Managing risks, incentivising hard work and constructive politics (Debate on President’s address)

Robust debates which focus on the issues and problems at hand, and where alternative solutions are proposed and properly considered, can help shape better policies, which will benefit Singaporeans. But when debates start getting personal and descend into unnecessary political attacks, they risk losing focus from the bread-and-butter issues that citizens are concerned about. This sort of politics can cause our people to become cynical about the political process, and erodes their respect for politicians of all parties.

Speech delivered in Parliament on 27 May 2014

Madam Speaker,

I would like to focus on three areas in my response to the President’s address: Managing risks, incentivising hard work and constructive politics.

Managing risks

First, on managing risks. We face numerous risks in the course of our lives, or what the President called “the vicissitudes of life”. We could lose our job and suffer a drastic drop in income; we could fall seriously ill or get into an accident, and have difficulty affording the medical treatment; or we may retire but find we do not have enough to live our golden years with peace of mind.

This Government has been an excellent risk manager – it has been very good at managing its own risks, but less so the risks faced by our citizens. It pegs the CPF Minimum Sum amount to inflation, but does not do the same for CPF LIFE annuity payouts to the elderly. It raises the CPF drawdown age, which helps preserve the value of CPF balances, but leaves many retirees struggling to make ends meet, despite decades of contributions to CPF.

Even a risk sharing scheme like MediShield, which is supposed to be a form of social health insurance, is run more on commercial than social principles. The MediShield Fund had a capital adequacy ratio of 161% in 2012, which is more than 40% higher than what the Monetary Authority of Singapore (MAS) expects commercial insurance funds to hold. The loss ratio of MediShield averaged just 63% from 2001 to 2012. This means that it is collecting a lot more in premiums than it is paying out in claims.

In the past two decades, this Government has “marketised” many public services like transport and healthcare, transferring risks from the Government to service providers, which can easily pass them on to customers because of their near monopoly positions.

There are negative consequences for transferring too much risk to citizens. If Singaporeans face very high uncertainties in their lives, they will be less willing to start a business or volunteer their time to help others. Their minds will be so preoccupied with survival, that they find it hard to engage in innovative, creative or compassionate thinking. Instead, they will be under tremendous stress, worrying about how to cope with the rising cost of living and the increasing responsibilities of work and family.

In my maiden speech at the opening of the first session of Parliament in October 2011, I criticised the regressive transfer of risks from government to citizens over the previous decade. I am glad that in the last two-and-a-half years, there has been a shift in mindset and policy, and the Government is starting to bear a larger share of risks.

The HDB says it has de-linked BTO (Built-to-Order) flat prices from resale market valuations. The LTA has just announced that public bus services will undergo a nationalisation of their infrastructure and operating assets, with operations contracted out to private operators under stricter service standards. Changes are underway in healthcare to distribute more risks through universal insurance.

These are moves in the right direction. However, it is not time to declare victory yet. While flat prices have moderated, they come from a very high base and prices are still high relative to incomes of young home-buyers. We have yet to see whether service quality will improve under the new bus contracting model and whether fares will continue to rise as the same rate as now.

While everyone will soon have health insurance, is the risk simply being distributed among all Singaporeans? Will the Government take on some of the risk by subsidising premiums and removing some claim limits, as I proposed in my adjournment motion on healthcare financing last November? I look forward to some good news in this respect when the MediShield Life committee announces its recommendations.

There are other related issues like the increasing cost of living, the adequacy of CPF for retirement, healthcare affordability and job security that continue to cause Singaporeans a great deal of worry. The Government will do well to pay closer attention to these issues in its remaining term.

Incentivising hard work

Next, on incentivising hard work and productive activity.

In Singapore, almost all government financial assistance is strictly means-tested and time bound. Most Members would have seen cases at their Meet-the-People sessions where a struggling resident with a family to support is given a small amount in financial assistance – sometimes as little as $50 a month – by the community development council (CDC) and has to repeatedly appeal through the MP for it to be renewed every few months.

I presume the purpose of this is to motivate such residents to work harder and reduce their reliance on government handouts. However, in many of these cases, the resident is already working as hard as she can, but her income is simply not enough to maintain her children and elderly parents, while paying off utilities bills, service and conservancy charges and medical expenses, just to name a few.

The Government cannot expect that, by making them jump through hoops to receive financial assistance, they will suddenly be able to pull themselves up by their bootstraps, especially when incomes at the lower end are not rising at a fast enough rate. Some struggling families need to be given financial assistance on a longer term basis, until their circumstances change, for example, when their siblings or children graduate from school and start working.

We must always incentivise hard work and productive contributions to our economy and society. However, these incentives should not be only focused on welfare recipients.

We must be on guard against rent-seeking behaviour, particularly in major industries that have an impact on our economy. The Economist magazine defines rent-seeking as cutting oneself a bigger slice of the cake rather than working to make the cake bigger. In other words, trying to make more money without producing more for customers.

Rent-seeking may or may not be illegal. Some examples of rent-seeking include forming cartels, or lobbying for changes in regulations that benefit one’s own company at the expense of customers. Rent-seeking can impose large costs on our economy without creating any value. It insults our sense of what is fair, and goes against the values of meritocracy and hard work that we expect people to put in before getting rewarded.

The Economist has developed what it calls a “crony-capitalism index”, which ranks countries according to billionaire wealth earned as a proportion of the overall economy, in sectors that are vulnerable to monopoly, or that involve licensing or heavy state involvement. Singapore ranks poorly on this index. We are ranked 5th among the 23 countries that were surveyed in 2007 and 2014.

The Economist identifies several industrial sectors that are prone to rent-seeking behaviour, including casinos, real estate and construction. We should be on higher guard against the risk of rent-seeking behaviour in these sectors.

Madam, as social spending increases, the Government has said that it will need to develop other revenue streams to make up for future budget shortfalls.

We should continue to keep taxes low for income derived from engaging in value-adding activities which bring technological advancement and create good jobs for Singaporeans. This rewards hard work and incentivises productive activity and entrepreneurship.

However, if there is a need to raise more revenue to make up for future budget shortfalls, the Government should look first to increasing the Net Investment Returns Contribution or taxes on profits derived from economically non-productive activities. These should be done before considering raises to the GST or personal income taxes for middle-income earners.

Constructive politics

For my last point, I want to respond to what the President said in his address about constructive politics.

He said that “it is crucial to maintain constructive politics that puts our nation and our people first”. He acknowledged that “politics lives off robust debate and passionate argument” and that “we should continue to have vigorous debates on the challenges facing our nation” as this is important so as to “have the best ideas and best leadership for Singapore”.

I agree with the President on these points. My reason for entering politics was to contribute towards shaping better public policies that benefit my fellow citizens and help Singapore progress. I trust that this was also what motivated all members of this House to enter the political arena.

Robust debates which focus on the issues and problems at hand, and where alternative solutions are proposed and properly considered, can help shape better policies, which will benefit Singaporeans. But when debates start getting personal and descend into unnecessary political attacks, they risk losing focus from the bread-and-butter issues that citizens are concerned about. This sort of politics can cause our people to become cynical about the political process, and erodes their respect for politicians of all parties. We must not let our politics descend to this level because that will weaken Singapore.

Having said that, we must not presume that vigorous and passionate debates will lead to gridlock and paralysis. We should not sacrifice quality for efficiency. As the wise adage goes, “legislate in haste, repent at leisure”.

It is unproductive to rush through new policies, only to have it cause pain and unhappiness for the people, and have to reverse it later. It would be much better to have a proper and informed debate both inside and outside this House, make adjustments in response to feedback from MPs and the public, then roll out better schemes for Singaporeans.

I will continue to join my Workers’ Party colleagues to contribute constructively to debates on issues that matter to Singaporeans. If we assess that a policy will go against Singaporeans’ interests, we will oppose it and where possible, propose alternatives. If the policy is good for our country, we will support the Government for the benefit of our people. This is how we play the role of a constructive opposition.

Madam, I support the motion to thank the President.

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