Dear Mr Lee,
First off, thank you for the speech that you had made at the National Day Rally 2012 (NDR12). I have also given my two cents worth on an online discussion on theonlinecitizen’s Facebook page. I believe in the overarching vision that you had described and I hope that it will come true – for a Singapore where we can learn to be happy, compassionate and caring. I want to give the government another chance to make it work, so I sincerely hope that the government will make good the things that it had said it would look into.
After the NDR12, further discussion had occurred online, some of which I believe are valid discussions which the government needs to take into account in the long-term planning, and I would argue that this should be done much sooner, than later. Singaporeans are starting to take part in the National Conversation and I hope that the government will listen and act on them responsibly.
At the NDR12, PM Lee had shared that to encourage Singaporeans to have more babies, the government will look into encouraging work-life balance, letting couples with children have housing priority, catering for paternity leave and by raising pre-school standards and keeping it affordable. These are small steps in the right direction.
PM Lee’s Proposals Did Not Touch Singaporeans
However, in a poll conducted by Channel NewsAsia, which asked if PM Lee’s suggestions would encourage Singaporeans to have more children, an overwhelming 94% said no.
(Photo credit: theonlinecitizen’s Facebook page)
PM Lee’s suggestions had somehow not manage to hit the right spot. It did not tackle what Singaporeans were truly concerned about. There are some disclaimers, of course – the survey might not be representative of what all Singaporeans think in general and the government has yet to laid out clear plans as to what PM Lee’s suggestions will translate into.
However, 94% is not something to be looked upon lightly. PM Lee’s suggestions were not wide ranging enough to cater to our needs.
Mr Lee Kuan Yew had asked at the Tanjong Pagar-Tiong Bahru National Day celebration dinner, “Do we want to replace ourselves or do we want to shrink and get older and be replaced by migrants and work permit holders? That’s the simple question.” But the government has to ask itself and ask Singaporeans – what will make us want to replace ourselves? The government knows what it is. But our government, it seems, is not willing to be bold enough to take the right steps to move forward.
aAdvantage Consulting Group and Barrett Values Centre had conducted a survey to find out what the values are that Singaporeans want. According to the Singapore Armchair Critic, topmost is affordable healthcare – 44% of Singaporeans want affordable healthcare. Further down the list, 28% ranked quality of life as the 7th top value.
In an interview with Yahoo!, former GIC chief economist Yeoh Lam Keong shared that Singapore only spends 1.5% of our GDP on healthcare whereas comparable countries such as Taiwan spends 4% of their GDP. Singaporeans have to pay for nearly two-thirds of their medical bills out from their own pocket, whereas Taiwanese and Koreans need only pay one-quarter or one-third of their bills, which is the “universally affordable” standard. We are on the wrong side of the equation.
Not only that, when it comes to spending on education, Singapore spends only 3.8% of our GDP, whereas “the average OECD country spends about 6 per cent of its GDP on education.” According to Yeoh, the true cost of education is borne by Singaporeans, who have to spend a significantly higher amount on tuition.
Yeoh also pointed out that because “Build-to-Order (BTO) flats are linked to general market prices by being pegged to the cost of resale housing … (it) price out everybody else who falls below the top 20 to 30 per cent of households.”
PM Lee had proposed solutions aimed at ameliorating the effects of short term care for our children. However, the truth is there are longer term effects and broader implications of taking care of a child, which Singaporeans are very much well aware of. Singaporeans know that, to bring up a child, there are very clearly significant increases in costs in the areas of housing, education and healthcare, other than immediate childcare costs. This is what puts people off.
The government might aim to provide quality standards in these areas – housing, education and healthcare – but the issue is not just about the quality. The topmost concern is cost. PM Lee had not proposed any solution to reduce the costs in these areas. Singaporeans are price-sensitive, and they would not budge if the government doesn’t.
Right now, we are waiting for who will blink first.
So, We Need to Raise Taxes to Increase Social Spending? Not Really.
The next question we would ask then is, as PM Lee had said that, “As spending increases significantly, sooner or later taxes must go up too – not immediately, but certainly within the next 20 years.”
I had written about this before and I would like to remind ourselves again – in other countries, the government collects taxes from the people and redistribute this into social spending and pensions etc. In Singapore, the government collects taxes, but it also collect monies from our CPF for our pensions. The difference between Singapore and the other countries is that, for Singapore, we collect monies for our pensions separate from our taxes.
Seen in totality, our CPF is actually 4 times the size of our taxes, which means that for a fair comparison with the taxes of other countries, we need to include our CPF with our taxes, in our comparison with theirs.
The argument that we need to raise taxes to increase social spending does not hold water. Here’s why.
Firstly, if we take into account our CPF, our taxes will grow by 5 times. But isn’t the CPF our money for our retirement, you might ask? If the government takes away the money, won’t there be lesser for me? This won’t be an issue because already the government uses our money for investment in the GIC and Temasek Holdings, which make an interest of 7% and 17% respectively. We are only given an interest of 2.5% and 4% on our Ordinary and Special/Medisave Accounts respectively. Not all the interest earned is returned to us. It goes into the national reserves.
If this is the case, the government can afford to channel a percentage of the interest earned, which is not returned to Singaporeans anyway, to increase social spending – namely, healthcare and education spending. The government need not touch our CPF monies. The interest earned from our CPF which is not redistributed can cover for that.
To put it into perspective, the government collected about $200 billion from our CPF last year. Together with the taxes collected, the total monies collected from Singaporeans is around at least $250 billion.
Of course, this is a simplistic way of looking at the financial situation. However, the government clearly has additional funds to increase spending. If the government disagrees, it needs to have a National Conversation as to how our CPF is being used for investments, how the government decides on how much to set aside for the national reserves and what is really enough?
We have to ask – are the medium terms interests of Singapore’s social and welfare needs more important or are longer term national interests of security more important? I would like to remind ourselves again that our national reserves are one of the highest in the world and we have the highest reserves per capita in the world. Without the government explaining their rationale for hoarding the monies for the reserves, we wouldn’t adequately know why social spending on Singaporeans’ needs have to be reduced at the expense of the government’s chronic fear of foreign attacks.
In an article by TR Emeritus, it was stated that Singapore sets aside the highest percentage of our GDP on defence spending – 4.3%. Malaysia spends only 2.0% whereas Indonesia spends only 0.9%. We spend the highest per capita GDP on defence in the region. In monetary terms, Singapore spent $7.6 billion while Malaysia and Indonesia spent only $3 billion and $6 billion respectively, which is minute, for countries which are many times Singapore’s size in terms of population. Understandably, the government has to be concerned about the national security of Singapore. The government has also stated that “the total funds managed by GIC are not published”, which I assume could also be because of issues of national security.
Naysayers could argue that the government wants to hide the truth from Singaporeans, yet as long as the government does not clarify the decision-making behind the defence spending, its obsessive pursuit to increase the reserves at the expense of Singaporeans’ social needs and the use of our CPF in investments, Singaporeans will continue to be distrusting of the government.
Our Government Needs to Take Bold Steps
Clearly, Singaporeans are aware of how the low fertility rate will impact on Singapore’s growth strategy. But giving birth to and raising a child is a dearly personal decision and a commitment that will continue on for years. Parents have to base their decisions on several factors, one of which as argued in this article, is the overall and broader costs of raising a child – in the areas of housing, education and healthcare.
The government has the financial capacity to increase social spending to reduce the costs of education and healthcare substantially, so that Singaporeans do not have to unnecessarily worry over whether they would have enough finances to support their children through to university and to cater for their healthcare needs. This doesn’t have to happen in 20 years. It can happen now.
The government has to understand this very important fact – the high costs of education and healthcare has gone beyond the psychological barrier that Singaporeans are able to withstand. The very effects are seen in their unwillingness to have more children.
At the moment, the government allows Singaporeans to use their CPF to pay for their flats and the university education of their children. A part of it is also set aside for healthcare expenditure. But why go through this cumbersome process of making Singaporeans apply for their CPF to be used in these areas? The CPF is already managed by the government. They can short-cut the process by channelling the monies into reducing housing, educational and healthcare costs directly – we can remove one layer of red tape. Necessarily, the government has caught itself in a corundum by the system of its own making, which thus tightened its social spending, yet at the expense of benefiting its investments.
The government has to understand that at this point, it has to reduce costs to below that of the psychological barrier that Singaporeans are able to handle. Once we consider that costs are lower, Singaporeans will naturally be more comfortable in having more children. PM Lee might say that, “In many countries, politicians champion social spending, but pretend that it costs taxpayers nothing.” But it works. Do you know why? The government takes control of spending, and free the people up from having to make these burdensome decisions.
Understandably, our government prides its governance approach as one of self-reliance among Singaporeans. But there has to be a limit – at which point do we want to take self-reliance so far that Singaporeans worry so much for their future that they withdraw from their commitments, for fear that they would not be able to sustain their spending?
My government, you need to have a National Conversation with us on the utilisation of our CPF in investments and how priorities are made in terms of national expenditure and the contribution to the national reserves. You have to also look into how much responsibility the government needs to reclaim back, and understand the effects that self reliance has on the national psyche. There is only as much that we can take, before we break. If you know what it is like for low income earners, when all you care about is to ensure that you have enough money to survive, you have no time to be able to afford to think about others.
If our psychological barrier has been breached, we have no time to think about our national commitments. And the government needs to start owning a part of the problem.
Additional Note: I had also mentioned in the article that 28% of Singaporeans ranked quality of life as the 7th top value that they would want to aspire to. The purpose of the article is not to discuss this, but other than looking into flexible work arrangements, the government needs to look into quantifying work-life balance. As I have discussed in a previous article, countries which have shorter work hours are able to achieve higher productivity. In Singapore, because of the long work hours, many workers spend their time taking breaks during work and doing their personal things. If time at work becomes more compact, we would be able to more effectively streamline our work and be able to work efficiently. Clearly, the evidence shows that with shorter work hours, productivity will increase and so will work-life balance. This is also one clear factor which will affect Singaporean’s decision-making as to whether to have children. Question is, is our government bold enough?