SINGAPORE’S fiscal strength is a “vital source of competitive advantage”, and unexpected surpluses are better than surprise shortfalls, said Finance Minister and Prime Minister Lawrence Wong, rounding up the third and final day of the Budget debate on Friday (Feb 28).
“Singaporeans will decide: will they prefer a government that underestimates our needs, spends more from our hard-earned reserves and leaves us weaker?” he asked.
“Or will they prefer a government that is steadfast, that upholds fiscal responsibility and discipline, and ensures we have enough resources for current and future generations to handle unexpected challenges?”
In the previous two days of debate, opposition Members of Parliament (MPs) criticised the government’s accuracy in fiscal forecasts, as Budget predictions were often later revised to better fiscal states.
But in turbulent times, fiscal strength enables swift responses to sudden shocks and crises, said PM Wong.
In a later exchange with Non-Constituency MP Hazel Poa, he said: “A strong fiscal position is not at the expense of Singaporeans.”
Hard to predict
On the question of accuracy, PM Wong said revenue and expenditure projections are based on the best available information. With greater economic volatility, it is “inherently more difficult to predict the turning points”.
That said, aside from unexpected crises such as the Covid-19 pandemic, Singapore’s operating revenue projections “have generally not been far off the mark”, he added.
In the 10 years from FY2010 to FY2019, the average deviation was within a “reasonable range” of 5 per cent. In the last two financial years, the deviation has been larger, but still around 7 per cent – comparable to jurisdictions such as the UK and Netherlands.
For FY2024 specifically, Singapore’s growth exceeded not just the Ministry of Trade and Industry’s projections, but that of other private-sector economists, he noted. This is one reason for the unexpected surplus, alongside better-than-expected corporate income tax collections.
“In most other countries, poor Budget marksmanship is when a government severely overestimates the revenue it will collect and underestimates its expenditure,” he said. Such governments make “unfunded promises” that cannot be fulfilled or require borrowing.
That is not the case in Singapore, he said. “The Workers’ Party and the Progress Singapore Party may think that we are being overly cautious in our projections, but this government will never take risks with Singaporeans’ lives and futures.”
The government’s approach is to keep public finances healthy, spend within its means and raise revenues to meet new demands, he concluded. Any surpluses can go towards future needs or more support for Singaporeans.
Raising rates
Earlier in the debate, conservative revenue projections were cited by opposition MPs in objecting to the goods and services tax (GST) hike. They questioned if the hike was necessary, given the healthy fiscal position.
But Singapore’s current strong fiscal position is because of earlier steps to raise revenues, noted PM Wong. When Covid-19 hit, there was no way of knowing how much deeper a “fiscal hole” Singapore would have, nor when the pandemic would end.
The GST hike aimed to plug the funding gap arising from higher projected expenditure, which property and income taxes would not sufficiently cover.
Some MPs asked about the expected revenue impact of the minimum corporate tax of 15 per cent, as part of global tax changes under the Base Erosion and Profit Shifting (BEPS 2.0) initiative.
PM Wong said the government cannot provide immediate updates here, given the uncertainty shrouding the global tax landscape after the US withdrew from the tax deal last month.
He reiterated that it is too early to tell if the surprise upside in corporate income tax collection will persist, but added: “We remain committed to providing further updates on our medium-term fiscal position, including revenues.”
Cost-of-living concerns
Opposition MPs flagged the danger of cultivating a reliance on handouts, such as Community Development Council (CDC) vouchers, to cope with inflation.
In response, PM Wong reiterated that the CDC vouchers are a temporary measure. The more durable way of tackling cost-of-living issues is ensuring higher real incomes, through a strong economy and productivity gains.
This is reflected by how the cost-of-living measures and SG60 Package make up just 5 per cent of the Budget, said PM Wong (*see amendment note). More has instead been allocated for structural programmes, such as SkillsFuture enhancements.
Such programmes are what will ensure that Singaporeans can seize opportunities in a rapidly changing world, he said. Households have done relatively well, with real income growth over the past decade, he noted.
As for claims that the GST hike was “turbocharging” inflation, PM Wong noted that headline inflation eased in 2023 and 2024, despite GST hikes in those years.
Still, while inflation has eased globally and in Singapore, people are still concerned about cost pressures, he acknowledged. In the so-called “vibecession” in the US, economic indicators are positive but public sentiment is poor.
“But there is a reason for the negative vibes,” he said. “It is because price levels remain high, even though inflation has eased.”
As it will take time for households and businesses to adjust to new price realities, the government will provide cost-of-living support for “as long as needed and within our means”.
Social support
Beyond this, the government is strengthening social support through its Forward Singapore agenda, said PM Wong.
Addressing MPs’ concerns about housing, he reiterated a commitment to keeping public housing affordable. “With a sustained and robust supply of new flats and as the overall market stabilises, we will have scope to consider how to adjust our policies to meet the needs of other groups, including second-timers and singles.”
He also acknowledged MPs’ other social policy concerns, from support for families to helping seniors age well. The government is studying inclusive hiring and employment support for persons with disabilities, as well as support for caregivers, he added.
Amendment note: A previous version of this story incorrectly stated that the CDC voucher scheme alone makes up 5 per cent of Budget 2025.
