TODAY: Debate over drawdown

BUDGET 2009
NATIONAL RESERVES

MPs lock horns over whether savings used for Jobs Credit scheme is money well spent

LOH CHEE KONG
cheekong@mediacorp.com.sg

THE unprecedented move to draw upon the national reserves proved a lightning rod issue as Parliament sat to debate the Budget yesterday, drawing feisty exchanges among Government backbenchers, an Opposition leader and a Nominated Member of Parliament (MP).

Two in three of the 24 MPs who spoke broached the issue. But while many called it a bold and watershed move, Workers’ Party chief Low Thia Khiang and NMP Siew Kum Hong questioned the need to dip into the fiercely-guarded past savings for $4.9 billion, when the Government could afford the entire $20.5-billion Resilience Package out of its current surpluses.

They, as well as some ruling party MPs, also asked President S R Nathan and the Council of Presidential Advisers to lay out the reasons for giving in-principle approval.

But the bone of contention was whether the reserves would be well spent on the Jobs Credit scheme – a $4.5-billion initiative which, some argued, cannot guarantee jobs will be saved as companies struggle to stay afloat.

While the Government will give employers a cash grant – 12 per cent of the first $2,500 of each local worker’s wages, paid every quarter – Mr Low pointed out that in the face of declining demand, the “most logical thing to do” for most businesses, especially small and medium ones, is to cut wage costs.

“Between waiting three months for a $900 cash rebate from the Government versus saving $7,500 immediately by retrenching a worker, which choice does the Government think a struggling employer will make?” he asked.

Arguing that the scheme will inadvertently favour big companies still doing well, Mr Low said: “Are we using reserves to increase the profits of profitable companies in the downturn?”

‘CHOOSE: CPF CUT OR JOBS CREDIT?’

But Mr Low’s criticisms drew immediate retorts from seven People’s Action Party MPs, including labour chief Lim Swee Say.

Given that the Government cannot guarantee the scheme would save jobs, should it then also “forget about” all other programmes that do not guarantee against retrenchments, asked Mr Heng Chee How, Minister of State in Prime Minister’s Office?

As the cash grant is equivalent to a nine-percentage-point cut in employers’ CPF contribution rate, Mr Lim posed Mr Low a choice: “It’s either you introduce a Jobs Credit scheme or you take a CPF cut – which option will the Workers’ Party go for?”

Mr Low’s reply: The WP “will never cut the CPF”. He also reiterated his belief that the money could have been better utilised “by other schemes which can more effectively help companies stay afloat”.

For instance, he had “no problems” with the Special Risk-sharing Initiative, for which $400m will be drawn from the reserves. “I have spoken to some companies (that) would rather have credit facilities,” he said.

Mr Siew agreed that while Jobs Credit would provide a “temporary cushion for businesses, especially SMEs” and make employers “a little bit more reluctant to lay off locals”, it would be a “very expensive band-aid” at best.

But East Coast GRC MP Jessica Tan begged to differ. “I have spoken to small companies … You’re right, they’re facing demand challenges. It’s tough.

“But at the same time, having that relief enables them to tide over and be able to keep the capabilities they would otherwise have not been able to keep.”

Almost all 22 PAP MPs who spoke gave the Jobs Credit scheme their thumbs up, especially since it would favour companies that employ a large number of Singaporeans, and would protect workers from CPF cuts. Jurong GRC MP Halimah Yacob said it “gives Singapore a comparative advantage when global companies decide where to trim their workforces. We may not be able to save 100 per cent of the jobs currently on the line as this is not realistic”.

Still, Sembawang GRC MP Lim Wee Kiak urged “greater clarity” on the guidelines for dipping into the national reserves. Concurring, Mr Siew also expressed concern over the “precious little information” about the deliberations of the President and his advisers in giving their nod to unlocking the reserves.

Said Mr Siew: “The Government has stated some principles for using the reserves, but principles articulated by the Government do not – and more importantly, should not – bind the President. After all, the President is the independent check on the Government in its use of the reserves.”

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Posted in 2009 02. Comments Off on TODAY: Debate over drawdown
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