NDR 2013 : What's wrong with PAP?

[Goh Meng Seng]

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. <br />
<br />
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.<br />
<br />
<b>HDB Higher Grant is Good?&nbsp;</b><br />
<br />
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:<br />
<br />
1) Reduce the listing prices of New HDB flats directly according to Cost-plus formula.<br />
2) Increase HDB grants<br />
<br />
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.<br />
<br />
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. <br />
<br />
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.<br />
<br />
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.&nbsp; <br />
<br />
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. <br />
<br />
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.<br />
<br />
Some people raise two concerns. One is on the impact on resale market and second, how to price the land that the Government own.<br />
<br />
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.<br />
<br />
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!<br />
<br />
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. <br />
<br />
<b>Heathcare: PAP's Universal Healthcare Insurance?</b><br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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. <br />
<br />
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.<br />
<br />
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.<br />
<br />
4) Most of the time, there should be surplus in the pooled fund. If there is any shortfall, the government should top it up.<br />
<br />
These are the basic structure of my Universal Healthcare Insurance scheme. It has wider Scope and Coverage.<br />
<br />
<b>Conclusion</b><br />
<br />
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.<br />
<br />
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?<br />
<br />
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.<br />
<br />
Goh Meng Seng<br />
<br />
<br />
<br />

 

[zhihau]

Government land can be priced according to such formula, fixed at 1% or 2% increment per year.

hmm... land costs having 1% to 2% increment per year... would this result in a curb of the rocketing resale HDB prices? GMS, good suggestion here, but can show the maths? me a bit kuku with maths :o:o:o

 

[Goh Meng Seng]

If we curb at 2% per annum, the land price will only increase less than 85% (1.85 times) in 30years time.

Goh Meng Seng

hmm... land costs having 1% to 2% increment per year... would this result in a curb of the rocketing resale HDB prices? GMS, good suggestion here, but can show the maths? me a bit kuku with maths :o:o:o

 

[zhihau]

If we curb at 2% per annum, the land price will only increase less than 85% (1.85 times) in 30years time.

Goh Meng Seng

correct me if me is mistaken, this affects the BTO flat prices, but what about resale market? the valuation alone can skew the price upwards.

 

[oratedar]

Mr Goh,

Currently some 1st time buyers go for resale because they whatever reasons cannot or do not want to wait for BTO or maybe just prefer some particular mature estates. If the BTO is priced at cost -, it may just forced this group to die die tahan a few years and get these BTOs as the price of these may really be very very attractive.

Will this group be huge enough to cause the resale market to crash?

 

[Goh Meng Seng]

First of all, these are minority. Second, those first timer who chose to buy resale most probably is rich enough to afford it. Third, as you have stated clearly, they prefer to choose where they stay for various reasons: schools, parents, MRT, work place etc. These are something not able to be addressed by BTOs.

As I have said, the impact will be minimal to resale market, if any.

Goh Meng Seng

Mr Goh,

Currently some 1st time buyers go for resale because they whatever reasons cannot or do not want to wait for BTO or maybe just prefer some particular mature estates. If the BTO is priced at cost -, it may just forced this group to die die tahan a few years and get these BTOs as the price of these may really be very very attractive.

Will this group be huge enough to cause the resale market to crash?

 

[zhihau]

As I have said, the impact will be minimal to resale market, if any.

as long as the BTO prices can be curbed, it's good enough for a start. good suggestion!

 

[Nik1971]

Very thought provoking piece! Nobel prize material! Well done, Mr Goh! No way this is plagiarize.

 

[TopSage]

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

!


Dear Mr. Goh,

I'm trying to understand how how your Cost Plus scheme works. While I agree with you that Cost Plus will not cause resale market to plunge, one cannot price a new flat sold to Singaporeans completely detached from resale market.

1. Prices in resale market ultimately will be higher than Cost Plus sale prices. This difference can be quite large.
2. This means new HDB flats buyers get a large market discount under Cost Plus scheme.
3. If the Cost Plus scheme is detached from resale market, we are talking about a difference of say $100K.

This means the govt is putting $100K (or whatever difference) risk free into pockets of new home buyers when they resell their flats. This is very unfair to those who have no opportunities to benefit from the scheme.

A grant may not at the end be a perfect solution, but it gives you money with a justification attached (living near parents, 1st time buyer, etc) and it uses market prices as a reference so you don't make excessive risk free profits.

Giving away risk free profits is a hazard. It is better for govt to collect this money and reallocate to the most needy.

The problem with housing prices has to do with Singapore becoming an overcrowded city and the result of PAP policies - once this mistake was made, it is very difficult to patch up the housing problem. Almost no scheme is satisfactory...trying to solve the problem is futile because there are no good solutions possible. A buyer wants to pay less whether through a grant or market discount ...actually he prefers the govt gives him a flat for free .


Since we are all so free to be in this forum lets just examine a scheme that is completely fair. ...and think out of the box.
If the govt gives every Singaporean adult a one-room flat or 2 Singaporean adults one 2-room flat free (or a low price to cover building cost) and a bigger one if you have children to encourage people have children, it is at least completely fair and solves the fertility problem. Revenue wise it is neutral to our budget as landsales are not counted as revenue to the govt, they just simply add to our rdiculously large reserves that don't need the money anymore. Every month so long as you stay in the flat you pay a conservancy charge. When both you and your partner die, the flat is returned. Everything is based on ballot and waiting time, if you want a popular location, you have to wait longer and go for a ballot, you also have to pay a higher conservancy. The govt tries to level up all locations by adding facilities to less popular location. At the steady state everyone will have a home, zero housing debt and you can argue that this is a scheme most beneficial for society.

Such a scheme is financially feasible and you can keep tweaking it until it is completely fair. you may think it does not work but the socialists countries did them for decades....and you notice they never have fertility rate problems.

So what is wrong with such a scheme? I would argue it is superior to Goh Meng Seng's Cost Plus scheme. If everyone has housing, then the CPF is untouched and not drained off tou pay housing debt, that would also solve our retirement problems. The only loser is our reserves, which are already too big so why do we need to top it up somemore and make the lives of Singaporeans worse...the other losers are our banks, who have been making easy money charging us housing loan interest. . In fact, by freeing Singaporeans from worries about housing, the quality of life will be elevated, Singaporeans will be energised to start businesses and our economy will boom.

I brought up this out-of-the-box idea to show that even Goh Meng Seng, who has been a secretary general of an opposition party, is boxed-in in his thoughts, we are all conditioned to talk markets and subsidy....the only criteria that makes a govt scheme good is FAIRNESS, FINANCIAL SUSTAINABILITY and BENEFITS for the people.

Can someone tell me why a free (or nearly free just pay for construction) public housing scheme for everyone is not good?

 

[soIsee]

Mr Goh,

Currently some 1st time buyers go for resale because they whatever reasons cannot or do not want to wait for BTO or maybe just prefer some particular mature estates. If the BTO is priced at cost -, it may just forced this group to die die tahan a few years and get these BTOs as the price of these may really be very very attractive.

Will this group be huge enough to cause the resale market to crash?

The re-sale market will never crash cos all the viable flats are built in such areas. To create a viable area or some termed as matured areas, takes many years and even with the passing of time some places even after many years stay non-viable like Punggol, Sengkang etc.

The age old wise phrase about buying and selling of property has always been LOCATION, LOCATION, LOCATION!

While some previous areas were very attactive but due to some movement of the main attraction features, roads re-diverted, no MRT going to be there etc became no longer so viable.

The ppl who knows how and where to buy and sell properties always look out for certain present and future features.

But mind you. The formulae is not exactly the same for HDB and private properties. The latter has certain features unique to them, that are essential for it's success.

 

[zhihau]

trying to solve the problem is futile because there are no good solutions possible.

how about this? taxes on the resale price of the lease on the open market whilst the resale of lease back to HDB incur no charge?

 

[RafflesTiger]

PAP doesn't have any more ideas already.......


Can tell that very clearly from PM Lee NDP Rally speech...

 

[Equalisation]

Dato Goh,

What about CPF withdrawal age at 55 ? Not important ah ?

 

[Goh Meng Seng]

First of all, you must understand the differences between First Time Flat vs Resale market. First Time HDB Flat is a National Program to allow citizens to enjoy what their forefathers have sacrificed for Nation building... in giving up their land to government for National development.

There will be always be a big gap between the ACTUAL pricing between First Time Flat vs Resale market...even NOW with the grants given...Some also as much as $100K! So what's new? The difference is where the money goes.

Apparently, you got it totally upside down here. If the Flat is priced using Cost-plus system, the government didn't need to draw from current budget to provide "subsidies" which eventually goes into the Reserves. It actually means that these money can be used for other expenditure like Healthcare.

The First Time HDB flats NEED to be detached from resale market and there are mechanism to prevent arbitrage... First time HDB buyers are not supposed to sell within the first 5 year... you can make it 10 years if you want to. There are restrictions on the purchase of First Time HDB flats and this follows the concept of "home ownership", not "property investment".

Resale market price inflation is "IRRATIONAL" in the sense that they are affected by liquidity rather than NORMAL inflation rate effected by cost of labour, building materials, food prices, energy prices etc. That is why Resale market price inflation is horrendously HIGHER than normal inflation and this is UNHEALTHY. You are worried about First Time HDB market to be detached from this UNHEALTHY property inflation?

In fact, the method used in pricing land is a REASONABLE one. It "NORMALIZED" asset inflation in accordance to general prices, instead of speculative liquidity.

There is absolutely no "risk free" profits as suggested to you because property bubbles will burst, just a matter of time. And the control mechanism on sale of HDB flats will limit that option. Put it simply, after you sell your flat, you will still need to buy another flat to stay, right? And in the open market, it is as high as you sell! So what "risk free" profits are you talking about?

Goh Meng Seng

!


Dear Mr. Goh,

I'm trying to understand how how your Cost Plus scheme works. While I agree with you that Cost Plus will not cause resale market to plunge, one cannot price a new flat sold to Singaporeans completely detached from resale market.

1. Prices in resale market ultimately will be higher than Cost Plus sale prices. This difference can be quite large.
2. This means new HDB flats buyers get a large market discount under Cost Plus scheme.
3. If the Cost Plus scheme is detached from resale market, we are talking about a difference of say $100K.

This means the govt is putting $100K (or whatever difference) risk free into pockets of new home buyers when they resell their flats. This is very unfair to those who have no opportunities to benefit from the scheme.

A grant may not at the end be a perfect solution, but it gives you money with a justification attached (living near parents, 1st time buyer, etc) and it uses market prices as a reference so you don't make excessive risk free profits.

Giving away risk free profits is a hazard. It is better for govt to collect this money and reallocate to the most needy.

The problem with housing prices has to do with Singapore becoming an overcrowded city and the result of PAP policies - once this mistake was made, it is very difficult to patch up the housing problem. Almost no scheme is satisfactory...trying to solve the problem is futile because there are no good solutions possible. A buyer wants to pay less whether through a grant or market discount ...actually he prefers the govt gives him a flat for free .


Since we are all so free to be in this forum lets just examine a scheme that is completely fair. ...and think out of the box.
If the govt gives every Singaporean adult a one-room flat or 2 Singaporean adults one 2-room flat free (or a low price to cover building cost) and a bigger one if you have children to encourage people have children, it is at least completely fair and solves the fertility problem. Revenue wise it is neutral to our budget as landsales are not counted as revenue to the govt, they just simply add to our rdiculously large reserves that don't need the money anymore. Every month so long as you stay in the flat you pay a conservancy charge. When both you and your partner die, the flat is returned. Everything is based on ballot and waiting time, if you want a popular location, you have to wait longer and go for a ballot, you also have to pay a higher conservancy. The govt tries to level up all locations by adding facilities to less popular location. At the steady state everyone will have a home, zero housing debt and you can argue that this is a scheme most beneficial for society.

Such a scheme is financially feasible and you can keep tweaking it until it is completely fair. you may think it does not work but the socialists countries did them for decades....and you notice they never have fertility rate problems.

So what is wrong with such a scheme? I would argue it is superior to Goh Meng Seng's Cost Plus scheme. If everyone has housing, then the CPF is untouched and not drained off tou pay housing debt, that would also solve our retirement problems. The only loser is our reserves, which are already too big so why do we need to top it up somemore and make the lives of Singaporeans worse...the other losers are our banks, who have been making easy money charging us housing loan interest. . In fact, by freeing Singaporeans from worries about housing, the quality of life will be elevated, Singaporeans will be energised to start businesses and our economy will boom.

I brought up this out-of-the-box idea to show that even Goh Meng Seng, who has been a secretary general of an opposition party, is boxed-in in his thoughts, we are all conditioned to talk markets and subsidy....the only criteria that makes a govt scheme good is FAIRNESS, FINANCIAL SUSTAINABILITY and BENEFITS for the people.

Can someone tell me why a free (or nearly free just pay for construction) public housing scheme for everyone is not good?

 

[Sir_Fcuk]

Did you just copy your plan out of a textbook? The whole deal of private healthcare is to take patients with the means, away from public healthcare. With treatments in Singapore costing 5-10 times more privately (or even more, ask Dr Susan Lim) compared to public hospitals, your fixed payout could most likely cover their taxi fare to their appointments

Your plan has neither scope nor depth, just about as crap as the PAP's.

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.<br />
<br />
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.<br />
<br />
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. <br />
<br />
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.<br />
<br />
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.<br />
<br />
4) Most of the time, there should be surplus in the pooled fund. If there is any shortfall, the government should top it up.<br />
<br />
These are the basic structure of my Universal Healthcare Insurance scheme. It has wider Scope and Coverage.<br />
<br />

<br />
Goh Meng Seng<br />
<br />
<br />
<br />

 

[Goh Meng Seng]

If you can't afford private healthcare, then don't go for it. There is still public healthcare available! Nobody forces you what!

Goh Meng Seng

Did you just copy your plan out of a textbook? The whole deal of private healthcare is to take patients with the means, away from public healthcare. With treatments in Singapore costing 5-10 times more privately (or even more, ask Dr Susan Lim) compared to public hospitals, your fixed payout could most likely cover their taxi fare to their appointments

Your plan has neither scope nor depth, just about as crap as the PAP's.