APPROPRIATION BILL

10.30 a.m.

First Reading

The Financial Secretary (Mr T. M. Hart): Sir, I beg to introduce a Bill intituled "An Ordinance for making provision for estimated financial requirements for expenditure out of the revenues and other funds of the Colony for the year 1958."

Bill presented and read the First time.

Second Reading

Mr Speaker: Second Reading, what day?

Mr Hart: Now, Sir.

Mr Speaker: Are printed copies of the Bill and the Estimates available for the use of Members?

Mr Hart: Copies have been handed to the Clerk, Sir, for prior circulation to Members. There are also copies available on the Table for Members who have not brought their copies.

Mr Speaker: Please proceed.

Mr Hart: Sir, I have to move, "That the Bill be now read a Second time."

Sir, it is customary, before presenting the Budget for any particular year, to review the events of the preceding year, in so far as they affect the financial and economic position of the Colony, and to give some idea of how the estimates of revenue and expenditure are likely to be fulfilled.

1957 has been a year of great-

Mr Speaker: Order. It is, I think, necessary for the Governor's recommendation or consent to be signified.

Mr Hart: I beg your pardon, Sir, I have His Excellency the Governor's authority to move the Second Reading.

Mr Speaker: Please proceed.

Mr Hart: As I was saying, Sir, 1957 has been a year of great significance in Singapore. Constitutional problems have been settled in an atmosphere of reason and friendliness which augurs well for the future. The Singapore Citizenship Ordinance has become law. The new Local Government Ordinance has been approved. An excellent understanding has been established with the Government of the Federation of Malaya. In the field of labour relations, there has been less tension between employer and employee, and labour disputes, strikes and consequential losses of pay and working time have been far less frequent than in the recent past. With the help and co-operation of all political Parties, great progress has been made towards settling the vexed question of vernacular education, although we must face, in consequence, a much heavier bill to carry the new policy into effect. A cautious and common sense approach to problems in the economic field has commended itself to observers all over the world. Most important of all, however, there has been a return of confidence in the future of Singapore. It would be idle to deny that the events of 1955 and early 1956 did much to destroy the feeling of stability, security and confidence which is vital for the existence of Singapore as a centre of world trade, services and communications. It is important that this growth of confidence should be maintained.

Not the least important event of the year has been the achievement of independence by the Federation of Malaya. This has caused as much pleasure in Singapore as it has happiness in the Federation. It has, of course, given rise to certain problems. It has necessitated an examination of existing Pan-Malayan arrangements in the economic and monetary field against the background of the Federation's new status as an independent state. Existing arrangements for the issue and control of currency, banking, foreign exchange control, import and export control and certain aspects of fiscal policy, all of which raise most important issues, have had to come under review. It would be inappropriate to deal with these matters in detail at this particular time. They are, as it were, sub judice and must be studied against the background of the very natural wishes of a sovereign state to exercise sovereign powers. At the same time, while underlining this Government's sympathy with these feelings and aspirations, I hope that it will not be misunderstood if I express some general thoughts about these matters. For close on a hundred years, Malaya and Singapore have developed and grown up in partnership. As the production of rubber and tin has expanded in Malaya, so have the services supplied by Singapore in the field of marketing, banking, insurance, transport and communications increased. As the demands of the growing population of Malaya for consumer goods have multiplied, so has the capacity of Singapore to meet them quickly and competitively grown. During this period, the ramifications of commerce and industry have spread over the whole peninsula regardless of geographical or constitutional boundaries. The economies of the two territories have become complementary. Common policies have been followed not because they have been dictated but merely because reason, experience and commonsense has indicated the desirability and wisdom of a common approach in the economic field. The results of this partnership have been quite outstanding. By their joint efforts, the two countries have achieved a well-being and prosperity which is the envy of all their neighbours. With regard to the future, reason, experience and common sense suggest that this partnership should be continued if the two countries are to gain the maximum advantage in the economic field, and to develop and prosper in the manner in which they have done in the past. When I speak of partnership I am not talking in constitutional terms but merely in terms of full economic co-operation. I mean a free association of two partners whereby their individual resources and skills are used jointly for their mutual advantage in matters of mutual concern. There need be nothing hard or fast about such an association. It need subsist just as long as mutual self-interest demands. It calls for no more machinery for consultation and agreement on matters of policy than exists at the present time. It would be hoped that it would continue for as long as the two territories remain apart because it seems certain that any relationship short of such a partnership could only be to the disadvantage and detriment of both.

As far as trade generally is concerned, 1957 has perhaps not been quite as good a year as 1956 although it has not been a bad year by any means. The value of total trade is likely to be maintained but imports tend to exceed exports and it is probable that there will be a fairly substantial adverse balance of trade at the end of the year. The gradual decline in the price of rubber has already had an effect on the economy and traders are finding it difficult to maintain their turnover. On the other hand, there are one or two encouraging features. Despite a deterioration in conditions in Indonesia, there has been some slight improvement in trade with that country. Exports to Indonesia in particular are showing an increase over previous years.

As one would expect against this background of returning confidence and prosperity, revenue has remained reasonably buoyant. Details of the revised estimate of collections are given in the pages of the Draft Estimates which are devoted to revenue and comments are made in the Memorandum which accompanies the Draft Estimates. I will not go into great detail at this time but merely endeavour to draw attention to main points.

The original estimate of revenue was $235.9 million and it seems likely that $235.7 million will be collected.

The revised estimate of collections under Class I is $186.9 million compared with the original estimate of $193 million. The main shortfall is under Income Tax. $68.5 million was estimated but only $65 million is likely to be collected. This shortfall reflects a slight falling off in the profits of smaller companies in 1956 as compared with 1955. It also reflects the effects of Malayanisation in the Department of Income Tax. A number of experienced income tax officers have left and their places have not yet been filled by officers with the same degree of experience. As a result, there has been a slight slowing up in the work of the department, and assessments have fallen slightly into arrears. This decrease in efficiency will only be temporary. Arrears of assessment and collection will be caught up.

Tobacco also shows a shortfall of about $5 million, the revised estimate being $39 million as against the original estimate of $44 million. There are a number of reasons for this shortfall. A certain temporary decrease in consumption was to be expected as a result of the price increases resulting from the increase in duty imposed last November. This has been aggravated by recent medical reports on the possible effects of excessive cigarette smoking. There has been an increase in smuggling as a result of the increase in duty. Exports to Rhio have increased since November last year and considerable quantities of cigarettes are brought back into Singapore under cover of darkness, despite the efforts of the Customs Department to prevent the traffick. In this connection, I should like to pay a tribute to the officers of the Preventive Branch of the Customs who, night in night out and often in circumstances of great discomfort, patrol the sea approaches to Singapore and wage a constant war against the smugglers. Another reason for the decrease in collections is the fact that, under the protection of a wide differential in duty, local manufacturers have made certain inroads into the monopoly of imported cigarettes. It is unfortunate that this has not been offset by any marked increase in local employment. It is thought, however, that these limiting factors will be temporary phenomena and that consumption will return in due course to its previous level. The collections of duty on liquors and petrol are likely to exceed the original estimate by fairly substantial amounts. The collections of entertainment duty continue to mount and the yield on other items of taxation imposed in 1956 appears likely to equal if not exceed the estimate.

The collections under the other Classes of Revenue seem likely to exceed the estimate. Gains should counterbalance the shortfalls on Income Tax and Tobacco. As I said earlier, the revised estimate is only a little short of the original estimate and it may in the end exceed it.

Turning now to expenditure, it will be remembered that the original estimate was $254 million, and it will be seen from pages 15 and 16 of the Draft Estimates that it is likely that actual expenditure in 1957 will amount to about $242 million. It should be noted, however, that this total includes a sum of $9 million in respect of compensation under the Malayanisation Scheme. If this sum is excluded - it is, I think, a fair charge on surplus funds since it will be recouped by savings on expatriation pay and passages over a period of years - what might be called "normal" expenditure will amount to about $233 million and there will probably be a small surplus of revenue over actual normal expenditure at the end of the year.

As will be seen from pages 15 and 16 in the Draft Estimates, the revised estimate of expenditure in the case of a very large number of Departments falls below the original estimate, usually by small amounts. In the case of several, however, the under-expenditure is likely to be considerable.

The main under-expenditure again appears under Education. Here actual expenditure is likely to fall short of the estimate by about $8 million. About half of this will be in respect of personal emoluments. Expenditure on Defence Services and Medical and Health Services is likely to fall below the original estimate by about $3 million in each case, again mainly due to difficulties in filling vacant posts.

This year, I propose to comment on the Development Estimates for 1957 and 1958 after the Ordinary Estimates have been dealt with. All I will say at this stage is that expenditure has again fallen considerably short of the estimate, and that there is likely to be a substantial balance left in the Development Fund at the end of the year.

Turning now to the financial position at the end of 1957, attention is invited to the Statement of Assets and Liabilities which appears on pages 6 and 7 of the Draft Estimates. It will, of course, be appreciated that this Statement was drawn up in September and that there will be numerous amendments in matters of detail by the time the final accounts are made up.

Assets are estimated at $153 million, Liabilities at $81 million, and the General Revenue Balance at $72 million. Amendments will of course have to be made when the final accounts are available, and allowance will have to be made for depreciation in the value of investments, but the final result should not be very much different from the estimate which is now given.

On the face of it, therefore, the position of the Colony is sound. The public debt is small and is being serviced as required by Law. We have a general revenue balance in liquid form which is equivalent to 3½ months' revenue. In point of fact, however, the position is even sounder than at first appears. $20 million should be added to the liquid reserves in respect of the payment which will be made by the Australian and New Zealand Governments in connection with the loss of Christmas Island revenue. Account should also be taken of $17 million worth of Singapore Telephone Board stock which will be issued in due course in respect of the purchase of the Oriental Telephone and Electric Company. Having regard to the steady progress which is being made by the Singapore Telephone Board, it is likely that a ready sale would be found for this stock if it were placed on the market. In short, the Colony is very comfortably off and many larger territories with much greater natural resources would be happy to be in the same fortunate position.

Turning now to 1958, it is difficult to make any forecast of what conditions may be like during the course of the year. Too many unknown factors are involved. It is also undesirable to be too categorical in such circumstances. But it is undeniable that there is at the present time a certain amount of pessimism about the future. World conditions are unsettled and are likely to remain so. It is feared that there may be a recession of trade in Europe and the United States, which may affect the price of rubber and consequently the economy of Malaya. Conditions in our main entrepot markets are disturbed and trade may be affected. On the other hand, the experts whom I have been able to consult are not quite so despondent. In their opinion, the possibility of a trade recession has tended to be exaggerated in the light of recent events. The long-term prospect for rubber is sound. The price should remain not very far off the 80 cents mark throughout 1958. Conditions in some of our traditional entrepot markets are certainly disturbed but, despite this, trade has shown a certain buoyancy in recent months and the indications are that this trend is likely to continue. All in all, they feel that conditions may not be as bad as the pessimists fear. Trade will almost certainly be less favourable than it has been in recent years, and profits will be reduced to a certain extent, but there is nothing to indicate anything more than a slight recession of trade such as Singapore has often taken in its stride in the past.

Against this background, collections of revenue under Class I have been estimated at $189 million, or $3 million in excess of the revised estimate for 1957. Allowance has been made for a slight increase in entertainment duty. Over 90 per cent of this duty is derived from cinema tickets. New picture houses have been or are being built, the cinema-going public continues to increase, and it is estimated that this duty will yield $6,750,000 in 1958. Income Tax has been estimated at the same level as collections in 1957. It is doubtful if company profits generally will maintain the same levels as in 1956 and 1957. Again, as I said earlier, the department is having staffing troubles. On the other hand, tax assessed in 1957 but not collected in that year will be collected in 1958. In the circumstances, it is hoped that about $65 million will be collected in 1958. As far as liquor duty is concerned, the increased demand resulting from growth of population will probably more than counterbalance any decrease in consumption due to falling purchasing power, and the figure of $28 million entered for 1958 is slightly in excess of the revised estimate for 1957. The number of cars on the road, the number of new cars registered each year, and the amount of petrol consumed continue to increase and it seems reasonably safe to assume that $27 million would be collected from petrol duty on the present basis of taxation in 1958. As far as tobacco is concerned, 541 million has been allowed for 1958. Consumption is bound to recover from the setbacks of 1957. The smoking population is growing all the time, a quota on exports to Rhio has recently been imposed and the campaign of the Customs Department against smuggling is gaining momentum month by month. It will be noticed that there has been a marked drop in revenue from pawnbroking licences, due to the change in policy with regard to the issue of licences. As hon. Members are aware. licences now bear a fixed fee. They are no longer the subject of tender, as they have been in the past, it having been decided that the system of tender was anachronistic and open to objection.

The estimate for Class III shows an increase of about $1.4 million due to the increased returns expected from Postal and Telecommunications Services which increase steadily year by year.

Class IV is increased by $2.4 million due partly to interest on loans and partly to the fact that interest on funds in the hands of the Custodian of Property will be credited to revenue under the Draft Enemy Property Bill which, it is hoped, will be enacted during the next session of the Assembly.

The total estimate or Revenue for 1958, on the present basis of taxation, is $242 million, or $7 million more than the revised estimate for 1957.

The estimates of expenditure for 1958 total $277 million compared with $254 million in 1957. This is a substantial increase but I can assure you, Sir, that the estimates have been prepared with the utmost care and that no provision has been made which is not essential for the maintenance of existing services or for the expansion of the social and defence services to which great importance is attached.

I think this will be clear from an examination of the estimates. It will be seen that a considerable number of departments are provided with less or very little more in 1958 than was provided in 1957. The main increases appear under Medical and Health, Defence Services, Pensions and Education, which between them, account for $16 million of the $23 million increase on the Estimates for 1957.

An additional sum of $2.6 million is required for Medical and Health, of which $2.2 million represents an increase in personal emoluments. In this connection, attention is invited to the schedule of new appointments which appears as an appendix to the Memorandum which accompanied the Draft Estimates. From this, it will be seen that 314 new appointments are provided for the expansion of the Medical and Health Services.

The Defence Service estimates show an increase of $2.8 million. Of this sum, $700,000 is required for the Royal Malayan Navy, $800,000 for the Singapore Military Forces and $1.3 million for the Infantry Battalion which will get into full swing in 1958.

Pensions require an additional $3.9 million. Of this increase, $917,000 is provided for the Supplementary Allowances on existing pensions which were approved by the Assembly this year. Of the remainder, $2 million is required for commutation of pensions and ordinary pensions arising in the main out of the retirement of pensionable officers under the Malayanisation Scheme.

The main increase is, however, under Education where an additional $6.7 million is required. The estimates for 1958, by comparison with those for 1955, show very clearly the effect of the new Education Plan. The salaries of Headquarters staff, and teachers and servants in Government English schools, demand $30.9 million as compared with $18.9 million in 1955. Recurrent expenditure has risen to $30 million compared with $13 million in 1955. Grants in aid total $23 million, of which $14.4 million goes to Chinese schools. This compares with a total of $10 million, including $4 million for Chinese schools, in 1955. $1 million is provided for the running expenses of the Polytechnic, $360,000 is provided for Evening Classes, $300,000 for the provision of free text books, $388,000 for aided school provident fund schemes, $934,000 for the teaching of English in Malay Schools and so on. Special expenditure totals $3.9 million of which $3.2 million is required as the Government contribution towards the running expenses of the University.

For the rest, there is nothing new or novel in the estimates of expenditure. The truth of the matter is that the framing of the ordinary estimates does not present much opportunity for dramatic changes in the emphasis or incidence of expenditure. The services of Government expand as the need for them increases. Expansion is only approved after long drawn out and sometimes bitter arguments with the Treasury and even then is only in accordance with plans which have been presented to and approved by the Assembly and which are generally accepted as necessary by the taxpayers of Singapore. Short of a major trade recession with a serious contraction of Government revenue and demand for Government services, it is difficult if not impossible to limit or restrict expenditure on services which arc already in existence. They are already operating on the minimum standard consistent with efficiency. Government operates within very narrow financial limits and funds are not available for any dramatic departures from the well trodden path of approved policy.

The position therefore is that the estimate of revenue is $242 million, the estimate of expenditure is $277 million, and we are faced with an estimated deficit of $35 million.

The question is what would this deficit be in the event if no steps were taken to eliminate it. We know that, in the past, expenditure has invariably fallen short of the estimate and estimated deficits have turned into substantial surpluses. Development programmes have not been implemented as fast as was expected, recruits have not come forward in sufficient numbers to fill vacant posts, there has been delay in placing orders and in obtaining delivery of costly items of special expenditure, and so on and so forth. The question is to what extent will expenditure fall below the estimate in 1958?

There is no formula which indicates what actual expenditure will be. We make our estimate in the light of past experience and results and anticipated future requirements and capacity. We know that, for the past two years, actual recurrent expenditure has tended to increase on the average by about $18 million a year. In this connection, I invite attention to the tables which were given in the Memorandum which accompanied the Draft Estimates. It seems likely that this rate of increase will be maintained in 1958. If that should prove to be the case, actual expenditure, excluding any compensation in respect of Malayanisation which may have to be brought to account, should be of the order of $250 million. In the circumstances, assuming that the estimate of revenue is achieved, it is possible that the actual deficit would be of the order of $8 million, and it is this sum which we must endeavour to cover by means of additional taxation.

To this end, it is proposed to increase the duty on petrol and to make slight increases in the special tax on heavy oil engine vehicles and in the stamp duty on conveyances of immovable property. These increases should yield about $8 million in a full year.

With regard to petrol, an order under Section 11 of the Customs Ordinance has been gazetted this morning which raises the duty from 80 cents to $1 a gallon. This rate of $1 a gallon has been in force in the Federation since November of last year and its imposition is unlikely to cause any hardship in Singapore. It has caused none in the Federation. The new rate of duty will result in cars which do 20 miles to the gallon costing 1 cent a mile more to run. Those which do 30 miles to the gallon will cost 2/3rd of a cent a mile more to run, those doing 40 miles to the gallon, ½ a cent more, and so on. If 1,000 miles a month, or 30 miles a day, is taken as a fair average mileage for private cars in Singapore, cars doing 20 miles per gallon will cost $10 a month more to run, cars doing 30 miles to the gallon $6.60 a month more, and those doing 40 miles to the gallon $5 a month more. These additional sums can be of no consequence to people who can afford to run cars for pleasure or who have to run them in connection with their work. Nor will the increase in duty be of much consequence to hauliers. A round trip to Penang will cost about $10 more. I do not think that the increase in duty will affect consumption. The number of new cars, and the total number of cars registered, tend to increase each year and the consumption of petrol increases accordingly. I doubt if the increase will tend to make people use their cars less than they have done in the past. It is expected that the increase in duty will yield between $6 and $7 million in a full year.

It is also proposed to increase the tax on heavy oil engine vehicles. As hon. Members are aware, this tax was originally imposed to compensate for the loss of petrol duty occasioned by the introduction of diesel engine vehicles into Singapore. The present rates of tax are shown in the schedule attached to Gazette Notification No. 5 202 of 22nd July, 1955. The rates have not been changed since the duty on petrol was raised to 68 cents a gallon. It will now be $1 a gallon. This increase would merit a proportional increase in the heavy oil engine vehicle tax of about 50 per cent. However, it is considered that an increase of this order at this juncture is undesirable. As a first step, therefore, it has been decided to raise the present rates by 25 per cent. The new rates are given in the motion which will be presented in the near future. They will be effective from the 1st of January. 1958. It is not considered that this increase should occasion any hardship to bus companies or hauliers or necessitate any increase in fares. It will be noted, when the motion is published, that the fee on diesel taxis has been raised considerably. The new fee places these vehicles on all fours with petrol-driven taxis. The yield from this increased tariff is estimated at $375,000.

It has also been decided to increase the stamp duty on conveyances of immovable property to an "advalorem" rate of 2 per cent on the value of the property transferred. This rate is the same as that charged in Hong Kong. It is expected that the new rate will yield an additional $700,000 in 1958.

The total estimated yield from these items of new taxation is therefore approximately $8 million and I hope that this additional revenue will go a long way towards balancing actual revenue and expenditure in 1958. However, if it is found later in the year that these measures are going to be insufficient, additional measures will have to be considered.

Turning now to the Development Estimates, it is desirable at this time to give some idea of what has been done in this connection since the war. There is so much pre-occupation with the present and the future that there is perhaps a tendency to forget or overlook what has been done in the past.

By all standards, the achievement has been monumental. Since the war, over 15,500 housing units and 600 shops have been built at a cost of $95 million. $28 million has been spent on 93 primary schools and 11 secondary schools, quarters, playing fields, equipment and other educational services. $20 million has been spent on expanding the Medical Services. The number of beds in the General Hospital has been increased by 100 per cent, in Kandang Kerbau Hospital by 50 per cent and in Tan Tock Seng Hospital by over 100 per cent. Accommodation in the Trafalgar Home and in the Woodbridge Hospital has been increased by 300 per cent. $36 million has so far been spent on making the finest airport in the Far East. $15 million has been spent on Rural Development. Land purchases for development have totalled close on $50 million. $10 million has been spent on capital work for Defence Services. These items alone total over $250 million. In addition, $17 million has been paid in connection with the acquisition of the Oriental Telephone and Electric Company, $4 million lent to the City Council in connection with the Kallang Bridge Road, $30 million lent to the Federation of Malaya, $10 million lent to the Singapore Telephone Board, and considerable sums spent on the construction of buildings for the police and customs, roads, bridges, quarters and the like.

Apart from Government expenditure on development, the City Council has since the war spent over $270 million on the development of the public utilities.

As I said, development work of this order represents a monumental achievement. This small island, which depends for its prosperity on trade, has managed to find funds for development to the tune of well over $600 million over a period of 10 years without extending itself unduly. It is an achievement of which we can justly be proud and it must be the envy of many larger territories outside Malaya.

Turning now to development expenditure in 1957, it will be recalled that the estimates presented in November 1956 envisaged expenditure on general development (including Colonial Development and Welfare Fund projects) amounting to $66 million and expenditure by the Singapore Improvement Trust and Singapore Telephone Board of $15 million and $5 million respectively. Under general development, provision of $17 million was made for work of one kind and another for the Education Department, $10 million for the Medical and Health Department, $17 million for purchase of land, resettlement of squatters and rural development, $3 million for Defence Services and $3 million for further work on the Singapore Airport. It was estimated that the Development Fund would be completely exhausted by the end of the year but, knowing how far performance falls short of expectation in the field of capital works, we were fairly confident that there would, in the end, be a balance in the Fund.

This has proved to be the case. On the basis of figures available up to September, it is clear that there will again be substantial under-expenditure on general development. As in the past, difficulty has been experienced over the acquisition, clearance and preparation of sites. Lack of "capacity" in the architectural branch of the P.W.D. has also caused a planning bottle-neck. The only expenditure which has exceeded the estimate is that on public housing. Here it seems likely that the Trust, with a clear field at Kallang and St. Michaels Road, will spend $23 million against the estimated $15 million. And, of course, the Singapore Telephone Board has spent the $5 million provided in the Estimates. Altogether, it appears likely that, instead of the estimated deficit of $3 million, the Development Fund will show a surplus at the end of the year of the order of $40 million including interest on investments amounting to $7.6 million not brought to account until this year. I mention the round figure of $40 million because adjustment will have to be made in respect of revaluation of investments and in respect of interest payments. But it does mean that we will start off the new year very substantially better off than we hoped to be and that the question of raising funds for capital development in Singapore in 1958 will be eased correspondingly.

The Development Estimates for 1958 are shown on pages 395 to 439 of the Draft Estimates.

The Development Fund is given on page 395. It will be seen that receipts are estimated at $64 million, expenditure at $94 million and the deficit at about $30 million.

With regard to the items on the receipts side of the account, the item "Repayment of Loans" allows for repayment of principal of long-term loans to the Singapore Improvement Trust which will be made in 1958. It will be recalled that I said in 1956 that it had been decided that such repayments, which will be spread over 60 years in most cases, should be credited to the Development Fund so as to be available for further development.

It will also be noted that a contribution of $20 million is again made from revenue for development. It is, in my opinion, of vital importance that substantial contributions of this kind should continue to be made for expenditure on "non-productive" items of capital development such as schools, hospitals, etc. - in fact, much of the work done under General Development.

It will be seen from an examination of the Estimates that they follow the same pattern as in previous years. Indeed that is inevitable when Government is already committed to approved long-term development plans. Briefly, of the sum of $32 million provided for general public works, $10 million goes to Education, $8.8 million to Medical and Health, $3 million to Civil Aviation, $4 million for special P.W.D. schemes which are outlined under Head 60, and $1 million for police building and quarters.

Of the sum of $61 million provided for special development expenditure, $26.5 million is provided for further work by the Singapore Improvement Trust on programmes 6, 7 and 8 and a further sum of $5 million is provided for Singapore Telephone Board development. Provision is made for the loan of $1 million (out of a total of $2 mil lion) to the Singapore Government Officers Co-operative Housing Society in accordance with the policy that Government will not provide quarters for its officers but will, within the limits of its capacity, provide loans on reasonable terms to enable officers to acquire their own homes. Again, out of this sum of $61 million, $10 million is provided for the purchase of land and $4.8 million is provided for further rural development. Of the $6 million provided under Head D. 45 Education, for special expenditure, $2.8 million is required for dollar for dollar grants to aided schools, and $1.25 million for equipment for the Polytechnic and $1.25 million for equipment for new schools. $2.6 million is provided under Head D. 59 Telecommunications for further essential development of the telecommunications system which is revenue earning.

I will not deal with the estimates of development expenditure in greater detail. This has already been done in the Memorandum which accompanied the Estimates.

As regards the estimated deficit, it is, difficult to say what actual expenditure will amount to. I think it more than likely that the estimate of expenditure for the Singapore Improvement Trust will be fulfilled, which is gratifying in itself. The Singapore Telephone Board will be able to spend the $5 million which has been provided. In the light of discussions which I have had with the Minister and having regard to past performance, I am inclined to doubt if planning and building capacity, and the other factors which tend to delay capital works, will permit of expenditure in excess of $22 million in 1958. Again, on the basis of past performance, it seems unlikely that more than two-thirds of the balance of special expenditure, after loans to the Singapore Improvement Trust and Singapore Telephone Board have been subtracted, will be spent. In short, it seems unlikely that total development expenditure will be much in excess of $70 million and that the deficit, if any, will be comparatively small.

At the same time, the Development Fund will be exhausted and development will in future depend in the main on contributions from revenue and loan money, and whatever sums can be transferred from general reserves to finance further development.

To summarise the position therefore, if all the prognostications about 1957 and 1958 are fulfilled, revenue and expenditure should balance in 1958 at about $250 million (excluding any charge in respect of Malayanisation compensation), the General Revenue Balance (including the Christmas Island payment and Singapore Telephone Board stock) should be of the order of $100 million and the development fund will be exhausted.

Finally, I should like to say something about the future.

Expenditure has increased at a very great rate since the war. In this connection, attention is once more invited to the schedule of actual expenditure which appears on page 13 of the Draft Estimates. In 1947, expenditure, including Public Works Non-Recurrent expenditure, amounted to $51 million. In 1957, including Development expenditure, the total is likely to be about $300 million. If we look at individual items, we see that recurrent expenditure on Education has risen from $2 million in 1947 to $50 million in 1957; on Medical and Health from $5 million to $27 million; on Social Welfare from under $1 million to $11 million; on Police from $2 million to $26 million, and on Defence from practically nothing to $8 million. Recurrent expenditure as a whole has risen from $50 million in 1947 to a revised estimate of $232 million in 1957.

It is inevitable that recurrent expenditure will continue to increase in the future, although perhaps not at the same striking rate. As in the past, the main reasons for increase will be the expansion of Education and Medical and Health Services and Defence Services.

In the case of Education 40,000 children are reaching the age for entry into Primary Schools each year. It is the am of Government to give primary education to all children between the ages of 6 and 14, and secondary education of either a general or a technical nature to a large percentage of those who pass through the primary stage successfully. It will consequently be necessary to make similar additions to staff in the future as have been made in the past and funds will be required to meet the recurrent expenditure required for the additional schools which will have to be built. Again, increased provision for grants-in-aid will be required to meet increased expenditure in expanding vernacular schools. The recurrent cost of the Polytechnic will increase as the organisation comes into full operation. Again, the University must be expanded to provide the graduates of all kinds which the expanding economy of Singapore requires. It is difficult to say to what extent the cost of Education will increase over the next five years. Prior to the introduction of the full aid scheme, the effect of which is seen in the returns for 1956 and 1957, expenditure tended to increase at the rate of about $7 million per annum. It might be reasonable to assume that the increase in the future will be at about the same rate. This would mean that, by 1962, expenditure on education will have reached a total of about $80 million a year.

In the case of Medical and Health Services, it is a case of expanding hospital accommodation, clinics, health centres, etc, as fast as the availability of staff, funds and building capacity will allow. The ultimate aim is to build another General Hospital, ten district hospitals - 5 in the urban area and 5 in the rural areas and each with 500 beds - 20 out-patient departments and about 100 small maternity and child health clinics. In addition, now that the elimination of tuberculosis is no longer a possibility but a probability, the drive against this disease will be stepped up. Quite obviously, it will be very many years before these plans can be fulfilled. As I have said, lack of funds and lack of trained staff are likely to be the limiting factors. But they will be fulfilled gradually and recurrent expenditure will mount in the same way. In the past recurrent expenditure on Medical and Health services has tended to mount at the rate of about $3 million per annum. Assuming that it continues to mount in the same way, it will by 1962 have reached a total of about $41 million per annum.

It is unlikely that the Police Force will grow to any great extent between now and 1962, but it is inevitable that the cost of Defence Services will increase. The future of the Royal Malayan Navy is still uncertain but, if it is transferred to the Federation of Malaya, we shall have to expand the role of the Malayan Royal Naval Volunteer Reserve and of course we have to provide for a second battalion of the Singapore Infantry Regiment. Expenditure on Defence Services is at present running at the rate of about $11 million a year, and I consider that it is not unlikely that this may have increased to about $16 million by 1962.

It is doubtful if expenditure on any other service of Government will expand at anything approaching the same rate as in the case of the three services I have mentioned specifically. There will of course be some increase. That is inevitable. But it should be comparatively small. By and large, the majority of departments have stopped expanding - at least for the time being. For the next five years at any rate, any increase in expenditure should only be required in connection with increments and replacements.

All things considered, therefore, it seems likely that total expenditure will tend to increase over the next five years at a rate of something between $12 and $15 million a year. Total expenditure by 1962 therefore may well be of the order of $300 million.

This is a somewhat alarming figure and the first reaction of hon. Members may be to ask not how it can be met but how it can be reduced.

This is a difficult question. Contrary to general belief, there is no more over-staffing, extravagance or waste in Government than there is in any large scale commercial undertaking. There is not a superfluity of staff in any section of the service. Only that amount of recurrent and special expenditure is allowed which is necessary to keep the machine running with maximum efficiency. The Treasury sees to that, as any Head of Department will agree. Allegations as regards Government extravagance have been made in the past and investigations have been made by select committees, organisation consultants and other agents. But the results have generally been disappointing from the point of view of the critics. Minor examples of waste and extravagance have of course come to light and have been corrected, temporary staff which has become redundant has been removed, but the total saving which has resulted has been comparatively small. This has been the experience of other administrations as well.

This does not mean that waste and extravagance do not exist, or that the Government is prepared to close its eyes to them. Quite the contrary. Government is always on the lookout to eliminate waste, extravagance and redundancy. To this end, it is proposed to set up an organisation in each Ministry which will keep these matters of organisation and efficiency constantly under review. The scheme follows the proposal of an Indian expert who visited Singapore in 1955. Unfortunately we have not yet been able to recruit the adviser who would train the officers required to run the scheme. Such men are in very short supply.

If there is to be any significant reduction in Government spending, it can only come as a result of drastic changes in plan, reduction in the rate of expansion of the social services, retrenchment, cuts in salaries, or a combination of some or all of these factors. For example, expenditure could be reduced if it were decided that secondary education should be limited to a smaller percentage of those passing through primary school, or that primary education should stop at 12 years of age and not be extended to 14 years of age, or that the expansion of Medical services should be drastically cut down or cease altogether for a period, or that variable allowances should be reduced and so on and so forth.

But such decisions could defeat the Government's avowed intention to expand essential services to the public. Consequently we must look in the main to increased taxation to meet the bill.

Revenue has increased substantially over the past decade from $77 million in 1947 to an estimate of $235 million in 1957. During this period, the only completely novel measure of taxation which has been introduced is Income Tax which now yields $65 million or about 27 per cent of total revenue. There have been increases in rates of duties collected by the Customs Department over the years and collections under Class I have increased from $42 million in 1947 to $186 million in 1957. Again, the expanding economy, the growing population, and the growing demand for Government services have all made a material contribution to the increase in revenue.

There is still a considerable revenue potential left in Singapore within the present pattern of taxation. We are, in effect, still one of the most lightly taxed nations in the world. We are for example considerably better off than people in the Federation who, in addition to paying duty on tobacco at a much higher rate than we do, have to pay a wide range of customs duties on other goods.

But increases within the present pattern of taxation will not be enough in themselves. Other means of taxation, hitherto novel in the Malayan context, will have to be devised. The population generally will have to contribute more towards Education - perhaps through the Education rate. It seems doubtful if Medical attention and the supply of medicines can remain altogether free for any length of time. I do not exclude the possibility of the eventual introduction of import duties on a selected range of goods which either do not enter into the entrepot trade or enter only to a limited extent. But I hope sincerely that this step will be long delayed, and only taken after all other measures have been exploited to the full.

In short, if Singapore is going to have the services it wants, it must be prepared to pay for them, and to pay much more heavily than it has in the past. We must be prepared for greatly increased taxation. Reduction in expenditure can only be achieved by a drastic change of policy which should probably be avoided as long as any revenue potential remains untapped.

The question of financing development in the future also raises difficult questions. I have already given some indication of what has been done in Singapore in the way of development in the public sector since the war. I think that it will be generally agreed that what has been achieved is most impressive. At the same time, much remains to be done. Assuming that estimates of the amount of development which can be undertaken in 1958 prove to be correct, Government will still remain committed to work estimated, at present prices, to cost over $100 million. In addition, allowance must be made for continuing items not shown in the estimates such as housing after the completion of existing programmes, rural development, purchase of land for development, education and medical development in addition to noted commitments, and Defence Services development. The City Council has plans for the development of public utilities which will entail the expenditure of $130 million over the next three or four years. The proposed allocation of this expenditure is $50 million for electrical works, $40 million for water works, $6 million for gas and $36 million for sewage disposal. In addition, the Singapore Telephone Board will require substantial sums for further development if the demand for telephone facilities is to be met. In short, Singapore will be faced with the task of financing known commitments amounting to something of the order of $340 million irrespective of any other urgent works which may arise in the meantime, and this will have to be undertaken over the next few years.

The question immediately arises whether this can be done, and if so, over what period of time must it be spread. I think the answer is that it can be done if certain conditions are fulfilled, but it will take somewhat longer than most authorities and citizens would like, and implementation will have to be planned and integrated on an island-wide basis if we are going to succeed.

Hitherto we have managed to finance our development because of a number of factors. We have experienced a decade of unparalleled prosperity which has enabled Government to build up reserves beyond the wildest dreams of Financial Secretaries of the past. Government has managed to finance all its development, including loans to the Singapore Improvement Trust and to the Singapore Telephone Board, from these resources and, more recently, from substantial contributions from revenue, and has left the loan market free to the City Council which has managed to borrow $214 million since the war. All the quasi Government authorities in Singapore have, like Government, been able to make substantial contributions from revenue to development. In addition, confidence in the future of Singapore has been high and institutions and private investors to a lesser extent have been easily persuaded to invest their surplus funds in City Council loans.

Now, however, the position has changed somewhat. The boom period is over. We are back to what might be called "normal" Singapore conditions. Money is tighter. Institutions and firms have no longer surplus funds to invest in long-term loans. Long-term loans have lost popularity and all the emphasis is on short-term lending and borrowing. The Government Provident Funds have appeared on the scene as a source of development capital for the two Governments and have had the effect of almost completely drying up other institutional sources. Although confidence is growing, it would be idle to deny that there is not now as much confidence in the future of Singapore as there was, say, in early 1955. It is now more difficult than it has been before to obtain access to the London market. Perhaps due to the nature of the economy and to its subjection to the vagaries of commodity prices, there is an almost complete absence, amongst the population as a whole, of that instinct to save which is a characteristic of other races. The response of private individuals to Government and City Council loans has been poor and the response to such means of saving as National Savings Certificates and Premium Bonds even worse. The problem of how best to promote the saving habit in the population is one of the Government's main pre-occupations at the present time.

In short, one may safely say that, by and large, the main sources of development capital available in Singapore at present are the contributions which the various authorities can make from their own funds, such funds as the Central Provident Fund Board is prepared to make available for local investment, and the small sums which other sources of long-term investment capital can supply. As regards the Central Provident Fund, I am afraid I am not very happy about the policy of the Board of this national provident fund which insists that 25 per cent of its funds should be invested outside Malaya at a time when the City Council is sorely in need of funds for development purposes. At the very outside, I place the total sum which is likely to be available in any one year from these sources at $50 million. In addition, it may be possible to obtain specific loans from international organisations for development of certain aspects of the City Council utilities, and it may also be possible to invest some of the currency fund in local loans. These accretions of wealth, however, are not certain and, even if available, will not accrue for some time.

In brief, the implementation of existing development plans after 1958 is going to be limited by financial considerations to at the most $50 million a year, at least at the start. This clearly demands the integration and phasing of existing development plans against the background of finance likely to be available. Gone are the days when both Government and the City Council could go blithely ahead without much thought for the availability of funds. From now on, development will have to be planned on an island-wide basis to ensure that the funds available for capital development are spent to the best advantage of the territory as a whole. To this end, it has been decided to set up a Planning Committee under the Financial Secretary and consisting of representatives of the Government and the City Council and other development authorities. This Committee, which will meet as soon as possible, will examine existing plans and commitments of the Government and City Council and will integrate and phase them in the light of the essential needs of the Colony funds, and development capacity likely to be available. It will be appointed by the Council of Ministers to which it will report from time to time. Its findings will also, of course, be made available to the City Council which will have an opportunity of expressing any opinions it desires. In this connection, I must make it clear - since fears have been expressed in other quarters - that the need for the development of public utilities is fully appreciated, and will not be overlooked in the allocation of funds for development.

The net effect of this limitation of funds and phasing of development will be that development is spread over a longer period than was originally intended. This is regrettable but unavoidable in the circumstances. We can, however, take comfort from the fact that so much has been done in the past and rest assured that, if there is any opportunity to accelerate the programme in the future, it will not be neglected.

That, Sir, gives some indication of the shape of things to come. If we are to have the services which we regard as essential for our well-being and prosperity, we must be prepared in the future to save much more and pay much more in taxes than we have ever done in the past.

Finally, I should like to pay tribute to the officers who have been responsible for the preparation of the Estimates. They have been hard at it since April and I cannot speak too highly of their conscientiousness and devotion to duty. I should also like to thank the Government Printer and his staff who, as always, have met all demands on their ability and time with cheerfulness and customary efficiency.

Sir, I beg to move.

Mr Speaker: The Question is, "That the Bill be now read a Second time." In accordance with the provisions of paragraph (2) of Standing Order 69, the debate now stands adjourned.

Debate to be resumed, what day?

Mr Hart: 13th of December, Sir.

Mr Speaker: 13th of December it will be.