Committee

Mr Speaker: Committee stage, what day?

Mr Lim Yew Hock: Now, Sir. Sir, I move,

That this Assembly will immediately re solve itself into a Committee on the Bill.

Mr Stewart: Sir, I second it.

Question put, and agreed to.

Bill considered in Committee.

[Mr SPEAKER in the Chair]

11.40 a.m.

Clause 1 ordered to stand part of the Bill

Clause 2-

The Chairman: Mr Minister, in sub-clause (1) (a) there is the expression "expressed or implied". I recollect that when the Clerks Employment Bill was considered, the expression used there was "express or implied".

Mr Lim Yew Hock: Yes, Sir, in this instance it should also have been "express or implied".

The Chairman: That will be amended as a typographical error.

Clause 2 ordered to stand part of the Bill.

Clauses 3 and 4 ordered to stand part of the Bill.

Clause 5-

Amendment made: In page 4, line 29, to leave out the fullstop and insert a semi-colon. - [Mr Lim Yew Hock].

Mr Lim Yew Hock: Sir, I move,

In page 4, line 42, to leave out "(2)" and insert "(3)".

This is a drafting error, Sir.

The Chairman: There are, I notice, two other similar amendments, Mr Minister.

Mr Lim Yew Hock: Yes, Sir.

Amendment agreed to.

Further Amendments made:

In page 4, line 44, to leave out "(3)" and insert "(4)". -[Mr Lim Yew Hock].

In page 5, line 4, to leave out "(2) and (3)" and insert "(3) and (4)". [Mr Lim Yew Hock].

Clause 5, as amended, ordered to stand part of the Bill.

Clauses 6 and 7 ordered to stand part of the Bill.

Clause 8-

Amendments made:

In page 6, line 25, to leave out "(2)" and insert "(3)". - [Mr Lim Yew Hock].

In page 6, line 40, after "Fund", to insert "and". - [Mr Lim Yew Hock].

Mr Lim Yew Hock: Mr Chairman, Sir, I move,

In page 6, lines 42 to 43, to leave out "and provided further that any" and insert "but no".

This is a drafting improvement.

The Chairman: The next amendment, Mr Minister, is connected?

Mr Lim Yew Hock: Yes, Sir.

Amendment agreed to.

Further Amendment made: In page 7, line 3, to leave out "not". [Mr Lim Yew Hock].

Clause 8, as amended, ordered to stand part of the Bill.

11.45 a.m.

Clause 9-

Mr John Ede: Sir, I beg to move,

In page 8, lines 25 to 28, to leave out from "amount" to the end and insert "of every contribution paid in his respect from the date of receipt of every such contribution:".

As I said just now, Sir, the sub-clause as it stands means that the Board will only pay interest on the amount in the contributor's account on the 1st of January of each year and will not pay any interest on the next 12 months' contributions. I have my own statement of account in the Central Provident Fund Board with me here. On the 1st of January, 1956, the amount in my account was $250. On the 31st of December, 1956, the amount was $900, but the interest earned is two and a half per cent on $250 only, namely, $6.25, making the total amount in my account on the 1st of January this year $906.25. Now if my contributions and those of my employer had been put in the Post Office Savings Bank each month in 1956, so that the two and a half per cent interest would run from the date of paying in each contribution, the amount in my account would be more than $906.25 by something like $8.

Let me carry the argument one step further to make this situation still clearer. As I have said, my account stood at $906.25 on the 1st of January this year. It will be this sum which will earn two and a half per cent seven months from now on the 31st of December, 1957. In other words, the $50 per month which is being paid into my account by my employer each month of this year is bringing me no interest whatever, but is being invested by the Board at something like six or seven per cent. And this goes for every single one of the thousands of compulsory contributors to the Fund, most of them much more in need of the extra interest, which is their right, than I am.

This Ordinance, as it stands, compels the people of Singapore to lose valuable savings in comparison with what they could get from the Post Office. That is why we propose this amendment. The Central Provident Fund Board holds to the contention that it is protected by section 6 (3) of the principal Ordinance which reads:

"Interest shall be payable on contributions to the Fund at such rate per annum, not being less than two and one half per centum, as the Board may declare after and in respect of each year ending on the thirty-first day of December:".

The Board's interpretation of the word "annum" with reference to the interest rate apparently precludes the application of the interest provisions to sums which have not been in the hands of the Board for one whole year - that is, whether a contribution is paid in on the 15th of January or the 15th of December, it is not entitled to interest. I do not think that this argument can be supported. If the Board were to invest any of its own funds at six per cent per annum, it would feel considerably aggrieved if the borrower repaid the Board its capital without interest 364 days later and contended that "annum" meant "year". This interpretation of the word "annum" makes meaningless the proviso to subsection (2) of section 11 of the principal Ordinance which reads as follows:

"Provided that where the authority of the Board is granted under section 12 of this Ordinance for the withdrawal from the Fund of any sum of money standing to the credit of an employee, the amount of interest due from the first day of January of the year in which such authority is given to the date upon which it is given shall be calculated at two and one half per centum per annum and credited to the employee before such withdrawal notwithstanding that the rate of interest subsequently declared by the Board in respect of that year may be greater than two and one half per centum per annum."

To say that in the case of withdrawals interest will be made at not more than two and a half per cent from the 1st of January until the date of withdrawal, when you have already ordained that such interest is not payable, is of course sheer nonsense: yet here we have a Labour Front Coalition Government seeking in this amending Bill to retain this proviso and yet not to amend the subsection to allow interest to accrue from the date of each contribution. This makes no sense at all.

The argument which the Board puts up, to which the Chief Minister has referred, is that the cost of administration would be too high. We on this side of the House are not prepared to accept that unless we are supplied with facts and figures to support it. It is common knowledge that the Board is investing its funds at six or seven per cent, whereas it is paying out interest at only two and a half per cent. When on top of that the Board is acquiring for itself considerable capital interest-free, a proper explanation from the Minister is clearly called for. I hope that we shall be told what income at, say, a minimum of six per cent is received on the contributions paid in during one calendar year and how this compares with the cost of administering the Fund. The balances already accumulated should be enough to pay for the extra administrative costs, if the General Post Office can do it in the case of post-office savings, why not the Central Provident Fund Board?

Now the Government will probably try to answer that the Board intends to do better than the Post Office and raise the interest rate to three per cent when allowed to do so under section 6 (3) (b) of the principal Ordinance, which reads:

"the Board shall not declare a rate of interest exceeding two and a half per centum per annum until the assets of the Fund valued at the current market price exceed its liabilities by ten per centum;";

but that is one of the airy promises of the future. Who is to know that once the condition in this paragraph is fulfilled, there will be enough excuses put forward that three per cent cannot be entertained because the funds will no longer be invested in six per cent, or the cost of living has gone up, or some such else? Whatever the excuse, the fact remains that all the contributors to the Fund have been denied the interest on their 1956 contributions and their 1957 contributions to date, to which they were entitled under this Ordinance as it was originally drafted: and that the Board and the Government are hiding behind the phrase in section 11 (2) of the principal Ordinance "in such manner as the Board may direct". That is a dangerous phrase which gives far too much power to a statutory corporation and enables it to snap its fingers at the public and the Legislature.

The Board should act as trustees for their contributors and the Government must see to it, if they are to justify the compulsory savings scheme in the eyes of thousands of working people, that the terms offered are at least as good as those offered by the Post Office, and for the first two years the people have been forced to contribute to something which is less good.

Mr Lim Yew Hock: Mr Chairman, Sir, one would feel that what the Member for Tanglin has said is as a result of what the Labour Front Coalition Government has done. I said on the Second Reading that this Bill was being claimed by the then Progressive Party as their masterpiece in the interests of the workers of Singapore. I sat on the Select Committee on the Bill not as a Member of the Progressive Party but as a Member of the Labour Party, and as the Member for Tanglin was not there on the Select Committee, he is therefore not aware that this matter was discussed at some considerable length and the decision arrived at was that we should try out the operation of this new venture and leave it to the Central Provident Fund Board, which would be entrusted with the running of this Fund, to discharge its responsibilities under the provisions of the law.

It is easy, Sir, to say that more and more money should be paid to contributors, but the Board has to pay the money out of interest earned as a result of investments and it can only pay out of its profits. There is a guarantee of two and a half per cent and to date the Board has been operating on a deficit. At the beginning of 1956, I am informed that the deficit was $540,996. At the beginning of 1956 the total contributions amounted to $9,075,065, whereas at the close of the year the amount standing to the credit of contributions was $34 million. As a result of the operation during the year 1956, the net profit earned was $332,329, and on the basis of payment of interest as decided upon by the Board, this would mean a distribution of $223,005, leaving a balance of $109,324 to reduce the opening deficit of $540,996. The deficit as at the beginning of this year is therefore $431,672. I am informed that the Board hopes that by the end of this year this deficit will have been totally reduced so that in later years the interest to be paid on contributions, even on the basis of what the Board has decided, will be more than two and a half per cent. It is not correct to say that it was wrong for the Board to be given such wide powers. The powers are given to the Board and it can only exercise them within certain restrictions, and those powers and those restrictions were in the principal Ordinance - the product of the Progressive Party. If the amendment proposed by the Member for Tanglin is to be accepted, as I said on the Second Reading, Sir, it will mean extra clerical assistance at least to work out two and a half million accounts.

12 Noon.

If at each stage of the contribution interest is to be paid on that basis, we know that the money that comes into the Fund from the employers does not come in at the beginning of the month, but it keeps on coming in during the course of the month: and employers have up to 21 days to remit the money to the Central Provident Fund Board before they become liable for interest. Now if one were to stretch what is being sought by the amendment, it would not only mean two and a half million accounts, but it would mean very, very much more. Is this worth it in the interests of the contributors concerned? The money is in a trust fund. It is their money. No one can take it away. The Government has no right to take it away. It is vested in the Central Provident Fund Board which has discretion to use that Fund in the interests of the contributors. In the light of what I have explained, Sir, I find it difficult to accept the amendment.

Mr Lim Choon Mong: Mr Chairman, Sir, credit was given to the Progressive Party for bringing forth this Bill, and I think if it had been taken through by the Progressive Party then you would have to give it greater credit, because that Party never acted on impulses. It would probably have given a great deal of thought to those clauses which the Member, who sat on the Select Committee as a representative of the Labour Party and who is now the Minister for Labour and Welfare, has overlooked as being not important. They would have had a thorough investigation.

I cannot agree with the statement by the Minister that if the contributors were to be paid more money, then more and more money would have to be paid to them. I say they must be paid - it is their right; it is their money; it is not our money. If we make a profit on it, we are making a profit on the money contributed by a section of the people whom we say we are out to protect. The figures which the Minister has given are most interesting. The Board operates on a deficit of $540,996. Sir, sometimes when we have a little bit of money to spare, we bring it to the Post Office and they accept it and immediately credit us with three per cent interest. If we have more money to spare, we go along to a bank and the banker says. "Yes, we welcome your money on a three-month or a six-month basis, and we will pay you three and a half per cent." If we pay that money in on a current account with some banks, we will still get some interest on that money. We can deposit and draw out the money as we like. There must be a lot of clerical work involved, and yet commercial firms seem to be able to do much better. It gives me the feeling that whatever Board the Government sets up, is always run inefficiently. If the Government wants to run it on a very economical basis, I suggest it would be best to deposit every account in the Post Office Savings Bank, and there you are, you save all your clerical work. The Post Office Savings Bank will give you three per cent. The Central Provident Fund Board is giving the contributors only two and a half per cent.

1956 is a very interesting year. The Board had a net profit of $332,000. That money was money earned by the Board from the money deposited by the people, and to put it away and not give it to the poor people - those earning under $200 a month pay no contributions at all - and say, "I will save it up for you," is, I think, open to query. I ask, "Save it up for whom? Save it up for the Government to invest in other things so that it has more money to play about with." What little money the people contribute should bring them the maximum amount of interest. The Government should not take advantage of forcing people to pay into their Fund and make money out of it. That is absolutely wrong.

Then there is the excuse that if you are going to pay them as they deposit the money, you will have extra clerical work. I cannot understand how that can hold water. If you operate a small number of accounts, you need less clerical work, but you have less business, you have less money to invest, and you have less profits. But if you have a large number of accounts, you operate a big concern and you can cut down overhead expenses, if the argument were to be true that if you have a big organisation and you cannot pay more, but you must pay less because it involves greater clerical work, then all the big businesses should fail. You must open up small shops all over Singapore and you will make much more money than the big firms. But that is not the case. Usually we find big businesses swallowing up small ones because they can cut down on overhead expenses. It is not a good argument to say that if extra clerical work has to be called in, the net result will be less profits. The Post Office Savings Bank can do that. The banks can do that. The insurance companies can do that with even a lesser volume of business. Why cannot a Government body do that?

The wide powers referred to in the amendment is opposed by the Government on the ground that it is the product of the Progressive Party. I would like to remind the Government that even with the Education Bill and many other Bills placed before this House during the last sitting we are against such wide powers. This is a democratic country. We do not want to produce dictators. I think those persons who are going to handle business for the people must be servants of the people and given just sufficient powers and not over-riding powers. Sir, I support the amendment moved by my colleague.

Mr Lim Yew Hock: Mr Chairman, Sir, a little knowledge is indeed a dangerous thing! What I said, Sir, was not to ridicule the Progressive Party for having introduced the Bill. I gave them due credit. I said this is their Bill. It is a good Bill. If it had been a bad Bill, the Labour Front Coalition Government would not have put it into operation, but what we did was to improve the Bill by not asking people drawing up to $200 to contribute. That was all, and that was introduced because of opposition worked up by people whose line of reasoning had been the same as that expressed by the Member for Serangoon: the Government is cheating the people; the Government is using this money for its own good. What is all this? If you want to pay interest, you have to pay it with the money you have earned, even in a business venture where you earn very much more than from investing in gilt-edged securities. When you begin a business, you will not be able to pay handsome dividends for the first few years. In the same way, the Central Provident Fund Board cannot pay interest which can be attractive to contributors. It was because of that that the Progressive Party felt that there should be a guarantee of two and a half per cent. Had there been no such guarantee at all, hon. Members would certainly have realised that it could not be two and a half per cent interest at all for still some time to come. I gave a profit of $332,329. On that basis, paying interest at two and a half per cent on the total contributions at the beginning of 1956 will take away $223,005. If we were to pay it at the end of the year on $34,101,466, it would mean a deficit of $520,207. You will have to find $629,531 more in order to pay two and a half per cent on $34,101,466 at the end of 1956. If you work out two and a half per cent on $34,101,466, you will get a figure of $852,536. With only $332,329 profit there will be a deficit of $520,207 and this, if added to the deficit as at the beginning of 1956, would mean that the Board would be in the red for $1,061,203. That is all. The statement of accounts for 1956 will, I think, soon be tabled and when hon. Members see that statement, it will be time for them to criticise with the information which will be at their disposal. I do not know what the figures are other than those which I have given, and I suggest that the Member for Serangoon, before passing judgement on whether the Board has badly handled its work or has in fact handled it quite well, await the Report of the Central Provident Fund Board which should be in his hands in the not distant future.

Mr John Ede: Mr Chairman, I would like to point out to the Minister that this Bill, as he himself says, though originally drafted and passed by this House in 1955, is a good Bill, but the point is that it has been wrongly interpreted by the Central Provident Fund Board, and I think there are two points which bear this out.

By wrong interpretation, I mean that it was understood, when the Bill was framed in 1953, that interest would be paid on contributions from the date of paying in those contributions and not only once a year on the 1st of January. I would draw the Minister's attention to section 6 (3) (a) of the principal Ordinance:

"Interest shall be payable on contributions to the Fund at such rate per annum...:

Provided that-

(a) no such interest shall be payable in respect of the year during which this Ordinance comes into force;".

Now there would be no point in having that proviso in at all if the intention of the Ordinance was that there should not be interest paid on contributions from the date of paying in those contributions. In point of fact, that is precisely what has happened - no interest was paid until the 1st of January. If that was the correct interpretation of the Ordinance, this particular proviso would be entirely unnecessary. The fact that it is there points to the fact that the intention was that interest should be paid from the moment of paying in contributions.

12.15 p.m.

The other pointer in the same direction regarding the intention of the original Bill, to which I am glad the Minister gives credit to the Progressive Party, is the proviso which I mentioned earlier. Mr Chairman, the proviso to section 11 (2) of the principal Ordinance, and there you have the very same thought and idea running through the Ordinance - that, in cases of withdrawal, interest shall be paid for the period of the year up to the time the withdrawal takes place. An attempt is being made to correct the situation now so that the Board can interpret this Ordinance in the way in which it has in fact interpreted it, namely, only to allow one interest payment on the 1st of January, by the Government amendment before us, that is by calling this a cleaning up of an ambiguity. It is not. It is trying to put straight the interpretation of the Board for its entirely unjustifiable interpretation; and that is the point, that through this mis-interpretation of the original intentions of the Ordinance, the contributors in 1956 and 1957 to date have been denied the interest on their contributions to which under this Ordinance they were entitled. The case seems to me not to have been proved that the administration costs would be too high to allow of the Ordinance being properly interpreted and so intended, unless facts and figures are given with which to convince us. At the moment, Sir, we are not convinced.

Amendment negatived.

Clause 9 ordered to stand part of the Bill.

Clauses 10 and 11 ordered to stand part of the Bill.

Clause 12-

Mr Lim Yew Hock: Sir, I beg to move,

In page 9, lines 29 to 30, to leave out "appointed in accordance with" and insert "nominated under".

Sir, subsection (5) which appears immediately above this uses the word "nominate", and the amendment proposed is to improve the drafting.

The Chairman: I take it the next two amendments. Mr Minister, are allied?

Mr Lim Yew Hock: They are, Sir.

Amendment agreed to.

Further Amendments made:

In page 9, line 45, to leave out "appointed in accordance with" and insert "nominated under".- [Mr Lim Yew Hock].

In page 10, line 4, to leave out "appointed" and insert "nominated"-[Mr Lim Yew Hock].

Clause 12, as amended, ordered to stand part of the Bill.

Clauses 13 to 20 inclusive ordered to stand part of the Bill.

Mr Lim Yew Hock: Mr Chairman, Sir, I beg to move, "That the Bill, as amended, be reported to the Assembly."

Question put, and agreed to.

Bill reported, with Amendments.

Third Reading

Mr Speaker: Third Reading, what day?

Mr Lim Yew Hock: Now, Sir. Mr Speaker, Sir, I beg to move, "That the Bill, as amended, be now read the Third time."

Mr Stewart: Sir, I second it.

Question put, and agreed to.

Bill, as amended, accordingly the read Third time.

Mr Speaker: I think this is an appropriate time to suspend. I will take the Chair again at half-past two.

Sitting accordingly suspended at 12.22 p.m. until 2.30 p.m. Sitting resumed at 2.30 p.m.