ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [8th March, 19851.

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986.". - [Minister for Finance, Minister for Education and Minister for Health].

Question again proposed.

Dr Ow Chin Hock (Leng Kee): Mr Speaker, Sir, I rise to support the motion standing in the name of the Minister for Finance, Minister for Education and Minister for Health, with some reservations.

Mr Speaker, Sir, we Singaporeans must congratulate ourselves because we have done very well in the last five years. Despite the world recession in 1980-82, despite external threats of protectionism and the instability of the world financial system, and despite the internal constraints of labour shortage and limited land area, our economy grew at an average rate of 8.5% per annum. There was no unemployment; there was minimal inflation. Domestic exports expanded by 28%, external reserves went up by 65%. Net investment increased from $870 million to $1.14 billion, average earnings of workers increased from $161 per week to $253 per week.

Sir, we are supposed to be happy but we are not. The reason is that this year, our economy is facing a downturn, we may be heading towards a recession. But let us keep these in mind: the Business Cycle is a reality, we have to live with it as a hard fact of life. Economic growth is not a certainty, we cannot expect to come up with a double-digit growth rate year after year.

Let us do what needs to be done to meet the challenges ahead of us. Let us not over-react and not be unduly pessimistic. Pessimism can only undermine our investors' and businessmen's confidence; expectations of the future can easily become a reality.

The Government has taken measures to help businesses to prepare for a downturn - for example, the Skills Development Fund contribution rate has been reduced by 2%, payroll tax has been lifted, repatriation of foreign workers will be made more gradual, and JTC rentals of industrial properties are being frozen. An economic committee has been set up to review the development plan. The Government needs to do the necessary to help businesses help themselves. Let me stress that businesses themselves must also respond, and respond positively. They should not adopt the attitude that these concessions are long overdue, and therefore expect the Government to give more concessions and still more concessions. As the Lianhe Zao Bao editorial on 2nd February, 1985, correctly pointed out: small and medium-sized enterprises must seriously re-examine their styles of doing business and their management systems. To remain competitive, they have to make necessary adjustments and changes.

Sir, last year, one of the objectives of the Budget was to restrain the increase in Government spending. Some Members, including the Member for Rochore, myself, and others, commented on the role of Government in economic development and on Government spending. I have checked the Tables in the Economic Survey, 1984, and I take note that, in the Annex Tables 7.2 and 7.3, the increase in Government expenditure in 1984 was 7.7% as compared to 17.5% for two years in 1982 and 1983, and 16.1%, the average rate for the period 1969-1979.

This year, the Government has moved a step forward. The Government will refrain itself from direct participation in productive activity; it will leave to the private sector to set the pace so that the private sector would be the engine of growth. This is a welcome move. There are no inherent reasons why civil servants in public enterprises should be more efficient than entrepreneurs. There are no inherent reasons why Government is smarter than market mechanism. In production, basic economic decisions on "what to produce", "how to produce" and "for whom" are better left to the invisible hand of the market. Only in the distribution of income and wealth, must Government continue to intervene to help and protect the less well-off.

However, Sir, there is one area that I feel the Government can play a more positive role, ie, the grooming of local entrepreneurs. EDB's Small Industry Financing Scheme is confined, more or less, to the manufacturing firms. Commercial banks providing loans to professionals are not really generous in their terms and conditions. The Government therefore should consider setting up a local entrepreneurship scheme to help those with professional expertise, working experience, and willing to take a risk. The assistance can be in the form of preferential loans, market information and technical advice. We must build a core of local entrepreneurs who can take advantage of the expansion of trade in services and in advances in science and technology. To stand still is to be left behind.

Sir, despite the concessions to the business community (and I feel these concessions will benefit the whole economy and eventually everyone), many Singaporeans are not happy with this year's Budget. The reasons are obvious: increases in duty on petrol, road tax, taxi fares and the impending diesel tax on taxis. Ground reactions are strong. Some have become emotional. Many have accused Government of being Gian Lui-"Money faced", and I overheard one taxi-driver verbally accusing the Minister for Communications and threatening to do something to his mother. All tax increases, Mr Speaker, Sir, are supposed to effect Government's land transport policy. If that is so, at the outset we must dismiss the concept that these tax increases are designed to punish motorists and are merely to enrich the coffers of the Government. Allow me to make some brief comments on these tax increases. I may have some more to add in the Committee of supply.

First, duty on petrol. Among all the tax increases, this is the most serious one. Mr Speaker, Sir, I also find the statement that "duty on petrol is raised by 10% from 50% to 60%" is misleading. We have a peculiar way of calculating tax rate on petrol.

Let us take the premium or supergrade petrol as an example. The old pump price was $1.21 per litre, and the duty was 60.5 cents. The duty was calculated to be 50% because it was based on $1.21 which included the 60.5 cents tax. We may argue, Sir, that the duty was in fact 100% of the petrol price, excluding tax. Now, with the recent increase in duty, the new pump price per litre is $1.51, inclusive of tax of 90.7 cents. The 90.7 cents per litre represents 60 cents of the new pump price. The petrol duty therefore has increased from 60.5 cents to 90.7 cents per litre, an increase of 30.2 cents or 50% increase and not 10% increase, as stated by the Minister for Finance. As a result, the pump price increased by 24.8%. In this way, Sir, the Government is seen to have not only imposed a tax on petrol but also imposed a tax on tax, and a tax on tax increase.

Secondly, Sir, road tax. If we have to use price mechanism to curb car ownership, the increase in road tax is not necessarily the best measure. We may argue that increase in import duty on cars and registration fee will increase the selling price of new cars, and this will discourage potential car buyers. The increase in import duty and registration fee will achieve the same objective but, more importantly, at the same time, these measures do not increase the tax burden of existing car owners. Sir, an alternative to price mechanism is quantitative restriction. The Member for Whampoa has discussed with me on the feasibility of quantitative restriction. Under this proposal, only a certain number of new vehicles should be allowed on the roads each year, depending on the expansion of our road capacity. The Member for Whampoa is in favour of auction. I am more in favour of balloting. But whatever the form of quantitative restriction, there is to be a supplementary measure to prevent the resale of cars under balloting or a lump sum tax to siphon windfall gains from auction, if auction is the form of quantitative restriction.

Thirdly, Sir, the tax measures relating to taxis and taxi fares. I believe that the demand for taxi service is price inelastic. The increase in taxi fares will more than offset the decline in demand. Hence, the gross income of taxi drivers should increase. However, this is not good enough. The increase in gross income must be more than $550 per month so as to offset the impending increase in diesel tax of $6,600 per year. Here, Sir, I would like to urge the Minister for Communications to hold back part of the proposed increase of diesel tax if the taxi driver's gross income fails to increase by more than $550 per month. I think this is a very reasonable request and I hope the Minister will consider this.

Sir, according to the Household Expenditure Survey 1982/83, transport expenses accounted for 12.2% of total household expenditure. Moreover, the increase in petrol price will increase the cost of every line of production and every line of distribution. The inflationary impact of the increase in petrol price, road tax and taxi fares can be very substantial. Hopefully, this may be partly offset by the deflationary effects of our strong dollar on imported goods.

Sir, let me conclude with this sober thought. In the evening of 5th March, 13 days ago, there was a blackout in the eastern and central parts of Singapore. Many families had their dinner by candle light. It was really very romantic. Children cheered because they associated candle light with birthday parties. But let us imagine this: if the power failure were to last for a few more days, then what would have happened? Candle light dinner would no longer be romantic; students would begin to worry about getting their homework done or preparing for their examinations; housewives would worry about food turning bad in their refrigerators. No electricity, no light, no television, no air-conditioning; machines, computers, lifts not working; traffic jams everywhere; economic activity would slowly grind to a halt; life itself would be disrupted. Mr Speaker, Sir, the power failure therefore serves as a sober reminder to all Singaporeans of how dependent we are on oil, and not forgetting that we have to import oil. Similarly, we are also dependent on imported water and foodstuffs, Sir, we are vulnerable, very vulnerable.

Sir, having arrived at the promised land, having achieved what we set out to achieve, we tend to forget the basic - our very survival. We tend to squabble over high cost of car ownership, car park fees, taxi fare increase and so on. These perhaps are good signs - they are problems of economic affluence. In China, when a farmer bought his car, he made it to international news! In Hong Kong, I am told a motorist has to pay HK$ 20-25 per entry in some commercial car parks, and taxis are allocated by auction. In Taipei, taxi fares are based on mileage only and there is no charge for waiting time.

Sir, of course, Singapore is not Hong Kong, not Taiwan, not China. But let us remind ourselves that no one in this world owes us a living. Our very existence as a people and as a nation is itself no small achievement. So let us count our blessings, let us look at things in perspective, and let us not allow these transport problems to blur our long-term vision.

12.22 pm

Mr Jeyaretnam: Mr Speaker, Sir, I rise to express the disappointment that was felt and echoed throughout Singapore at the Budget Statement that was presented to this House by the Minister on Friday of the week before last.

Sir, before I comment on the Budget Statement and the proposals contained therein, may I say something about the lack of information that is made available to the public and to this House on the management of the people's finances by this Government. The Government are but stewards of the people's monies, and it is important when they make their report on the people's monies that they should make full and frank disclosures.

Sir, I have an article that appeared in the Singapore Business of February 1983 where the authors of that article - that was written before the Budget for that year - spoke about the unavailability of figures and the intentions of the Government on how to improve the economy in Singapore. They pointed out quite rightly that, "before one can try to suggest or think of ways by which the government might achieve its objectives, one must know where those government's finances or the means at its disposal stand at the given time." And they went on to say that, "finding that out is not easy in Singapore." "The public sector's consolidated accounts," they pointed out, "are not published." They say, "the consolidated accounts incorporating those of Government companies have not been published for a long time. One series incorporating direct revenue and expenditure of the Government and those of the statutory boards which used to be published by the Monetary Authority of Singapore has been discontinued." But nevertheless, with whatever information they had, they went on to predict that there was more than enough revenue available for the Government, either from direct taxation or through its participation in the business sector, to meet all its objectives.

It will be my complaint, Mr Speaker, Sir, that this Budget does not give the information, as that article pointed out, which the Government should give about the people's monies. I have some questions for the Minister which I shall pose to him at the end of my speech. These are some of the questions that are being asked -outside this House and which I think it is my duty to bring to his notice.

May I now move on to look at the Budget speech and the proposals contained therein, Mr Speaker, Sir. The Minister in his speech refers to the downturn in our economy or business activities as a temporary slackness. May I suggest to the Minister that he has probably caught the British disease of understatement. Sir, a number of people that I have spoken to think that there is much more than a mere temporary slackness in our economic situation at the moment. We have heard or read in the papers about the failures of businesses, about companies being put into liquidation, about workers being thrown out of employment, and all that within the last six months, and it does not look as though it has come to an end. It looks as though it is going to stay with us for some time. But the Minister merely dismisses that as "a temporary slackness." He mentions the case of workers. He says there is hardly anyone in Singapore who will be unable to get a job if he puts his mind to it.

Not very long ago, Mr Speaker, Sir, I raised the question of our seamen. There are a substantial number of our seamen who are unemployed, and not just for in-between periods as the Minister said, but for very long periods. Some of them have been unemployed for as long as two years or three years. And I asked then whether the Government was doing anything to help these seamen of ours who are unemployed. I referred to the practice that was adopted some years ago of requiring companies which had registered their ships under the Singapore flag to recruit seamen through the National Maritime Board from the register kept by the Board of Singapore seamen. That was discontinued. I do not know why. But the result is that, as I pointed out, all these companies no longer look to Singapore seamen for their requirements but recruit foreigners who come to Singapore to find jobs on the ships. And the Minister glibly said that it was because Singapore seamen were demanding too high wages. Since then, I have spoken to one or two of them and they say that that is simply not true.

And not only our seamen, Sir, there are others who have been out of employment. In some cases, it is far more difficult now for graduates than for seamen to find employment in Singapore. I personally know of people, who have got not just a first primary degree from the University but an advanced degree, who are not simply able to get employment in Singapore. So the position is not merely a temporary slackness but may suggest something far worse than that.

The Minister then proceeds to give what he says are reliefs which will perhaps inject some life into this sluggish economy. And he outlines three fiscal measures. One is the reduction in the rate of 4% payable to the Skills Development Fund. I do not want to repeat what has already been said a number of times. We have got a very sizable balance in this Skills Development Fund. We are not spending anything like what we have accumulated. Is a reduction of 2% the best that this Government could do? Would it not be possible for the Government to suspend the collection of this levy for another two years or three years, until some of the reserves that have been accumulated have been utilized? This Government would appear to be niggardly in whatever it does.

Now if I may turn to the Payroll Tax. Mr Speaker, Sir, speaking in this House in 1983 I pointed out the history of this payroll tax. It was introduced when we were part of Malaysia and we here, as I said, opposed this payroll tax when Malaysia first introduced it. We were against it. We thought it was a most unwise measure. When we came out of Malaysia, one would have thought that the Government which had opposed the payroll tax would do away with it. But no. The then Government decided to retain it, and said it would use it for a completely different purpose from which it was intended, when it was introduced in the Malaysian Parliament. And I then read out what was said in this House by the then Minister for Labour. This is what he said, Mr Speaker, Sir [Hansard, 16 Dec 65, col. 205]:

'We intend to set aside the revenue collected under this head to form a fund for the social security of the workers. We will set up a committee to put up recommendations for the implementation of the scheme. As what we have done in all our major labour legislation and policies, the NTUC will be the first we would approach for their views and suggestions on the scheme.'

As I have said, Mr Speaker, Sir, there was this solemn declaration by a Minister that the monies collected by this payroll tax would be utilized for the benefit of our workers. Not only that, I see that there was, as reported in this article in the Singapore Business for February, 1983, a statement put out by the Government, and the statement was this:

'it is intended that the proceeds will be paid into a social security fund soon to be established. Out of this fund will be paid social insurance benefits to unemployed workers included in this scheme.'

So not only had a declaration been made in this House by the Minister but we have a statement put out by the Government, it would appear. But, as we learnt, this solemn declaration in this House and this statement put out by the Government came to nought. Year after year these monies were paid into the Consolidated Fund.

But what I have just learnt, Mr Speaker, Sir, is that the Government which introduced this payroll tax in 1964, ie, the Malaysian Government, repealed this payroll tax in 1971. They obviously took to heart the advice of the Singapore Government that was tendered in 1964, that it was perhaps an unwise tax. Whilst the Malaysian Government repealed this tax in 1971, we however continued it on the Statute book and continued to collect the tax. Now the Minister says he "will suspend this tax." When he said the word "suspend", I immediately became curious as to why the Government was merely suspending it. Is it the Government's intention to hold it in reserve and to reinstate it at some future time when the Government thinks the employers will be able to pay this payroll tax. Perhaps the Minister would clarify this.

But may I tell the Minister, I am sure he has been advised by his legal experts, and he has, of course, the Second Minister for Law sitting next to him, but may I tell him that under the Finance Act, he really has no power to suspend the tax. The only thing that can be done is to bring in an Act to repeal the Act or the levy collected for the Payroll Tax. So are we going to see an introduction of new legislation to repeal the payroll tax? That at least would make very clear to our people the intention of the Government as regards a tax which has been a burden on our employers, businessmen, entrepreneurs. So will the Minister tell us what exactly are the Government's intentions on this payroll tax.

I pointed out that the Government, when it retained this tax, had declared its solemn promise of using it for the workers. May I ask the Minister whether the Government will now honour that promise, not perhaps altogether to the full extent that was envisaged or contained in that declaration and statement, but at least partly, to help workers who are now thrown out of jobs? Will there be some form of unemployment benefits given to these workers who have been thrown out of employment? That would at least be an honourable way for the Government to redeem its pledge made in 1965 to the workers. We have, as you are aware, Mr Speaker, Sir, no unemployment benefits in this country. And a worker who is thrown out of unemployment suffers great indignity in that he and his family are thrown back on any savings they have, and if they do not have any savings, then they will have to resort to borrowing. So has the Government any plans to help those who may be unemployed as a result of the downturn in the business activities?

The other fiscal measure that the Minister announced was this partial, as I see it, suspension of tax on telephone services and trunk call services to West Malaysia. May I ask what is the reason for it being only a part suspension on trunk calls to West Malaysia? What is wrong with doing away with the tax altogether? I am sure the Government does not need that money.

The other measure that the Government says it will take to improve the economy is to encourage tourism. Mr Speaker, Sir, may I refer the Minister to an article that appeared in the Far Eastern Economic Review for the 14th March, 1985, under Tourism. It was headed "Sanitized Culture leaves tourist beds empty". The point of that article was that the tourists were not going to come to Singapore to see even a city in the park, which I see is the latest attraction that is going to be put out by the Singapore Tourist Promotion Board. This has been said again and again and it does not need any repetition, but if tourists are to be encouraged to come to our country, we are not going to encourage them to come here to see our parks. There are other parks in other parts of the world for them to go to. They are not necessarily going to fly out to Singapore to see the parks, neither are they going to come here to see the wax figures in Sentosa. They could see them elsewhere.

What will bring them here is, if they can see something about the life of the people. And do they find it? We are driving life out of the streets in Singapore. This was a comment made by somebody in an article that I read, in the sense, that there is hardly any street life in Singapore. Hawkers who used to do any trade on the streets have all been driven out. I know they may cause a pollution problem, they may cause an environmental problem, but nevertheless they add something to the life of the city. We have artificial attractions now for tourists, like kampungs that have been specially modelled for tourists and other entertainment. But this is not going to attract the tourists. It is time we sat down and thought quite deeply about what will bring tourists to Singapore.

Then the Minister talks about the shortage of labour in Singapore, and he says in column 482 of his statement, Section 1, that:

'our indigenous workforce will grow by at most 1.5-2% per annum even if we succeed in encouraging more women to continue working after they have children.'

Not very long ago the Government increased the levy on foreign maids.[ hope I shall not be quoted as saying that I am advocating the import of foreign maids into Singapore. But the Minister in his statement mentioned the needs of working mothers, among others, in considering the question of foreign workers in Singapore. Does the Minister propose to do anything to make it worthwhile for mothers of children to go back to work by reducing the levy on foreign maids? Or will it remain at the sum of $120 which was imposed last year?

Mr Speaker, Sir, it does not need very much of a calculation to realize that with this levy and the amount paid by way of wages to the maid - and if you take into account the income tax, travel and eating expenses - there is hardly anything left for the working mother. It does not make it worthwhile at all for mothers to consider going back to work.

We welcome, Mr Speaker, Sir, the Government's decision to decrease its participation in the private sector. There has been a general feeling among our people that not only does the Government intervene and participate directly in what should be the private sector but when it does, it also competes unfairly against the private sector. It has built-in advantages and preferences, and this works against the private sector. So we welcome that and I also welcome the announcement by the Minister that they would monitor the companies over which the Government will retain control more closely when it comes to policy decisions for investment.

Sometime ago, Mr Speaker, Sir, I asked the Minister about the acquisition by a Government company of shares in another company which resulted, we understood, in some substantial losses. The Minister then said he was not going to comment because it was a mere commercial transaction. I hope we might have some information now from the Minister on this acquisition by Keppel Shipyard of shares in Straits Steamship, and what led to the losses incurred. We have a right to know this.

We also welcome the tax deductions that had been given for certain educational expenses for individuals. That is certainly a step in the right direction.

May I bring to the Minister's attention a lacuna in our income tax laws on relief for children, and I hope perhaps he will do something about that. Somebody rang me up the other day and said, "Would you please bring this up in Parliament?" He said he was an orphan, both his parents had died but he has a sister and she is in the Polytechnic. And he is bearing the cost of her fees and her education in the Polytechnic. She is learning a skill, but he said, "i cannot get any relief at all from the income tax authorities for the money I spend on her." He stands in loco parentis, as it were, to his sister - in the position of his parents - and if his parents could have got that relief, why should he not get it? I myself do not see why he should not. So would the Minister perhaps consider this request from this member of the public?

If I may now move on to the tax changes that have been introduced by the Minister in his Budget Statement. First of all, if I may deal with the increase in road tax of 15% and the increase in petrol tax which, as has been rightly pointed out, is more than just 10% - it is 10% ad valorem - but it works out to 25% for the motorist over its old price.

Mr Speaker, Sir, the private motor car still remains the most convenient and the cheapest form of transport for a family. What is wrong about this tax is that it is discriminatory. The Government, time and time again, resorts to the price mechanism. That may be the most efficient and the most convenient method of regulating the use of any article or service, but it is not the most equitable method. Yet I find the Minister says that that is the most equitable method. This measure hits at families who can only afford one car and who need it perhaps for the man's business and also for the family's use. It does not strike at the wealthy, far from it. There are people in our society who own not just one car, who own not just two cars, but three or four cars. This tax is not going to be any restraint for families in that category. But it will certainly be a blow to the people who need cars for their business and who can only manage just one. There are some businesses, Mr Speaker, Sir - I do not have to elaborate or illustrate - where a car is essential, especially for the small businessman. He cannot just simply rely on taxis or on buses to conduct his business activities, and it is that person that you are going to hit and you are going to make his position worse.

Likewise, with the increase in the petrol price. It is not going to affect the rich and the wealthy. The people it will affect are those who find it already a burden to pay the present petrol prices. Mr Speaker, Sir, we are collecting by way of tax from the motorists a sum far in excess of what we need to provide the roads on which they run their motor vehicles or cars. I see that the revenue from taxes on motor vehicles comes to something like $764 million. The expenditure on roads - this is the development expenditure and the recurrent expenditure - only amounts to $258 million. So we are collecting from the motorists and users of motor vehicles something like three times what we spend on the provision of roads. Our motorists and car owners, as has been pointed out more than once, are the most heavily taxed people in the world at the moment.

If I may move on to the diesel tax on taxis coupled, as it were, as a sort of palliative to the taxi drivers, with an increase in the taxi fares. I was surprised to see, Mr Speaker, Sir, in yesterday's Sunday Times a statement by the Secretary-General of the NTUC that he thought it was unwise ---

The Second Deputy Prime Minister (Mr Ong Teng Cheong): I never said that.

Mr Jeyaretnam: All right, it does not matter. Do not get excited. Perhaps you can bring the paper. He thought it should not have been introduced at this time. May I tell the Second Deputy Prime Minister that he is a member of the Cabinet and there is such a thing as collective responsibility. Perhaps he might tell us whether, when this matter was brought up in the Cabinet, he registered his protest and his vote against it. I would commend to him that if he disagreed with that decision, then the only alternative is for him to resign from the Cabinet. Then at least he will be shown to be standing up for his principles. I am sorry. You cannot as it were agree to this tax in the Cabinet and then go out and say, "i do not agree with this. It is not a wise measure" or words to that effect. Perhaps the Second Deputy Prime Minister will tell us what he proposes to do about this.

Mr Speaker: Order. It is 1.00 pm now. The Sitting is suspended until 2.30 pm this afternoon.

Sitting accordingly suspended at 1.00 pm until 2.30 pm. Sitting resumed at 2.30 pm