A political budget? Is WP’s accusation valid?

A political budget? Is WP’s accusation valid?
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The Workers’ Party (WP) threw an accusation at the People’s Action Party (PAP) Government in Parliament on Tuesday, insinuating that the ruling party has designed the annual Budget to its political advantage.

This, said Mr Leon Perera, the WP’s Non-constituency Member of Parliament (NCMP), had some economists predicting “that Budgets in certain years will be election year Budgets that spend off the accumulated surpluses from the preceding term of Parliament.”

He accused the government of not spending enough in this year’s budget despite the economic slowdown.

“Has the government held back on fiscal stimulus in 2017 so as to keep ammunition in reserve for closer to the election?” Mr Perera asked. “And if so, is this the right thing to do for Singapore?”

The NCMP backed up his assertions with a list of recent hikes recently announced by the authorities, such as car park fees being raised by 20% in December, electricity tariffs hike last year as well, along with increases in gas prices, service & conservancy charges, the upcoming carbon tax, and the price of water.

All these, Mr Perera said, would beef up the government coffers in the early part of what he called a “political cycle”.

He said “recent Budgets from the PAP government have tended to follow a pattern – racking up a surplus in the early part of the Parliamentary term and then incurring deficit spending towards the end of the term close to the General Election.”

“What is the justification for these price hikes and their timing?” he asked. “Hitting the economy with these multiple price hikes within the space of a few months may make good political sense, because people have three years to forget them before the next General Election.

“But do they make good economic sense?”

In responding on behalf of the government, Minister in the Prime Minister’s Office, Chan Chun Sing, dismissed the accusations.

“Some say this is a political Budget; that we spend less so we can time the political cycle,” said Mr Chan. “Guess what … At the start of every term of Government, PAP (People’s Action Party) or otherwise … We precisely designed the system such that no Government will come in and promise to spend before it has earned its keep.”

As for Mr Perera’s charge that the government was not spending enough to help Singaporeans alleviate the pains of the economic slowdown, Mr Chan rattled off a list of assistance measures targeted at individuals and businesses. These, he said, included the $700 million worth of projects being brought forward in the construction sector, and the increase in U-Save rebates for households.

“If we adopt such a cynical attitude to budgeting, would we have done this? If indeed this is a cynical Government, then we shouldn’t be giving anything at all,” Mr Chan said.

“No, this is not a cynical Government and it would be wrong for us to impute our own perverse motives.”

Mr Perera did not provide details to substantiate his accusation that the ruling party designs the Budget to its political advantage.

Nevertheless, did he have a point?

Below is a chart of annual Budget surpluses and deficits from 1997 to 2015. The years circled in red are election years.

So, you decide for yourself if the PAP government indeed has one eye on the electoral cycle when planning the Budget.

Note that for Financial Year 2016, a surplus of $5.2 billion is expected; while for FY 2017, a smaller surplus is projected, at $1.9 billion. (Business Times.)

Graphic from Straits Times’ “50 Years Of The Singapore Budget“.