LOCAL GOVERNMENT INTEGRATION (AMENDMENT) BILL

Order for Second Reading read. 5.03 p.m.

The Minister for National Development (Mr Teh Cheang Wan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The existing provisions of the Local Government Integration Act allow the Public Works Department to recover road-making costs incurred by the Department from the owners of properties fronting, adjoining or abutting streets which have been made up. Payments may be made by instalments with an interest rate not exceeding 6% per annum over a period not exceeding 10 years. The interest rate of 6% per annum has never been revised since 1963 and does not reflect the present cost of funds.

The Amendment Bill, therefore, seeks to:

(i) revise the interest rate for recovery of road-making costs by instalments, to 11% per annum which is the normal rate levied by the Government for the recovery of debts by instalments; and

(ii) allow the Minister to vary the rate by notification in the Gazette when there is a need to further revise the rates as economic conditions change.

Sir, I beg to move.

Question proposed.

Mr Jeyaretnam: Mr Speaker, Sir, I rise to oppose this Bill. The main purpose of this Bill, as explained by the Hon. Minister, is to raise the rate of interest that is charged at the moment for monies due from occupants of properties fronting streets where the Public Works Department has carried out any works that improve the property and, where monies are payable by these persons, to allow for interest to be charged where the money has not been paid within a limited time or where payment by instalment has been allowed.

The Minister's reason would appear to be that no revision has been made to the interest rate since 1963. Mr Speaker, Sir, that may well be true, but is there any particular reason besides that? Why should the interest rate be increased now?

Under the Civil Law Act, the Courts are empowered to award interest for any debts upon which an action is brought by a person, and the Courts have power to award interest of 8%. In this particular instance here, where the Director of Public Works, i.e. the Government, institutes proceedings against the owner or the occupant of a property for the recovery of costs, under the Civil Law Act, the Courts may only award interest up to 8%. But, nevertheless, this Bill now proposes to impose a rate of 11%, which is almost twice the rate that is at present charged.

Mr Speaker, Sir, this Government is known, and quite rightly, for its efficiency in collecting revenue. But whilst this Government is ready to collect all revenue that is possible, it is not at the same time that ready and willing to extend to the citizens the same benefits that it claims for itself. I refer to deposits of money held by statutory boards or by the Government that belong to the citizens, and upon this money no interest is paid, as far as I know. Recently, I have come across cases where people have paid quite large sums of money to the HDB and the HUDC, in particular, and these monies have been held for periods of years, sometimes two or three years, and no interest is credited to the persons who paid the deposits of money for the purchase of properties either from the HUDC or the HDB.

There is also the dissatisfaction felt in many quarters of the low interest that is paid on the CPF contributions. I would, therefore, ask the Minister to consider whether it is right in these circumstances that the rate of interest should be doubled, almost doubled, to 11%. These persons from whom the monies are sought to be recovered may be quite ordinary, poor persons, often from the middle class and lower middle class income groups, and it may be a burden for them to meet these charges, in the first place, for the making up of roads or other improvements, and provision is rightly made for the Govern- ment to carry out these works and to recover the cost. But is it necessary that there should be imposed on these persons an unnecessary extra burden just because they are unable in the first place to meet the cost themselves? It is because they are unable to meet the cost themselves that the Director of Public Works carries out the work. It seems as though they are being penalized for being unable to meet the cost of the works that an interest is levied on any amounts due to the Director if it is not paid within 14 days or the time limited for payment. Now it is proposed to increase the interest rate from 6% to 11%. I would ask the Minister to consider this before he adds another burden, not on all of our citizens but on some of our citizens who may be charged with payment of monies to the Director of Public Works. I move to oppose the Bill.

Mr Ho See Beng: ( In Mandarin): Mr Speaker, Sir, in my view this amendment Bill is very necessary for a valid purpose. I have something to say that is different from the Member for Anson's. I feel that the existing Act should be amended. If there is no amendment then the Government will stand to lose. For instance, I own a property that has a mad frontage, and as a result of public works being carried out on the road, I owe the Government a certain sum of money for the cost of these works. But since the interest rate paid by banks and finance company is so high at present, I would rather put the money, which ought to be paid to the Government, in a bank or in a finance company and earn interest at more than 6% every year. So why should I pay the Government in one lump sum? By paying the Government in instalments, I can not only offset the 6% interest rate charged by the Government but also make some money out of it. If the existing law is not amended, the Government will be the loser in the end.

When the Government makes up the road for owners of properties fronting the road, the expenses incurred by the Government must be recovered from the owners. At present the owners can make use of the money payable to the Government to make some profit. That is not right and is unfair. If we do not amend the Act, then perhaps because of the extra workers needed to carry out the work, the 6% interest cannot cover the additional expenditure on administration and labour, Now that wages are so high it is also not easy to engage any worker, hence, it is necessary for us to amend the present law. If anybody thinks that the intention of the amendment to the existing law is to make a profit, I would say that this thought is very childish. It is not the intention of the Government to make money. If the Government wanted to get more money, it could levy more taxes in other fields, not an insignificant 5% from this item.

I support this Bill.

Mr Seah Mui Kok (Bukit Ho Swee): Mr Speaker, Sir, I am not a lawyer. But from the question raised by the Member for Anson that money deposited with the Government and statutory boards does not earn interest, I would like to know whether a lawyer pays interest on money put by his client into the lawyer's office.

An hon. Member: Second account.

Mr Seah Mui Kok: There is no interest at all. Maybe the Member for Anson is paying interest to the people. I do not know. Let us face the facts.

Mr Jeyaretnam: Mr Speaker, Sir, the question has been asked whether client:s money left with solicitors have to be deposited in interest-bearing accounts and whether the interest so gained is paid over to the client. May I inform the hon. Member that there is provision for this, and I am sure lawyers who are in this House will bear me out that the rules provide exactly for this - that where a solicitor holds a sum of more than $5,000 of his client's money, he shall deposit it in an interest-bearing account and the client should be credited with that interest.

I hope that answers the Member.

Mr Teh Cheang Wan: Mr Speaker, Sir, I wish to thank the Member for Khe Bong for his support of the Bill.

On the various points raised by the hon. Member for Anson, I would rather not go into the details of the deposit with the HDB and HUDC because we will have plenty of opportunities very soon in the Budget debate to discuss this matter.

But I just want to say that the amount of deposit for an HDB or HUDC flat is not sufficient to buy the land. If the hon. Member for Anson has dealings with developers, he can ask them whether the few thousand dollars deposit for an HDB flat or the $18,000 deposit for an HUDC flat is sufficient to buy the land to develop the flats. If the hon. Member for Anson has an opportunity to ask the developers, I am quite sure the answer is "No". The amount of deposit is not sufficient to buy the land. The money held by the HDB or HUDC is utilized for the purchase of the land for development of flats. In fact, both the authorities are not holding any money of these people who deposit money with these two authorities. But this has nothing to do with the Bill before the House.

Under the Local Government Integration Act, the 6% interest which the Government collects is well below the prevailing market rate at present, I am quite sure the hon. Member for Anson knows that the interest rate that a finance company pays to those who put money in it is certainly very much higher than 6%, probably much higher than 11% which this Bill proposes to collect.

The Public Works Department incurs the expenditure mainly for making up roads. And it involves those properties fronting the roads which have not been made up. Quite often, these roads have a lot of pot-holes and not suitable for vehicular traffic. What the PWD does is to make up these roads to Government standards and thereafter the Government will declare the roads as public roads and maintain the roads henceforth. After the roads have been made up by the Public Works Department, the owners of properties fronting these roads will find that the value of their properties has been greatly enhanced. I think all the owners should be very glad that the PWD is able to make up the roads which help to improve their properties. Of course, many of the owners are good businessmen and they can do the calculations. If the finance company is paying a good deal more than 10% interest, then by paying instalments to the Government at 6% they can use the money for another purpose. It is not that these are poor people who cannot afford to pay the Government the money for making up of roads. In fact, the developers are multi-millionaires. At present, they are paying the Government instalments at an interest rate of 6%. But if the interest rate is increased to 11%, maybe the Government will increase its revenue and make the cost of money reflect the market rate. The owners will do the calculations and quite often they will still pay the instalments because they find that the proposed interest rate of 11% is still quite low compared with the market rate or the rate charged by the banks. Most probably it will cost them a good deal more than 11%.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Teh Cheang Wan].

Bill considered in Committee; reported without amendment; read a Third time and passed.