ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Dr Augustine Tan: Mr Speaker, Sir, I was commenting on the Central Provident Fund when we adjourned for lunch. The Member for Potong Pasir asked whether the CPF would be able to repay its contributors when the time comes for withdrawal. I have here the Monthly Digest of Statistics, February 1985, and on page 98, Table 11.20, the data given is as follows: in 1984, the CPF collected $5.4 billion but the amount withdrawn was only $3.5 billion. Of this $3.5 billion withdrawn, only $817 million represented withdrawal at the retirement age. In other words, only 30% of the total amount collected for the year was withdrawn by people upon retirement. In other words, on the basis of the current figures, every year the CPF takes in more money than the amount withdrawn by people upon retirement. The total amount due to contributors is $22.7 billion. It might interest the Member for Potong Pasir to know that our external reserves for this year happen to be exactly that figure, $22.7 billion. I believe that is an underestimate because our gold stocks, as I understand, have been valued at cost, and so the actual figure may be higher.

The Member for Potong Pasir also mentioned that because of rising Government expenditure, Government has had to tax more and more each year. I just looked up the figures in the Yearbook of Statistics, page 204, for the last five years. I find that the percentage of increase in Government revenue from year to year has been dropping: Percentage Revenue increase 1980-81 28.3 1981-82 33.9 1982-83 15.2 1983-84 - 0.02 1984-85 12.4 1985-86 1.6 Sir, statistics can be made to lie. The Senior Minister in the Prime Minister's Office has exhorted us to tell the whole truth, but some people tell everything but the truth.

Next, Sir, I would like to make some comments on the Government's proposal to sell off Government companies. I think it is a good move at this time. After 25 years of building up a very solid infrastructure, after much effort to attract the multinationals to set up bases in Singapore to export, it is time we gave stimulus to the private sector in Singapore. As to Government companies, the Minister of State for Trade and Industry said earlier, in defense of Government's efforts in these companies, that by and large they have done well. But at the same time I would urge the Government to look carefully to see whether some of these companies might not have departed from their original objectives, or that they might have exceeded whatever authority or original goals given to them.

In the process of divesting Government ownership, I think one must make a distinction between privatization of ownership and privatization of management. I think it may be wise to go beyond privatization of ownership and to allow more private management to take over some of these companies. And I would like to see that, in the process, there is more share ownership by workers-a process already begun I believe if one reads press statement about Singapore Airlines (SIA). It has from its inception been encouraging employees to buy share. So when the Government offers its shares to the public, I am sure this would be a point that they would pay attention to.

Next, Sir, we come to the question of our taxation policy. Over the last few years, we have seen a switch in terms of Government tax policy - away from taxes on income to taxes on expenditure. The rationale for this policy should be obvious, namely, that Government is trying to encourage greater production and trying to give more incentives to individuals and firms to produce more. Let us never forget that it is only when we can produce more that we can safely spend and consume more. To do otherwise is to court disaster.

But Sir, here, as in other countries, taxes on expenditure are very unpopular measures and, beyond a point, they even become counter-productive. Taxes on expenditure have been used in Singapore to achieve certain social goals. We need to ask ourselves a number of questions. First, do people understand the entire rationale for these taxes, for example, in the car ownership, taxes on taxis, ie, the diesel tax, and so on? Do people understand these policies? Are people able to see the comprehensive road transport policy of the Government? There are buses, there is the MRT to come, there are taxis, there are private cars, private vehicles. Perhaps more explanation need to be given. At the same time, hon. Members in this House have brought to the Government's attention that taxes which impose costs on people and on the production process can have a multiplier effect. And I think Government would be foolish not to take this into consideration. The problem is, when taxes on expenditure become too high, people get too angry; and when they get too angry; they stop listening. So we have got to defuse the anger and to get the people to listen to the rationale. There is clearly a need, as several Members in this House have pointed out, the need to look for alternatives to fiscal measures to achieve a social policy.

What about the private sector itself? So far, nobody in this House has really said anything about what the private sector can and should do for itself. Neither in the press do I read any statements by the private sector about what they can do and what they ought to be doing for themselves. People complain about paternalism. On the other hand, people should not treat Government like a "Big Daddy" that can give hand-outs and goodies. I think we have got to disabuse people of this attitude towards Government.

At a time when there is an economic challenge, or the downturn, our entrepreneurs, our businessmen, must search for effective ways to overcome the problems. They need to look for new lines of production, perhaps new markets, to have greater efforts at productivity, and a willingness to use some of the fat profits accumulated over the past five years for times such as this, so that they can hold out during a period of recession. I believe that our people are more resilient, more enduring, but they need to speak out exactly what they can do, share ideas of what could be done. And above all, one should not panic. One should not create an atmosphere of panic. The banks, in particular, should not over-react. I believe they have been over-reacting to the Hoo Thye case. I think we do ourselves a tremendous disservice if we over-react both publicly and privately. In every crisis, there is opportunity, and I believe myself that we have all the vital ingredients for a great new boom to come. Firstly, we have an excellent infrastructure. Secondly, we have created tremendous excess capacity, whether it be hotel rooms, shopping complexes, offices, or residences. All we need are the people to fill these rooms and offices.

There is plenty of capital around but we need to redirect the capital away from speculative channels to productive channels. I have advocated over SBC, on Friday Background, that the Government should consider a lowering of company taxes from the present 40%. If over the years we can gradually lower this tax, say, to the level of Hong Kong, I believe we will see a tremendous influx of new businesses, new head offices being established here, to fill up those empty offices and shopping centres. We have the trained manpower. We have been investing in this social infrastructure, whether it be university or technical and vocational training. What we need is simply a release of entrepreneurial energies. And I believe our people are creative, and I believe that the vision of the year 2000 of creating a City of Excellence, a Society of Distinction, is achievable. That is within our reach if only we are united, if only we work together towards constructive policies. We can bring in the tourists if we make the efforts, as are being made. We can encourage new companies to come in.

So much, Sir, for the economic transition. Now, if I may venture a few words on political transition. As we have now got a group of younger leaders, people are looking at them to see whether they have style or substance, or preferably both. I venture a classification of leadership, a four-fold classification. Firstly, soft-headed and soft-hearted; secondly, soft-headed and hard-hearted; thirdly, hard-headed and hard-hearted; and fourthly, hard-headed and soft-hearted. Now, I know what Members would prefer, namely, the fourth category. A hard-headed government with the heart soft enough to be caring and compassionate for the needs of the people.

Perhaps, here I might give a little anecdote. I met an ex-MP recently. He was formerly in Government. He was very critical of several aspects of Government policy. And as I let him talk, after a while I asked him this question, "If you are so critical, and if you claim you have been so critical for so long, why did you stay so long in the Government?" And he gave this answer, and it is something which should really make us sit up and take note. He said to me, "The reason I stayed so long is because the Prime Minister is an honest man; the Cabinet is honest. They are for a better Singapore. That is why I put up with their nonsense." Therein lies a lesson for our younger leaders. If they can continue this tradition of honesty and effective government then we can have a bright future.

But maybe I can give a word to the older leaders. Ex-MPs and ex-Cabinet Ministers can be one of two things. Firstly, they can be bitter in resentment, vengeful, bent on destructive criticism, kicking the ball into their own goal post. They will become the laughing stock of Singapore. People will ask, "Wasn't he part of the team responsible for the very policies he is now criticizing?" On the other hand, these older leaders can be elder statesmen. Beneath the grey hairs and beyond the receding hair lines, there is the wisdom of years that can be tapped by the younger leaders. They can be graceful in retirement, a little anxious at times perhaps about the bold new policies of their successors but, by and large, able to enjoy their pensions. Perhaps there is a third option: we can export their services to China and other places.

I also have a word for the Opposition. The Opposition, Sir, is a part of the political transition. The question is: what kind of Opposition does the public want? I know what the public does not want. They do not want a destructive Opposition, an abusive Opposition, an irresponsible Opposition, bent on mischief. The public wants a constructive Opposition. They want a credible Opposition and not superficially credible, mouthing apparently truthful platitudes, but people who know what they are saying, really truthful, and having done their homework carefully.

Sir, let us raise the level of debate in this House and outside the House. I agree with some writers to the press that we should not be personal. If I have appeared to be personal at times and have offended the hon. Members of the Opposition, I do apologize for it. But I reserve the right to be angry, Sir, if I see Singapore's best interests being threatened.

I have a proposal. The proposal is that the Government should provide briefings, information that is not secret, to educate the Opposition MPs in Statecraft. Perhaps then we shall see more constructive debates and propositions in this House.

A second proposal is that in the process of gathering public opinion, forums should be encouraged in which genuine, constructive, in-depth discussions can be conducted about vital issues facing our nation, about the CPF, about road transport policy, about the Government Budget. There are so many misconceptions, largely stemming from ignorance. The Opposition Members were saying that the Government is getting more revenue, as though the Government is taking the revenue for itself. And who is the Government? Are there corrupt people in the Government? The Ministers are on salary, honestly and plainly on salary. Who benefits if Government gets revenue? Ultimately, it is the people.

We need to educate the people in terms of economics. What makes Singapore tick? It is vital, Sir, as we consider alternatives for future development, that people should get at the truth.

Finally, Sir, we are all in a third kind of transition. From the Presidential speech and from contributions by Members in this House, and feedback from the public, it is clear that Singaporeans are searching for something more besides material things. And I believe it is not merely culture, be it music or drama or literature. It is really "coming to terms with God". Quite a few Members have already passed into the next world from this Chamber. Many more are due to go, soon. This nation, Sir, must turn to its Creator and acknowledge His ways. We have been much blessed, Mr Speaker, Sir, and I believe, if we seek God with all our hearts, we shall prosper as a nation and be secure.

An hon. Member: Amen! 2.51 pm

The Acting Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, may I be allowed to respond to some points made by the Member for Potong Pasir regarding CPF as I am the Minister in charge.

Mr Speaker: Yes.

Mr Lee Yock Suan: Sir, although the Member for Potong Pasir claims to be a responsible Opposition Member, he has made unfounded statements both during the elections and in this House, which confuse and mislead the public. One begins to doubt his sincerity.

One statement that he has made concerns the pricing of HDB flats. The Member must be still wondering how he can build four blocks of HDB flats at a profit. More likely, he must be considering how he is to get out of the fix he has got himself into. My sympathies with him.

The other issue that he has raised this morning concerns the CPF, ie, the Government will be unable to pay back the depositors. Before I proceed, may I ask the Member whether he has ,any facts or figures to substantiate his claim? Would the Member like to reply?

Mr Chiam See Tong: Mr Speaker, Sir, I was looking through my file and I shall presently produce the facts and figures that the Acting Minister requires. But the fact is that my Party has got two sets of facts and figures, one concerning the HDB and we have had it before, I repeat, before the elections. And that set of facts and figures has never been rebutted by the Minister for National Development. He has come forward with a new scheme. Many people have said that he is just sidetracking the issue. Instead of the Government coming out clean to justify and say that, in fact, the HDB is not making profit, it has come out with a new scheme just to draw the attention away from the responsibility of the Minister.

As regards CPF, I have stated, if you have listened carefully, that it is "eventually" - the word is "eventually" - and our calculations have shown that. So if the Acting Minister wants it, I will produce those facts and figures.

Mr Lee Yock Suan: Sir, since the Member has made an important allegation, he should have the facts and figures at his fingertips to substantiate the point. He wants the electorate to believe him and these are the points on which he has gone to the elections. So surely the facts and figures must be right there with him for him to produce now rather than trying to delay and avoid the issue.

As for HDB pricing, it is not for me to debate with him. I think the Minister for National Development will take him on on his point - within the three - month period during which he has to accept or reject the proposal or offer from the Minister. If Members recall, in fact the Minister has amply explained during the elections why he figures produced by the Member were faulty. But, as I said, my concern here is with the CPF and before I proceed, I just want to know whether he has facts and figures ready to substantiate the point that he made this morning.

Mr Chiam See Tong: Mr Speaker, Sir, may I be allowed to answer that? I have already stated that we have got two sets of facts and figures, one in relation to the HDB and the other in relation to the CPF. I am speaking about the second set of figures in regard to the CPF. And that has been published in our Party's magazine known as The Demokrat and it has been out for months, and we have got no reply from the Government side. This is most surprising. I am sure the Acting Minister is aware of this publication.

Mr Lee Yock Suan: We request the Member to produce those figures in time so that we can consider them in this House.

For the moment, let me just explain the figures that I have to show how he has been misleading the public. The total deposits of members with the CPF as at 31st December 1984 amount to $22.7 billion. The foreign reserves of Singapore as at the same date, 31st December 1984, is about $23 billion. In addition, we have loans to HDB and JTC which amount to $10.8 billion, not counting the others like the loans to PUB, loans to companies and so on. So we do have these foreign reserves of $22.7 billion. We also have local reserves amounting to $10.8 billion, the figures I have just quoted. If you add these two figures alone, it comes to $33.5 billion, which is about 50% more than the sum owing by the CPF to all its members, Therefore, it shows very clearly that Government reserves are much greater than the CPF savings of all its members. Even if today all the CPF depositors were to be allowed to withdraw their entire CPF savings - I am saying "if"; I am not saying that we are going to allow this but if we allow it -there is definitely more than enough money to pay off all the depositors. So do not worry about this.

As can be seen from this budget and from previous budgets, the Government has been extremely prudent in its budgetary and reserve management policies. There is absolutely no danger that the Government will be unable to pay back the CPF depositors. So long as we continue to have yearly surpluses as noted by the Member for Rochore and so long as we invest our surpluses in good, strong assets which appreciate over time, there is no question that we will be able to pay back the CPF depositors. It may be true that with the aging of the population at some point in time, the CPF contributions to the CPF may be less than the amount withdrawn.

Mr Chiam See Tong: That is right.

Mr Lee Yock Suan: But so long as each dollar of CPF money is fully invested and backed by hard reserves which appreciate over time, there is no problem of paying back the CPF money. Our CPF savings are invested carefully in bonds, properties and other assets which are a good hedge against inflation. When the time comes for the CPF to pay back the depositors, these assets will be simply sold to obtain the necessary cash. Where then is the problem of repayment?

I hope this has helped to clarify the issue and to show how, in fact, without hard facts and figures, the Member has been misleading the public.

The Member for Potong Pasir has further raised the point this morning that CPF contributions should be reduced from 50% to 40%. This is something which is very popular on the surface. But you must realize that CPF is workers' pay. Lower CPF means lower pay for the workers. Is that what the Member wants?

I think the Member for Whampoa has already explained very clearly why we need to have high savings, why the CPF rate should not be reduced at this time of great economic uncertainty. We may well need the CPF savings to tide us over a severe world depression, which may be triggered by the world debt crisis. He has further made the point that the lower income group especially are the ones who will require high CPF savings to enable them to purchase HDB flats, for Medisave and for old age security.

It is really a paradox that this CPF scheme that we have, which many countries are trying to emulate, has become a whipping horse of the Government. We should realize the full benefits of the CPF scheme. Through CPF we have been able to have yearly surpluses, to have a high savings rate which has enabled us to build and to pump prime the economy even in times of recession. There is no need for us to borrow externally, and these sources of funds are non-inflationary.

The CPF scheme is, in fact, a wonderful scheme. Many countries, Taiwan, Malaysia and others, are trying to copy us. And yet because of the falsehoods and the confusion spread by the Opposition, the CPF has now become a whipping horse of the Government. Mr Speaker, Sir, these are the points I want to make.

The Second Deputy Prime Minister (Mr Ong Teng Cheong): Mr Speaker, Sir, the Member for Potong Pasir was not here yesterday when I explained my stand, in as far as the taxi fares and the diesel tax and measures taken by the Ministry of Communications are concerned. So I thought it is necessary that I should explain the point.

The Member for Potong Pasir had twisted my words, in the same way as the Member for Anson has done yesterday. But I know the Member for Potong Pasir is new in this House, and he is young, so we will forgive him.

Sir, the Member for Potong Pasir repeated the claim that there is a contradiction or differences of view between myself and the Cabinet. We know that that is not true and is incorrect. It is true that the subject has been thoroughly discussed in Cabinet and I agreed wholeheartedly with the decision of the Cabinet that (1) measures will have to be taken to solve the taxi shortage problem, and (2) to increase taxi fares in order to increase the income of taxi drivers, as has been ciamoured by the taxi drivers themselves for some years. The measures finally adopted by the Government will obviously have an impact on taxi drivers.

The Ministry of Communications' assessment is that the impact on taxi drivers would be small. My feeling, based on the feedback that I had from taxi drivers, as I am Chairman of the NTUC Comfort Board of Directors, is that the impact would be large. Hence my suggestions to the Ministry of Communications to review these measures if it fails to achieve the intended objective. I hope I have made my position clear. I also hope my feeling would be proved wrong, instead of the assessment of the Ministry of Communications.

Meanwhile, when the measures are put into operations soon, I believe it is the 1st April, I hope that all the taxi drivers and all of us who use taxis will give the scheme a try. Cooperate with the Government and try it out, and let us hope that the intended objective will be achieved. If not, we will urge the Ministry of Communications to review it. That is my stand. Thank you.

Mr Jeyaretnam: May I ask the Second Deputy Prime Minister by way of clarification? If the Ministry of Communications' calculations are proved wrong, will the Second Deputy Prime Minister assure the House that he will urge the Cabinet not to impose this diesel tax?

Mr Ong Teng Cheong: The Member's question is, whether I can assure him that I will urge the Cabinet to review the measures introduced. Is that your question?

Mr Jeyaretnam: Will you tell them to review it?

Some hon. Members: "Not to impose".

Mr Jeyaretnam: Not to enforce them.

Mr Ong Teng Cheong: I have already mentioned earlier that we will have to let the scheme come into operation first. I expect, as I mentioned in my statement, that there will be a drop in demand in the first one or two months of the operation, and if it fails to achieve the objective, then I will urge. I have already said so. That is in my statement.

Mr Jeyaretnam: Will you give an assurance to this House?

Mr Ong Teng Cheong: I have already made that assurance. 3.05 pm

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, in his Budget statement, the Minister for Finance said that "the outlook for 1985 is not as rosy as for last year." But he went on to say that "the last five years have been years of exceptional prosperity for Singapore and for Singaporeans."

Sir, when unveiling the 'Vision for Singapore by 1999', the First Deputy Prime Minister also boldly proclaimed that by 1999 Singapore will become a developed country, with a standard of living which is better than the Americans and the Japanese and equal to the Swiss today. Sir, such a vision and promises really sound exciting. Are they achievable?

When the Minister for Finance and the First Deputy Prime Minister talked about matching the standard of living of the Japanese or the Swiss, they were referring to the per capita income. Yes, based on the projections of our economic growth, we can reach the targeted per capita income. But I must say that the figure of per capita income by itself is not an absolute measure of the well-being and comfort of our entire population. Labour share of national income, distribution of income and cost of living are important factors to consider. Our labour share of national income, in terms of wages, for instance, still falls below that of the Japanese and the Swiss. Per capita income only tells us half the story. To complete the picture, we must also set targets with respect to other social and economic indicators.

Sir, I have examined the income figures of our workers over the last 10 years. In 1975, the average monthly income of all the salaried workers in Singapore was $480. In 1984, it has increased to $1,094. The annual average increase in wages over the 10-year period was around 10%. Even if the figures were adjusted for inflation, the average real growth in wages is over 6% annually. By any standard, this is a remarkable achievement. Due credit must be given to our Government, our businessmen, our workers and, of course, our trade unions.

The next question is, have our ordinary citizens benefited much from the wage increases in comparison with the better qualified professional, technical and managerial staff? Is it true that the wage increases enjoyed by the ordinary worker is what we call "peanuts", which is nothing to boast about? Let us look at the figures and statistics again. In 1975, the average wage of the production and manual worker was $320. In 1984, the average wage was $730. The annual increase over the 10-year period averages 10.2%. For the clerical, sales and service related workers, the monthly wages increased from $400 in 1975 to $810 in 1984. The annual increase was about 8.5%.

Now, how about the professional and managerial staff? In 1975, the average wage of this category of employees was $1,200. In 1984, it was $2,400. The annual increase was also around 8.5%. So, over this 10-year period, from 1975 to 1984, annual wage increase of production and manual worker was 10.2%. The increase for clerical and sales worker as well as for the professional and executive was about 8.5%.

Looking at these figures, we can see that the increase of income of our population, in percentage terms, is fairly uniform. There is therefore no ground for complaints that our lower educated, lower income group, is not getting a fair deal for their effort, and a fair share of the economic growth.

But a stark fact which is thrown up from these figures is that although, in percentage terms, all categories of workers enjoy more or less the same rate of wage increase, the income gap between the manual worker and the managerial staff in quantitative terms, in dollars and cents, has widened. This can be easily understood. A 10% wage increase for a person who earns $500 is $50. But a 10% wage increase for a person earning $2,000 is $200. Whereas in 1975, the income gap between a manual worker and a managerial staff was $900 in 1984, it has widened to $1,700.

Sir, as we know, the disparity in income between the manual and the skilled and managerial staff is due essentially to the difference in educational and skill levels and the influence of supply and demand. Because of the rapid economic growth, skilled workers, engineers and managers were in great demand. Their wages therefore went up. While we could bring in unskilled workers in large numbers to meet our demand for labour, we were not able to do so for the professional and technical staff because of the scarcity of such personnel. The wages of the technical and managerial staff in Singapore have escalated to the extent that today our engineers and managers are getting more than their counterparts in the developed countries. While the production workers in Singapore are earning about one-third or one-fourth of their counterparts in Europe or America, our engineers and managers are getting more than their counterparts in these countries.

Sir, I am not begrudging the high wages of our engineers and managers. We know that the cost of living of the middle income group, for instance, the cost of owning a house and the cost of owning a car, is very high. But I am rather annoyed that the rising wages of our ordinary worker is singled out as the factor which affects the competitiveness of our industry and exports. If Singapore wishes to remain competitive, not only should the wages of the production workers be competitive, so must the wages of technicians, engineers and managers.

And how about the overheads and other operating costs? We all know that land cost and property prices in Singapore are high. The transportation cost is high and is getting higher, The utilities and other overhead expenses are high. I think it would be wrong to pursue a policy which allows the overheads and other operating costs to rise while, at the same time, trying to maintain our competitiveness by keeping wages low. Our people will become worse off at the end of the day because they will have to live with rising costs and inflation.

I must also caution the Minister for Finance that if we want to succeed in attracting high-technology, high value-added industries into Singapore, we must build up a sufficiently large pool of technicians and engineers who are available at reasonable cost. Our competitiveness and our ability to attract high technology investments will be determined not by the availability of a large number of unskilled cheap labour but rather by the supply of a large pool of skilled workers, technicians and engineers. The Government must intensify its programme to produce more engineers and technicians so that, by supply and demand and pricing mechanism, the wage cost of such categories of personnel can be adjusted to a more reasonable level. Sir, I welcome the Minister's plan to set up a high level committee to undertake an in-depth review of our economic development plan. I hope that the Committee will examine thoroughly all the factors that affect Singapore's competitiveness.

Sir, the distribution of wealth and the share of economic and productivity gains in the form of wages has, in the past more than one decade, been determined to a significant extent by the National Wages Council (NWC). NWC has served a useful purpose. Not only has this tripartite body brought about orderly wage increases in the last 13 years but it has also contributed greatly to the industrial peace and harmony which we are enjoying today. There is no denying that because of the existence of NWC recommendations, intense negotiation and bargaining, which is adversarial in nature, has been alleviated at the enterprise level. Wage increases and collective agreement negotiations have been concluded rather expeditiously because both parties, the union and management, could use the NWC guidelines as the basis for negotiation.

NWC, as an institution, has served us well. It has contributed to the industrial peace which should not be taken for granted. We should not forget that political stability and industrial peace is the single most important factor in influencing an investor's decision to invest in Singapore. You can have the cheapest labour cost in the world. You can have the most attractive incentive schemes to lure the investors. You can scrap all the Government taxes and levies. But with political strife and industrial unrest, you are going to attract nobody.

Some employers have suggested that NWC should be phased out because it resulted in unrealistic wage increases. Under the present business and economic conditions, the pressure is even greater for the abolition of NWC. But the arguments and reasons put forward are, in my view, far from convincing. The NWC usually recommends a range of wage increases as a guideline. The recommendations take into consideration the previous year's economic performance, prevailing business conditions, and projection for the future. The employers and the unions use the guideline as a basis for negotiation and the actual settlement depends on the profitability of the establishment, the existing wage level, the productivity of the workforce, and the situation of supply and demand.

This explains why there are employers who are prepared to pay even beyond what the NWC recommends and there are some who pay below the guideline because of financial and other constraints. But if you take away NWC recommendations and ask both parties to start negotiating from a blank sheet of paper, you are asking for a lot, of trouble. The Member for Rochore has suggested yesterday that the union should not use the reduction of payroll tax and SDF levy as a leverage to ask for more wage increase. My response to him is that instead of leaving it to the individual union and employer to argue over this matter, NWC is the best forum where such issues can be discussed sensibly and rationally. NTUC will ask for what we think is fair to our workers. I hope the Minister for Finance do agree with my view of the need to retain NWC.

Sir, in the final analysis, the wage level and earning capacity of our workers will depend basically on their education and skill levels. I agree wholeheartedly with the Minister for Finance's statement that "education and training is the cornerstone of our economic upgrading strategy and the key to a better life for our people." But what puzzles me is that, while highlighting the importance of education and training, the Minister has, at the same time, allowed for a reduction of the Skills Development Fund levy. I can understand the reasons why the Government has decided to scrap the payroll tax and to reduce the SDF levy. This is to reduce the costs of doing business in Singapore. While I can join the employers and the businessmen in applauding the Government's decision to suspend the collection of payroll tax, I cannot agree to the reduction of SDF levy without expressing some reservations.

First of all, employers must be reminded that SDF levy is not a Government tax which is slapped on the companies arbitrarily. SDF was set up during the implementation of the economic restruc- turing and wage correction policy for a very specific purpose of upgrading our workforce. The Fund was set up with the consensus of the employers, the unions and the Government. The contribution to the SDF, which started from 1979, was as a matter of fact part of the wage increases agreed upon by the NWC. The 4% SDF contributions could have been added to the disposable income of the workers. I cannot therefore agree to the reduction of the SDF without feeling some loss on the part of the employees.

I must remind the employers of their obligations to train and retrain the workers. The Minister for Finance has decided to reduce the SDF levy with the good intention of lightening the burden of the employers which I would have no objection if this is indeed going to make the company more competitive. After all, if our workers can help to make the companies more viable, why not. But the employers should not lose sight of the original objective of the SDF. Reduction of SDF levy should not be misconstrued to imply that we are relenting in our effort to train our workers.

The Minister said that SDF has accumulated a sizable balance and hence it was possible to lower the rate of contribution without jeopardizing the scope and effectiveness of the SDF programme. I would like to draw the attention of the Minister to the need to pay particular attention to the retraining of our older workers. It is true that jobs are plentiful in Singapore. But it is also true that many older workers, especially those who are retrenched by their employers after spending many years with the company, could not fit into the new jobs which are created by the establishment of new industries. There is a mismatch between the job seekers and the job vacancies. Many of these workers who are above 45 years of age are unskilled or illiterate. It would be very difficult for them to find jobs of reasonable remuneration once they are retrenched. Many of them tried to apply for a hawker stall or to become a taxi driver. But the Government has stopped building new hawker centres and driving a taxi today is not necessarily a lucrative vocation.

The Government may wish to introduce schemes to encourage these workers to take up part-time skill training. It would be better for them to attend some upgrading courses so that they can acquire marketable skills and seek alternative employment when they are phased out of their present jobs. The solution to the problems of retrenched workers is not, as the Member for Anson suggested, to put them on the dole. This is most humiliating. The solution, Sir, is to help them find gainful employment. This is where the Government can help.

Presently, in my view, the Government has not been providing adequate guidance to the workers, especially those engaged in the sunset industries, on the types of skills that they should try to acquire. Neither is the VITB adequately equipped to train large numbers of existing workers. The SDF too does not have any scheme to sponsor retrenched workers for skills training. If you are out of employment, you do not qualify for SDF grant, the only exception being the BEST programme. I suggest that the Minister for Finance ask the Ministry of Trade and Industry, SDF and VITB, to study the problem or set up a special task force for this purpose. At a later stage, the Government may have to consider introducing incentives to encourage companies to employ older workers.

Finally, Sir, let me say a few words regarding measures taken by the Government to curb car ownership. I am sure the Minister for Finance is aware that increasing road tax, diesel tax, petrol tax and taxi fares has an inflationary effect. It causes a chain reaction in price increases. The general public will suffer as a result. Many of my colleagues in this House have already voiced their concern yesterday about the impending rise in the cost of living. Let me inform the Hon. Minister for Finance that the price hike has already taken place. Last night, someone told me that he has to pay 10 cents more for a cup of coffee at a hawker stall which he frequents. A colleague of mine had to pay $2 more for a hair-cut when he went to a barber shop two days ago. Sir, I am not convinced that the ultimate solution to the problem of increased car population and road congestion is to keep increasing levies on car owners and car users. There must be other non-inflationary measures which can be explored and introduced by the Government.

The imposition of diesel tax too has caused much dissatisfaction and anxiety among the taxi drivers. In spite of the assurance given by the Minister for Communications and Information, there is fear among the taxi drivers of a possible drastic drop in demand, thus affecting their income. I would like to join my fellow MPs in this House to appeal to the Minister for Finance to consider reducing the diesel tax if the income of taxi drivers is indeed adversely affected by a drop in demand.

Mr Speaker: There is only one minute left, Mr Chai.

Mr Chai Chong Yii (Bukit Batok): Mr Speaker, Sir, since I have only one minute, I would just join the Members in giving my observation on whether or not the CPF Board has money to pay its members. As a professional accountant, I know that the CPF Board operates more like a big bank. It is like saying that the biggest bank in Singapore will have no money to pay its depositors. If we make this sort of misleading statement, unless the intention is to have a run on the bank or to have a run on the CPF Board, I think it is irresponsible. [Applause] 3.29 pm

The Minister for Finance, Minister for Education and Minister for Health (Dr Tony Tan Keng Yam): Mr Speaker, Sir, let me begin my reply by first thanking all hon. Members for the more than usual interest which they have given to this Budget Statement and also for their numerous suggestions and comments.

Judging by the speeches which we have heard in the last two days, it would appear that Members have gone through the Budget with a fine tooth-comb. The increases in road tax and petrol tax and the imposition of diesel tax on taxis have been given a disproportionate amount of attention by Members. And understandably so. Members must have received a lot of unsolicited feedback from their constituents and taxi-drivers, and I truly sympathize with them.

But, Sir, fascinating as this topic may be, I shall resist the temptation of leading off with this subject, particularly as my colleague, the Minister for Communications and Information, has informed me that he intends to give a full explanation of Government's land transport policy during the debate on his Ministry's estimates in the Committee of Supply. I shall therefore leave it to him to do most of the difficult ork, and concentrate on elaborating the Government's economic policy. However, Sir, if there is time, I should like to make a few observations on the increase in petrol tax and the imposition of diesel tax on taxis.

Now, several Members, I think the Member for Leng Kee first, then the Member for Rochore, Member for Anson, Member for Potong Pasir among others, have painted a gloomy picture of the economic and business situation in Singapore today. The implication, Sir, is that our economy is in serious trouble, indeed on the verge of collapse. And Government for some strange unknown reason has chosen to turn a blind eye to the plight of our businessmen and is doing nothing to help them. Is this true? Consider the facts.

We have had five years of exceptional prosperity. We still have a severe labour shortage. We have overfull employment. Then because we expect that this year our growth rate would be, say, 6% as against 8.2% in 1984, does this mean that Government should hit the panic button, bring out the first-aid box, render some instant stimulants, irregardless of the long-term consequences? 3.34pm

[Mr Deputy Speaker in the Chair]

The Minister for Finance, Minister for Education and Minister for Health (Dr Tony Tan Keng Yam): Sir, we are a young society and it is perhaps not surprising that we have not yet achieved the degree of serenity which older societies have. Singaporean,9 are often of a volatile nature. One day, we are jubilant when the sun is shining. Newspapers are filled with stories about our economic success -to such an extent that I worry. Because such stories tend to create natural feelings of resentment in our trading partners. But the next day, Sir, when there is a shower, we are plunged in gloom and we expect the sky to fall down on our heads. Newspapers seek out then the most sensational stories of bankruptcies and retrenchments that they can find. Businessmen, Chambers of Commerce, Members of Parliament, particularly Backbenchers, each have their own ideas about what kind of instant medicine that is required to bring our economy to life.

Sir, I have to inform the Members of this House that the rumours about the impending demise of our economy are greatly exaggerated. And for us to prescribe a patent medicine in order to give our economy a quick-fix is precisely what we should not do. It is because, Sir, governments in Europe, Australia, New Zealand,have adopted ad hoc measures to prop up ailing sectors to protect jobs in non-viable industries trying, like King Canute in the legend, to resist the sea of market forces that have brought their economies to their knees. I ask the Members to ask themselves: why have we been able to weather one economic storm after another? The reason is not a complex one. The answer is very simple. Sir, it is because we have set our sights correctly, because we have had the courage and the determination to adhere to our chosen course, to overcome obstacles which arise in our way rather than choose to be diverted into dangerous and unsafe byways which may appear to be easier-going but which inevitably will lead us into the forest of economic stagnation if we give in to temptation.

Sir, in case Members and businessmen have forgotten, I would like to remind them that business is not the civil service. Business is about taking risks, and making a profit if you are right and going bankrupt if you are wrong. No government can ensure the profitability of companies. I know that some governments have tried to their great regret, and to the regret of their taxpayers when the inevitable debacle occurs. Government can only create the necessary conditions - a free enterprise economy, political stability, predictable and stable rules. Businessmen must do the rest.

Sir, business is not only about taking risks. Business is also about change and the mastering of change. We do not live in a static world. The company, the entrepreneur, who can adjust to market conditions, will survive and prosper. The businessman who believes that the world or the Government owes him a living will soon run into disaster. Sir, the world of business is not a playground. Rather than complaining about high overheads or the intrusion of Government in the economy, I think that businessmen can more profitably spend their time looking for new business opportunities, working hand-in-hand with the appropriate Government agencies to seek new markets for their enterprises. Sir, in business, as in love, fortune favours the bold.

The path to our economic success is clear: more education and training, more mechanization and automation. Only then will we have high productivity which will make it possible for our companies to pay high wages. What about those companies which can only survive on the basis of lowly-paid workers or which are badly managed? What will happen to them? The answer, Sir, is that they will go bankrupt. Should governments help these companies? The answer is no. Will their workers suffer? Yes, if we have been foolish or timid and we have not taken the timely measures which we did in the last few years. Then our economy would be stagnant - no growth, unions fighting with each other, unions fighting with employers, as the coal miners are doing in England, each seeking to preserve their share of an ever-diminishing economic pie.

But, Sir, because we did not allow these temporary setbacks to divert us from doing what we knew was right, because we allowed the market to operate, we have had and we will continue to have full employment, with high wages for our workers, high wages that are justified by high productivity, whether this is in manu- facturing, in hotels, in services, in banking or in tourism.

The Member for Anson has asked if the Government has any scheme to devise a plan for unemployment benefits to help those workers who are retrenched or who are thrown out of employment. Sir, the Member will never learn. Look at those countries which have generous unemployment benefits - Holland, England, Australia. Are their economies doing well? Are their workers employed? Does he want Singapore to follow these countries? Sir, in England or in Holland, workers can afford to go on holidays because of their unemployment benefits. On some occasions, a worker cannot afford to work because what he gets from unemployment benefits is more than what he will receive if he gets a job. Where then is the incentive to work? Under such a system, Sir, the most sensible course of action for you and I would be to draw our unemployment benefits and have a good time. It is stupid to work. And that is why the governments of these countries are crippled by enormous social welfare spending, enormous deficits, high taxes and a fragmentation of the fabric of their societies. I think, Sir, our system in Singapore is better - free enterprise, high growth, good wages for good work, no wages for no work. Then you will have full employment and a prosperous society.

Now, Sir, I do not want to imply that the Ministry of Finance and the Ministry of Trade and Industry treat the economy of our country with benign neglect. We monitor very carefully the level of economic activity in Singapore and when measures have to be taken, they will be taken timely and appropriately. While keeping steadfast to our long-term economic goals, we will make sure that we do not price ourselves out of the world market, that our international competitiveness will not be eroded by too high tariffs, or rates, or fees, or statutory contributions. In this respect, Sir, I am heartened to hear from the Minister for National Development yesterday that HDB would be freezing the rentals of their shops for another year. And I am also pleased to read in the press that the TAS intends to reduce the tariffs for the international telephone and telex services.

Sir, it never rains but it pours. JTC has just informed me that for the period from 1st April 1985 to 31st December 1986, they intend to give a 10% reduction in current rentals on industrial land and a 15% reduction in current rentals on standard factory buildings, terraces, workshops and flatted factories. [Applause] And they will review these rates after 1986.

Dr Toh Chin Chye (Rochore): Ask and you shall receive.

Dr Tony Tan Kong Yam: As the Member for Rochore says, "Ask and you shall receive." Sir, these moves by TAS and JTC are, in my view, all the more commendable because they were initiated by the statutory boards themselves and were not done on instructions from the respective ministries or from me. It shows that the management of these two statutory boards have a keen perception of the markets in their respective areas and are prepared to exercise the flexibility given to them to make rapid adjustments to market conditions. Sir, I commend more statutory boards to follow their good example.

An hon Member: What about Housing Board for a start?

Dr Tony Tan Keng Yam: Sir, I come to the speech from the Member for Whampoa. Sir, in my view, it is an outstanding speech worthy of the close attention of all Members in this House. The Member has suggested, among other things, that Government should consider a cut in corporate tax in order to stimulate the economy. I would like to take advantage of this opportunity to brief Members on this important matter. It is important, Sir, to realize that we do not have a corporate tax in Singapore on the same basis as corporate tax in other countries. We have a one-tier taxation system in Singapore in that the income of a company is taxed only once, either as company profits or as shareholders' dividends. At the company level, the 40% company tax in Singapore can be viewed as a tax on undistributed profits. But if a company distributes all its profits, then the rate of tax eventually suffered is determined by the circumstances of its shareholders. This effect is achieved through the granting of a tax credit which no doubt many Members are familiar with. The impact of a reduction in company tax for most companies would therefore be to improve the companies' cash flow and to increase their after tax profits which will be available for ploughing back into the business.

The above, Sir, is necessarily a very simplified explanation of the implications of company tax in Singapore. Now, Sir, I will explain why there are good reasons that it is not opportune at this time to reduce company tax. Company tax collection is the single largest contributor to Government revenue. In recent years, it has accounted for about $2.5 billion, or about one-quarter of our recurrent revenue. A reduction of 1% in the rate of company tax would imply a loss of about $63 million. And if company tax were lowered by, say, 5% to be effective, this would result in a revenue shortfall of some $315 million. Therefore, if company tax is to be reduced, an alternative and substantial revenue source must be found. If the alternative source is to be indirect taxes, then we have to raise a large number of new taxes or raise the rates of existing taxes, like our road tax. And I think this would not be desirable.

Sir, another good reason why company tax should not be reduced this year is because last year I introduced a three-year write-off for all plant and machinery in all sectors. Based on assumptions on capital equipment purchased and expenditure, the revenue loss for the first three years from this concession is estimated to be in the region of some $450 million. The effect of this concession on income tax collections will only be felt from this year onwards. This generous depreciation allowance helps companies to defer their taxes and thereby reduces the effective rate of tax and increases the companies' cash flow. And I would be wary about introducing further concessions before looking at the effect of the above concession.

Sir, the 40% company tax rate should also be viewed in relation to our present system of tax incentives. Already companies in many sectors enjoy very low rates of taxation. ACUs pay only 10% tax or less on their profits, while companies which are granted pioneer status pay no tax at all for up to 10 years of their operations. A company which seeks to systematically invest and expand its operations in Singapore can therefore enjoy the benefit of these tax incentives to substantially reduce its tax rate. This system we have found to be most effective in stimulating further investment and economic growth in Singapore. Also, Sir, our extensive network of tax treaties facilitates foreign investment as a tax exemption in Singapore is often reciprocated by way of tax sparing in the overseas country.

Now, Sir, while I do not consider it desirable to reduce company tax on this occasion, I would not rule out the desirability of a cut in corporate tax in future years when our revenue position allows us to do so. As our economy continues to mature, there is merit in the argument that our tax system should be non-selective and that tax should be levied on a nondiscriminatory basis. However, due conside ration will have to be given to sectoral demands.

The move to lower the rate of corporate tax should also be tied in with the move to lower the maximum rate of individual tax. Previously, when the maximum individual rate was 55% and the company rate was40%, many high income individuals formed companies through which to conduct their activities and thereby legally avoided paying the 55% tax. One way these companies work is that most needs, for example, entertainment, transport and housing, were met through expenses charged against the company while the individual drew a low salary for his personal tax calculations. Such tax planning can only be practised by the self-employed but not by salaried workers. This is the reason why last year I reduced the maximum rate of individual tax to 40%, the rate of company tax. To avoid this problem in the future, it will be desirable for any reduction in the rate of company tax to take place at the same time or to be preceded by a lowering of the maximum rate of individual tax. This however, Sir, will have to be considered very carefully as it will lead to a further drain on revenue.

Now, Sir, I would like to comment briefly on some points from the speech of the Member for Rochore. The Member for Teck Ghee this morning has made an excellent rebuttal of many of the points contained in his speech, and it will not be necessary for me to cover the same ground. However, I think that it would be churlish of me to ignore his speech altogether, and therefore I would like to pick up and comment on one or two areas.

Sir, in the Member's long speech yesterday, he was most critical of Government's economic policy. Indeed, if we take him at his word, everything that we have done in the last five years has been wrong. Sir, even by the laws of probability, this is not possible.

I have great respect for the Member for Rochore as a politician and as a scientist, fields in which he is a recognized expert. But, Sir, in economics I would respectfully suggest to him that one tutorial from the Member for Leng Kee is not sufficient. The thrust of the Member for Rochore's remarks is that it is in some way strange or immoral for the Government to run a surplus in its overall account. He would prefer that we run a deficit, presumably the bigger the better. And I suppose we finance this deficit, first, by running down our reserves and, secondly, by borrowing massively overseas. Sir, this strategy will give us a few years of glorious living, and then what? A massive hangover when the party is over! An overseas debt which will break us and our children for generations to come, which is what many third world countries are suffering from today. Sir, prudency may not be as much fun as profligacy, but I assure the hon. Member that it is a much safer course.

Then, Sir, I cannot follow the Member's economic reasoning. Having advocated that the Government should, if it is to be a good government, endeavour to incur a deficit rather than to earn a surplus, the Member then proceeded to criticize the scale of Government expenditure. He warns that Government expenditure is expanding too rapidly and we should take steps to curb the rapid rate of increase. Sir, these are sentiments with which I am very much in agreement with him. But if Government is to reduce its expenditure, then how can we incur a deficit? That is why, Sir, I think perhaps a second lesson in economics from the Member for Leng Kee would not be out of place.

It is not Government expenditure itself, Sir, which is worrying. It is how Government spends its money. And here in Singapore we have not wasted Government funds on consumption. The bulk of our Government expenditure is on development, on productive uses which will enhance the competence, the ability of Singaporeans, to earn their own living and which will improve our economic and physical infrastructure and this will pay dividends in due course. Sir, we have not wasted the Government's funds.

Sir, it is not my purpose to ridicule the Member for Rochore who is one of our Party's elder statesmen. But wrong impressions, unless corrected promptly, can soon be accepted as gospel truth by the public. I must say that the Member has made a number of interesting points in his speech and, in particular, I regard his advice to the trade unions that they should not use the suspension of payroll tax as leverage to get higher NWC payments this year to be very sound advice. I hope that those Backbenchers who are trade union leaders will take this advice to heart.

Now, Sir, a few words on the Skills Development Fund which has been brought up by the Member for Yuhua and the Member for Boon Lay, Sir, the SDF has a crucial role to play in promoting and developing employer-based training and other activities which are critical to our economic restructuring. These activities have only recently taken off and are beginning to gather momentum. In fact, it was only last year that the SDF grant commitments began to exceed the levy collections. I would like to stress that the reduction in the rate of SDF levy should not be misconstrued to imply that we have reached a satisfactory level of training activity, mechanization or upgrading of our business operations. Economic restructuring is an on-going process that requires even higher levels of employer commitment and investment in these areas. Given the current economic conditions, the SDF will continue to ensure that generous incentives are given to maintain and to increase the momentum of economic restructuring.

Sir, it may be pertinent to remind the House that the SDF levy was introduced to encourage employers to run training programmes which are designed to equip our workforce for the activities of the future. It was to be expected that initially, the SDF would accumulate at a rate faster than its grant commitments. Now that the SDF has accumulated sufficient funds to allow a reduction in the SDF levy, I have been able to reduce it. But, as I said, this rate of levy contribution will be reviewed in three years' time.

Skills development involves the proper training and development of manpower in knowledge, in skills and in attitudes. As an investment in human resources, it is a necessary activity supporting the business of individual firms as well as the economy as a whole. To maintain economic growth, our economy must switch to higher skill, capital-intensive and brain-intensive activities. Our workforce, including our management, must acquire new knowledge, higher skills, the latest expertise. We must be able to use advanced machinery and equipment. We must keep abreast of the latest technologies.

With our tight labour situation and a highly competitive international market, we have to accelerate our economic restructuring process and move as fast as our competitors. We cannot wait for workers to develop these skills through lengthy on-the-job training programmes. We have to foster an intensive skills development programme now.

Sir, the Member for Pasir Panjang has suggested that, in order to assist small companies during these difficult times, they should be exempted from paying the SDF levy and presumably not participate in the various SDF schemes. Sir, this would be a retrograde step. If anything, small companies, more than large companies, need to be spurred to ensure that they give proper training to their workers. Most of the larger companies, for their own benefit, would have implemented a fair amount of training, irrespective of whether the SDF was established or not. Training and manpower development are unfortunately not activities which are highly visible in small companies. Sir, indeed I sometimes suspect that small companies meet their needs for experienced personnel by poaching from the bigger companies. If we were to confine the SDF levy to the large companies and exempt the small companies from paying this levy, then this would be tantamount to penalizing those who train and rewarding those who do not train. I think that a better solution would be for the SDF to devise schemes which are specially tailored to meet the circumstances of small companies. And this is what the SDF secretariat is doing at the present time.

Now, Sir, I would like to touch briefly on the increase in the duty on petrol and the imposition of diesel tax on taxis. As I mentioned in my speech, the increase in petrol duty is, in my view, one of the most equitable ways of discouraging the excessive use of motor cars. Those who own cars but to drive only at weekends or at night are not unduly penalized. Those who drive excessively and therefore contribute to the congestion on our roads must be prepared to pay the price.

The move to increase the duty of petrol is also in line with the Government's energy conservation policy. Members may point to the falling price of oil in the international markets. However, we must remember that one of the causes for the recent oil glut has been the sluggish state of the economies in the Western industrialized countries. Once their economies pick up and go on the upswing, oil prices will invariably increase. If we do not make a conscious effort now to stem the increase in our energy requirements, future oil price increases will place a heavy strain on our economy.

As for the diesel tax increase, the past practice has resulted in a wide disparity in fuel cost between petrol and diesel-operated vehicles. This has resulted in making the fuel cost of diesel-powered taxis unrealistically low as compared to that of petrol-powered private motor cars. The diesel tax on taxis is aimed at removing this discrepancy.

Sir, in my view the imposition of diesel tax on taxis is not only equitable but, in fact, overdue. The Ministry of Finance would have preferred to levy this tax on taxis with effect from the beginning of our fiscal year, that is 1st April, 1985, but the Ministry deferred to a request from the Ministry of Communications and Information to delay the imposition of the tax for six months to enable taxi drivers to earn enough to pay the tax. Sir, instead of vilifying the forebears of the Minister for Communications and Information, as the Member for Leng Kee delicately put it, the various taxi drivers' Associations should, I think, hold a dinner to thank the Minister for so assiduously looking after their interest. Sir, I can assure hon. Members that the Minister for Communications has a much kinder heart than the Minister for Finance.

I come now to the comments from the Opposition Members. The Member for Anson asked why the Government is so stingy. He says that even when we give a concession, we only give it half-way. On the suspension of the tax on telephone services and on trunk call charges to West Malaysia, he asked why this concession could not be extended to charges on trunk calls to other countries. Sir, the answer is really very, very simple. I cannot suspend the tax on trunk call charges to other countries other than West Malaysia because there is no such tax!

Regarding payroll tax, his view is that it is not possible to suspend payroll tax; we either have to keep it or we should abolish it. I ask him to be patient, Sir. In a few months' time the mystery will be revealed.

Mr Jeyaretnam: You are going to reveal it?

Dr Tony Tan Keng Yam: Yes, of course. Sir, the Member is also worried about the state of our tourist industry. He says it is time for us to sit down and think, to consider what will bring tourists to Singapore. But I think, Sir, the Tourism Task Force has just done that and has produced a series of recommendations which have been endorsed by the Government. For example, the reduction in entertainment duty. The Singapore Tourist Promotion Board has been given a fresh burst of energy and new ideas, and vigorous action is being taken to publicize Singapore as a tourist attraction and to enhance and develop new tourist attractions in Singapore. The Member feels that one of the reasons why tourists do not come to Singapore is because we have, as he calls it, a sanitized culture; that we have driven life out of the streets of Singapore. I am not quite sure, Mr Deputy Speaker, Sir, as to what he really intends. There are certain categories of people on the streets which I think all of us would prefer not to see. Sir, we are not in such desperate straits that we have to resort to such measures.

Finally, Sir, the Member has again repeated the allegation that our tax structure is discriminatory, that our tax system favours the rich. As I was listening to him, I became rather alarmed because for a moment I thought that he had forgotten to make this allegation, which is a standard part of his budget speech. I would then be deprived of the opportunity to table my yearly schedule (Cols. 981 - 982), Sir, which shows the distribution of taxpayers in Singapore. Sir, I am glad that Members will not be denied this annual dose of useful information. schedule - STATISTICS OF PERSONAL INCOME TAX ASSESSED FOR YEAR OF ASSESSMENT 1983 (Cols. 981 - 982)

[Copies of schedule distributed to Members.]

Sir, you can see from the schedule that in the lowest chargeable income group, ie, from $1,000 to $5,000, there are altogether 376,601 taxpayers. They comprise 53% of the total number of taxpayers. The tax they paid amounted to $38 million, less than 4% of the total tax collected in that year. The average tax assessed was $101. At the other extreme, our biggest taxpayers, those with chargeable incomes above $100,000, there were only just over 7,000 such taxpayers in 1983. They constitute only 1% of the total number of taxpayers in that year. Each of these taxpayers paid an average amount of $58,053 which, taken together, total $411 million, or over 38% of the tax collected in 1983. Sir, if our tax system is discriminatory, it is discriminatory against the rich by making them bear a disproportionate share of the tax burden.

Sir, if what I have just said sounds familiar to Members' ears, I must confess that this is not by accident. If Members will consult their Hansard, they will find that I have merely repeated word for word what I have said last year, but with updated figures. We are all getting old, Sir, and there is no use exercising more brain cells to think up new answers to meet a familiar situation.

Now, Sir, to a few points raised by the Member for Potong Pasir. Most of the points which he has raised have already been touched on, and I do not think that there is need for me to spend much time on his speech. I will just mention one or two points.

The Member for Potong Pasir mentions, quite correctly, that income tax collections for fiscal year 1985 are likely to be higher this year than in fiscal year 1984 because of poorer business conditions. That in order to maintain Government revenue of $10.6 billion for 1985, about the same level as 1984, he says that Government is forced to resort to tax increases in order to meet the loss in revenue which arises from the tax concessions which I have just announced. Sir, the Member does not read his Budget Statement carefully. If he does, then he will note that the very first line of Section III of my Budget Statement states, and I quote:

'Consolidated Fund receipts on existing tax rates are expected to amount to $10.62 billion for the Financial Year 1st April 1985 to 31st March 1986.'

The operative words are "on existing tax rates". In other words, Sir, the estimate of $10.62 billion for fiscal year 1985 revenue was worked out on the existing tax structure and, in accordance with standard practice, losses in revenue due to the tax concessions announced or gains due to the tax increases have yet to be factored into the calculations. The reason for this is a straightforward one. It is not possible to estimate accurately, for example, the revenue loss which can result from certain tax concessions, one of them being the tax deductibility of certain educational expenses for individuals. This will depend on how many individuals take advantage of this concession and the amount which they claim. All I can say at the present time is that I do not expect the revenue loss from this concession to bankrupt the Treasury. Therefore, I would advise the Member for Potong Pasir that the Budget Statement should be read very carefully. A word here and there can mean a difference of several million dollars.

On a more serious note, Sir, the Member has brought out the issue of the Central Provident Fund and whether Government has the necessary revenue to pay to members when they go to withdraw their money. The Acting Minister for Labour and the Member for Whampoa have already spoken on this and I do not want to repeat the same arguments. I would just like to assure the Member for Potong Pasir that we live within our means. And that Government revenue is more than sufficient to meet estimated Government expenditure with a healthy balance left over to help finance our development expenditure.

Sir, the funds of the CPF members are safe and no member needs to worry that he will be deprived of his CPF funds because the Government has been profligate.

Finally, Sir, may I, in conclusion, take this opportunity to thank you personally and all the other Members of this House for the assistance and cooperation which they have given to me during the last four years when I had the privilege of presenting the Budget on behalf of the Government. It has been for me, Sir, personally, a gratifying experience and a source of much satisfaction that, despite the economic troubles which have plagued the world in the last four years, Singapore has continued to enjoy full employment and the economic well-being of Singaporeans has improved significantly.

In the coming months, Sir, the management of the economy will be largely in the capable hands of my colleagues, the Minister for Trade and Industry and the Minister of State for Trade and Industry. Under their careful direction, I am sure that Singaporeans will continue to have the vigorous, imaginative leadership which has stood us in good stead all these years.

Sir, provided that we have a pragmatic, honest Government and a sensible population, we should not be apprehensive about the future. Indeed, my view of the prospects that face Singapore can be simply stated. If we work with and not against each other, if we are bold and not timid, if we do not shirk the hard decisions and go for the soft options, then whatever be the achievements we have made in the last 25 years, we have every reason to be optimistic that, as the motto of one of our schools says, "The best is yet to be."

Much obliged, Mr Deputy Speaker, Sir. [Applause]

Mr Jeyaretnam: Mr Deputy Speaker, Sir, may I clarify something that I said to which the Minister replied? The Minister takes up my charge that the tax structure is discriminatory. But I am afraid the Minister has completely missed the point of my remarks. I was referring to the personal reliefs that are allowed. I mentioned that they are much lower than what they were in 1947, and I made a comparison with what they were in Malaysia. And I repeated that the Minister, I am afraid, misled the House two years ago when he said that because the rates were different they evened out. The families in Singapore were worse off than in Malaysia. It is no good producing these figures. We know that those who have the money will have to pay more. That is an elementary principle.

The Minister for Foreign Affairs and Minister for Community Development (Mr S. Dhanabalan): Point of order, Sir. If the Member wants to make a clarification, he can just repeat what he said. He cannot introduce new arguments.

Dr Tony Tan Keng Yam: Sir, I do not think there is much point in continuing this debate. We have finished the Budget debate now. All I would say, Mr Deputy Speaker, Sir, is that I believe that rather than increase personal reliefs, we should reduce our tax rates. That is better.

Mr Jeyaretnam: It is a mockery.

Question put, "That Parliament approves the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986."

Mr Jeyaretnam: I call for a division, Sir.

Mr Deputy Speaker: Take a division.

The House divided: Ayes, 66; Noes, 2; Abstention, 1. Ayes Ayes (cont) Abbas Abu Amin Ho Kah Leong Abdullah Tarmugi Ho Tat Kin Ahmad Mattar Hu Tsu Tau Ang Kok Peng lbrahim Othman Barker, E.W. Jayakumar, S. Beng Kian Lam, Anhur Jek Yeun Thong Chai Chong Yii Koh Lam Son Chandra Das, S. Koh Lip Lin Cheong Yuen Chee, Eric Lai Tha Chai Chew Heng Ching Lau Ping Sum Chin Harn Tong Lau Teik Soon Chng Hee Kok Lee Boon Yang Ch'ng Jit Koon Lee Hsien Loong Chua Sian Chin Lee Yiok Seng Dhanabalan, S. Lee Yock Suan Goh Chee Wee Leong Horn Kee Goh Chok Tong Ng Kah Ting Goh Choon Kang Ong Teng Cheong Heng Chiang Meng Othman bin Haron Eusofe Ayes (cont) Ayes (cont) Ow Chin Hock Wong Kan Seng Phua Bah Lee Wong Kwei Cheong Sia Khoon Seong Yap Giau Cheng, Eugene Tan Cheng Bock Yatiman bin Yusof Tan, Dixie Yeo Cheow Tong Tan, Augustine H.H. Yeo Choo Kok Tan Keng Yam, Tony Yeo Ning Hong Tan Tee Yong, Philip Yeo Toon Chia Tang Guan Seng Yu-Foo Yee Shoon Tay Eng Soon Zulkifli bin Mohammed Teh Cheang Wan Teo Chong Tee Noes Toh Chin Chye Chiam See Tong Vasoo, S. Jeyaretnam, J.B. Wan Hussin bin Haii Zoohri Wan Soon Bee Abstention Wang Kai Yuen Wong, Aline K. Tan Soo Khoon

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 1985 to 31st March, 1986.