EXPENDITURE POLICY

Our expenditure policy is designed to support our economic and social objectives. The FY95 budget's spending priorities are on education, infrastructure, affordable healthcare, quality public housing, and national security. To meet expectations for a better quality of life, and to develop a more robust, well-balanced and cohesive society, more funds will also be made available for the arts, sports, recreational facilities, community development and schemes to advance social cohesion.

The size of Government will continue to be contained so as to provide the private sector with more resources, but care will be taken not to compromise the quality and level of public services. At the same time, we will seek new ways to improve our systems of financial and personnel management.

Our budgetary policy is to keep total expenditure within operating revenues. This policy, coupled with buoyant revenues linked to strong economic growth in recent years has enabled Government to keep the budget in surplus since FY88. We have been able to set aside substantial sums each year to reserves without dampening economic growth or foregoing productive investments.

Budgetary surpluses generated in the past have enabled us to start programmes like Edusave, Medifund and CPF-SOTUS. Better than expected economic growth has allowed the build-up of Edusave to its present level of $3 billion since its inauguration 3 years ago. This is much faster than the planned build-up rate of $1 billion initial capital and $500 million annually over 8 years. As a healthy budget surplus is also forecast for FY94, I am pleased to say that the FY94 contribution will be doubled to $1 billion. This earlier build-up of Edusave will allow students to participate in a larger variety of educational programmes to maximise their potential.

Medifund balances presently stand at $300 million. Medifund is a scheme to help those who cannot afford basic medical care, even with the help of their relatives. Unlike Edusave, there is therefore no reason to accelerate its build-up unless income flows from the Medifund prove insufficient. As this has not been the case, I do not propose to accelerate the build-up of Medifund. A transfer of $100 million will therefore be made to Medifund in FY95 as planned.

CPF Share Ownership Top-Up Scheme (SOTUS)

We will also continue to use budget surpluses to enhance the assets of Singaporeans through the CPF share ownership top-up scheme or SOTUS. As promised in last year's Budget Speech, we will implement a second CPF SOTUS this year as part of our aim to make Singaporeans a share owning society. Under SOTUS-II, Government will credit $300 into the CPF account of every Singapore citizen aged 21 and above provided he or his employer has credited at least $750 into his account between 1 March 1994 and 31 August 1995. Members who pay in less will get a prorated contribution from Government. There are still 6 months to go before the qualifying period expires. Government has set aside $380 million in FY95 to pay for the top-up. Pension Fund

Last year, I informed the House that a Pension Fund would be set up to explicitly recognise Government's pension liabilities and to make provision for it as part of prudent financial management. Legislation to set up the Fund has already been passed. The Fund will accordingly be established on 1st April 1995 and all future pension obligations will be met from the Fund.

Our pension liabilities have been estimated based on actuarial studies. To set up the Fund, a sum of $9.6 billion will be transferred from existing balances in the Consolidated Fund to the Pension Fund to meet past service and medical liabilities of pensioners and serving officers. This is so that current and future tax payers need not bear the burden of building up the Pension Fund in respect of these past service and medical liabilities. On-going service liabilities for serving pensionable officers will be funded by an annual budgetary contribution to the Pension Fund. This is currently estimated at 17% of pensionable emoluments. It will be reflected as part of Expenditure on Manpower or EOM in the Expenditure Estimates, to which I will now turn.