CIVIL SERVICE SALARY REVISIONS

CIVIL SERVICE SALARY REVISIONS: Debate resumed.

4.55 pm

The Minister for Defence (Mr Teo Chee Hean): Mr Speaker, Sir, thank you for allowing me to join in this debate and to take the opportunity to respond to many of the points that Members have raised in this House. I should say that the Prime Minister intends to speak tomorrow. So those Members who are going to speak after me should not feel disappointed, as the Prime Minister will take care of the points which they raise.

First of all, I would like to thank all the MPs who have spoken. What was gratifying to me was to see that we all share the same objective. We are trying to make Singapore a better place for all Singaporeans. And that we all also appreciate the necessity of having a good public service, and this is an important institution which we need to nurture, cultivate, grow and develop if we want Singapore to be that better place which we all want it to be.

The question is how to achieve this. Let me address the key issues raised under five themes. We have talked a lot about the benchmarking. We have talked about alternatives. We have talked about pensions and independent panel. We have also talked about the difference between the private and the public sectors - risk, accountability, reward - performance and career management in the civil service and also the income gap and timing of this adjustment.

First, let me talk about this principle of pegging salaries to the market, and also whether or not by paying Ministers and civil servants more, Ministers in particular, then the moral authority is lost, as though there is some inverse proportionality between the two.

I am glad that most Members of the House, if not all, have actually spoken in favour of market comparable salaries for our civil servants. Some, of course, have suggestions on how this salary level is determined. I will deal with these later. But, at least, they agree that we have to pay competitive salaries for a good public service. This is already quite a big step forward. Because if we look back 15-20 years, even as recently as 10-12 years, this may not have been so easily accepted. People say, "The civil service is an iron rice bowl. There is no need to pay them competitive salaries. Just enough for them to get by will do." The fact that we have taken this step forward that civil servants need to be paid competitive salaries, and the majority, in fact, almost all Members of this House, support that, is a major advance.

Indeed, in many countries, civil servants are lowly paid. The result is poor quality of public services, and civil servants who are more focused on using their public office for private profit, whether it is a policeman at a roadblock, a tester at a driving centre, or a senior officer in charge of granting approvals and licences, whether these licences are really necessary or not for the proper functioning of the country and society.

I am glad that many Members also support the concept of benchmarking the pay of office holders to the types of jobs they could otherwise be doing, but not all agree with this and not all agree with the method and the methodology that we have chosen.

I do agree with Mr Lim Biow Chuan and Mr Siew Kum Hong that it is indeed an honour and privilege to come into public office, and to lead and to serve. Public service is an honourable duty, with intrinsic rewards.

Some go further and argue that by comparing salaries of officer holders in this way, it undermines the whole concept of service and the moral authority of Ministers. As I said earlier, it is an inverse relationship - the more the salary, the less the moral authority, and the less the salary, the higher the moral authority.

I think this is not the correct way of thinking about it. What is most important is the motivations of the person and his willingness to devote his time and energies to serving and to making a difference. If a person is motivated by money, then even a low salary has its dangers.

As pointed out by Mr Alvin Yeo, if the motivation is money, there are more effective and less public ways of using one's position to make money than to have an open debate on salaries, as we are having in Parliament.

Sir, I was rather disappointed by Mr Low Thia Khiang

who said that it was a waste of time and money to have such a debate in Parliament. But, Sir, this debate shows precisely how transparent the Government is. We are even prepared to come forward, speak in this House, have it debated publicly on a subject which can be as emotive and as personally discomfiting as discussing salaries. So I am somewhat disappointed with Mr Low that he is actually against such transparency. Would he prefer a system where Ministers and civil servants’ salaries are a murky secret? Ms Denise Phua should be assured that it is by this very transparency, that we make sure what she called the "nexus of power and money" will not arise in Singapore because we present what we do openly and transparently. It is for the people to see and judge. It is where there is no such transparency where politicians may take a pittance but actually amass a fortune that we need to be most concerned about the nexus of power and money.

But back to the subject of moral authority. The key lies in how we make sure that the people who serve are motivated by the desire to serve and to do their best for the country and our people. The key is in choosing the right people.

The approach we take is a practical one. In the last election, the Prime Minister asked me to help induct new candidates for the People's Action Party into this House and I am glad to see that many of them are now making substantive contributions in this House, in their constituencies to their constituents, serving them, doing good work for them. When I asked them to come in, personally I knew that I was asking each one of them to make a sacrifice. Those who were prepared to come in have come in, agreed to do so and they never talked to me about it, they did not mention it to me but I could see the doubts, the concerns, that little flicker in the eye where it said, "Is this really what I'm going to do? Is this what I'm getting into?" Some had to give up their jobs, they had mortgages. But what I could see was they were most concerned about the family, "Will I have time for my wife, my husband, my children, to look after my ageing parents?" and then the uncertainty – would they be able to make good MPs, to live up to the expectations of the public, to live up to the expectations of the people that they hope to serve and the privacy they would lose because any shortcomings or failures would be exposed in a most public way possible.

We looked for people who have shown commitment and concern for their fellow men. A good number had already been active in the community, in NGOs, before we fielded them. Ms Denise Phua is one of them. Mr Lim Biow Chuan himself served many years in the grassroots. We asked them to come in and take on even heavier commitments and responsibilities in serving the people.

The sacrifices that they make when they decide to become MPs and office holders are real and unquantifiable. We cannot do much about reducing these. But what we can do is to reduce the financial sacrifices so that we reduce some of the impediments that might otherwise make it more difficult for good men and women to serve, and to make a difference for Singapore and Singaporeans.

Ultimately, the choice is made by Singaporeans themselves at the General Elections, every five years. And the people have chosen wisely. They have rejected candidates who offer themselves, with doubtful capabilities and motivations, and selected good ones.

That is one level of checks. But the PAP itself has another level of checks. We screen, test and select our candidates carefully and one of the key qualities that we look for is the willingness to serve the people. If his motivations are self-serving or to make money, we do not select him. And if we discover that that is what he is about after he has come in, we drop him. One can only hope that Mr Low has equally stringent processes for selecting the persons they offer as candidates to the people because if you do not have transparency and you do not have discussion in this House, as we have been doing these last few days, we cannot be sure that the people that we bring into the office are the right ones.

Now, let me deal with some of the issues on benchmarks. Many MPs have spoken on this - Mr Inderjit Singh, Mr Gautam Banerjee, Mr Low Thia Khiang, Mr Lim Biow Chuan, Mr Alvin Yeo, Mrs Josephine Teo, Mr Chiam See Tong, Dr Loo Choon Yong, Ms Denise Phua. Some have suggested pegging the pay to levels of government officials in other countries, taking a moving 3-5 year average, job sizing and scoping, including new categories of jobs, defining a new benchmark based on companies by market capitalisation. Mr Inderjit Singh has also suggested there is really no need for a benchmark. The Prime Minister should just decide and that would solve the problem.

Sir, in 2000, the formula for the MR4 benchmark was revised to make it more robust. We moved the Ave24 to 2/3M48. And we took in half of stock options, not the full amount, in order to reduce the volatility. We increased the numbers to eight persons in the six professions and we moved to the median, instead of the mean, to take care of this outlier problem.

The rank positions of the MR4 benchmark among the top 1,000 earners have been remarkably stable and this shows that the benchmark is quite robust. The rank position of the MR4 benchmark for YA1999 was 206th and in YA2006, it was 201st - remarkably stable.

The benchmark formula, as I said, has been designed to take care of outliers and that is why we have taken the median in the six professions and we have also applied a one-third discount. The median is $3.3 million. The one-third discount brings it to the benchmark number of $2.2 million.

Some have pointed out that the individuals in the group of the top 48 earners change from year to year. It is therefore unfair for Ministers to be paid according to this benchmark every year. I will ask for a table* to be circulated and this is a table on the 'dwell' rate of the 48 top earners each year.

*Cols. 357-358.

On average, for the last six years, on a year to year basis, close to 40% of the top 48 income earners remained in the top group of 48. Specifically for lawyers and accountants, about two-thirds of the individuals remained unchanged (from one year to the next in this group). Engineers stay the shortest in the list. I am sure Ms Lee Bee Wah will have something to say about that. No doubt they stay short in the list because when they get on this list, they grow up very quickly and become something else. They are likely to become CEOs or take on senior management jobs in companies.

Some Members have pointed out that if the persons change every year, then we are only selecting the top persons every year and it may be different persons on the list. So that is not fair. On the other hand, I can also see problems if the same persons remain on the list every year. Then you can say that only these people are doing well and how about the rest of them who are not doing well all the time. So when you look at it, a 40% ‘dwell’ rate, it seems to me to be not unreasonable but the more important thing is, what are we benchmarking against. We are not benchmarking against specific individuals. What we are benchmarking against is the typical salaries that persons holding these types of jobs and responsibilities do earn.

We have selected these six job categories because they are realistic alternatives for persons who are considering a career in the public service, whether they are at a young age on graduation or whether they are considering coming into public elected office in their 30s and 40s because many of them are from these professions. We have not included architects or doctors, because they require specific talents or skills, and we have not included entrepreneurs. So entrepreneurs are not on the list. Those who have made the point about entrepreneurs and risks, entrepreneurs are not there. We can fine-tune the job categories - add in a few, put up, lose some, but I do not think the outcome will be very different.

On Mr Alvin Yeo's suggestion to adopt a 3-5 year moving average, to some extent, we are doing this already, except that the average is very sticky - going up and very quick to come down when we move, because we move down very sharply during a recession. I think it is very difficult for any government to say, "Well, the moving average tells me that I should stay there or go up when, in fact, we are in the middle of a recession." So it comes down very quickly but it is quite sticky going up and, to some extent, I am taking a measured approach when we make these adjustments. We are taking a longer term view of how salaries are moving already. Mr Inderjit Singh suggested that the PM should just decide and the problem is that we are having this debate because we have this benchmark but if the PM were to just simply decide and come up with a figure, he would still need to justify to the public how he came to this number, and he would have to find some means of comparison and benchmarking in order to have this number.

Mr Inderjit Singh (Ang Mo Kio): Sir, I just want to clarify that I did not mean that the Prime Minister makes an arbitrary decision. I was saying that we already have 13 years of a track record of Minister salaries and that we now have a base of $1.2 million and, now that we have a base, to implement a system of increments or deductions like any company, based on the base that you already have developed and well accepted. It is not an arbitrary number.

Mr Teo Chee Hean: So, in the end, we will still have to have some kind of benchmarking in order to have a basis for deciding what is a reasonable salary package.

Job sizing and scoping to determine pay levels. In the Public Service, we do evaluate and grade our jobs regularly to ensure that they reflect our expectations of the job and job grades are used for deployment purposes to stretch our officers and certainly in awarding performance bonuses, we also take into consideration the size of the job relative to the officer's actual job grade. So we do that but I think that if you ask a person to come in - a HR consultancy - and say that we come in and evaluate the size of a Minister's job and you try and do that, I think it will be quite a complicated exercise and to make that comparison, again, there will be considerable controversy about that whole exercise itself.

There were also questions raised, both in public and in this House, about what components go into the salary and what components do not go into the salary, that there is this very large figure that they have presented before them and there might well be other hidden extras which we are not aware of. So perhaps I should ask for these other two tables to be handed out. [ Copies of tables distributed to hon. Members. ] We pay a clean wage. There is no free housing, no paid holidays, no free COEs, or exemptions for foreign maid levy nor for ERP and there is no free medical care. Some of you would already have seen this handout and it lists out some of the common misperceptions about pay for Ministers and what the reality is.

I have also asked for a handout to be circulated that lists out all the salary components using the MR4 grade as an example, and this contains all the fixed components and variable components. [ Copies of handout* distributed to hon. Members. ]

*Cols. 359-360.

You will see that it is all there, and that the fixed components have decreased from 66% of pay to 53% of pay and the variable components have increased from 34% of pay to 47% of pay.

If Members will allow me, I will take a little time to address the issue of pension. The majority of civil servants are now on the full CPF scheme. Only the Administrative Service and Intelligence Service are on pension. We have also earlier decided that the Senior Police Service and the SAF officers should also be on pension. The reason is that these particular Services require long-term development of the officers, deep experience in order for them to develop the expertise that is necessary in the area, and also to deal with issues generally of high sensitivity to our country. Therefore, we felt that the pension component was useful and that we should have some long-term employment scheme for these officers. The Police and the SAF are not on pension anymore, but they have changed to, what the Police call, an Invest Scheme and the SAF to a SAVER Scheme which is also a long-term employment scheme which encourages and rewards officers if they stay and serve loyally for a number of years. So the principle is something which we do want to maintain for these key Services.

Given their role and impact, the Political Office holders also are eligible for pension provided they serve at least eight years as an office holder. We believe that it is important to encourage people to serve longer periods of time so that they develop the instincts and understanding of how our Government works so that they can serve Singaporeans better. I should say that MPs elected after 1995 are no longer eligible for pension and all the salary revisions since 1995 have been non-pensionable in the civil service. So pension benefits have been frozen at the 1994 level for each grade.

Our aim in designing the salary package for our officers is to do so as transparently as possible, taking into account all remuneration components, in order to make as good a comparison as possible with the private sector. Therefore, in principle, we ought really to take into account retirement benefits, such as pension, but we also have to take into account if we do that, whatever benefits of similar type, including full CPF, any kind of gratuity, termination benefits, and so forth, that may exist in the private sector. This itself is quite a complicated exercise. And in any case, if these benefits exist in the private sector, they are not reflected in the annual reports of income to the IRAS as well. So they do not enter into those benchmarks that are in the private sector either.

But in practice, the salaries at MR4 have been lagging so significantly that retirement benefits, whether pensions or CPF, have not been a significant factor in previous salary adjustments.

As steps are taken to close the gap with the benchmark, we will see whether it makes sense to take the superannuation benefits, both in the private sector and the public sector, into account. I think it will be quite a complicated exercise but we will have a look and see whether it can be done and how it can be done.

Let me deal now with this subject of benchmarking salaries of public officials to those public officials in other countries. When Singapore is usually so obsessed with ranking and benchmarking on an international comparison basis - competitiveness, PERC, quality of government and public service, corruption index, and so forth - why do we not do so for Ministers and office holders as well? On the surface of it, it sounds like a very compelling argument. But you ask yourself, why are you doing these comparisons in the first place and are these comparisons valid?

First of all, as I explained earlier, our salaries are clean. Everything is there. So when you look at the salary of the Prime Minister of Britain, or Australia, or almost any other country in the world, you do not know what is the total compensation package. You are really not comparing apples with apples. We cannot find out exactly what it is that they are earning because it is not completely transparent. That is one problem. But the second and more fundamental issue is this. Is that a relevant comparison? When you do a competitiveness ranking with other countries, it is a relevant comparison. Why? Because you are trying to attract investors to come to invest in Singapore, to create jobs for Singaporeans. So we want to see how competitive Singapore is against another country which is your competitor. When you are looking at salaries for civil servants and office holders, you must look at what are the realistic alternatives that civil servants and office holders might pursue. They cannot become office holders in Finland, Denmark, or the United States. It is not a relevant market comparison for them, or vice versa . You have to look at what a young man or a person in his 30s or 40s is comparing himself to - a young man or woman when he is deciding what he is going to do with his life. And these are the relevant market comparisons, not what politicians in Germany, France, Finland, or Denmark are being paid. It is not relevant.

Many Members have suggested that we set up an independent panel to review and set salaries - take it out of the hands of this Parliament, take it out of the hands of the Prime Minister. We do not have to deal with this issue which makes us all feel very uncomfortable.

In 1994, we had a panel, chaired by Mr Michael Fam, who was then the Executive Chairman of Fraser and Neave, and it comprised other private sector leaders. Its terms of reference were to verify that the IRAS data and calculations in the White Paper were correct, and to comment on the appropriateness of the Prime Minister's salary, taking into account the job scope and responsibilities of PM.

The panel was satisfied with the data and the calculations used and we have since computed the benchmarks annually on the same basis. And incidentally, the annual IRAS data that we use for the benchmark computation is audited by the Auditor-General.

But we now have more than a panel. In fact, we have a full discussion and debate in the House, as Mr Inderjit Singh reminded us because he has kept the cuttings from 1994. We have done this in 1994 and in 2000. We have full transparency.

But, ultimately, even if you had an independent commission and it recommended a salary, somebody has to decide whether to accept that recommendation and implement it, and you cannot escape from the responsibility of making that decision. What happens if the number is too high? Do you just go along and say, "Should be all right. Nobody should get upset because this was an independent panel that set it." I do not think you will escape the same difficulties as we are having today. You still need to explain how, why and whether it makes sense or not. And the Prime Minister and his Cabinet have to decide whether to accept this recommendation or not.

Indeed, in other countries, there are independent panels but, unfortunately, the legislature or the government does not have the will and determination to implement the recommendations of the independent panel because of the political pressures and the inability on their part to do so.

And what if the benchmark level determined by the independent panel is too low? The Prime Minister and the Cabinet still have to take the responsibility for running the Government, making sure that the civil service has got enough people, and so on. And it still has to decide whether to accept that, even in the face of a civil service which is losing people. So, in the end, the Cabinet and the Prime Minister have to take responsibility and then go to the electorate at the elections and ask the electorate to decide whether the job that they have done has been good enough.

Let me talk about the difference between the public and private sectors. Mr Lim Biow Chuan, Mr Michael Palmer, Mr Teo Ser Luck, Dr Lim Wee Kiak, Dr Loo Choon Yong, Ms Denise Phua have spoken a lot about the difference between the private sector and the public sector, particularly where it applies to risks. I think I explained earlier that the benchmark does not contain entrepreneurs and people who own companies. So, basically, it is people who earn incomes and particularly the 15P32 benchmark contains the 32-year-olds who are working for others. In that sense, it is not that different from a good Administrative Officer working in the public service.

I completely agree with Members who say that if we are going to pay competitive market salaries, then we should adopt market policies in our performance management and HR policies in the civil service. And certainly, that is the way we are going to go, and that is the way we have been moving for the last 10-12 years.

Those of you who were in the House when Mdm Halimah spoke, I think she gave an excellent speech which described the HR practices that we have in the public service today, which are very different from the HR practices 10-12 years ago, and it was a very good speech, as Mdm Halimah usually gives, from the perspective of the workers who now face these new pressures in the civil service which they did not face before - performance bonuses, annual assessments, risks of having their whole function best sourced if they are inefficient, being invited in for polite conversations to tell them that they might find it more advantageous for themselves to continue another career in another line in the private sector, and not in the Government sector. The fact is that many of our officers now are employed initially on contracts and they have to prove themselves before they are put on permanent service. These are now features of the public service in Singapore.

On developing KPIs for public servants, we have been spending a lot of time talking about the Administrative Officers. But actually, there is a wider public service out there, as Mdm Halimah pointed out, there are over 60,000 public servants and also statutory board employees who serve in the wider public service. As Mr Teo Ser Luck pointed out, you can actually select KPIs for different groups of people, depending on what kind of performance you want from them. Certainly, those frontline agencies, like EDB, who go out and chase for investments to come to Singapore, EDB incentivises them that way. That is one example.

We have different benchmarks for different levels and different types of officers in the service. We also have different ways of rewarding our officers.

The senior officers in the service have a larger component of performance bonus, and the performance bonus is both on an individual as well as GDP basis, whereas the junior officers, while they do have performance bonus, their performance bonus is generally a smaller percentage of their total annual remuneration. For very senior civil servants, as I pointed out, the variable component is now 47% of pay. Mr Alvin Yeo, I believe, and Mr Gautam Banerjee also suggest moving it up to 60% to 70%. I am not sure whether we will get there eventually, but we are certainly moving in the right direction. We have moved from one-third to half. Mr Alvin Yeo says we should go to two-thirds. As we restructure the salaries, as we have the opportunity to do so, we will see whether this makes sense for us.

One example of restructuring the salaries is also at the junior levels. One of the reasons why we have given out the performance-based payment for our junior officers is because we want to take this opportunity to build up the performance element among our junior officers in the civil service. And if the economy and salary levels permit in the coming year, we will take this performance-based payment and build it into the scheme so that it becomes part of the salary structure of our junior officers with a larger performance element.

There have been many suggestions on what we can include into the matrix for deciding on the performance bonuses of Ministers and top civil servants. We have considered a number of different possibilities. None of the suggestions really is new, whether it is inflation, lower or average wage levels or whatever it is. None of these suggestions really is new. But the Government as a whole has to cater not just to individual groups of Singaporeans but also to all Singaporeans. Therefore, we felt that the GDP is a good indicator of being able to create wealth for all of Singapore and, with that wealth, to be able to make, even those Singaporeans who may not directly benefit from that GDP growth, those Singaporeans even better off as well, as this Government has done consistently over the years through asset enhancements and wealth transfers.

I should also note that even the private sector, not just the public sector, also has difficulties defining KPIs to make sure that there is no distortion between short-term and longer-term goals of the organisation. This is because if you have a KPI that is very focused on your quarterly returns, you may run the company into the ground over the five-year period time-frame to produce good quarterly returns for the next two or three quarters. That has happened in companies. And in Government, many of the things we do are very, very long term. Some Members would have read the Straits Times' article where they interviewed Mr Tan Gee Paw, the Chairman of PUB, and he was quoted as saying: "Some of the things we do in Government, we do not see the result within our own career." The results come after we have finished our career. Those are some of the types of things which senior public officers in the civil service have to deal with.

So I would be a little careful about defining KPIs which are too specific, too targeted and too short-term. But the Prime Minister decides on the performance bonus, and I am sure that, when he decides on what performance bonus to give to the Ministers, he will look at how the Minister and his Ministry are performing and take that into consideration.

But all said and done, what number does this benchmark produce for us? May I ask for this table to be circulated? [ Copies of table distributed to all hon. Members. ] Does it make sense? Many people say that, "Well, actually, you are operating on a part of the curve which is very rarefied, where the oxygen is very thin, it fluctuates very rapidly, there are very few people down there." And, if you can think of it mathematically, if you draw a curve from the first, say, to the 1,000th income earner in Singapore, Singaporeans are concerned that this benchmark produces an answer which is on the steep part of the curve.

If I can draw Members' attention now to this chart. [ Copies of chart distributed to all hon. Members. ] This chart shows the income level on the vertical axis and the ordinal number, ie, the rank of the person for the top 1,000 income earners in Singapore. So owners of companies are not there. It is income earners. How we have defined this number is explained in the explanatory notes, ie, what goes into the income elements. But this is the plot. There is indeed a very steep part in the curve, the part where it basically goes exponential. But where are we on the curve of the top 1,000 income earners for the MR4 benchmark as well as the current salary? We are actually on the flat part of the curve, not on the steep part of the curve. So, actually, the benchmark is a relatively stable benchmark. We are not on the top left part of the curve where it shoots up very sharply. So the benchmark indeed produces quite a stable result. It gives you the MR4 benchmark level, the revised and current salaries for both MR4 Ministers and the Prime Minister.

When you look at the top 1,000 income earners at age 32, you see a very similar pattern. Really, what you see are four points there, three clustered very closely together, the benchmark itself 15P32 for SR9, the current SR9 salary and revised SR9 salary. So here we are almost at the benchmark. And we are about where we want to be on this curve, because we are on the knee of this curve. Probably one or two of the best of our officers get promoted to this grade each year. And we are taking some of the best people into the civil service each year, and we want them, because we want them to contribute to making Singapore better. So these are people who have not just got their four 'A's and two S-papers in JC. That is not enough as a qualification. That gets them through the door perhaps of the interview room. But what the Public Service Commission is looking for when it looks for scholars of this category, this qualification, are people who have commitment to the country, have shown that they have interests beyond just their books and studies, have leadership qualities, done community service, have been active in sports and games, and so forth, ie, outstanding young Singaporeans, some of the most outstanding Singaporeans you can find in their cohort. And we should be fortunate that we have a system in Singapore which is able to bring some of these people into the public service to serve Singapore and Singaporeans, rather than for them to all be attracted out into the private sector and working for the bottomline of some other company, which may well be an MNC or, perhaps, as many might do, go to London, New York, Hong Kong or Silicon Valley to work and be lost to Singapore.

Let me now deal with some more mundane matters - mundane perhaps for some Members here but certainly matters I think very close to the heart of Mdm Halimah as well - ie, performance and career management in the civil service. So I hope that Members will bear with me if I take a little bit of time to explain some of these details.

We have focused most of our discussion on Ministers and Administrative Officers. There is actually a wider civil service out there whom we all depend upon to service Singaporeans and the public. We must take care of all of them as well, because they serve loyally and faithfully. I would like to thank Mdm Halimah for her compliment on the civil service and that it has come a long way, and I would like to reiterate that we value all civil servants, not just the Administrative Officers. Like Mdm Halimah said, civil servants no longer enjoy secure tenure. We have an exit route for under-performers and organisational renewal schemes. Even our top public sector officers have fixed tenures. Those who are on the Public Service Leadership Scheme have a 10-year tenure if they are at Deputy Secretary level, and then, if they make it to Permanent Secretary, 10 years. After that, they leave. So they are not there all the time, permanently. As someone said, perhaps we should change the name "Administrative Officer", because it does not correctly reflect what an Administrative Officer does. Perhaps, we should change the name "Permanent Secretary" too, because the Permanent Secretary is not there permanently.

I do freely admit that the civil service can do better in its human resource management and, in particular, its performance management. I think all of us are very Asian. The idea of calling in your subordinate and telling him all of his strong points is not so much of a problem, but telling him all his weak points, that is more of a problem. So everybody thinks he is doing fine and, if he does not get his performance bonus, he wonders why. As we have introduced the performance bonuses and more promotional grades in the various schemes and services, HR managers, in fact all managers in the public service, have to become better managers of people, to learn how to lead, motivate, reward them and tell them how they are doing, so that they can help to develop them. So PSD will certainly examine how to improve the supervisory skills in the service so that they in turn can coach and mentor other officers better.

We have a rigorous regular appraisal system. It is not just by the immediate superior. But we have a ranking system where the officer is also considered by superiors of other staff of similar grade so that there is comparison between departments. So it is not just on the whims and fancies of one superior officer that the fate of a civil servant gets decided. There are quotas for performance grading so that you cannot have everybody good or very, very good. You cannot have the entire organisation very good. I was told by someone - I will not mention which uniformed organisation this is and in which foreign country - that, in his navy, 95% of his officers are performing above average. There is obviously a problem there somewhere.

I agree with Mr Siew that we should be more transparent in how Administrative Officers are managed. In fact, we do counsel and out-manage Administrative Officers who are not performing well. May I ask for this other table to be circulated? [ Copies of table* distributed to all hon. Members. ]

*Cols. 361-362.

This table shows the performance bonus distribution for Administrative Officers for work done in 2006. So we do have a system where there is a spread of performance. We are not afraid to reward excellent officers with high performance bonuses and, at the same time, we are not afraid to pick out officers who are not doing well to counsel them to improve and, for some of these officers, they get zero performance bonus. Some of these officers have actually been outplaced from the Administrative Service.

Mdm Halimah has brought up a number of concerns of our junior officers, and we should not forget these officers in the junior schemes who play an equally important role in the civil service while we are talking about the senior-most officers in the civil service and the Ministers. We will provide our junior officers with opportunities to upgrade and increase their employability through structured training. We are embarking on a study to redesign the jobs of

officers in the Corporate Support Scheme and related schemes with the objective of examining and redesigning these jobs so that the officers can do higher value work. We hope that this would result in greater motivation and job satisfaction for these officers. We are very glad that we would be able to work hand-in-hand with the unions on this.

Mdm Halimah also mentioned one group of employees in the public sector. These are the daily-rated employees (DREs). Our DREs today are now entirely employed by the statutory boards. Most of them are in the National Environment Agency (NEA). The NEA, which employs the vast majority of our DREs, has training incentives for them to upgrade themselves as part of the new Collective Agreement (CA) that was signed in October 2006. They will receive a training incentive of $200 (per course) for completing and passing courses that lead to a nationally recognised certificate, and they can receive up to two such incentives a year. This encourages them to improve themselves so that they can do better.

There is also a Good Conduct Allowance which has been increased from $30 to $40 per month to encourage them to come regularly and to reward those who do not absent themselves from work. This was increased with effect from October 2006. NEA also has plans to conduct a salary review of its DREs. This is intended for implementation in the later part of this year.

Sir, I do agree that we do need a more holistic human resource management system in the civil service. Pay is not the cure for everything, and the civil service knows and realises that. There are other deeper issues that we have to deal with. That is why, in conjunction with the pay increases, we are also conducting reviews of a few key services, for example, the Management Executive Scheme and the Management Support Scheme.

The civil service will also look into tapping and developing leadership potential across the public sector. It is not confined to the top echelon of officers and includes senior officers in our professional and departmental services. Young officers and other services with potential and drive will be provided more opportunities to stretch and grow them.

Our system is not designed to keep everyone in the service. So, we do not look for zero resignation and zero attrition, but we do want to make sure that we do not fall into the same position that we were in in the 1990s where, with a galloping economy, we were losing many people from all segments of the public service. What it meant was that the level of service to Singaporeans fell. Those who remained in the service were demoralised because they had to do more work and they saw their colleagues leaving. And because the service level fell, they had more complaints from the public, and I am sure, from Members of Parliament, about the quality of service and we were put under more pressure. So we do not want to find ourselves in that same kind of situation. We want to make sure that we can continue to remain competitive and we can keep, employ and retain our public servants and have a good working climate in our institutions and organisations.

Let me now deal with timing and whether or not this is a good time or right time to do this. Sir, I have been asked whether this is a good time to make such salary adjustments. But, actually, the point is that such salary adjustments must be done in good time. Otherwise, we will end up with problems in the public service. We have had no major adjustments since 2001. We have already waited for six years. Economic recovery has been going on for the last three years and we have had good growth for three years, but we have not raised salaries as quickly as we should have. If we wait too long and we are too far out of line, it makes it even more difficult to move our salaries because each time we do that, there will be consternation with the huge percentage which we are raising salaries by if we have to move once in a very long time to come to market levels. In the long term, I believe that will be to the detriment of Singapore and Singaporeans.

There have also been many speeches and views brought up Members of Parliament and also members of public about the income gap and the difficulties of the lower-income group and those with no income. Capping the salaries of Ministers and top civil servants will not solve this problem. The problem can be best addressed - how to help low-wage workers, how to help the lower income and how to help the aged with no families through sound policies and programmes like those which were introduced in the Budget recently - Workfare, increased allocations for ComCare but, most importantly, through growing the economy, creating jobs, creating the resources so that we can help everyone in Singapore to lift themselves up and have a better life.

We have paid attention to the needs of the low income through the GST offset package so that over the next five or six years, they will be well taken care of. For those in the lower-income groups, the GST offset is worth some 16 to 19 years of the extra GST that these low-income Singaporeans will have to bear.

On public assistance, there was a debate in this House with Dr Lily Neo during the Committee of Supply. Minister Vivian Balakrishnan summed up that we want an approach that is low in entitlement, but high in flexibility, because the needs of these individuals are quite different, and we need to find more holistic and flexible ways of looking after their needs. Indeed, I must say that Dr Lily Neo is a good example of a Member of Parliament who has, through her ingenuity and active involvement with the older people in her constituency, found these creative and more meaningful ways of helping them because they know that this is not the anonymous hand of Government that is giving that assistance, but it is real people with real hands and warm hearts who are helping them.

Sir, I would ask now for this article to be circulated. [ Copies of article distributed to hon. Members .] It is an article by Steven Bartos. He is the Director of the Institute of Governance in the University of Canberra. This article appeared in this magazine called the "Public Sector Informant", February 2006. The article looked at Singapore's public service as a possible benchmark for Australia. The Australian public service is held generally in quite high esteem. Bartos acknowledged that "Singapore had overtaken Australia in the efficiency and effectiveness of its public service". He explained the reasons for this. He said that we have revamped our processes, we have very creative and active use of information technology and we have reorganised our institutions. He said that it took 300 people to draw up the Australian budget and 20 in Singapore. I have not actually gone to the Ministry of Finance to count the numbers but that was what he reported in the article approvingly. And very tellingly, this was what he said, and I quote, "The other source of Singapore's public service advantage is the extent to which it has invested in public servants themselves. The senior ranks are very well paid, which of course helps. Just as important is their investment in education.". He has many other comments to make about Singapore and the cultural differences and why we do things here, like banning chewing gum, which will be unacceptable in Australia, and so forth. All in all, a balanced and thoughtful article - someone who understands Singapore and obviously knows what it takes to build a good public service. And he quite ruefully said that the senior ranks are very well-paid, which of course helps. I think that is a very understated way of making a very important point.

Sir, I listened carefully to what Mr Chiam See Tong had to say yesterday. He said that we are just a little dot. When we look at America, it is 15,000 times our size and 60 times the population of Singapore. He said that we are just a dot. America is such a big country, so many people, such a huge country and the American President is paid so little. What is so special about Singapore? But, Sir, that is precisely the point. There are many, many dots in the world. But what makes this dot so special? This little red dot is very special because all of us have taken the trouble to take care of it very well. All Singaporeans have worked hard to make Singapore special. The Government is a special government, carefully constructed, bringing in the best people so that it can move Singapore forward even with all the disadvantages that we have - the lack of resources, the position that we are in the region and the world. And Singapore is helped along by a first-class, excellent, efficient, uncorrupt public service that helps it to achieve Singaporeans' dreams.

Sir, we do need a good public service in Singapore. It is a very special country, a very special red dot, Mr Chiam. We do want to make it even better for Singaporeans in the future. We need thinkers, planners and doers in the whole public service. The whole public service has to work as a team and it has to work as a team with all Singaporeans. We have a public service that we can be proud of. We have a Government that works. It is a Government that works for Singapore and Singaporeans. [ Applause .]

Mr Teo Chee Hean: 5.55 pm

Mr K Shanmugam (Sembawang): Madam, after that tour de force by the Minister, I am tempted to say that there is nothing further to debate about. But regardless of the logic, this issue will remain a difficult topic and I think it is our duty to speak up and slowly convince Singaporeans. I cannot think of another issue where there is such a disconnect between what is clearly the correct policy and how the public react to that policy.

Should we, as a matter of policy, pay Ministers and senior civil servants salaries pegged to market? The answer is really a no-brainer. And yet, for over 13 years, this has been a very difficult issue. Public reaction in Singapore is, however, not unusual. Many societies in the world keep official pay for public servants slow and have difficulties in increasing their pay. Paradoxically, many societies also have little difficulty in accepting the institutional hypocrisy of low official pay and large unofficial income. They are content to let that hypocrisy continue and where it is not possible for them to be unofficial income, such societies are content to accept the loss of talent from the public sector.

Everyone is content to be less than honest about the situation, and salaries are held hostage to politics. This mould is politically very difficult to break. But difficult as it is, we have to, in Singapore, completely break this mould if we are to prosper and move ahead as a society.

Let us look at whom we want in our public service. We want the very best. The people we want have many career choices. They have to be of a quality to get to the top in any profession or field that they choose. Put it this way: if someone is not good enough to get to the top of PricewaterhouseCoopers, would you want that person to be a Minister? Would we want someone as a Minister if he cannot get to the top in a major law firm, MNC or a bank? Madam, it is a rhetorical question. The answer is obvious.

Such a talented person will have to choose, and it is a real, serious choice. Do I want to go into public service or do I want to be a top lawyer, accountant or banker? Let us not fool ourselves. The opportunities in the private sector have always been good. Now, they have become quite extraordinary. Many of us here know that for a fact. Take a bright young man in his 30s. Assume that he is among the brightest in his generation. Today, he has an array of career choices. He can stay in Singapore or go overseas. He can join any MNC or financial institution, or he can stay in a profession. If he remains in the private sector, he will have his privacy, he can travel the world, live where he likes, have a second and a third home, and choose to live the life he wants. In his early 40s, he could be earning $2 million and more, and by the time he is in his late 40s, a real high flyer could be taking home $5 million or more. If the median for top lawyers and accountants is $4.2 million and $3.7 million respectively, Members can guess what those above the median will be making. That was in 2005, and I am leaving out the real heavy hitting investment bankers out of these scenarios. Those who are entrepreneurial and start businesses could earn even more. We are talking about tens of millions. Of course, the risks are also higher. But the trend is clear. In our globalised economy and in this almost borderless world, the economic opportunities are vast and breathtaking for a bright, talented young person.

Do we think it is fair, just or realistic to expect such a person to come into public service and earn 30% or less of what he could earn outside? It does not make any sense that Ministers should earn a fraction of top private sector professionals, when we look at the different sets of responsibilities and the consequences of how they perform. Why do we, as a society, think we can expect the brightest and the best to go into public service, earn much less than what they would earn in the private sector, and get regularly attacked and abused for what they do earn?

Is it all pure fantasy and rhetoric that we look for the best to come into Government? Well, let us look at the frontbench. It is not good to personalise an argument, but sometimes an illustration helps. As an example, let us look at the Minister who kicked off this debate. Minister Teo, by common consent, is among the very brightest of his generation. His academic and subsequent track records speak for themselves. He runs the Defence Ministry and oversees the civil service. The rest of us in the private sector earn our money only because he and his team ensure the safety and security of Singapore. Only the naive will take that for granted in the case of Singapore.

Minister Teo is not a cog in the wheel. He is at the very apex of the system, and bears the final and ultimate responsibility for the functioning of the system. I have yet to hear a single convincing argument as to why someone like him should earn less than the senior partner of a major accounting or a law firm in Singapore. They are not even in the same ball park when we consider the responsibilities.

Would we be better off as a society if he was now an investment banker earning several million dollars? There are likely to be several in his cohort in the private sector who are earning much more than him. It probably does not matter to him, otherwise, he will not be in the public service. But we have to look at the future. It may matter to the next Teo Chee Hean in his 30s, and it will matter even more to the future of Singapore. If we do not keep salaries competitive and we lose some of the potential Ministers and Permanent Secretaries, then we will pay dearly as a society - in reduced opportunities, in reduced competitiveness and reduced national wealth. We can continue navel-gazing, squabble over the individual salaries and, in the process, we run the risk of losing the plot.

When it is such a no-brainer, why is it that people are so resistant? Let us consider the arguments that are routinely trotted out in support of keeping official pay low. In summary, the views against the salary increase are as follows:

A Minister's job cannot be compared with that of a top private sector job. Motivations in each case are different. The Minister performs public service and he should not be disgruntled about the extra million or so that he could earn outside. Ministers are already adequately paid and increasing the salaries may break the compact of trust, respect and regard between the Government and the people. Ministers are expected to make a sacrifice, and we, as a society, should not be coldly materialistic. To peg Ministers' salaries to the market will transmit wrong values. Reference was often made to other countries which do not pay their Ministers as much, and which have no corruption. These arguments are deeply flawed. They cannot stand the test of logic or an analysis of the facts.

Let me, first, take the point where our approach to salaries is contrasted with that taken by the US and other western countries. It is a false point because the comparisons are misleading. In the US, for example, people are in politics or in the senior civil service for a relatively short period. When they come out, their market value is enhanced. It is what the Minister Mentor called the "revolving door" system. It is not a like-for-like comparison. If we want a honest comparison with the US, then look at areas where public service is a lifetime career. One example is the US judicial service.

It is very revealing to look at the Federal Court System in the US. That system used to attract top lawyers. But years of policy failure in not paying adequate salaries to Judges has resulted in a serious situation, serious enough in the words of the current Chief Justice, John Roberts, to be called "a constitutional crisis" - a constitutional crisis that has arisen because of the lack of political will to pay Judges adequately. Chief Justice Roberts said this in January this year in his annual report on the US judiciary.

The Chief Justice did not mince his words. He considered the issue so important that it was the sole point he made in his report. He made the following points:

Judicial salaries had fallen far below private sector salaries for lawyers. As a result, in fact, they have stopped comparing the salaries of private sector lawyers, and the number of lawyers from the private sector who were coming in as judges had fallen sharply. He said, "It changes the nature of the federal judiciary when Judges are no longer drawn from among the best lawyers in the practising bar." He emphasised the vital importance of a strong and competent judiciary for the well-being of the entire country and the American people. He criticised Congress' inaction in failing to raise salaries in the strongest language that a judge could possibly use. He said Congress had failed for over 20 years to do anything. He called Congress' inaction "grievously unfair". He quoted the National Commission which said that the inaction was "the most egregious example of the failure of federal compensation policies." He pointed out that the budgetary cost of the increase would be minuscule in proportion to the benefit. He accepted that a pay rise would be unpopular, but also pointed out that Congress had a duty, indeed a constitutional responsibility, to make a decision which, even if unpopular, is necessary to promote the long-term good.

What would be the result of inaction? Again, there is no need to guess. The US experience shows what will happen and I quote Chief Justice Roberts, "In the face of decades of Congressional inaction, many Judges who must attend to their families and futures have no realistic choice except to retire from judicial service and return to private practice. The numbers are sobering. In the past six years, 38 Judges have left the Federal bench, including 17 in the last two years. If judicial appointment ceases to be the capstone of a distinguished career and instead becomes a stepping stone to lucrative positions in private practice, the Framers' goal of a truly independent judiciary will be placed in serious jeopardy."

When you do not keep salaries competitive, what sort of people do you attract? Again, I quote the Chief Justice: "Our judiciary will not properly serve its constitutional role if it is restricted to (1) persons so wealthy that they can afford to be indifferent to the level of judicial compensation; or (2) people for whom the judicial salary represents a pay increase."

If we want a truly class-based system of government, or if we want to attract people who will not make it in the private sector, then, yes, go ahead and let the salaries go below the private sector. For a lawyer, being appointed a judge is the ultimate recognition, the pinnacle of professional achievement or as the Chief Justice said, "the capstone of a distinguished career." And, yet, judges resigned in enough numbers for it to be called "a constitutional crisis". That is what will happen if there is too much of a disconnect between public service and private sector income.

Let us not fool ourselves. The public service, whether in the US or in Singapore, will fail to attract good people, and it will lose good people in such a situation. If you want that, then go ahead and quibble about the extra $10.5 million or so that will be paid to the entire Cabinet, an amount which will not even qualify as a single top salary in 2006. Or put it in another way, that is, marginally more than what the two top lawyers in the median income for 2005 were getting. It is almost surreal that there is so much angst and debate over this issue. We need a sense of proportion.

The alarm bells about the low levels of judicial pay have been sounded by others in the US as well. The Financial Times on 5th April 2007 carried a report about competition between New York and London to be the world's leading financial centre. The stakes are high - thousands of jobs, billions of dollars. One of the disadvantages of New York was stated to be its litigation culture. In that context, the Chairman of one of the top US law firms, Mr Cohen of Sullivan & Cromwell, said that part of the problem lay in the quality of the US federal judges. He was quoted as saying, "A very radical idea would be to take the federal judiciary and double the salaries, so you would be able to keep your best judges instead of them being forced to go into private practice."

This is the US which critics of our pay policy frequently cite as a model to be followed. The truth is that there has been a failure of political will in the US to pay adequately. Do not compare with the politicians. That is not a like-for-like comparison.

The politicians in the US will not suffer as a result of such inaction. They will have opportunities to get good compensation often when they are out of office. Former President Bill Clinton gets an average of US$250,000 per speech that he delivers. So does former Secretary of State, Mr Henry Kissinger. People simply do not understand the US system, and do not realise what it will mean to us if we follow that system. Look at Senior Minister and Minister Mentor. If we had the US system, they will be spending their post-Prime Ministerial years giving speeches for money. Minister Mentor could join Kissinger Associates and Senior Minister could join the Carlyle Group. Better still, they could form their own lobby group - call it Lee-Goh Associates. This is no laughing matter. This happens everywhere. They can then lobby the Government they used to lead or open doors in China, India, the Middle East or elsewhere, not on behalf of Singapore, but on behalf of their own corporate clients and for their own benefit. Lee-Goh Associates - what do you think it could pull in in a year? $20-$30 million, much more, no problem.

Do we not think about all this when we make facile comparisons? Is it fantasy? Well, is that not what happens in a country that we refer to as a model to be followed? So, why not here? There is no law against it. It is ultimately Singaporeans who will pay the price if we do not pay our public officials properly.

These are real issues. Chief Justice Roberts and Mr Cohen are serious people dealing with serious issues which go to the heart of the American system. They decry the way American judges are paid. True, we are here debating the salaries of not only our judges but also a broader group, including politicians. But the principle, the rationale, is the same because, in both situations, it is a career choice with a substantial element of public service; and it would be normal to think that when you accept appointment of a senior judge, you put the element of public duty over pay.

In this competitive world, there will be a direct impact on all of us if the best people are not in Government. And in the fierce race to the top, when we are competing with other countries which are bigger and have more resources, it is critical for our future that we have two essential elements:

one, a talented, creative population; and two, the very best in leadership positions. Without either, we will fall short. We could even seriously falter because, in many ways, we are not a natural state. Too many Singaporeans seem to take our stability and progress for granted without a nuanced understanding of our somewhat precarious geopolitical and strategic situation.

We can be more sanguine if we were Monaco, in the middle of a prosperous and peaceful Europe. But we are in Southeast Asia, in a region rife with religious, ethnic and racial tensions and afflicted by poverty. If we leave aside diplomatic niceties, then the truth is that our neighbours do not really love us - and that is putting it mildly. If it was possible, they would make our lives much more uncomfortable. And that is also putting it mildly. It is our task to ensure that it is not possible for them to do that to us.

The natural state of affairs in this region therefore is disorder and tension. It is not peace, progress and stability. We have turned this dangerous state of affairs on its head, and used it for our prosperity. But we have to work with that disorder and work very hard, all the time, to make sure that it does not wash over us. And we have to keep several steps ahead of it on all fronts. The arguments about whether we should pay our entire Cabinet S$10 million per annum more, appear almost absurd when compared with the real issues.

So much for comparisons with other countries. When you deal with policy issues, make sure your arguments are valid. Look at the US, New Zealand, Finland; look at their history, population, culture, their political systems, the type of people they get into Government and then ask yourselves whether direct comparisons make sense.

Now, let me deal with the second point that is often made - that public office involves substantial public service and therefore, there must be a sacrifice. It throws up a number of questions. How do you quantify the sacrifice that is needed? What is the nature of the sacrifice that is needed? Or I will make an even more fundamental point. If you look at how this concept of public service came about, you will see how much it is bound by hypocrisy. This concept was developed at a time when one had to be an aristrocrat to be in power. The somewhat patronising approach was that the aristrocrats had to do their bit for society by taking on political office - Noblesse Oblige .

The truth, however, is more prosaic and less romantic. A friend sent me an extract from the British House of Commons Information Office on British Ministerial Salaries and that document has this wonderful quote from Lord Macaulay about what office holders who came in for public service, under the so-called concept of Noblesse Oblige, did. I quote:

"From the nobleman who held the White Staff and the Great Seal, down to the humblest tidewaiter and gauger, what would now be called gross corruption was practised without disguise and without reproach. Titles, places, commissions, pardons, were daily sold in the market overtly by the greatest dignatories of the realm; in the 17th Century, a statesman who was at the head of affairs might easily and without giving scandal, accumulate in no long time, an estate amply sufficient to support a dukedom."

Office holding in truth meant power and through power, serious wealth. Human nature has not changed much over the years. When you design a system, you do not work on the basis that you will get another generation like our founding generation. You set up a system for bright people with perfectly understandable and acceptable wishes, aspirations and values.

Ms Denise Phua spoke from her heart. I admire the conviction with which she spoke and she said there are people who will be prepared to sacrifice. I agree but that misses the point. Some may be prepared to sacrifice but we cannot take a chance and rely on people making sacrifices in order to come to public service. It is too important. It is the future of Singapore. You cannot rely on people's charity. You have to put in place a system that you know will work and not rely on the good faith alone.

After the 17th Century, the British reformed their system and by the early 20th century, a top Minister like Churchill was earning about 5,000 pounds. I am told that that would be worth about 350,000 pounds in today's terms. That is roughly what our MR4 was. But British Ministerial salaries have not kept pace with inflation. It is probably not politically feasible in the UK. But that does not make it right. As an aside, if you read Roy Jenkin's biography of Churchill, you will see that Churchill also made some money by writing. For example, he received an advance of 8,000 pounds for a book (about half a million pounds now) in the early 20th century, just before he took office. In the year in 1960, President Kennedy was getting US$150,000. The Presidential salaries had kept pace with inflation. The salary would be higher than the US$450,000 that the US President now gets.

So we need to know this concept and the context and the history before we start talking about public service and sacrifice. Historically, there was really no real sacrifice in financial terms and salaries were relatively high and, when they were low, there were other significant advantages. Through a lack of political will, over time, public service salaries have fallen in many countries. Why do we think that such an approach is a correct one or that it will work for us?

When we talk about sacrifice, ask - what is the logic behind the idea of sacrifice? Why do we demand financial sacrifice from those going into public service? Is that the most sensible way of showing one's commitment to one's country? It is surely more logical to make sure that money is a neutral factor, ie, it should neither be an attraction nor a disincentive. Qualified people should be able to make the choice of public service based solely on whether they have the ability, character and commitment to make a difference to society.

Further, when you refer to idealism and sacrifice, the question also is - how much sacrifice is enough? Take the young person whom I referred to earlier, who is about to embark on a career. He can go into public service or he can go and become a lawyer or an accountant with an expectation that he will get S$4 million or more a year; or start a business with the possibility of eventually earning tens of millions. And we are talking about the very best - the people who know that if they start out on a career, they will reach the top. If he chooses the public service and if he is paid S$2 million a year, he will, nevertheless, forgo S$2 million a year over 10 to 15 years. That is a S$20 million to S$30 million sacrifice. Is that not enough? How many successful people in the private sector contribute S$25 million to charity? I will say, let us get real.

The problem, of course, is for the bulk of the population, it is difficult to comprehend this sort of numbers. So, it is easy to make political points, as Mr Low sometimes makes, but we have a greater duty to look at the market from which we are sourcing the talent and saying what is it that we need to do in order to get them. Money should not be an attraction nor should it be a disincentive.

Yes, Ministers are public servants. Yes, they have to be much more than the equivalent of top private sector professionals. But taking the arguments made by the critics at face value, a Minister has to have all the brain power and analytical qualities and energy of a top private sector performer; and on top of that, he has to also have a strong sense of public spiritedness, ie, they should be more capable and more all-rounded than private sector high fliers. Is that an argument or is that a logic for saying that Ministers then should get less than private sector top performers?

The central thread underlying all these arguments against a salary increase is a breezy assumption: that we are in a steady state, there is a lot of talents available and people will cheerfully give up S$25 million over a 10 to 15-year period for the sake of public service. And that even if the best do not come into public service, nevertheless, we will somehow carry on prosperously, like various European countries. I wish such a "blue sky" scenario is real. But an hour's plane ride will tell you otherwise.

Then, there are number of other points made: is the formula correct? Are we looking at too small a sample? The private sector winners will change every year, whereas the Ministers remain the same, and that means the Ministers will win every year, and so on.

Well, Ministers are at the apex of the system. You have to compare them with those at the apex of the private sector. Any other comparison will be meaningless. If you want the very best - then the comparisons must be with the very best. In this context, I would like to refer to what my colleagues, Mr Hri Kumar and others, have said - that senior partners, for example, of major professional firms are equity owners and take an enterprise risk and that their income is different from salaries. In theory, that may be so but, in truth and in reality, the fact is if you are bright and you are very good and you start out in a professional firm, you will reach the top and along the way, you accumulate enough equity. So, sometimes, the risk is overstated. The test is that there is really a lot of room at the top. You just have to be good enough. And if you are good enough, you will overcome all these risks. Therefore, the best and most suitable approach is really to compare with the top performers, as long as the Minister is performing.

Madam, I will end with another quote, again from Chief Justice Roberts. He said: "Reason commands action." He said that in January 2007. For us as well, reason commands action. Inaction, due to lack of political will, will be a failure - a failure to do the right thing.

The critics of this policy are however right on one thing. Public sentiment is not positive on these changes. It will strain the social compact. And I do not believe that the ground sentiment is going to change anytime soon. So this is one of those policies on which political capital has to be spent. But spend it we must, for the longer-term good of this country. And we have to do our best to bring across the nature of our society, the risks we face and how we are different from other more natural countries, to explain and, hopefully, eventually convince the ground. It will take time. [ Applause. ]

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