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Road to purgatory paved with PAP’s ‘good intentions’

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[See also: DPM Teo’s Press Sec clarifies MediShield Life]

Messrs. Teo Chee Hean and Chan Chun Sing were full of soothing platitudes and good intentions at the Singapore Perspective conference. As with most things from a government overly comfortable in its political dominance, perhaps such good intentions are what paved the road to purgatory.

Housing subsidies

First off. Mr. Teo stressed

“It is not how much redistribution you do per se, but what you actually spend the money on. You can spend a lot of money, for example, on providing rental housing for those who have no homes or need homes, but we have decided to spend the money on very large housing subsidies to help people own their homes. That has an entirely different effect on inclusiveness, on a sense of ownership, a sense of belonging to Singapore.”

By now, most knew HDB losses were due to market-based prices paid for land owned by the government which then result in huge surpluses that were not reported in the annual budget. Viewed in aggregate, HDB losses are not because of “very large housing subsidies”. From IMF data, the cumulative growth of surpluses since 1990 is given below.


Over $500b surplus in today’s money were generated, not all from land sales. Yet on the subject of a second Pioneer Generation Package, Mr Chan finds himself saying

“Will we have the means? Will society have the same values (as now) to want to honour those who contributed”

Really? The PGP was expensed in a single year’s Net Investment Return Contribution from the reserves in 2014 so what about the NIRC of 2015 and every subsequent year. And who contributed to the reserves than the citizens who paid for those surpluses via house prices, low CPF rates and high charges.

Then he said Singapore must avoid a situation where government subsidies and policies “turn into an auction in the elections”. Did not the government create that situation with last year’s Pioneer Generation Package? The writer does not begrudge the government taking full political advantage of incumbency but at least stop the preaching. Citizens are discerning these days.


Contrary to Mr. Teo, it is indeed about how much redistribution. The starting point on any discussion of redistributive social spending is how little the government spends. Here is how Singapore stands in the reduction of inequality through redistribution.

Gini coefficient before social transfers Gini coefficient after social transfers
Singapore 0.463 0.412
Denmark 0.43 0.25
Germany 0.51 0.29
Switzerland 0.44 0.29
United Kingdom 0.53 0.34

The increased stress on household finance caused by government policies of loading costs onto citizens, not only result in sharpening inequality but also reduced social mobility. It is well known that income inequality is directly correlated to social mobility.

Then, Mr Teo helpfully points out that

“We should not, by socialising (costs) too much, remove that inter-generational responsibility within families.”

Familial inter-generation transfer (children paying for parents) appeals to Asian values but in reality let the government get away its own Asian values, i.e. its social obligations to citizens. Without redistribution, i.e. socializing costs, then the lower income will remain poor, exacerbating income inequality and preventing social mobility from one generation to another.

Theory meeting Hard Truths

Mr. Chan said that focusing on social transfers alone is one-dimensional.

“It is one thing to just give out some token, cash, or financial assistance…….Their challenges very often arise from the inability to do simple financial planning, investing in their children’s education, providing a positive role model, providing a stable home environment, so that the next generation can be uplifted…”

The reality is without a level of financial support to provide comfort and stability, all those nice sounding stuff is putting the wagon in front of the horse. Again this is well-known in social policy, but there is not enough social services here for the feedback of this Hard Truth.

Redistribution requires hard work

Here is the writer’ perspectives on redistribution.

The PAP keeps pounding the mantra of economic growth as if it cures all ills but it does not. Once the economy reach maturation, redistributive social spending becomes important because aspirations and standards are much higher. However more people are unable to keep pace, society becomes more unequal. Redistribution consolidates progress made and aid social cohesion and mobility.

Even the most economically advanced and competitive countries are very unequal before redistribution (Gini before social transfers). Economic growth and advancements in technology and management are no panacea to inequality without redistributive social spending, Even the IMF acknowledge that, unless excessive, redistributive social spending promote competitiveness and sustained long term economic growth.

One thing though, redistributive social spending requires hard work from the politicians. It is a continuous balancing act of distributing finite resources to meet competing policy demands. Then the question of the extent of redistribution: too much causes disincentives which harm the economy, too little causes stress in social cohesion and mobility which also harm the economy.  In the real democracies, this is where the toughest battles are fought and political reputation burnished. In Singapore politics, one party dominance meant the PAP avoid the inconvenience of this Hard Truth.


At the conference, Mr. Chan welcome diversity as a strength and an enlightened electorate that asks tough questions of political parties which make election promises. That diversity and that enlightened electorate appears not extend to anything that are alternative to the PAP’s. Rather Messrs. Teo and Chan prefer to remain within their ideological strait jacket and why not? It is comfortable so long as enough citizens buy their nice-sounding platitudes, they are let off the hook.

Chris K

* Chris is a retired executive director in the financial industry who had worked mostly in London and Tokyo. He writes opinions and commentaries on economic and financial matters.


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