LOAN BY GOVERNMENT TO THE SINGAPORE IMPROVEMENT TRUST

12.00 noon.

The Financial Secretary (Mr T. M. Hart): Mr Deputy Speaker, Sir, I have His Excellency the Governor's authority to move,

That this Assembly approves of the loan by the Government to the Singapore Improvement Trust of the sum of $44,737,000 at an interest rate of 5¼ per cent per annum repayable over a period of 60 years, the repayments to be made by half yearly instalments based on the annuity method and together with repayments of previous loans to be secured by a legal mortgage of all the immovable properties belonging to and to which the Trust holds legal title and by an equitable charge of all the immovable properties belonging to and to which the Trust holds equitable title for the purposes of enabling the Trust to meet the cost of constructing buildings required for carrying out the purposes of the Singapore Improvement Ordinance.

Sir, this motion seeks the approval of the Assembly for a loan of $44,737,000 on the terms and conditions specified in the motion to the Singapore Improvement Trust for Housing Programme No. 8.

My friend and colleague the Minister for Local Government, Lands and Housing has already described in some detail the scope of Programme No. 8. It is, as I said, the most ambitious programme yet drawn up by the Singapore Improvement Trust in its capacity as the Housing Agent of Government. I do not think that I need add to the Minister's description. My task is to describe the financial implications of the programme.

As hon. Members are aware, the Government has already undertaken to provide funds for seven Housing Programmes. Details of these undertakings are given in Appendix F of the annual Estimates for 1957 and a summary is given on page 2 of the White Paper on Housing Subsidies. These undertakings amount to $95.9 millions against which $71 millions have so far been advanced. Programme No. 8 will increase Government's total commitments to $140 millions of which $70 millions still remain to be advanced. This, of course, is not the limit of Government's liability in respect of housing. With population increasing at its present rate and the need for a large-scale slum clearance becoming more and more compelling, it is difficult to put a limit to Government's liabilities in this respect. In the revised development plan to which reference was made during the Budget debate, allowance was made for an expenditure of $115 millions on housing over the five year period from 1958 to 1962 and the expenditure in subsequent years will no doubt be of the same order.

It will be clear from these figures that the supply of public housing presents a financial problem of considerable magnitude and hon. Members, no doubt, wonder where the money is going to come from. Here again, I must refer to what I said when introducing the Supply Bill in November. Singapore's most urgent needs for capital development over the next five years are estimated at $570 millions. This total includes some $226 millions for general development, $235 millions for the City Council and other agencies and $115 millions for housing. To meet this expenditure of $570 millions, it is estimated that, subject to certain conditions being fulfilled, $280 millions can be obtained from reserves and contributions from the revenues of Government and the other authorities concerned and $290 millions from loans including a special loan for the electricity undertaking of the City Council. The conditions which must be fulfilled are briefly as follows: (a) that Government revenue is increased by stages to yield at least an additional $50 million by 1959, thus enabling larger contributions to be made from revenue to development; (b) that the City Council and other agencies can make substantial contributions from their revenues towards the cost of their development projects, as they have done in the past; (c) that a special loan can be obtained for further electricity development and (d) that local capital resources are mobilised to the full.

I think these conditions can be fulfilled. The measures of taxation introduced this year will go a considerable way to increasing Government revenue by the required amount and I have little doubt about the capacity of Singapore to provide the balance required. The City Council and other agencies must continue to make substantial contributions from revenue to development and I hope that the proposals which we will make for a loan for a new power station will meet with acceptance. The proposals for a national savings campaign and other steps to mobilise local capital are under active consideration at the present time. Members will hear about them in due course.

There are, however, other conditions which must be fulfilled. Confidence in Singapore must be built up and maintained. We must have peace, security and freedom to go about our business without fear of civil disturbance, provoked by subversive interests. The rule of law must be maintained. Reason must be introduced into employer-employee relations and the rank and file of trade unions must learn to recognise and to reject the malevolent influences which have hitherto used them for their own ends.

If these conditions can be fulfilled, there is no doubt that all the funds which we require for development will be obtained, and Government will be able to meet its obligations in the sphere of housing. If these conditions are not fulfilled, then I am afraid that we will not be able to do so.

Now, as regards the terms and conditions, the rate of interest proposed for this loan is 5¼ per cent. This is the same rate of interest as was agreed in the case of the loan to the Singapore Telephone Board which was approved at the last sitting of the Assembly. It is about the rate which we should probably have to offer if we wished to float a loan on the Singapore market at the present time. The rate of interest is approximately that of current market rates and it follows the policy which Government has adhered to since it first started advancing money to the Singapore Improvement Trust. I am sure that it is the correct policy, particularly as the time has now come when money will have to be borrowed from the public in order to advance it to the Housing Authority. The loan will be repaid over a period of 60 years, this being the period taken not only here but in other countries as the period of useful life for a permanent building for loan repayment purposes.

Repayment will be by equal bi-annual instalments of principal and interest calculated on the annuity system. Repayment in this way is preferred by the Singapore Improvement Trust to the alternative of equal instalments of principal with interest on the balance of the loan outstanding. The last four loans are repayable in this way.

As in the case of previous loans, the loan will be secured by a legal mortgage of all the properties to which the Singapore Improvement Trust has legal title and by an equitable charge over all properties to which the Trust holds equitable title. Sir, I beg to move.

Inche Abdul Hamid Bin Haji Jumat: I second the motion.

Question proposed.

12.09 p.m.

Mr Lee Kuan Yew: Mr Deputy Speaker, Sir, the reason given by the Hon. the Financial Secretary, that the rate of interest is 5¼ per cent because we shall be borrowing the money on the Singapore market and re-lending it to the Singapore Improvement Trust, may be a perfectly logical financial reason, but it does not answer this question. This Government is committed to subsidise housing. In other words, it is committed, whatever the form of the subsidy, to provide housing below the normal economic rates. If the Government continues this practice which it pursued in the past of just borrowing money and acting as the guarantor and re-lending it to the Singapore Improvement Trust on mortgage, in effect, there is no housing subsidy. People pay economic rents to defray both the cost of management and the cost of the interest rate. Now, we were told by the Minister for Local Government, Lands and Housing that there is going to be a review of the rents of the Singapore Improvement Trust flats and houses - to redeem his election pledge. However we juggle between the rents paid by the new houses and the low rents paid on the prewar houses or the earlier built houses increasing the rents for the prewar houses and decreasing slightly the rents for the postwar houses, the fact remains that the total collection of rents must be sufficient to pay cost of management and the interest rate. [Interruption.] If I am wrong, I shall be delighted to be shown where I am wrong.

Mr Deputy Speaker: Order. I will suspend the sitting now.

It will be resumed at 2.30 p.m.

Sitting accordingly suspended at 12.12 p.m. Sitting resumed at 2.30 p.m.