By Devadas Krishnadas, Published TODAY, 2 Sep 2013
This year’s National Day Rally (NDR) has been celebrated by the official media as a watershed and a mark of how much the Government has changed and, importantly, changed because it has listened to the people. The Prime Minister has said that Singapore is in a new phase.
The key question, though, was left unasked and thus unanswered — a phase towards what?
If we are to make better sense of the “shifts” announced by the Prime Minister, we need to put them into the context of a larger direction. That direction continues to be ambiguous and the revealed approach seemingly a sum of tactical adjustments.
On close inspection, the adjustments to housing and healthcare appear to be incremental changes, albeit non-trivial increments. But do they suggest a departure from past policies at the level of principle? This is not clear. Perhaps announcements in the remaining years leading to the next General Election will add more clarity.
MORE, BUT NOT DIFFERENT
The Government will make more public housing available through increasing supply. This is nothing new and merely a reflection of the catch-up it needed to do because of its own deficit in past planning.
It will make public housing more affordable through the provision of more subsidies and make these available to more Singaporeans. Subsidies are nothing new either and expanding this intervention does not fundamentally tackle the question of why housing is so difficult for even the middle class to afford.
The basic question of why housing has become a problem is a combination of the action of three drivers — stimulation of demand, failure to ensure adequate supply and lagging incomes relative to prices. Attacking only the supply question while using a subsidy “band-aid” on the income issue is insufficient to adequately deal with the problem. Indeed, the “band-aid” comes with a high sticker price — some S$440 million annually. Who is to pay for this? “The Government”, we are told.
On healthcare, the innovation of MediShield Life is a step to match the changing life-span parameters. It is not in itself a departure from policy as the Government has previously made adjustments with the same motive.
The premiums for this new scheme will be more costly. The formula for cost-bearing is to be consistent with the long established co-pay principle — part of the added costs is to be borne by households, while the remainder will be borne by “the Government”.
On education, the details are to be worked out over a period of years, but the proposals to lower teacher-to-student ratio and additional investments in neighbourhood schools so they are all “good schools” is arguably only a continuation of an existing policy trajectory. Who will pay for this? “The Government”.
More interesting will be the changes to the scoring and educational pathways model. Singaporean children should theoretically benefit from more choices, less harsh selection and greater flexibility in education routes.
However, the Government remains committed to maintaining its distinction between “top” and “good”; one assumes this is now the preferred language in place of “neighbourhood” schools, elite streams and all others.
The adjustments, such as they are, will come with a price tag. In sum, will these changes in the education system improve social mobility? Will they ease the pressure on Singaporean families? Will this enable Singaporean children to have an education and enjoy their childhoods? The answers remain to be seen.
A BIGGER STATE
Despite this ambiguity, there are three shifts which we can discern about our political future.
First, while the recent announcements may be substantial, though still incremental, adjustments, they may represent a “wedge” that is suggestive of future progressive deviations from past policy trajectories. If we take this view, then certainly, in hindsight from several years down the road, NDR 2013 will have lived up to the hype of being a watershed speech.
Hence, the first shift may be not so much about what was said, but what was implied that remains to be said. And this is that Government policy will continue to shift to the left in successive steps and, consequently, the role of the State will expand dramatically over the course of the foreseeable future.
A MORE EXPENSIVE STATE
What is also clear is that the added costs of this expansion will not be trivial and it will have a very long tail. This is the second shift — the days of surplus budgeting may soon, if not already, be behind us.
We are entering a new phase in public finance characterised by barely budget-balancing and then only with recourse to boosting revenues. It is critical for the public to understand that when the Government says it will pay for something, it means that the public will be paying for it through higher taxation. To the Prime Minister’s credit, he did not sugar-coat this reality but dealt with it head on.
There are ways to avoid or reduce the pressure to raise taxation. These include diverting resources from other expenditure priorities to these new ones. But this would result in trade-offs which may not be trivial — for instance, if the defence budget was reduced, are we prepared to make our sovereignty more vulnerable?
It could be possible to increase the non-household or individual taxation — principally corporate taxation — but this would reduce our attractiveness to businesses.
It could be possible to adjust the Net Investment Returns Contribution framework to increase the contributions from our sovereign wealth funds. But would this ultimately be starving the geese which are laying golden eggs for the longer term?
This second directional “shift” is a point that the public needs to understand well now, before the bills pile up — this is that good things cost money, their money in one form or another. Further, there must be the recognition that each option or any combination of options for added fiscal supply come with trade-offs and risks. There is no free ride, nor is there a risk-free path to fulfilling our needs and wants.
Everyone has a responsibility in exercising good judgment on how to distinguish between needs and wants if we are to have any hope of moderating the expenditure curve, which is arching more steeply each year. Going forward, our politics will be a function of the tension between needs and wants and the inevitable collar — how to pay for it all.
A MORE NOISY STATE
The third directional “shift” revealed itself in the Prime Minister’s style of delivery. The choice of venue, the emotive language, the emphasis that the Government has and is listening to concerns as a predicate for policy action, were presumably all intended to demonstrate empathy between a democratically elected leader and the electorate.
This is a novel departure from not only the Prime Minister’s earlier style but the style of his predecessors, which characterised as top-down the communication between a paramount leader and the led.
Of particular significance was the emphasis in his conclusion on the need for faith. The People’s Action Party (PAP) has long prided itself on forming governments of technocrats who preferred evidence-based action and cut-and-dried pronouncements. However, this speech may herald a “shift” to a more American style of politics, where form is as important as substance and where style is as critical as details.
If this is so, Singaporeans will find the political road to the next election punctuated with not just more heartwarming verbiage but more verbiage, period, as every Member of Parliament strives to up their “communication quotient”. In other words, it is going to get noisier.
This may be welcomed by younger Singaporeans enamoured by the attractiveness of American political theatre that they have experienced only vicariously through television, the Internet and even Hollywood. So our politics may well shift from boring to become more fanciful.
However, we must be conscious of the power of incentives — emotive channels have a way of bypassing the head in their appeal to the heart.
Today, the Government decides on policies but then makes a more deliberate effort to emphasise its effectiveness of communication. If, in future years, this emotive channel becomes disproportionately influential, then politicians may invert the process by deciding on the communication first, then formulating policies to fit the messaging intent — which, in a democracy, tends to have only one vector: Getting votes.
ONE CAR, MANY DRIVERS
The dichotomy between our political past and our political future may be the difference between the Government doing all the driving and steering in the past, and these functions being more shared between Government and electorate in the future.
If the State were a car, one may be prompted to ask whose hands will prove stronger on the gear knob and steering wheel — the Government or the electorate? Will we find the right balance of tension between these forces?
Can the Opposition play a constructive role in Parliament? Can the electorate educate itself on the issues and thus make reasoned judgments about policy proposals? Will we see more public intellectuals stepping forward with ideas and constructive criticism to help massage the political process in a positive direction? Will we become like other democratic governments, which are forced by electoral pressures to think short term and be populist?
The interplay of the answers to all these questions will be what determines the shifts that will drive the State into the future.
Devadas Krishnadas, a Risk Consultant, is Managing Director of Future-Moves.
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