What's the difference between the Government's approach to using land sale proceeds and the WP's proposal?

Someone asks: what's the difference between the Government's approach to using land sale proceeds and the WP's proposal?

If you spend from your wealth, you will deplete your wealth. This is easy to understand.

Hence you need to create new wealth (new income) before you spend so that you do not deplete your wealth.

When you sell an asset (land) you are not creating new wealth. You are just converting a physical asset into a financial asset.

The asset goes to someone else and you get the money.

If you spend the money, then both the asset and the money is gone.

You now have fewer assets to invest and generate income. This means your power to generate new wealth is reduced.

Your remaining assets will generate a smaller new income.

If you keep selling your assets, very soon you will have little to generate new income or wealth.

What is just described is what the WP's proposal will do.

The PAP Government's approach is to put land sale proceeds together with Past Reserves and reinvest them.

The land goes to someone else. The financial proceeds remain and are reinvested. This creates new wealth.

50% of the (new wealth) investment returns under the NIR Framework are then used as government revenue for spending.

In this way, land sale proceeds are being used to generate a continual stream of income for sustainable spending.

The man who works hard to accumulate wealth knows that wealth creation is not easy. He looks at the wealth he has and ask: how can I use this wealth to generate a continual stream of income for sustainable spending?

The impatient man who comes into an inheritance, looks at the wealth and says: wow, I'm so rich. I can now relax and enjoy.

This is why treating land sale proceeds as revenue for government expenditure is a bad idea

 

Every policy proposal will have an impact on our lives.

What's the impact of treating land sale proceeds directly as revenue for government spending?

We can look at the example in Hong Kong where land sale proceeds are revenue for the government to spend. Hong Kong has the most expensive property market in the world with a lease of 50 years, half of Singapore's 99 years. Many Hong Kongers will outlive the lease of their flat.

If you are already complaining about the affordability of HDB flats, you will be hurt even more if a government decides to treat land sale proceeds as revenue for spending.

Such a policy prioritises land sales for fiscal needs instead of actual developmental needs, as is the case in Hong Kong.

It also subjects government revenue to the boom and bustsnof the property market. In a downturn, government revenue goes down at a time when it needs more money to spend. And that's bad for citizens.

A WP Government will remove the second key to raid reserves to fund their populist policies

If Singaporeans buy into the proposal that we can sell land for money to spend on daily needs, then we are not only stupid, we are the laughing stock of the world.

Singapore is so small, we don't even have enough land for all our needs. We have to reclaim land.

Saudi Arabia not only has oil. Saudi Arabia also has land (2.15 million sq km).

Singapore is just 716 sq km of which 141 sq km is reclaimed land.

For all its vast resources, Saudi Arabia has had to raise value-added tax from 5% to 15% in less than 2 years! 10 percentage points in less than 2 years.

The last time Singapore raised the GST rate was in 2007.

15 years later, Singapore wants to raise GST by 2 percentage points.

The proposal by WP to sell land for money to spend on daily needs is a desperate populist measure.

WP's proposals: sell land for money, borrow for money, no need for you to pay more taxes. Free education, free transport, ...

What is stopping WP from going all the way of populism to promise you free things is the second key to the reserves, the blocking power of the President.

A WP-led government will remove the blocking power of the President.

Yes, they will.

Pritam said in Parliament that the President must be restored to its ceremonial role with no blocking power so that there will be no confrontation with a newly-elected (WP) Government.