K Shanmugam: Singapore Government must deal with the needs of today, but also protect the interests of tomorrow

SINGAPORE: In a social media post on Monday (Oct 26), Senior Minister K Shanmugam wrote that Singapore has lessons to glean from the current financial crunch in France.

Posting related charts from the Wall Street Journal, Mr Shanmugam, who is Minister for Home Affairs as well as Coordinating Minister for National Security, wrote, “France is a wealthy, developed economy with strong institutions and an extensive welfare system. It also faces serious fiscal pressures.”

He argued that what is happening in France has come about when a government spends more than its available revenues to pay for its spending. The lesson for Singapore, therefore, is to not follow suit, but guard against overspending, especially on welfare, considering not only present circumstances but the far future as well.

First, Mr Shanmugam noted that France has a large budget deficit, 5.1% of GDP in 2025, along with high borrowing costs. As interest rates for paying back debts rise, there will be less money in the national budget.

Next, he pointed out that while France collected taxes equivalent to 43.5% of the GDP in 2024, for Singapore, the figure is only 13.4%.

“The basic point is this: at some point, it will be difficult to increase taxes and spend. The numbers have to add up,” he wrote.

Like France, Singapore also has an ageing population, and the cost of healthcare and other public services will only go up.

The minister noted the pressure on the Government to pay for more welfare and services, and admitted that it would be “easy” for the Government to promise to do so.

However, he warned that the “countries where governments have taken that path, find themselves in difficult financial situations,” such as France.

“When we want the Government to spend more, we also have to ask: how are we going to pay for it? Not just now, but five, 10, 20 years from now,” added Mr Shanmugam.

For him, the bottom line of what the Government is responsible to Singaporeans is to address present needs while protecting future interests.

And while Singapore is in a strong financial position today, in part due to the diligence and discipline of older generations who built up the reserves through decades, it would be wise to be very careful not to lose this “hard-won advantage.” /TISG

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