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What is the Real Surplus?

mysteryIt appears that our Budget Cash Surplus has fallen off a cliff.  The Budget Cash Surplus for FY2012,  which was shown as  $36.1 billion a year ago, is now stated as  $25.3 billion in the latest Monthly Digest of Statistics (MDS). I am indebted to  Leong Sze Hian,  who published an article in TRS  yesterday pointing out this discrepancy as this gives me an opportunity to explain the figures.

So although it looks as though $11 billion has gone missing or disappeared, I believe that  there is in fact a simple reason for it.

I think the explanation for the discrepancy is that the figure of $36.1 billion represents the General Government Cash Surplus (GGCS) whereas the figure of $25.3 billion represents the simple  Government  Cash Surplus (GCS).

The GGCS and the GCS are normally calculated differently. GCS surpluses normally only  include the equity share of profits of state-owned companies and statutory boards  if there is a dividend paid to the Government. Whereas the GGCS figure includes all the profits of government-owned  companies. ( I say normally because as usual our PAP Minister of Finance has not provided any explanation or definitions. Still, I believe this explains the discrepancy.)

If we look at the  Yearbook of Statistics (YOS) 2013, the GGCS for FY2011 is stated as $31.9 billion while the GCS is stated at  $27.4 billion, a difference of $4.5 billion.

Though this probably explains the difference it does not excuse the PAP Government’s lack of transparency in not publishing a full definition of the different accounting categories. It also does not explain why the use of different measures and revisions to these figures are so frequent. The General Government Cash Surplus is the figure that should be used to determine how much the Government is saving and what it can afford to redistribute back to the citizens in the form of lower taxes and more generous spending on health, education and income support measures. In my view investment in our people, their health and education  undoubtedly has much higher returns than the returns  that GIC  earns on its overseas investments.

I find it inexcusable that the General Government Cash Surplus  is not published as part of the Budget process. The public is entitled to know what resources  are available so that they can judge what the PAP are withholding from them and ask why.  We should not have to find out years later from obscure statistical publications like the YOS or the MDS what the Government’s true fiscal position is.

Instead of a clear set of accounts presented to our people in an easy to understand format we have the charade of the Budget process where the Finance Minister pretends that he is running a balanced budget or even a deficit.  In particular as I pointed out at Hri Kumar’s forum this is the question you may all remember watching him dodge  the Govt makes presentations that show contributions from Temasek and GIC, in the form of the Net Investment Returns Contributions (NIRC), being used to finance actual spending. I maintain this is not the case . In  fact the NIRC  are just being moved around , by a stroke of the pen or pressing of a computer key, from one account to another.

As an example, the Pioneer Generation Package is widely trumpeted as being $8 billion. Did you not  hear me ask Hri Kumar at the forum why have you got that figure when actual spending is only $240 million this year? By comparison, we pledged over $5 billion in loan commitments to the IMF to support the citizens of Europe.

Recently the  Government announced $4 billion of spending over five years in the form of subsidies to keep Medishield Life premiums affordable. The Government says that as a result of the subsidies premium rises will be small, at least,  for a transitional period of two years,  even though benefits are now more generous. But  this is not actual spending. Premiums did not need to rise anyway because the Medishield fund is still in massive surplus.  In the US the recently enacted Affordable Care Act means that your health insurer has to give you a refund if it is not spending at least 80% of the money it takes in premiums. Why do we not have that kind of ruling or condition here?

Everyone in the PAP, from the PM down to Hari Kumar, keeps saying that taxes will have to go up if we have any more spending. The Government uses this as a justification for why they cannot return your CPF to you at 55 (apart from a derisory $5,000) if you have below the Minimum Sum. You may squander it or lose it and you will have to pick up the tab because the Government has no resources and is running a deficit.

So, what is the truth? Is the Government running out of money or is it running a massive surplus?  As I said in “Sherlock Holmes and the Case of the Missing (Or Merely Hidden) Reserves” there are three possibilities:

  1.  The PAP Government genuinely believes that Singaporeans are not entitled to benefit from the austerity they have endured for so long or to share in the fruits of foreign worker-driven economic growth. They probably think of Singapore like the UK Premier League, which is the undisputed top league in world soccer, but one in which very few English players now play at the top-level. Just like the owners of Premier League clubs, who can bring in as many foreign players as they like, the PAP feel that they owe no duty to Singaporeans. Instead they feel their electorate is a global one who are attracted by Singapore’s low taxes (for the wealthy), cheap unskilled labour (no minimum wage) and the fact they do not have to worry about having to do NS or pay CPF.

  2. There has been mismanagement of the reserves and the money simply is not there or has been squandered through poor investments. Countries like Greece (which we indirectly shored up with our generous $5 billion loan commitment to the IMF) have been found to have published fraudulent national accounts. Yet surely this could never happen in Singapore.
  3. Fraud.

One would like to think that the first possibility is the correct one. However the longer the PAP Government fails to be transparent about the size of the surplus and to provide a believable justification for why it needs to hang on to our CPF money, the more the suspicion will grow that there is something to possibilities two and three.


  1. Thank u Mr. Kjeyaretnam for the post. U have brought out many doubts and loopholes hovering around government spending issues.


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