EXPENDITURE POLICY

The Government's expenditure policy will continue to be guided by the philosophy of investing in the future. Expenditure will focus on areas which promote and support future growth. These are education, economic infrastructure, health care, public housing and national security. Quality of life in Singapore will be sustained through greater funding for the arts, sports, cultural and recreational activities.

Control of costs will remain the cornerstone of expenditure policy. As the flagship of Singapore's economy, the private sector must play the leading role. The public sector will therefore be kept lean and trim to make available to the private sector a bigger share of national financial and manpower resources.

All operating and development expenditures will be met from operating revenues. Moreover, a substantial part of the surplus expected in FY93 will be channelled towards building up the Edusave Endowment Fund established last year and the Medical Endowment Fund which will be set up in April this year. Together with Government subsidies and Medisave, the Medical Endowment Fund will ensure that no Singaporean is deprived of basic medical care.

The FY93 Expenditure Estimates

The Government's medium-term policy target is to keep total operating and development expenditure within 20% of GDP, with 12% for operating expenditure and 8% for development expenditure.

In FY93, operating expenditure is forecast to increase from 11.7% to 11.9% of GDP while development expenditure is projected at 7% of GDP, up from 5.5% in FY92. Together, operating and development expenditure will amount to nearly 19% of GDP.

In dollar terms, total Government expenditure for FY93 is expected to reach $15.5 billion, an increase of 18% over FY92. Social and Community Services will continue to have by far the largest share, taking up nearly 40%. Expenditure in this area is mainly on education, health care services, environmental protection, community development and subsidies on public housing. National security, covering Defence and Home Affairs, will take up the second largest share of more than 33% of total expenditure.

The proposed budget allocations reflect the priorities of Government. They are to provide infrastructure as a basis for economic growth, ensure national security, house our people in decent, affordable housing in a clean and green environment, invest in quality education as well as provide good basic health care and a wide range of social amenities.

Let me at this juncture take a moment to re-emphasize Government's commitment to education. As members are aware, Government will build up the Edusave Endowment Fund to $5 billion, to put in place a strong permanent foundation for educational standards to be continually upgraded. This is crucial, for the experience of many countries has shown that the surest way to secure continued success in an uncertain world is by investing in the education of future generations. A well educated and highly skilled people will always remain the fundamental objective of Government.

In keeping with this philosophy, the Government will increase its FY92 capital contribution to the Edusave Endowment Fund from $1 billion to $1.5 billion. The additional $500 million will come from the projected surplus for FY92. Supplementary Estimates to effect this will be tabled in Parliament next week. With this transfer, the total allocation for education in FY92 will amount to 5.5% of GDP, which exceeds the allocation for every other sector, including defence. A further sum of $500 million has been earmarked for transfer to Edusave in FY93. This will bring the total Edusave endowment to $2 billion, double the current amount.

Government will also make its first capital transfer of $200 million to the Medical Endowment Fund in FY93. This Fund will eventually be built up to $1 billion. A one-off allocation of $5 million has also been provided to enable disbursements to be made from the Fund in FY93 itself for the benefit of Singaporeans who cannot afford basic medical care.

Allow me now to elaborate on the FY93 expenditure proposals.

Operating Expenditure

Operating expenditure comprises Expenditure on Manpower, Other Operating Expenditure, Grants-in-Aid and Pensions. For FY93, operating expenditure is projected at $9.7 billion. This is about 9.4% more than the revised FY92 expenditure of $8.9 billion.

Some 25% of Operating Expenditure will go towards Expenditure on Manpower, which is projected to rise by $358.6 million or 17.1% to $2.5 billion in FY93. This is 3% of GDP, compared to 2.8% in FY92. The increase is mainly to cater for salary increments, some salary adjustments and the filling of vacancies.

The authorised staff complement for ministries, organs of state and Government-funded statutory boards will decline by 0.6% or about 600 posts to nearly 99,500 posts in FY93. The decrease is due to Nanyang Polytechnic taking over the training of nurses and radiographers from the Ministry of Health, as well as restructuring and privatisation activities.

Around 88,000 persons are currently employed in the Civil Service and Government-funded statutory boards. This is about 600 persons less than a year ago. It shows the success of the Zero-Growth in Manpower Policy. Whilst Government remains committed to this policy, we will nevertheless ensure that it does not lead to a decline in standards or quality of public services. Wherever possible, increases in workload or manpower needs for new areas will be met through retraining, redeployment and productivity improvements. Where this is not possible, increases will be granted. For example, 116 new posts will be created in FY93 for the Ministry of Community Development to cater for the expansion of sports facilities and new community centres. Another 292 posts will be provided to the Ministry of Education to keep pace with the increase in student enrolment in schools and other teaching institutions.

Other Operating Expenditure or OOE is projected at $5.1 billion or 6.2% of GDP. The OOE provision is an increase of $325 million over FY92, due mainly to the provision of agency fees for the Inland Revenue Authority of Singapore, reimbursements to restructured hospitals, and bursaries for the training of nurses. Higher expenditures will also be needed for estate management and the maintenance of roads.

Grants-in-Aid will amount to $1.9 billion or 2.3% of GDP. It represents an increase of $141 million over FY92's provision, which is largely to meet the higher operating costs of schools and polytechnics, and the rising cost of subsidised medical care. Higher grants to the Economic Development Board, National Productivity Board, Singapore Broadcasting Corporation and the National Arts Council account for the rest of the increase.

Pensions expenditure is expected to remain under 0.5% of GDP. In dollar terms, it will increase by some $13 million or 4% over FY92. This is due to an increase in the number of pensioners and the rising cost of medical subsidy for pensioners.

Development Expenditure

$5.8 billion or 7% of GDP is proposed for development expenditure in FY93. This is around 37% of total expenditure, up from 32% in FY92. It is also closer to the medium term target of keeping development expenditure at no less than 40% of total expenditure, in line with the objective of allocating an increasing share of the budget towards development expenditure.

Direct Government development expenditure will increase by nearly 50% to $3.1 billion, or 3.8% of GDP. Major projects include land reclamation at Changi East and several other sites, the schools building programmes, provision of computer facilities for secondary schools, construction of Revenue House, and the development of Eastern General Hospital and the new Kandang Kerbau Hospital.

The capital subsidy for public housing is projected to reach $900 million, an increase of nearly 50% over FY92. HDB will need substantial increases in subsidies to build more flats and implement its Flat Upgrading Programme. More funds will also be needed to provide higher capital grants to Town Councils and a grant to HDB for the discount given on the sale of tenanted HDB shophouses.

R&D, or Research and Development, is increasingly recognized internationally as being of strategic importance in enhancing industrial competitiveness. To sustain the push towards greater industry-related R&D, a sum of $350 million or 0.4% of GDP will be allocated to the R&D Fund to be administered by the National Science and Technology Board. This represents an increase of 27% over FY92's allocation. It is in line with the policy to increase funding for industry-related R&D.

Another $1.4 billion or 1.7% of GDP in capital grants will be given to other statutory boards. Projects which require capital grants in FY93 include the Woodlands extension to the MRT system, a new campus for Temasek Polytechnic, and the expansion and upgrading of the 2 universities. Capital grants are also required for economic development schemes administered by the Economic Development Board, development of tourism infrastructure on Sentosa, and development and improvement works to community centres.