SINGAPORE, March 6 — Allaying concerns over how Singapore would fund higher social spending in the years to come, Deputy Prime Minister Tharman Shanmugaratnam reassured the House that the Government is in a good fiscal position for at least the rest of the decade.

Fiscal prudence and discipline — which are responsible for the Republic’s healthy reserves — must continue to be the hallmarks of the Government, he said.

“In our young and growing years, we kept our fiscal discipline and built up our reserves, which now give a lasting benefit for today’s generation and future generations,” said Tharman. “We have prepared ourselves in advance and that must remain the way in which we plan our budgets in decades to come.”

Over the past three days of the Budget debate, several Members of Parliament (MPs) raised concerns about the Government’s fiscal sustainability, given that the projected spike in social spending coincides with a moderating economy.

Wrapping up the debate, Tharman, who is also Finance Minister, pointed out that Singapore’s strong fiscal position today is due to savings built up in the first few decades after the nation’s independence, when the Government focused its spending on education, housing and healthcare.

In contrast, other countries started out with huge investments in social benefits, but are now paying the price.

Tharman described what he saw as “basic political flaws” in some European countries such as the United Kingdom: Each new electoral term brought about a rise in social spending.

This is inequitable and the end result may include a cut in spending on young children, while the rich continue to benefit, he said.

Singapore’s approach is quite different from cradle-to-grave welfarism. “It is about encouraging and empowering people, and rewarding responsibility throughout life,” he said.

The Government is expected to incur a budget deficit of S$100 million (RM266.8m) for financial year 2014. Tharman noted that this was due to funds being set aside for future investments.

During the Budget statement last Monday, Tharman announced that Temasek Holdings will be included in the Net Investments Return framework, which will allow the Government to spend part of Temasek’s expected long-term returns.

The Monetary Authority of Singapore and the GIC are already under the framework, which was implemented in 2009.

Tharman noted that expected long-term returns are less volatile than actual returns.

There are also rules in place such that it does not mean spending more, from a higher asset base when there is an asset boom.

The Government’s liquidity management strategy is also independent of investment strategies, said the minister.

Due to careful investment and spending plans, along with a progressive system, the Government is able to redistribute resources to temper inequality in society, Tharman said.

Currently, the top one-fifth of households contribute 55 per cent of total taxes and receive 12 per cent of benefits. The bottom one-fifth contribute nine per cent of total taxes, but receive 27 per cent of all benefits. The bottom 30 per cent of retirees’ households also have individual benefits of S$640 a month on average, such as in the form of health subsidies.

The middle class is not forgotten: Every S$1 in tax paid by people in this group will see them receiving S$1.73 in benefits, Tharman noted.

The new Silver Support Scheme, which gives cash payouts to needy elderly, has been hailed by observers and MPs. Reiterating that it will be a permanent feature, the minister said the payout amount — eligible seniors will receive between S$300 and S$750 every three months — might grow over time, with an increasingly greying population.

Calling the scheme a redistributive tool, he said: “We have tilted our system deliberately to help the lower- and middle-income groups.”

Several MPs, including Workers’ Party (WP) chairman Sylvia Lim, noted a leftward shift in the Budget. “This Budget explicitly talks about strengthening social safety nets. This suggests a shift to the left, a direction I believe is right,” she said.

At the same time, other MPs, including Nominated MP Chia Yong Yong, cautioned against moving too much to the left, while Pasir Ris-Punggol GRC MP Janil Puthucheary yesterday reiterated the need to find a middle ground.

Tharman, who noted the WP’s support of this year’s Budget and quipped that he hopes the opposition party will not change its tune come election time, stressed the importance of strengthening values for a fair and inclusive society.

Personal and collective responsibility have to go hand in hand to build a stronger social compact, he said. “Our whole approach... is to avoid a zero-sum game between personal and collective responsibility.

“We have to avoid looking at problems through the lenses of the left or the right alone, because there are truths on both the left and right.” — TODAY