Monday, August 19, 2013

NDR 2013 : What's wrong with PAP?

I have read some comments on Facebook and there were quite a number of applause for the POLICY TWEAKS from PM Lee. Yes, it is just POLICY TWEAKS, nothing revolutionary. It is worrying that all these tweaks seem to have hoodwinked some middle ground voters to only see the impact on their compartmentalized interests instead of the overall larger picture.

There are many things I think need to be addressed but since I am no longer Secretary General of an opposition party which will need to address broadly on the various issues, I will choose to focus on two most important issues.

HDB Higher Grant is Good? 

The debate on how to reduce HDB prices have started since I have raised this issue way back in 2010. There are two main methodologies:

1) Reduce the listing prices of New HDB flats directly according to Cost-plus formula.
2) Increase HDB grants

These two methods may or may no result in the same pricing in New HDB flats. But even if they did, they will have very different implications on the whole Government budgetary situation even though the impact on those Singaporeans buying their First HDB flats is the same.

The reason is that whatever HDB pays for land used to build these new flats, will be paid to SLA and all these money will go straight into the Reserves. This is one of the reasons why PAP can keep boasting about having exceptional ability to accumulate reserves. But wait, once these money goes into Reserves, it means that it will no longer be accountable to public scrutiny as the management of reserves is totally opaque and unaccountable to anyone! (President, you say? Look at what President Ong TC got from PAP when he asked for details!) It would practically mean that if more HDB grants are given to first time buyer without direct price control on the HDB prices, all these government grants will go straight to the reserves which will be managed in a very opaque way and not accountable to parliament nor public scrutiny.

Such transfers of government funds from its current account would have severe implications on the overall budgeting. It would mean that there will be relatively smaller funds for Education, Healthcare, Transport etc as compared to no grants given at all.

This is not to say these are real "subsidies" because the PAP government still make money from the land sales which is very much higher than their purchase price through the Land Acquisition Act. 

To make comparison, let's say there is no grants given but the HDB price is already set at the Cost-plus pricing. Singaporeans will enjoy very low HDB pricing and at the same time, the government do not transfer funds into the reserves directly but could use it for Healthcare subsidies.

This is the reason why I have been advocating Cost-Plus pricing mechanism, a totally revolutionary change in the system rather than the populist (because it makes Singaporeans think that Government is giving them money or subsidies) High Grant methodology advocated by Workers Party (Gerald Giam has made the point in TOC Face Off Forum) and now adopted by PAP.

Some people raise two concerns. One is on the impact on resale market and second, how to price the land that the Government own.

For the first issue of resale market, it is absolutely untrue that a change in the pricing mechanism of NEW HDB prices via Cost-Plus pricing would crash the resale market. Put it simply, the higher grant method would have crashed the resale market if what they say is true! But this is totally untrue.

HDB resale market is totally a segregated market because the needs of the people who are buying in resale market is totally different from first time buyers in New HDB flats. A substantial percentage of buyers in resale market are PRs who cannot buy New HDB flats. Most Singaporeans who buy resale flats are mainly upgraders or downgraders who will already have a flat or property as a leverage. If the BTO pricing for upgraders or downgraders is maintained at market prices, there will be no incentive for them to shift. Some are first time buyers but they are willing to pay a premium for choosing on where they stay. Thus, it seems that the HDB resale prices are more likely to be affected by Private Property Prices, as these are direct competitive substitutes, rather than NEW HDB prices!

As for how to price the land SLA acquired, we could learn from the Germans who are good at curbing unnecessary excessive speculations in property prices. Property prices are allowed to have a 1.5% increase in value per annum , anything above that, they will be subjected to very heavy taxes. Government land can be priced according to such formula, fixed at 1% or 2% increment per year.

Heathcare: PAP's Universal Healthcare Insurance?

The next important issue is of course Healthcare. Many people start to claim that PAP has finally embraced "Universal Healthcare Insurance System" simply because it has announced to cover elderly over 90 years old. That is really a misunderstanding of what Universal Healthcare Insurance entails.

Universal Healthcare insurance will need to cater to both Bigger SCOPE and DEPTH. What PAP is trying to do is just to increase slightly on SCOPE and a little bit on DEPTH. Furthermore, as some people have already mentioned in many blogs and articles, the payout from Medishield is pathetic as compared to the amount of premiums it received. The coverage of Medishield is pathetic. Medishield is in effect, "making money" and this coincide with the fact that healthcare spending by PAP government as compared to other developed countries in terms of percentage to GDP is also inadequate.

I have actually put up the idea of Universal Healthcare Insurance in NSP GE2011 Master Manifesto but unfortunately, it was not raised as the key policy view. The concept is simple.

1) Healthcare of Citizens should be the responsibility of Citizens, Employers and Government. (GEC). Insurance premiums should be shared by these three entities in different percentages. Non-working family members should also be covered with different percentages set for GEC in premium payment.

2) Universal Healthcare Insurance should have wider coverage, allowing citizens to cover every outpatient treatment in private clinic with a list of fixed payout for various drugs, consultancy and operations. Any excess will have to be born by patients. This means that for most Singaporeans or Foreign workers covered under this scheme, they will pay minimum amount for most treatments if they go to government hospitals or clinics. But if they chose to visit private hospitals, there will be a limit of insurance coverage and they will have to pay extra for their choice of expensive medical care.

3) Foreigners working in Singapore should also pay a higher premium into ths Universal Healtcare Insurance. The rational of this is to pool risk of working foreign population in Singapore to cross subsidize an aging Singapore citizens. For Foreign workers, the government will not pay for their premiums. The Premiums should be shared by the employers and foreign employees.

4) Most of the time, there should be surplus in the pooled fund. If there is any shortfall, the government should top it up.

These are the basic structure of my Universal Healthcare Insurance scheme. It has wider Scope and Coverage.


If PAP didn't transfer more funds into Reserves via HDB grants, most probably it would have more funds in current account to provide more spending on healthcare.

The fundamental question we should ask ourselves, how much reserves is enough? Should we have indefinite increases in our reserves and compromised on the well being of our citizens in Healthcare?

If the policy directions are done properly, there should not be additional increase in Medishield premiums or Medisave at all. That is what is wrong with PAP. They are totally obsessed with increase in reserves, stingy on spending for the well being of citizens and thus, never ending pay and pay.

Goh Meng Seng

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