SINGAPORE — It will be “ill-disciplined and unwise” of the Government to change constitutional rules in order to raise contributions from the country’s reserves (NIR) as a “first resort” to fund increasing expenditure, said Finance Minister Heng Swee Keat.

Wrapping up the Budget debate, Mr Heng stressed on Thursday (Mar 1) that the Republic must be “responsible stewards” in protecting reserves which were “painstakingly built up” over half a century by the pioneers.

“That is why over the years, we have carefully deliberated and developed a comprehensive set of rules to safeguard and manage the use of our reserves,” he said.

The net investment returns (NIR) framework introduced in financial year 2009 allows the Government to spend up to half of expected real returns from assets managed by the Monetary Authority of Singapore, state-investment firm Temasek Holdings, and the GIC. In FY2016, the NIR contribution (NIRC) overtook corporate income tax collections for the first time to become the Republic’s largest source of revenues.

The NIRC is expected to more than double from S$7 billion in FY2009 to an estimated S$15.9 billion in FY2018.

Addressing suggestions from Members of Parliament (MPs) to raise the 50 per cent NIRC cap or use a portion of land sale proceeds for recurrent social spending, Mr Heng said: “All these sound very tempting – it seems relatively painless to do so compared to raising taxes. But is it the right thing to do? No.”

Under the Constitution, state land and revenues from land sales form part of Singapore’s past reserves, which are invested.

The rules on reserves had been “enshrined” in the Constitution following parliamentary debates, Mr Heng pointed out. The cap was deliberately introduced so that the government of the day “(does) not succumb to the temptation to draw more from our reserves to fund current expenditure, or eat into the principal sum”, he said.

“To amend the rules as a first resort is ill-disciplined and unwise. This would defeat the purpose of enshrining the 50 per cent cap in our Constitution,” he reiterated.

Urging MPs not to “give in to the temptation” of chipping away at strategic national assets, Mr Heng added: “If as soon as we need more money, the first thing we do is relax the rules, that is the surest way to change Singapore’s basic orientation – from saving and building for the future, to living for today and letting tomorrow look after itself.”

An over-reliance on the NIRC will hurt the Republic’s ability to respond to changing circumstances in future, he said.

“We are stewards of the reserves for our future generations, as what our forefathers had been for us,” he said, stressing that Singapore must “uphold the discipline” in tapping the reserves in a sustainable way.

Noting how much the world has changed in the last century — a period which saw two world wars, the Great Depression, the rise and fall of communism, and major technological advances, among other things — Mr Heng noted: “As we now come into the 21st century, we are moving from a unipolar world to a multipolar one, with growing tensions between major countries and concerns about global and regional stability.”

He stressed that in the aftermath of a financial or geopolitical crisis, there are “usually many years of subsequent weak economic performance”. Employment and economic output tend to fall for a sustained period, he said.

The current generation must prepare not only for its own future, but for the future generations, he reiterated. “To be clear, we prepare for the future not only within our own lifetime, but our children’s and children’s children… we must do our best to give them the best chance of a better life, whichever way the winds of change blow,” he said. “What we have inherited from the past, we also owe to the future. That is our moral obligation.”