THE FY92 BUDGET ESTIMATES

The FY92 Budget achieves Government's medium-term policy target to hold total operating and development expenditure within 20% of GDP.

Development expenditure is expected to increase from 6.2% of GDP in FY91 to 6.8%. On the other hand, operating expenditure will decline to 12.2%. Together, operating and development expenditure will amount to 19% of GDP.

Statutory expenditure on debt servicing and expenses on investment will take up another 3.2% of GDP. Total Government expenditure in FY92 will therefore stand at 22.2% of GDP, a small decline from the 22.5% in FY91.

In absolute terms, total Government expenditure in FY92 is projected at $16.6 billion, an increase of 6.7% over the revised FY91 expenditure of $15.6 billion. The Social and Community Services sector will continue to have the largest share of total expenditure, taking up almost 35%. This sector covers mainly education, health, environment and public housing. The Security Sector, covering defence and home affairs, will take up the next largest share at 29%.

The proposed allocations reflect the priorities of Government. These are to ensure national security; house our people in affordable housing in a clean and green environment; and invest in quality education and good healthcare.

The importance of education is reflected in the transfer of $1 billion in FY92 to the Education Endowment Fund. This is an investment in our future. The transfer will be Government's first capital contribution to the Fund. It will be used to generate income for disbursement to schools and pupils' individual Edusave accounts. Further capital transfers will be made to the Education Endowment Fund in future years if healthy surpluses are realised.

Allow me now to elaborate on the FY92 expenditure proposals.

Recurrent Expenditure

Recurrent expenditure consists of operating expenditure, debt servicing and expenses on investment. It accounts for almost 70% of total expenditure. Recurrent expenditure for FY92 is projected to be $11.6 billion. This is an increase of 2.2% over the revised FY91 expenditure. However, it represents only 15.5% of GDP compared to 16.3% in FY91.

Expenditure on Manpower or EOM is projected to rise by 11.4% to $2.4 billion in FY92. This will constitute 3.2% of GDP, slightly higher than the 3.1% for FY91. The increase is to provide for normal salary increments, filling of essential vacancies and a small increase in total staff establishment.

The number of posts in ministries, organs of state and Government-funded statutory boards will increase by 0.3% or 279 posts to around 100,000 posts. This is due mainly to a large increase in the number of teaching posts, which has been partly offset by a reduction in posts in the Ministry of Health arising from the restructuring of Tan Tock Seng Hospital.

Despite the higher staff establishment, the Government-funded public sector will be able to keep its total establishment to 6.8% below the staff strength as at 31st December 1986. This was the ceiling imposed under the Zero-Growth in Manpower Policy announced in this House 3 years ago.

In terms of staff strength, there were about 89,000 persons employed in the Civil Service and Government-funded statutory boards as at 31st December 1991. This is 18% lower than the staff strength of about 108,000 as at 31st December 1986. Put another way, only one out of 17 workers in the economy is currently employed in the Civil Service and Government-funded statutory boards, compared to one in every 11 workers in December 1986.

I am therefore pleased to say that the Zero Growth in Manpower policy has so far successfully contained the growth of the public sector establishment. This has been achieved without compromising standards and the quality of public service. Government will press ahead with this policy in line with our philosophy of containing the public sector's share of national manpower resources. Revised manpower targets have been set, and requests for increases in manpower will continue to be scrutinised carefully by my Ministry. We will examine ways in which manpower for new functions and increases in workload can be made available through reorganisation, redeployment, retraining and increases in productivity.

Other Operating Expenditure or OOE is projected to increase by 10.1% to $4.7 billion. Apart from inflation, the increase is due to higher allocations for international humanitarian relief and peacekeeping operations, and staff welfare, as well as the establishment of the Singapore Cooperation Programme under the Ministry of Foreign Affairs. A sum of $15 million is also provided for the balance of Government's contribution of $25 million to the Singapore International Foundation. The increase in OOE is also accounted for by higher capitation grants to special education schools, and increases in the provisions for teaching bursaries and maintenance of roads. There is also a new provision for the maintenance of lands returned to Government by HDB.

Grants-in-Aid or GIA, including operating subsidy to public housing, will fall by 5.7% to $1.8 billion. The drop is due to the exceptionally high one-off contribution of $500 million to the Universities Endowment Fund in FY91. Government's dollar-for-dollar matching contribution to the Fund in FY92 is estimated to be $60 million. If we exclude these contributions, GIA will increase by $332 million or 24.2% to $1.7 billion. More than 50% of this increase is accounted for by the Ministry of Health to meet additional recurrent subventions for the restructured hospitals. This includes Tan Tock Seng Hospital, which will be restructured in FY92. The rest of the increase is largely to meet higher operating deficits of the tertiary institutions, including the Nanyang Polytechnic and the Singapore Open University, a higher operating grant to SBC and an operating grant for the National Arts Council.

Pensions expenditure is expected to rise by 9.6% to $345 million. This is mainly to provide for an increase in the number of pensioners as well as the rising cost of medical subsidy to pensioners.

Debt servicing costs are projected to fall by 12.6% to $2.3 billion. This is because debt servicing on new borrowings as well as Advance Deposits converted to loan stocks will be accounted for under the Government Securities Fund.

Development Expenditure

Development expenditure constitutes 30% of total expenditure. It will reach $5.1 billion in FY92, which is 18.5% more than that in FY91. The substantial increase is due partly to a contingency provision of $200 million for new development projects in FY92. If this provision is excluded, the increase in development expenditure is 15.2% over FY91.

Direct Government development expenditure will rise by 50% to $2.7 billion. Major development projects include land reclamation at various sites; construction of new polyclinics and the new Institute of Health, and the redevelopment of major hospitals. Two new prisons at Changi and more civil defence shelters are being constructed. More schools will also be built and upgraded to enable secondary schools to go single session. Other projects include the Roads Building Programme; extension of the Bedok Sewage Treatment Works; construction of Revenue House; and the development of public parks and agrotechnology parks.

Capital subsidy for public housing is projected to be $1.05 billion, an increase of 18.5% over FY91. This includes a higher capital grant to HDB for the building of more flats and a larger provision for the Upgrading Programme. Town Councils will also receive higher capital grants.

In March 1988, I announced in this House that the provision for R&D would be increased gradually over the years to reach 1% of GDP. For FY92, a capital grant of $230 million or 0.3% of GDP is provided for the newly-established R&D Fund under the National Technology Plan. This R&D Fund is administered by the National Science & Technology Board. The R&D Fund will be the sole source of Government financing for industry-related R&D by both the public and private sectors.

Capital grants to other statutory boards will amount to $1.1 billion, which is a 24% decline from FY91. The decline is the result of the completion of Changi Airport Terminal II and Phase I of the MRT system. Major projects in FY92 include the development of facilities and attractions on Sentosa Island and Singapore Zoological Gardens; the upgrading of facilities for SBC; the development of community centres, university campuses and staff quarters, independent and aided schools, and other educational institutions. Grants are also provided to EDB for the Economic Development Assistance Scheme, and to the restructured hospitals to meet depreciation expenses in respect of subsidised patients.