value of a budgetary exercise so lacking in transparency. This year the government has stressed its commitment to reducing inequality and helping the sick and disadvantaged. There has been much fanfare , yet as usual Singaporeans have been short-changed by a government that feels no pressure to be more honest with the electorate about the resources available. In addition to helping the less fortunate, taxes could have been cut for the bulk of Singaporeans and more money invested in meeting healthcare and education needs. Better still as the Reform Party has advocated, every Singaporean household could be given a direct share in our Sovereign Wealth Funds so that dividends paid accrued directly to the real owners of the assets. Privatization is the most radical solution and the one favoured by the Reform Party as Singaporeans would instantly be able to see how well the government managers were doing through changes in the market value of their shares.
The foreword to the IMF manual also said that one of the aims of the analytical framework was to provide an early warning system as to when things started to go wrong. The other side of the coin of the lack of transparency with regard to the government’s true net asset position is that Singaporeans will never find out till it is too late if the reserves have been squandered due to bad management. As we pointed out in a previous post (http://thereformparty.net/about/press-releases/an-elected-president-will-not-contribute-to-ensuring-transparency-over-our-sovereign-wealth-funds-nor-will-it-provide-any-meaningful-check-and-balance-on-the-executive/) the Elected President has no powers to scrutinize the investment performance of Temasek and GIC. And though the current CEO of Temasek may well have been originally appointed purely on merit, the government has provided no clear explanation as to why heads did not roll after the investment losses in 2008. How we are faring in the current difficult investment environment must be a matter of concern to every Singaporean.
Furthermore without the transparency that a free market in HDB housing would provide we can only state the likelihood that seniors are being short-changed by being asked to swap three bedroom apartments in low density blocks for grossly overpriced studio apartments in high rise blocks without adequate market compensation. The Silver Housing Bonus is not a genuine benefit. It merely serves as an inducement to our senior citizens to enter a swap the terms of which are likely to be disadvantageous to them. This benefits neither the greying population nor young singles and couples needing to get on the property ladder. Meanwhile all those in the middle continue to be squeezed by the government’s tight grip on supply and the fact that they are merely leaseholders. The Reform Party calls for Singaporeans to be given a share of the freeholds of their properties. It is about time we all got to own a piece of the land that we and our parents generation have worked so hard to build up.
Unnecessary Continued Austerity
In the context of what would appear to be the resources available it would be difficult to view this budget as a generous one even if that were to be expected in a pre-by-election period. In the light of the government’s extremely comfortable net asset position it is hard to justify the parsimonious attitude shown in this Budget and yet another year of unnecessary austerity imposed upon Singaporeans. We have concerns over the health care provision, provision for the greying population, the costs of education, the continuing wasteful corporate subsidies and the lack of a transparent HDB housing market. This and other factors will continue to impact negatively on our fertility rates.
For our response we will follow the categories used by the Finance Minister in his presentation. This, the first half of our response, concentrates on the transparency requirements for budgets. We will be presenting our response to the other initiatives announced by the FM and the areas highlighted above over the course of this week.
(A) Economic Performance and (F) Budget Position
The Budget is highly unusual in that it does not disclose the overall National Balance Sheet or even the General Government Budget Balance. The reasons for this omission are not disclosed. We compare the Budget figures with the government figures hidden in the Yearbook of Statistics and the Monthly Digest of Statistics, which purportedly follow the IMF Special Data Dissemination Standards as set out in the GFS Manual.
Buried in the monthly digest and the year book you can find a consolidated figure for the budget surplus. However without a full disclosure of the figures as required by IMF standard or even an explanation for the consolidated figure we have no way of ascertaining that the IMF standard has indeed been followed.
From this we conclude that the Budget Statement contains little useful information about the government’s overall net worth or the resources that belong to us Singaporeans.
To begin with the Budget Statement we are given:
TOP-UPS TO ENDOWMENTS AND TRUST FUNDS+
NET INVESTMENT RETURNS CONTRIBUTION
=OVERALL BUDGET BALANCE
But the Top-Ups to Endowments and Trust Funds do not necessarily represent actual spending as the monies allocated may never be spent or disbursed over several years. In addition the Net Investment Returns Contribution only represents UP TO 50% of the total investment returns earned on the government’s net assets (which of course belong to us!). It is likely that the Finance Ministry chooses the Net Investment Returns Contribution carefully to ensure that the Overall Budget Balance is close to zero.
This presentation is completely at odds with the IMF Standards which stipulate that the government’s finances should be presented in the following manner:
TRANSACTIONS AFFECTING NET WORTH:
Social contributions [GFS]
Compensation of employees [GFS]
Use of goods and services
Consumption of fixed capital [GFS]
Social benefits [GFS]
NET/GROSS OPERATING BALANCE1
TRANSACTIONS IN NON FINANCIAL ASSETS:
NET ACQUISITION OF NON FINANCIAL ASSETS2
Change in inventories
Non produced assets
NET LENDING/BORROWING [GFS]3
TRANSACTIONS IN FINANCIAL ASSETS AND
NET ACQUISITION OF FINANCIAL ASSETS
NET INCURRENCE OF LIABILITIES
Other Revenue includes dividends and interest earned on investments in bonds and shares (investments held by Temasek, GIC and MAS) as well as property income from land sales and rents.
The Reform Party calls on the government to include holding gains and losses and other volume changes on both financial and non-financial assets between balance sheet dates as shown in the GFS Analytic Framework below:
The only place where the government allows us a glimpse of its real budgetary position is in the Yearbook and the Monthly Digest of Statistics which have to follow the IMF Standards. In the MDS for January 2012 the government surplus for 2011 (January to December) is shown as approximately $26 billion while that for 2010 is shown as $15 billion. This contrasts with the Finance Minister’s presentation of an overall Budget Surplus for FY2011 of some $2.3 billion.
The Finance Ministry’s only explanation for the discrepancy is the terse (IMF mandated)
statement that the “Data in the table represent a broader definition of Government revenues and receipts than the fiscal position presented during each year’s Budget under Singapore’s Constitution as it includes the revenues and receipts accruing to both the Government’s current and past reserves. This is because some revenues and receipts accrue to the Government’s past reserves, which cannot be drawn on without the approval of the President.”
Even this is not the full story as the Yearbook includes a wider definition of the government’s finances known as the general government surplus. In 2009 the difference between the two figures was some $ 7.2 billion and transformed a $ 4 billion deficit into a $ 3 billion surplus. The Ministry provided little explanation for the difference other than the statement that it “includes budgetary and extra-budgetary accounts”.
Other advanced Nations present a full breakdown and disclosure of figures along with explanations to IMF standards year in year out. We feel that our Ministers, still being amongst the most highly paid in the world, with the shortest sitting parliament, could provide better value for money.