THE FY90 BUDGET ESTIMATES

The FY90 Budget reflects the steady progress made in achieving our long-term policy objectives. Government expenditure as a proportion of GDP will be maintained at the present level while the manpower establishment as a proportion of the total workforce will be reduced.

Government's total expenditure in FY90 is projected to be $14.14 billion, an increase of $1.18 billion or 9.1% over the revised FY89 expenditure of $12.96 billion. The estimated expenditure of $14.14 billion will amount to 24% of GDP, which is consistent with our objective of maintaining expenditure at a level no higher than 25% of GDP over the long-term. Of the total expenditure, recurrent expenditure accounts for $9.52 billion or 67.3% and development expenditure for $4.62 billion or 32.7%.

Recurrent Expenditure

Total recurrent expenditure for FY90 is projected to be $9.52 billion, an increase of $1.31 billion or 16% over the revised FY89 expenditure. The rate of increase for FY90 is higher than the average for the past five years, but as a proportion of GDP, it remains at about 16%.

Expenditure On Manpower (EOM) is projected to rise to $2.09 billion. This is an increase of $201 million or 10.6% over FY89. EOM for most Ministries will rise, with increases ranging between 10% to 21%. The increases are to cater for normal salary increments, the planned increase in employers' CPF contribution, salary revisions and the need to fill vacancies in essential services. The Health Ministry's EOM, however, shows a decrease because manpower costs associated with the newly restructured Kandang Kerbau and Toa Payoh hospitals will be met from Grant-in-Aid allocations.

The increases in manpower costs have been moderated by reductions in the staff establishments of a number of Ministries. The reductions arise from deletions of redundant posts, streamlining of work procedures and organisational reviews. The total authorised staff complement of Ministries including government-funded statutory boards, will be reduced to about 109,000 posts, a drop of more than 2,600 posts. Of the reduction, about 1,700 posts are from the permanent establishment. The bulk of the reductions is from the staff complements of the Ministries of Health and National Development. Staff increases are, however, supported for the Courts, the Auditor-General's Office and the Ministries of Education, Home Affairs, Labour and Law. The total manpower establishment in FY90 would grow only by 239 posts, or 0.2% higher than the zero-growth target.

Other Operating Expenditure (OOE) for FY90 is projected to be $860 million. This is 16.9% or $124 million more than the OOE in FY89. The increase is partly due to a contingency provision of $25 million as Government's contribution, on a dollar-for-dollar basis, to the 25th Anniversary Charity Fund. Excluding this one-off item, the increase in OOE would be 13.5%, a relatively high rate of increase compared with the average annual increase of 6% over the last five years. The larger than normal rise in OOE is attributable to a number of factors, the most important being substantial increases in financial subsidies to child care centres, higher grants to the Citizen Consultative Committees, increase in rental for government offices, implementation of the recommendations of the various Advisory Councils, and expenditure on the 1990 Census of Population.

Grant-in-Aid (GIA) will be increased by $152 million or 14.7% to $1.18 billion. Of the increase, $47 million is for additional subventions to the restructured hospitals, particularly Kandang Kerbau and Toa Payoh hospitals. Another $27 million has been budgeted as a grant to the Singapore Broadcasting Corporation for public service radio and television programmes. The provision for operating subsidies to the Town Councils is increased by $15 million to a total of $42 million. The balance of the GIA increase is to meet the higher operating deficits of tertiary educational institutions and other government-funded statutory boards.

Expenditure on Pensions is expected to rise by $32 million or 12.4% to $294 million. Of the increase, $17 million is statutory expenditure consequential to a projected rise in the number of retirees. The remaining $15 million is to meet increases in medical and dental expenses incurred by pensioners and also for ex-gratia payments arising from the restructuring of government hospitals.

Debt Servicing costs are expected to increase by $249 million to $1.8 billion. The increase is to meet interest payments on domestic loans that were raised in the second half of FY89 as well as new loans that are expected to be raised in the first half of FY90.

Development Expenditure

Development expenditure is projected to be $4.62 billion. This estimate includes a sum of $800 million as the second reimbursement to HDB for infrastructure and resettlement costs incurred on land returned to the Government earlier. The initial reimbursement amounting to $1.07 billion was made in FY89. Excluding both these transactions, the projected FY90 development expenditure would be $3.82 billion, which is marginally higher than the revised FY89 development expenditure of $3.68 billion.

Excluding public housing expenditure, direct government development expenditure and capital grants for approved projects would amount to $3.06 billion or 5.2% of GDP. The major development outlays in FY90 are to meet expenditures on the final phase of the MRT system and the second passenger terminal at Changi Airport; construction of the Senoko Refuse Incineration plant; development of infrastructural and tourist facilities on Sentosa; construction of civil defence shelters and prisons; the development of independent schools, aided schools, junior colleges and higher education institutes.

Capital grants for public housing, including capital subsidies to the HDB and Town Councils, are expected to decline by 60% from $981 million in FY89 to $423 million in FY90. The major reduction is due to lower capital subsidies required by the HDB as a result of the reduced scale of its public housing programme. The reduction, however, is partly offset by a provision of $51 million for the HDB upgrading programme.

The projected development expenditure includes a contingency provision of $333 million for new development projects that may be submitted by Ministries for implementation in FY90. An allocation of $150 million would also be provided for Research and Development (R&D) expenditure in FY90. The provision for R&D would be increased gradually over the next five years to about 1% of GDP.