LIQUIDATION OF SPECIAL RESERVE FUND

3.36 p.m.

The Financial Secretary (Mr T. M. Hart): Mr Speaker, Sir, I beg to move,

That this Assembly resolves that the Special Reserve Fund of one hundred million dollars, created by Resolution of the Legislative Council on the 15th December, 1953, be liquidated with effect from the 1st of January, 1957.

Sir, at a meeting on 15th December, 1953, the Legislative Council resolved firstly,

"That a sum of $50 millions be appropriated from the General Revenue Balances of the Colony to form a Development Reserve Fund to meet expenditure which may arise in the future in connection with the development programme of the Colony, this Reserve Fund and the interest derived therefrom to be invested by the Crown Agents for the Colonies on behalf of the Government of the Colony in such securities as may from time to time be approved by the Secretary of State."

And secondly,

"That a Special Reserve Fund of $100 millions be created to meet extraordinary expenditure which may arise in the future and that for this purpose the amount standing to the credit of the Opium Revenue Replacement Reserve Fund at 31st December, 1953, shall be transferred to the said Special Reserve Fund, together with the difference between that amount and $100 millions to be appropriated from the General Reserve Balances of the Colony, this Reserve Fund and the interest derived therefrom to be invested by the Crown Agents for the Colonies on behalf of the Government of the Colony in such securities as may from time to time be approved by the Secretary of State."

In introducing this motion, Sir, the Financial Secretary said:

"that it was intended to create a Development Reserve Fund amounting to $50 million from the General Revenue Balance to ensure that the Development Plans can be financed on the capital side; and also a Special Reserve Fund of $100 million to provide a cushion to enable us to carry on our various services should there be a heavy drop in revenue."

Later, he said that appropriations would not be made from either of these Funds except by resolutions of the Council. That, Sir, is the history of the Special Reserve Fund and of the Development Reserve Fund.

Sir, when I moved the Second Reading of the Appropriation Bill, I drew attention to the fact that our Development commitments were such that it was going to be extremely difficult to find all the funds required to meet them and that it was necessary to make all funds surplus to basic reserve requirements available for Development. I also invited attention to the fact that our Reserve position was reasonably strong and considerably in excess of the accepted minimum requirements of a territory like Singapore. I therefore suggested that the Special Reserve Fund be liquidated, the sum of $70 million, that is, approximately four months revenue, should be retained as a liquid General Revenue Balance and that the balance of our Reserves should be transferred to the Development Reserve Fund. The liquid General Revenue Balance will be the sheet-anchor of the Colony's finances. It will act as a Revenue and Expenditure Equalisation Fund from which unforeseen shortfalls in revenue and unexpected increases in expenditure can be met until such time as the original position can be restored by increased taxation or by saving on expenditure.

This motion aims at giving effect to this proposal and I hope that it will have the support of hon. Members. The position before and after the approval of this motion is shown in the Draft Estimates. On pages 6 and 7 of the Draft Estimates, hon. Members will see the Statement of Assets and Liabilities in the old form. On page 8 will be seen a Statement of Assets and Liabilities drawn up with Special Reserve Fund liquidated, Singapore Improvement Trust and other long-term loans charged to Expenditure - a matter which was touched on yesterday - the Development Fund increased by $58 million and the General Revenue Balance reduced to $70 million. On page 367 of the Draft Estimates will be seen the reconstituted Development Reserve Account. This account shows on one side the balance in the Development Reserve Fund, contributions from the Colonial Development and Welfare Funds, Contributions from Revenue to Development and Repayment of capital on existing Singapore Improvement Trust long-term loans. On the other side are shown the sums estimated to be required for General Development and loans to quasi-Government bodies.

The advantage of this method of presentation is that it shows, on one side, the funds available for Development, and, on the other, all our known commitments in any particular year. The previous Development account showed only commitments in respect of General Development.

Sir, I beg to move.

Mr Chew Swee Kee: I second the motion.

Question proposed.

3.36 p.m.

Mr R. Jumabhoy: Mr Speaker, Sir, what I could gather from the Hon. the Financial Secretary is that the last Legislature wanted to put aside $150 million for a rainy day and that it should now be liquidated. May I ask why in the 18 months working of this new Government, we have come to such a sad position?

Mr Hart rose -

Mr Speaker: In reply?

Mr Hart: Yes, Sir. I fear that my friend the Member for Telok Ayer does not quite appreciate the position, Sir. The Legislative Council established, first of all, the Development Reserve Fund which was to be used for Development until it was exhausted and a Special Reserve Fund of $100 million which indeed was, as he said, for a rainy day. But if I may say so, Sir, the rainy day is now upon us and we have to make a certain portion of that Special Reserve Fund available for Development if Development is to continue. I think that we are perfectly safe in reducing our liquid reserve to $70 million. It is a very substantial sum and I think that it will be sufficient to protect us against any shower which may occur in the future.

With regard to the Development Fund, we estimate that by the end of this year, the original $50 million will have been reduced to something of the order of $11.4 million.

Question put, and agreed to.

Resolved,

That this Assembly resolves that the Special Reserve Fund of one hundred million dollars, created by Resolution of the Legislative Council on the 15th December, 1953, be liquidated with effect from the 1st of January, 1957.