SALARY REVISION FOR THE ADMINISTRATIVE, PROFESSIONAL, AND OTHER SERVICES

BG Lee Hsien Loong: Mr Speaker, Sir, the Government has accepted the recommendation of the Committee on Scholarships and Civil Service Careers to revise salaries in the Administrative, Professional and Other Services.

Justification for Salary Revision

The need to revise salaries is most acute in the Administrative Service. This Service is a key national institution. Administrative Officers formulate and implement Government policies under the direction of the political leadership, to protect the security of Singapore, promote economic growth, and ensure the well-being of our people. The standards of ability, integrity and commitment expected of Administrative Officers are high. The most outstanding have to be as good as the best in the private sector. The Service must therefore always attract and retain its share of the top talent in Singapore.

State of the Administrative Service

Over the last 20 years, the Government has been able to identify and develop a core of young, able administrators to succeed the older generation of Permanent Secretaries (PSs). However, we have not succeeded in maintaining this flow of talent into the Civil Service. Our talent pool is inadequate for proper succession planning. Unless we correct this situation early, the quality of the Civil Service which we have painstakingly built up will decline.

Reliance on Scholars. The Administrative Service depends heavily for talent on returned scholars who went to university on Government scholarships. But in recent years this source has dwindled. More able students are refusing Government scholarships. Whereas a generation ago a Public Service Commission (PSC) scholarship was the only way for many talented students from poor families to go to university, nowadays many parents can easily pay for their children to attend NUS, NTI, or even overseas universities. Not enough top students are applying for PSC scholarships to meet the public sector's expanded needs.

Declining Recruitment and Strength. Annual recruitment in the Administrative Service has declined steadily from a peak of 37 in 1974 to an average of less than 10 per year in recent years. The number of non-scholars joining the Service has fallen even more drastically. In 1974, there were 23. They represented 62% of the intake. Two-thirds were non-scholars. Since 1980, we have had not more than one non-scholar per year. In some years, none. There is no queue of qualified applicants seeking to join the Administrative Service.

Many of those within the Service have left as soon as their bonds have expired, and some even sooner. Every one of those who were recruited in 1975 and 1976 has left. So have three-quarters of the 1977 and 1978 cohorts, and half of the 1983 cohort. As the economy boomed after the 1985 recession, able young officers quit for more attractive jobs elsewhere. The strength of the Service has fallen steadily. Here I refer you to Annex A (Cols. 467 - 468). From a peak in 1975 of 260 officers, it has declined to 183 this year, down by 30%. Important public sector jobs remain unfilled for lack of suitable Administrative Officers. Annex A - NUMBER OF ADMINISTRATIVE OFFICERS AS AT 1ST JANUARY OF EACH YEAR, 1974-1989 (Cols. 467 - 468)

Salary Comparisons with the Private Sector

Many of those who have resigned have complained, among other things, that promotions came too little and too late. The most successful of those who left the Service are earning 40% to 100% more than their contemporaries who stayed. In order to qualify to join the Administrative Service, a person must be practically in the top 30 in his year, in terms of performance. Then he will get an Overseas Merit scholarship, and has a chance of being absorbed into the Administrative Service. Or if he did not take a scholarship, he has to be of the same calibre: top 30. Annex B (Cols. 469 - 470) shows that in every age group below the age of 40, the most outstanding of the Administrative Officers is earning less than about 150 other persons of the same age in the private sector. This is a very complicated chart, Mr Speaker, but the dotted lines show how much the top earners of each age group are earning. The 1P line means the most well off person of that age. You can see the most successful person in Singapore is aged 39. He earned $2.6 million, one person. Those may be aberrations. So look at the 10th most successful person in an age group: the 10P successful person in an age group: the 10P line. Their incomes peak around the age of 40-41, about $350,000 a year. Similarly, for the 25th person, and the 100th person. The bottom line on the chart is the most successful Administrative Officer. That is the line called AS/A (Administrative Service/ Actual). He is earning well below the 100th person around $150,000. I will come back to this chart later. The Administrative Service has lagged far behind the private sector in remuneration. Annex B - COMPARISON OF PRINCIPAL INCOME OF TOP EARNERS IN THE ADMINISTRATIVE SERVICE AND PRIVATE SECTOR BY AGE (Cols. 469 - 470)

There is another way to make this comparison with the private sector, and that is, to look at the top earners, profession by profession. Look at Annex C (Cols. 471 - 472). This is the average monthly income in 1987 of the top man, the second man and the third man in some of the big companies in a range of businesses. It is an average of three, four or five companies, showing how much their top three people are earning. They represent typical rather than maximum earnings. A typical top banker earns $141,000 a month. His second in command earns about $31,000 and the third earns $22,000. In comparison, the single most successful banker earns $197,000 a month in 1987. If we take sharebrokers, $122,000; lawyers, $102,000; multi-nationals, $64,000; even local companies, $50,000. The Prime Minister released a similar table in 1983, when we discussed Ministerial salaries in this House during the Budget debate. You will see from this table that most of the numbers are several times larger than the gross salary of a substantive Permanent Secretary, Grade C, whose monthly salary all-in, including NWC, is $16,000. The car dealer earns nearly twice as much. Annex C - AVERAGE 1987 MONTHLY INCOME OF THE TOP THREE EXECUTIVES IN A SELECTION OF LARGE SINGAPORE COMPANIES AND PROFESSIONAL FIRMS (Cols. 471 - 472)

Need for Salary Revision

A Civil Service career offers certain traditional advantages over the private sector more stable incomes, stability of tenure, plus significant pension benefits for those in the pensionable services. The Civil Service therefore need not match, dollar for dollar, the very highest incomes in the private sector.

However, the free-market outcome proves conclusively that these positive factors do not compensate for the wide disparity between public and private sector incomes. Capable young men and women are no longer attracted by these traditional advantages. In a full employment economy, there are jobs everywhere. No bright young man believes that he will ever have difficulty finding a job. Civil Service pensions may be expensive to the Treasury, but that does not make them attractive to young people, more attractive than the full CPF contributions which every other job carries. The value of a pension is uncertain, especially for an officer near the beginning of his career, because the pension will only be collected somewhere in the very distant future, and it is indexed to the cost of living, unlike pensions for British civil servants. In other words, you are not sure when you will get it, and you are not sure what it will be worth when do you get it.

Young people are under no pressure to accept PSC scholarships, and see no reason to do public service at a personal sacrifice. Able civil servants are opting out and they are not being replaced fast enough. Low salaries and slow advancement are major factors in low recruitment and high resignation rates. A substantial salary rise for the key individuals in the public sector, especially the Administrative Service and related services, is therefore essential.

Principal Considerations for Revision

This salary revision package reflects five principal considerations. Firstly, as a fundamental philosophy, the Government will pay civil servants market rates for their abilities and responsibilities. It will offer whatever salaries are necessary to attract and to retain the talent that it needs. As the Minister for Finance stated in his Budget Speech, the Government can afford to do so, and this is only being fair to the officers concerned.

Secondly, the salary revision must be consistent with the principles of wage reform. We should not simply increase basic salaries. Timescales should be shortened. Remuneration should vary with the state of the economy, and individual rewards should depend on each person's own performance.

Thirdly, the revision must be selective, and not across the board. Salaries are not revised as a status symbol, or as a reflection of the worth of the service. They are revised only when officers are paid too little relative to the market. Civil Service relativities should not be ignored, but they cannot cause us to increase salaries across the board when the problems are more specific.

In this exercise, the first priority for salary revision is the Administrative Service. This service has the most acute problem and needs the largest adjustments, followed by the Professional Services. The Government recognizes that some other services also face structural problems, but the Committee will examine them later.

Fourthly, this revision is not a routine annual salary adjustment. It is designed to catch up with several years of rising private sector incomes, and to make public service careers more competitive with the private sector. The revision should not be taken as a benchmark for the National Wages Council deliberations, or for other salary negotiations in the private sector this year.

Fifthly, and finally, this exercise, including other salary changes to selected services which my Committee is still studying, will be the definitive salary revision for the Civil Service this year. The adjustment to the CPF rate, which is due in July, naturally will also apply to the Civil Service. However, the Government does not intend to make any further salary changes after the NWC recommendations are published. We cannot have two bites of the apple in quick succession.

These five principles apply to the whole Civil Service. For the purpose of this salary revision, the Government has divided the Civil Service into three groups:

First, the Administrative Service and the other pensionable services.

Second, the Professional and related services, and

Third, the rest of the Civil Service, including the daily rated employees.

Structure of Administrative Service Salary Package

Firstly, for the Administrative Service specifically, the Government has decided to do the following:

(a) We will increase basic salaries by 7% for the superscales, and by 13% to 20% for the Timescales;

(b) We will increase the existing end-of-year non-pensionable Variable Bonus by (r) month;

(c) We will introduce a new discretionary performance-based bonus of up to 2 months of salary for Superscale officers alone, in order to relate benefits to individual performance; and

(d) We will speed up promotions, so that benefits will be commensurate with the potential of individual officers.

Basic Salary Revision

Because of the size of the gap between private and public sector salaries, some revision of basic salaries is necessary. Annex D (Cols. 473 - 474) shows the revised salary scales. First, the Timescales, Administrative Assistant, Senior Administrative Assistant, Assistant Secretary, PAS. Then on the next page, the Superscales, G, F, E and so on. You will notice that the Timescales have been shortened and the ratio of the top to bottom salaries in each scale has also been reduced. For the Administrative Assistant, the first and longest scale with 14 points, originally had a ratio of about 2.4 top to bottom. Now it is a ratio of about 1.4. Similarly, the later scales have also been shortened. For the Superscales, there is a straightforward 7% revision. Annex D - NEW ADMINISTRATIVE SERVICE SALARY SCALES (Cols. 473 - 474)

The percentage revision for Timescales is larger than for the Superscales, for several reasons. Timescales will not be included in the performance bonus scheme. Many officers are resigning long before they reach Superscale grades. Competitive salaries at the entry point and early in the career are important for retaining them, and also for attracting other graduates who did not receive scholarships and are not already bonded to the Government.

New Staff Grades

Besides increasing the basic salaries of existing Superscale grades by 7%, the Government is also creating two new Staff Grades, Grades IV and V (you can see them at the bottom of the page) to increase the maximum salary point of civil servants.

The upper Civil Service grades and the salaries of Judges and Ministers are linked. For example, Judges are paid superscale A, and Ministers are paid Staff Grade I + 5%, It is expressed in terms of the Civil Service grade points. A top civil servant who reaches Staff Grade III (there is nobody in that grade now, but the grade exists) will earn more than any Minister except the Prime Minister. The Government will be revising the salaries of Ministers and Judges. We will be pegging these political salaries to higher grade points to leave more room for promoting civil servants. The new Staff Grades IV and V will maintain the relativity between the apex of the Civil Service pay structure and the salaries of political appointees.

At Staff Grade V an officer will receive a gross salary of $42,000 a month (including NWC). Compared to the private sector earnings of top executives, particularly Annex C, this is modest, not excessive. Those promoted to these new staff grades will be the most outstanding officers, particularly those holding extremely large and probably multiple job responsibilities. The Public Service Commission does not envisage promoting anyone to these new grades in the near future. It will be several years before any officers reach Staff Grade IV or V. Nevertheless, the real likelihood of attaining these higher grades is important for the morale of serving officers, and for attracting outstanding young people to join the Service.

Members will notice that the new salaries are expressed in terms of basic pay. We have not mentioned NWC. In previous pay revisions, the Government consolidated NWC awards accumulated over the years into the basic salary, which meant they were locked in and became pensionable. The NWC awards after the last salary revision in April 1982 have not been consolidated. There are three of them: the 1982, 1983, 1984 awards. 1985 was a recession. There was nothing. 1986 wage restraint, nothing. 1987 was partial restoration. 1988 restoration but no new award. 1982, NWC awards are part 1983 and 1984 of the variable component of the salary, and they can be reduced in bad years. Therefore, they will not be consolidated in this exercise.

Higher Variable Bonus

The second component for the Civil Service is the Higher Variable Bonus. We have implemented flexible wages in the Civil Service by introducing a year-end variable bonus which depends on the state of the economy. So far, we have built up this variable bonus to reach months of salary. Part of the salary adjustment should go towards increasing this variable bonus. The Government will raise it by (r) month, bringing it to 1ª months in all, provided that the economy grows this year by 5 - 8% as expected. This (r) month is equal to a 4% increase in the basic pay, but with one important difference: whether it is paid depends on the state of the economy.

Instead of paying the entire variable bonus in December, the Government will pay (r) month of the bonus in July and the remaining month in December. If by the end of the year economic growth turns out to be less than 5%, then, of course, this balance of 3/4 month will have to be reduced.

New Performance Bonus

Thirdly, the performance bonus. Rewards should vary not only with the state of the economy, but also with the performance of each individual. The Civil Service should move away from a non-discriminatory egalitarian system of rewards, based on the fiction that every officer is as good and productive as every other officer, to a system which ties rewards with performance, and singles out the outstanding from the rest. Performance bonuses will make the salary scheme more flexible, and give Permanent Secretaries an additional instrument for rewarding good officers.

The Government will introduce an annual, discretionary, non-pensionable performance bonus of up to two months of salary, based on individual performance, for Superscale officers in the Administrative Service. The Head of the Civil Service will consult the Permanent Secretaries and put up proposals to the PSC for endorsement. In other words, the Permanent Secretaries will discuss who should receive how much bonus. The Head of the Civil Service will put their recommendations to the PSC, the PSC will endorse. Actual bonus payments will be kept strictly confidential.

Not everyone will receive the full two months of bonus. Only a small proportion of officers, the obviously outstanding ones, will. Another 20% to 25% of the above average officers will be paid 1(r) months. The bulk of the officers will receive a one month bonus. 5-15%, those who are under-performing or clearly below average, will receive no performance bonus. These groupings correspond to natural breaks in the performance ranking of officers. Although we state that two months is the maximum, we expect only 5-10% of officers to receive two months. Those who are well above average, in the top one-quarter or so of the population, you get 1(r) months. An average Superscale officer gets 1 month. A below-average Superscale officer, and you notice that I have put it as 5-15%, the lower bound is greater than zero, gets none.

For this performance bonus scheme to work, the assessors will have to be rigorous and strict in ranking the performance of officers against their peers. They have to rank officers against their peers, to decide who is average, who is good, who is bad. Officers must have the courage to identify the outstanding, the above average, and the under-performers. If they take the soft way out and claim that nearly everyone is above average, then the scheme will fail. To prevent this, quotas will be set for each category of officers. In other words, Permanent Secretaries have to be hard and firm. They must have the courage to decide between two officers who is better, who is not so good, and recommend one for an above average bonus and another perhaps for nothing. And having done that, they must have the courage to face the officer and say, "This was my honest and well-considered judgment of you and I consider it fair." If we do not do that, the scheme will fail. Faster Promotion

Faster promotions are as important a factor in retaining good officers as higher salaries. Promotions are a much more selective and discriminating method of rewarding good officers than salary increases. They give deserving officers a sense of forward movement in their careers, and show that the organization values their contributions, which an equally generous salary scale will not do.

In the Civil Service, how quickly an officer is promoted depends on several things. Firstly, what we call his CEP (Currently Estimated Potential). Secondly, on the time norms for promoting officers with that potential. The CEP of an officer is formally assessed by panels of Permanent Secretaries and their deputies. For every Administrative Officer, we judge him, we assess him, we evaluated his powers of analysis, his powers of imagination, his sense of reality, his helicopter qualities and we make an assessment of how high he can go. He may be a junior Assistant Secretary, but you already know that he can one day become a Permanent Secretary. He may be a Deputy Secretary, Grade E, but you know that he has reached the ceiling grade and he is unlikely to go further, even though perhaps he is doing well in that grade. That is the CEP. Having worked out the CEP for each individual, we have tables to define for each class of persons this is your potential, this is the rate at which you will be promoted.

Despite all this apparatus, in the last few years, promotions in the Administrative Service have been slow, for a combination of reasons. Permanent Secretaries have been conservative in assessing the CEPs of officers, our time norms for promotions have been a little slow, and even these norms have not always been followed, particularly in the lower grades. As a result, officers, particularly the young ones, feel a sense of frustration. They want out to go somewhere where they can move fast.

To speed up promotions, the Government has shortened the promotion time norms. Generally, officers will be promoted to their final ranks by the age of 45 instead of 50. All intermediate promotion points will be brought forward accordingly. If you must reach Grade C by the age of 45, then when do you reach Grade D, Grade E, Grade F, Superscale all that is worked out. Able officers should reach the rank of PAS (Principal Assistant Secretary) two years earlier than at present, by the age of 30, within eight years of joining the service, a crucial milestone, because it is around that time that their scholarship bonds expire. Such an early promotion to PAS will be a clear signal to an officer that he is doing well.

At the senior levels, the Government will no longer treat every Permanent Secretary post equally as a Grade C post, just like every other one. It will recognize that the PSs of larger ministries, and the CEOs of the major statutory boards, are Grade B, Grade A, or even Staff Grade posts. For example, the Head of the Civil Service is obviously a Staff Grade post. If the Head of the Civil Service is not Staff Grade, who would be? These establishment ranks will make it clear that Grade C is not the practical ceiling for Administrative Officers. All high flying helicopters look out and watch the cloud base and wonder whether they can go through. So this is to show the sun shining through the clouds.

An hon. Member: It is raining.

BG Lee Hsien Loong: It is not raining. These establishment ranks will provide reference points for assessing the potential of very able officers, and make it easier to assign them accurate potentials above the Grade C, and therefore to promote them faster. We have officers who could be Permanent Secretaries of big ministries or who could run large statutory boards like PUB or PSA or HDB, but because we only say he is Permanent Secretary, we assess his CEP at Grade C, and promote him at Grade C rates. He arrives at Grade C at the age of 50. He may have left by the age of 50. So with this, if we can judge, by the time a man is in his mid-30s, that he can be a CEO of HDB, for example, or Vice-Chancellor of NUS, then we say, "All right. That is equivalent to a Grade A post, we move him at that rate." I give these only as examples.

These faster promotions are an integral part of this plan to make the Administra- tive Service more attractive. The Government could have packaged an equally attractive proposal comprising larger across the board salary increases alone, without speeding up promotion rates, but it would have been an inferior solution. Of course, not every officer expects to be promoted in this exercise, nor should an officer be promoted automatically because he happens to be occupying a post with an establishment rank which is higher than his rank. Otherwise the element of selectivity is lost. But overall promotion rates have to change if we are to achieve the full purpose of this exercise.

Views of the Public Service Commission

The Public Service Commission is responsible for promotions of officers. The Government has consulted PSC on these proposals. The Commission agrees with the salary adjustments and agrees with the concepts proposed to effect these adjustments. It also agrees that the changes will help to improve the Administrative Service.

Impact of Proposed Changes

These revisions will have a major impact on the attractiveness of the Administrative Service. I refer Members back to Annex B and also to Annex E. Annex E (Cols. 475 - 476) shows how the fastest moving Administrative Officer whose potential is Grade A will compare with his private sector counterparts as he progresses up the Civil Service ladder. The left-hand side shows the existing position and actual fastest movement. The right-hand side shows the planned ranks and the planned movements. At present, nobody has moved all the way to Grade A. The furthest a person has gone, according to the present promotion norms, is PS Grade C, age 44, where he ranks 24th in his cohort. Along the way there, as you can see, he is sitting well below the 100th mark. I said 150, but in fact, in his early 30s, they rank around 250. This is in comparison with 1987, mind you - 1989 Administrative salaries agains 1987 private sector salaries. So if we compare against 1989 private salaries, the position is even worse. The right-hand side shows when he will be promoted and how he will rank compared to the private sector. You can see there is a subsantial improvement. An AS will rank around the 56th, a DS, Grade G, will rank 27th, an SDS (Senior Deputy Secretary), Grade D, will rank 36th, and only beyond that point, when he reaches the Grade C, a year or two after that, does he begin to pull ahead of his contemporaries and move up. Annex E - NUMBER OF PRIVATE SECTOR EMPLOYEES (BASED ON 1987 INCOME) WHO EARNED MORE THAN TOP ADMINISTRATIVE OFFICERS, BY AGE (Cols. 475 - 476)

If you look at Annex B again, you may make sense now of some of the other lines. The line we looked at just now was AS/A, (Administrative Service/Actual), that is the bottom line. The proposed promotion rate is the line AS/P, the solid black line. It shows you the same picture as Annex E. A young officer will be ranked about 30s until he reaches the age of 39, then he moves up compared to his contemporaries. It is right that he moves ahead of his contemporaries, because beyond Grade C, we should make salary comparisons not just within the same age group, but with the top wage earners regardless of age, because these Permanent Secretary posts are among the most responsible positions in the country.

I mentioned two days ago the Permanent Secretary (Defence) whose job, I think, is among the largest. If you make a comparison between the Permanent Secretaries and the top wage earners in Singapore, you get the result which is shown in Annex F (Cols. 475 - 476). Before the revision, a PS, Grade A, ranks 263rd. After the revision, he ranks 137th. A PS, Grade C used to rank 676th, and will rank 364th. As I said, these are compared to 1987 private sector incomes. So the private sector is really further ahead. Annex F - NUMBER OF PRIVATE SECTOR EMPLOYEES (BASED ON 1987 INCOME) WHO EARNED MORE THAN SENIOR ADMINISTRATIVE OFFICERS, BEFORE AND AFTER SALARY REVISION (Cols. 475 - 476)

Other Pensionable Services

The Administrative Service is one of five closely-related pensionable services. The others are the Administrative Service (Foreign Service Branch), the Intelligence Service, the Police (Senior) Service, and the SAF (Senior) Service. Similar revisions will be made to the salaries of all these services.

Professional Services

Annex G (Cols. 477 - 478) lists the Professional Services. There are 21. They go from Accounting all the way down to Surveying, by way of Dental and Meteorological and Scientific. These 21 services share similar salary scales with one another, and they recruit only graduates with good Honours degrees or with professional qualifications. Their Superscale grades are the same as the Administrative Service, although their apex grades are lower. There are also nine other services - from Commercial Affairs, Economic Research, and so on, down to the Police (Senior) Service which have scales similar to the Professional Services. Annex G - Professional Services, Departmental Services with Professional Services Scales (Cols. 477 - 478)

Many of these 30 services also face recruitment difficulties. The Government has decided that this group will receive a 7% revision to basic salaries for both Timescale and Superscale grades, plus the extra (r) month of variable bonus. We will make minor adjustments to the longer Timescales to shorten them by two or three points, but the changes are not so drastic as for the Administrative Service. The details are complex and I will not burden Members with them. Recruitment entry points will remain unchanged, because they are generally in line with private sector starting salaries.

Legal Service

The only exception is the Legal Service. This service has special difficulty in recruiting good graduates, because of the very high incomes of private sector lawyers. If you look back at Annex C, you will observe that no civil servant is likely in the foreseeable future to be paid anything like what lawyers earn in the private sector.

Mr Chiam See Tong (Potong Pasir): Not true.

BG Lee Hsien Loong: Mr Speaker, I hate to digress, but there are about 1,000 lawyers in the private sector. Those at the top (and there are more than 40 of them) earn more than half a million dollars a year. On the other hand, there are about 40% at the bottom who earn less than $50,000 a year. The Member for Potong Pasir may find that information enlightening.

The Government is therefore raising the Legal Service starting pay by two increments. It is also increasing the market adjustment allowance for Legal Officers by 50%. Annex H (Cols. 479 - 480) gives the present and revised amounts for this special non-pensionable allowance. This was intended as a market adjustment allowance; in fact, it is just a small correction to reduce the disparity a little bit. Annex H - SPECIAL NON-PENSIONABLE ALLOWANCE (SNPA) FOR LEGAL OFFICERS (Cols. 479 - 480)

Performance Bonuses

What I say about performance bonuses for the Professional Services will also apply to the Other Services. In principle, the Government is prepared to introduce performance bonus schemes for Superscale officers in the Professional and the Other Services, similar to that for the Administrative Service and for the other pensionable services. However, performance bonuses will only work if several stringent preconditions are met, as I explained earlier. These include a fair and well accepted assessment system, and assessors who are willing to make tough judgments about officers. If you do not have the guts to make a distinction and stand up for it, then you cannot have performance bonuses. It will take some time to put these requirements in place for the professional services. The Government therefore prefers to delay implementing performance bonus scheme for the Professional Services to a subsequent phase. Meanwhile, the Public Service Division (PSD) and the departments concerned will lay the groundwork for such bonuses in these services.

This 7% revision will not by itself enable all the Professional Services to attract and retain good officers. These services are too disparate for a common set of scales to solve all their problems. For example, Foreign Service officers, Engineers, Inland Revenue officers, Accountants and Teachers, each have their own intricacies. The individual services need separate and more detailed reviews. This is being done.

The Government is also considering several additional changes for the Professional Services.

(a) We will revise the consultancy fees and specialists' allowance schemes for the medical and dental services.

(b) We will create a Legal (Senior) Service, or we may call it the Administrative Service (Legal Service Branch), in order to recruit and to retain some of the best Law graduates, those with First Class or Upper Second Honours degrees. This is similar to what we have done in the Foreign Service. The Foreign Service is really in two parts. There is a Foreign Service (Departmental) and the Administrative Service (Foreign Service Branch). The recruitment criteria are different, the salary schemes are different. The Legal Service does not have such a scheme. We will consider introducing one.

(c) We will also consider having different entry points for different qualities of recruits; and

(d) We will consider giving the better officers an early promotion, resulting in a substantial pay rise, within two to three years of joining the service, as is done in the private sector. Then we can be more competitive and discriminating in rewarding our better officers.

Other Services

Mr Speaker, Sir, the Administrative Service and Professional Services cover about 9,000 civil servants. The remainder of the civil service comprises 67,000 people. They belong to 126 services and 120 salary scales. No single percentage of salary revision can fit all of these services exactly. Indeed one of the terms of reference of the Committee is to study how organizational changes and further delegation of personnal management functions by both PSC and PSD can help the public sector to adjust more flexibly and responsibly to market pressures. It is such a large structure that if we try to manage everything in the centre, we freeze up. Every move leads to so many arguments about relativities and corollary adjustments that no moves are made, and everybody suffers. We must find some way to carve it up so that each piece can move on its own, not necessarily in step.

We know that several of these services need fundamental reviews, especially the Executive Service and the Clerical Service. These will be done.

However, unlike the Administrative and Professional Services, these services are in general not grossly underpaid. Ministry of Labour surveys show that from 1982 to 1987 (1982's last salary revision; 1987 has the most recent figures), average monthly earnings in the private sector for bargainable employees went up by 39%, in the public sector, for roughly the same categories, went up by 29%, a difference of only about 10%.

The Occupational Wages Survey last year (1988) showed that for Division IV employees and for DREs, the public sector for some vocations was paying more, for other vocations was paying less than the private sector, but not systematically less.

The Civil Service resignation rates are below 5% per year, no higher than they were before the 1985 recession, and much lower than the rates experienced by many private sector companies. In fact, those Members who have raised the private sector's problems will agree with me that if the private sector had 5% a year, they would probably withdraw their Oral Questions.

For this exercise, therefore, the Government has decided that for the rest of the Civil Service, timescale and daily-rated employee salaries will be increased by 4%, and the Superscales by 7%. In addition, the 1/2-month variable bonus will apply across the board.

Statutory Boards

This salary revision does not cover statutory boards. The intention is for them increasingly to set their wages in line with overall market levels, rather than solely by reference to relativities with the Civil Service. Statutory boards are not all the same. While some are self-financing entities subject to market discipline, others are really extensions of ministries wholly dependent on government grants, and there are others yet which are betwixt and between. The more a statutory board is like a commercial company, the more it should compare its wages directly to market rates rather than indirectly through Civil Service relativities.

The Government expects statutory boards to conduct their own salary revisions with these principles in mind. The appointment and promotion of Chief Executive Officers of statutory boards will continue to be subject to the concurrence of the PSC.

Financial Implications

The total cost of the pay revision is $169 million per year: Administrative Service, $4 million, Professional and related services, $49 million, and the rest $116 million.

Implementation

The revised salaries will take effect from 1st April 1989.

Conclusion

In the private sector, most multi-national companies conduct annual surveys of salaries and benefits to ensure that they are paying the market rate. For those who want the best, they pay a premium.

The present Civil Service revision will not be a one-off exercise. It does not completely close the gap between public and private sector incomes, especially at the higher grades. The Government will continue to carry out regular surveys of private sector salaries to stay competitive. As the economy grows and private sector incomes rise, we will regularly adjust Civil Service salaries to keep in step. I do not believe we will allow such a long interval as we have this time: from 1982 to 1989 has been seven years. Paying civil servants adequately is absolutely essential to maintain the quality of public administration which Singaporeans have come to expect.

Thank you, Mr Speaker. 1.30 pm

Mr Bernard Chen (Pasir Panjang GRC): Mr Speaker, Sir, there will be a debate on civil servants' salaries later in the week. I just like to ask the Minister a few clarifications.

First, on the recruitment of Administrative Officers. My question is: have the standards of recruitment been raised? Because much depends on what standards PSC set. If you set very stringent standards, then of course recruitment will be reduced.

The second question is: when exactly do these Administrative Officers leave? The Minister has said that for the scholars, they leave after eight years. What about those who are non-scholars? If these officers leave much earlier on in their career, then the move to compensate them before they leave is a good one. Do they leave before the CEP is made? In fact, are they aware of what degree of CEP they are going to get?

The third question is on the performance bonus to be given by Permanent Secretaries. Are the Permanent Secretaries the sole deciders in whether this performance bonus should be made? Or are they subject to PSC or some other bodies? Otherwise given the best intentions, the Permanent Secretary may not feel generous enough.

The fourth question relates to a matter of detail in Annex C where the monthly incomes of the private sector officers are included. The question is whether these benefits include cars and housing allowance. For some of the categories, especially bankers, profit-related bonuses are also included. And the treatment of profit-related payment is very different from salaries. They may have, in fact, the effect of jacking up the monthly income.

Mr Sia Khoon Seong (Moulmein): Mr Speaker, Sir, before I ask the Minister three questions, I just want to make a brief point. I welcome the Minister's statement that this pay revision is across the board and not just confined to Administrative Officers. My questions are:

(1) Why 7% for the Superscale Officers and 4% for the Timescale and the others?

(2) When he talks of 4% increase and 7% increase, is it of the basic salary or is it of the gross, that is to say, basic plus the 1982-84 NWC component?

(3) I believe the Minister mentioned that the Government has decided to give 1ª-month variable bonus based on the assumption that the economic growth will be between 5-8%. Supposing the economy grows by 9-10%, will it be more than that?

Mr S. Chandra Das (Cheng San GRC): Mr Speaker, Sir, like Mr Sia Khoon Seong, I also welcome the Minister's statement for the across-the-board payment of 4% to all the people in the public service. This clearly indicates that the Government takes into account not only performance of Permanent Secretaries but also daily-rated workers.

Sir, I have two questions for the Minister. Firstly, is the Minister aware that increasing the salary alone is not the total solution to this problem? What is really required in the service, I believe, is more accelerated promotions to narrow the gap. Has this problem been studied by his Committee and, if so, what measures have been recommended?

Since the civil service is an extremely large organization, it may be difficult for the Public Service Commission to have frequent promotion exercises. My second question to the Minister is: are there any plans to decentralize the functions of the PSC, eg, having separate commissions, say, for the Police Force, the Teaching Service or the Engineering Service?

Mr Heng Chiang Meng (Cheng San GRC): Thank you, Mr Speaker, for giving me the chance to speak on this.

Sir, I also agree that it is high time that the civil servants are given some form of salary adjustment. The basis for this adjustment seems to be the market place for salaries. We all know that in the market place, there are a number of risk factors, eg, the risk of dismissal, poor business conditions and salary depending on demand and supply. And there are other forms of risk factors not associated with being a civil servant. In the light of this, I would like to ask the Minister whether he also intends to introduce such risk factors for civil servants? For example, if a civil servant is found wanting or he has reached his level of incompetence, will he be dismissed? Or if in the light of supply exceeding demand for a particular service, will their salaries be reduced?

My second question is related. If the reduction of salary is not at all possible, then may I request that the Minister look at other alternative methods of making up the salary for the civil servants? For example, one can keep the basic salaries at lower levels while increasing the quantum of special allowances; such as consultant's allowance, market adjustment allowance; which can thereafter be reduced or increased in line with the marketplace.

BG Lee Hsien Loong: Mr Speaker, with your indulgence, I will take these questions first and we can take further questions after that.

Mr Bernard Chen's point is- are recruitment standards into the Administrative Service too stringent? I do not know if they are too stringent, but I know they are very stringent, because we are looking for the best officers. I said that to get in, you must be somewhere in the top 30 of your year. Just to give a comparison, every year there are about 600-700 students who collect 3A's and 4A's at 'A' levels. It was not so when you and I were in school. But I think teaching standards have improved. More students are in 'A' level. There are that number of people with 3A's or 4A's. From amongst these, we must find 30 odd and say, "All right, you are potentials. Are you interested?" Having decided that they are interested, then they go to various places. The Administrative Service is only one of them. Administrative Service (Foreign Service Branch) is another one because we have great difficulty finding Foreign Service officers who are prepared to serve overseas, with family overseas. The SAF take in almost as many as the Administrative Service. The statutory boards need good officers. So these 30 have to go to many places, which means really that, firstly, we are too small a country and, secondly, we need to catch nearly all of them to fulfil all our needs.

I do not think it is a good idea to relax on the Administrative Service entry requirements, because the jobs are very demanding. There are many jobs in the Civil Service where you can do well without the breadth of scope which an Administrative Officer requires. He can be a professional. He can be a top surgeon or an outstanding teacher or even a brilliant military officer. But can you fit into the Ministry of Health, the Ministry of Education, and the Ministry of Trade and Industry at different points in your career, and make a contribution in each Ministry? If you can, then potentially you are an Administrative Officer. If you cannot, you may still be a very able person, but we will channel you in line with your abilities. We need to find generalists for the Administrative Service.

Therefore, the PSC has been very stringent, and I support them in this. There have been occasions when we have been less stringent at the recruiment point, regretted it later. As Mr Heng pointed out, once the man is in, he is in. And it is not good for us, nor is it good for him.

Non-scholars and others leave the service early. Even scholars do not always wait for their bonds to run out. They often leave before that, because many of the companies which take them pay their bonds off. It is a small expense. If you are prepared to double his salary, what is a few tens of thousands of dollars on his bond? If he works for you for two years and does a good job, he has made good. The solution is not to make the bond more expensive, but to make sure that the people who are in are happy to stay and are not merely tied down because they have a bond and cannot leave. Which is why non-scholar recruitment is important. It is an indicator. If people who are not bonded are prepared to come in, that means we are paying about the market wage. If the only people who are in the system are those who are on scholarships and have been bonded, you may have enough staff but you can be sure that there will be rumblings and they want to get out.

I mentioned just now that we will promote good officers to PAS before the eighth year. But actually the AA and the AS promotions are also brought forward and should have an effect. Some speeding up has already taken place last year and this year, but this pushes it a little bit further.

Do they know their potentials? The Civil Service does not generally tell a person his potential. Peformance, yes, because it is something you can affect. Potential, no, because if you tell a person his helicopter has reached maximum altitude, there is not much he can do about it. The whole idea of the CEP is that it is something innate. You may discover it more accurately, but you are unlikely to enhance it very much. Therefore, we do not tell him directly. But they more or less know from the rate at which they are being promoted. The trouble is if everybody is promoted too slowly, then everybody decides that they have been mis-assessed and they leave. Therefore, faster promotions are the way to make sure they know.

Performance bonuses, as I said, I had some careful language there just now. I said:

'The Head of the Civil Service in consultation with the Permanent Secretaries will put up proposals to the PSC for endorsement.' "Endorsement", which means that the Permanent Secretaries make up the list, the PSC will moderate it. But if you had listened to me carefully, we are setting quotas for each category, which means minimum as well as maximum quotas, which means there must be a certain minimum number of people who are deemed above average and another minimum number of people who are deemed outstanding. If you look at the whole lot and conclude that everybody is mediocre, that means we have recruited wrong individuals into the Administrative Service. So I think there is a safeguard. You may want to change one or to people at the margin, but I do not see any fundamental difficulty.

I have some confidence in this because we have operated such an assessment system in the SAF for the senior officers for some years. It is a lot of work for the ranking boards, but the discipline, if it is adhered to, enables us to come up with a list which commands general assent. This is very important. It is not just getting the list, but people must know that the procedure has been fair and that the assessments are objective, as near as we can get. Of course, we have not tied that to performance bonuses in the SAF yet; we probably will now. But we have tied performances to promotions. We watch a person. If he is a B grader for three years in a row, that means well above average, and very promotable. If he is a C grader for some years, we look at it more carefully. If he is mostly D grader and in one year he got an E, we start thinking of giving him special marching orders. The system is workable.

Annex C, this question of profit-related bonuses. The people here are those who have declared themselves as employees. That means he may not be a wage-earner but he is an employed person. He is not the owner of the bank directly. I do not know whether it includes sharing profits. I would imagine it does, for some. But on the other hand, it is in the nature of the job that if you employ a person, then he shares profits. It is part of the scheme of service. For GMs and MDs of multi-nationals, part of their salaries is paid in terms of stock options, It is income; when the stock options are cashed in; the money is taxed. No doubt when an Administrative Officer goes out and takes these careers, he too will be able to enjoy share options.

It is risky, as Mr Heng says. The question is, therefore, should Administrative Officers get paid the same? My answer is there is no need to be exactly the same, but we are so far out. And really, if you are right, and it is so risky, why are the young men so keen to go there and leave the Administrative Service, voting with their feet? That is a decisive factor. In the end, whether we are paying above the market or below the market, depends on whether people are queueing up to get in or queueing up to get out. That is the test.

Here I can tell you that they are queueing to get out. Many have left. Those who have left have done well and we know it not only superior officers but officers, of equivalent calibre to those who have stayed. They are getting typically 30% more, some 100% more. The young officers, even more so. One young man who was working for me in MTI, a bright scholar, quit to join a stockbroking firm. They deployed him in London. He knew nothing about stocks. He had never, so far as I know, bought any stocks and shares on behalf of MTI in his life. But he is bright, he will learn fast. They took him, they doubled his pay. He came back to visit us. We are very friendly, because we parted amicably. He told the Permanent Secretary, "Why don't you join us. We will give you a six-figure monthly salary."

An hon. Member: And you didn't lose him?

BG Lee Hsien Loong: I didn't lose the Permanent Secretary. But I can tell you that he would have been worth it.

So what are we talking about? Look at the numbers. We make this adjustment. It is a step in the right direction and, as I said, in a few years we will have to do it again. We have to narrow the gap. We are not so badly off because we have made several big steps in the past, but I think we have left it a bit long, since 1982. This is timely. Another step will be necessary.

If I may move on to the other questions. Mr Lawrence Sia asked why 7% for Superscales and 4% for the rest of the Civil Service. I told you that there were 67,000 people in the rest of the Civil Service. There are only 20 are superscale officers. The Superscale officers carry the same grade points as the Professional and Administrative Services. I think it will be very troublesome to say,"You are one Superscale type, and he is another Superscale type." So we put it all at 7% across the board. But I do not think these 20 people should drag 67,000 others along. The salary adjustment for these 67,000 people is $116 million. It is the biggest part of the cost. To go from 4% to 7% would increase that cost by at least a third. So it is a $40 million decision. I do not think we should do it hastily. We make the 4% adjustment. Let us now review the key services which have specific problems. I mentioned a list; it is quite a long list. We make adjustments to fit their market conditions. Besides those which I mentioned, PSC tells me that the uniformed services, the paramedicals, and the teaching staff, are also expecting to have reruitment problems. We will look at them in good time, before too long.

4% the base wage increase. The question was, whether it is on the basic amount or on the gross amount. The question really is whether the 1982-84 NWC should apply to the new increases being granted this year. Strictly speaking, they do not have to apply, because at the time when we made the adjustments from 1982 to 1984, these sums did not exist. But the Government is generous, so the 1982-1984 NWC will apply.

The advantage of not consolidating 1982-84 NWC are of course, first, it is more flexible. Secondly, by consolidating, it will be bundled into the pensions, and people know that it is better to have salary on the line as you are working rather than a more generous pension down the line long time from now. So if we have a fixed budget to work, why not settle for larger non-pensionable amounts. Pensions are not a serious problem, particularly people have CPF. Let us leave it like that.

1ª months. Mr Lawrence Sia asked: what happens if growth goes to 9%, 10%? I notice he did not ask what happens if it goes to 3% or 4%. Of course, the same principle has to apply. I would be hesitant to give any definite commitment or hostages to fortune. But in principle if the economy exceeds 8% growth, which I do not presently expect, then we will look and see whether further small one-time adjustments might be in order. Last year, if you will remember, we paid a month one-time adjustment, making the total 2(r) months. This year if there are no surprises, the total is only 2ª months because last year was one-time. We will see how it goes. We should not count our chickens too early.

Mr Das asked whether promotions are not an important factor. They are. As I said, it is better to promote a person than to give him an increment, because promotion means I have applied my mind and judged him and decided that he is up to the job, and he deserves it, and probably also I have applied my mind and judged the other one and he does not deserve it. So a discrimination is made. We have to move the promotions much faster. As I reported to the House, the Public Service Commission has had sight of this statement, has also had its inputs into the Committee Report on which this statement is based, and they support the proposals and the concept on which the adjustments are based.

Decentralizing Public Service Commission and Public Service Division duties. In principle this is a good idea, because to run a 70,000-man personnel department is no mean feat. How to do it, I am reluctant to say now. The Member has suggested some ideas, an Educational Service Commission, for example, or parcelling out responsibilities for the lower grades of officers, Divisions III and IV, to the Ministries, or in the case of medical staff, when the hospitals go independent, they take the responsibility and make things easier; and when schools go independent, they also take the responsibility and make things easier, like SJI. Many Members will have noticed that SJI, having gone independent, has promptly paid performance bonuses to its teachers. We should emulate this. But it is much easier to do it when you have 50 teachers than when you have 22,000. So we have got to find ways. The difficulty is not just creating more bodies to manage teachers, but also finding the right individuals to apply their minds, judgment and impartiality to the problem and to promote and advance and recruit the right people.

The Public Service Commission has an establishment of 12 members. It is not filled. We have three slots for which we have been unable to find good individuals. Now, if we are going to create new commissions, we will have to find suitable individuals. Maybe less momentous decisions are made because it is a smaller job. The requirements will not be so strict, but I do not think it will be very easy to find people to take the posts. But in principle we will try to decentralize.

Mr Heng asked: the market place is risky; can we make the Civil Service so? We are trying. I do not know what the Member for Moulmein will think of that, but I think we should. Why do we want to make a system based on iron rice bowls? Iron rice bowls have gone out of fashion in China. They are not appreciated by the new staff. They make it difficult for us to part from staff who are still performing well but whom we can see will have problems down the road. So why not shake hands now rather than having to serve marching orders later? The SAF has a different philosophy, as I explained to you two days ago. We hire on contract. After six years, if we decide you are not for us and you decide we are not for you, we part as friends, you take your gratuity. We have had good service, so have you. Can we do that for the Civil Service? I am not sure, but I think we should explore such ideas.

Mr Heng's other point is to have more allowances rather than basic salary. I agree. That is what we are trying to do. If you look at the list of things which I mentioned concerning the Professional Services just now, that is the approach. Legal Service allowance, Medical allowances, promotions rather than extra base pay. As far as possible, keep the base pay flat and adjust the rest.

Dr Arthur Beng Kian Lam (Fengshan): Sir, I have three questions. Firstly, I would ask the Minister whether there will be adjustments to the salary scale of Legal Officers recruited in the last few years and who were recruited on the lower starting salary scale. In view of the increase in the new starting salary, there will be a morale problem for those, say, recruited last year, since those recruited this year will receive two increments.

Secondly, he has mentioned the problem of recruitment in the uniformed services. Will he consider the setting up of a Committee to look into the problems of all the uniformed services as a whole, ie, the Police Force, Fire Service, Civil Defence, Prisons Service and even the Customs Service?

Thirdly, I would like to seek his clarification on the CEP. When is this arrived at? After how many years of assessment? After it is arrived at, is there a review of this CEP, as it is now so critical in the career of the civil servant?

Mr Lim Boon Heng (Kebun Baru): Mr Speaker, Sir, I would like to ask the Minister that whilst he said that this was not the National Wages Council guideline for this year, since talent is limited and indeed, since labour in Singapore is limited, does he expect the private sector also to revise wages and salaries to match the civil service revision in order to attract talent and to attract labour?

The second question I would like to ask him is on the performance bonus. This would depend very much upon the performance appraisal system being properly established, seen to be fair and fairly administered. So is he satisfied that the stage is now set for this to take place?

Dr Tan Cheng Bock (Ayer Rajah): I would like to ask the Minister: since he thinks that this bonding of the civil servants is of not much use because the private sector can buy out all these good civil servants, then will he consider reducing it or even abolishing it? Because you will then encourage more people to join the civil service. If you do not have the bond, then at least those who were not willing to join in the first instance may now want to join.

Your annex C, monthly income of the top three executives. I am not very clear about this. Is it the earned income of the person doing his job? Or is it the total income, that is including his investments not pertaining to his job? Because this figure could be very misleading. Since you are so short of talent, would you consider recruiting from outside into the civil service?

The Minister is very concerned about the performance of the civil servants. I was wondering whether he would like to take the cue from the Minister for Finance who, I believe, in March 1988 made a suggestion that perhaps the civil servants should come to the Parliament House and answer some of the questions fielded by Members of Parliament. I think that is a good way of assessing these civil servants. If they are good, I am sure they will be praised. Do not always think that we are going to shell them. 2.00 pm

Mr Loh Meng See (Kampong Glam): Mr Speaker, Sir, the Minister alluded to the subject of pension which is expensive for the Treasury. The young Administrative Officers under the pension scheme have on the average higher take home pay but are also taxed higher because of lower CPF contribution. Will the Minister consider reviewing the pension scheme because a young officer who wishes to set up home and wants to buy a property, the CPF contribution will be useful to repay his housing loan. The pension scheme, as it stands, is attractive only when a person retires and if he is likely to continue to work after retirement. Can the Minister consider finding means to balance out so that while he is in active service and when he needed the money most he would have the income befitting his position and his growing expenditure needs and this will not cause additional cost to the State but also to allow the individual maximum benefit without his having to incur higher tax burden?

The second question, Sir. The Minister spoke about selectivity and assessment based on actual performance and potential. I wish to know, Sir, how long a period should this review cover? Since the last salary revision exercise or last year's performance? Consistent performance over a reasonable period of time is pertinent.

Mr Speaker: Mr Loh, can I remind you that you are not supposed to make a speech. You are only supposed to ask questions.

Mr Loh Meng See: Yes, Sir. Can the Minister respond as to the period under review and the performance that he wishes to focus?

The third question, Sir, is the question of matching officers to jobs. How will he avoid a situation whereby unglamorous jobs in certain ministries will not be desired by some of the Administrative Officers?

Dr Dixie Tan (Ulu Pandan): Sir, I wish to ask a quick question of the Minister. Do Permanent Secretaries earn from their directorships outside their jobs? And, if so, how much do they make?

BG Lee Hsien Loong: Mr Speaker, Sir, on Dr Arthur Beng's point, legal officers who are recruited at a lower starting grade will now have their salaries restored as if they had been recruited at the higher starting grade at that point. In other words, they get their two increments back from wherever they stand. Uniformed services I do not know whether we need a separate committee, but we will look into it. Certainly when we examine this matter we will get expert professional advice, including from the GPC concerned.

CEPs, when are they assessed, and are they reviewed? They are assessed and reviewed annually. We never make a final judgment about a person, but there is a considerable degree of stability in our judgments of people even though the reviewing panel changes year to year. After you get to know the person, individuals do not suddenly blossom forth. Once in a while they do, but the older you are the more rarely does this happen. There is a tendency, when an officer is young to be a bit conservative in the CEP assessment. As he is tried out in more jobs, and we learn what he is capable of doing, we grow more confident of assessing a higher potential of him. Because if he has only been an AA and you say that this man can be a PS one day, what is your basis? But if he has been a PAS, or been a director of some department, then you know he has that administrative and leadership ability, and if you say he can be a PS, it is credible. That does happen.

Mr Lim Boon Heng's point - private sector to revise salaries. I imagine that the private sector salary adjustment this year will not be zero. Because the economy is still doing quite well, business is still up, although Manufacturing has slowed down somewhat. I would expect some private sector adjustment this year, especially as they are going to have CPF rates revised in the middle of the year which, in itself, would already mean an increase in take-home pay for the employees. This will have some demonstration effect on them. I hope the union leaders will understand that if they take this and use it as a flag in their collective bargaining with employers, it is not going to do the economy any good. The private employers do not have a catch-up problem the same way as the public sector does. Therefore, I depend on Members, and particularly the union Members, to try and explain this to the public and at the same time to get a fair deal for the unions.

The performance bonus depends on the appraisal system. Indeed it does. We are quite confident that we can do it for Administrative Service Superscale Officers. There are only 65-70 officers there. If we add in the other pensionable services, you may double that number. If you include the Professional Services, then we are not so confident, because there are about 400 Superscale officers there altogether. It is not so easy to establish the system. Let us take our time. Members will remember that some years ago we had a brush with performance bonuses, with the second tier of NWC. It did not go down very well. Partly the assessment system was not in place. Partly the assessors were so uncomfortable that they decided to scrap it, more for their convenience than for the morale of the officers concerned. We must proceed carefully in order not to repeat the same mistake.

I did not fully understand Dr Tan's point that bonding is useless.

Dr Tan Cheng Bock: No. What I mean is that bonding could deter some of the able scholarship students from joining your service.

BG Lee Hsien Loong: Yes, they want the scholarship but they do not want the bond. That is right. But after the scholarship they will voluntarily join the Civil Service. It does not follow. The Americans have a thing against bonds. They believe it violates fundamental freedoms. We don't. This is a contract. We send you to university on scholarship. You agree to come back and serve us for a certain number of years, and we are not going to pay you peanuts. You are going to get a fair wage and a reasonable advancement. I think the bond serves a purpose. It also has a psychological purpose because the person who then goes to university thinks in terms of a civil service career. Otherwise, he says, "Now, starting point, this multi-national, that firm, that bank, somewhere down, fifth or sixth, PSC, let's go and give it a try." Young people today are very knowledgeable. They make very good calculations, and choose highly optimized paths. So better to have the bond. The scholarship is a lure. It is fair because you are going on scholarship. It is generous. We are allowing you to get into universities which you might otherwise not have been able to enter because, while you can go to a university without too much trouble, to go to a top American university or a top British university is not so easy and not so cheap. So the scholarship is worth something. I return, we would like you to serve with us and we hope that by the end of the eight years we have persuaded you that it is a good career and you will stay on. Dr Tan does not believe me, but in the SAF where we have used bonds for SAF scholars. There was a time when we feared that everyone would leave immediately the bond was up. But as the bonds came due we found to our relief and satisfaction that many people were happy to stay because we had treated them fairly. I know of very few who resigned the day the bond expired.

Recruitment, top three, total income or earned, I think I have addressed this question just now. It is mainly earned income but even if it is total, it is based on himself rather than based on inherited wealth. That is what IRD tells me. I do not doubt that if we let a top Administrative Officer loose in any of those professions, he will reach somewhere near the top, which is the reason why we must keep the pension scheme. The pensions may not be effective for keeping people early in their career, but it is quite good for keeping them in after they have stayed 10 or 15 years and become Permanent Secretaries. I agree with Mr Loh that we have to find some way to address particular needs of the younger people. He mentioned buying a house. We have housing loan schemes which are quite generous which enable a young officer to buy a house sooner than he would otherwise be able to outside. It is not just the terms but also the availability of the loan. We will look into other ways to do this but I would be cautious about getting rid of the pension scheme altogether.

Mid-career recruitment, which Dr Tan has suggested, is feasible for the private sector. I think we should make it feasible for as much of the public service as possible, but there are some parts of the public service where you cannot. You cannot join the SAF as a major. For the Administrative Service, it might be possible. In fact, we are trying to do this and to establish some linkages between the Administrative Service, the statutory boards, and the other services so that at the top we have identified not just Administrative Officers who have come up from this group but a corps of Top Administrators who have come in from many parts of the Civil Service. They can go many places, not just end up as Permanent Secretaries, but also run statutory boards as CEOs and, I would even venture to say, even serve in some Government companies on secondment. We are working on that. It is not straightforward, but we are thinking about it.

I do not know whether it is a good idea to have civil servants answer questions in Parliament. The worth of a civil servant is not judged by his glibness but by his overall contributions over a period of time. I am not sure Parliament ought to substitute its judgment for that of the PSC. We had better leave the PSC to do it and not change the Standing Orders unnecessarily.

One more point from Mr Loh -- matching officers to unglamorous jobs. The worth of a civil servant is shown by what he can make of his job. The size of the job depends on the quality of the man. If he is good in a small ministry he can make a lot of initiatives. If he is not good and you put him in a big post the boundaries will close in and the post will become a small one. Some jobs are not as popular as others. Some Ministries are not so popular as others. But I think we have to take it as a rotation during a career. I tell soldiers this, and I think it applies to civil servants as well; "Good soldiers do what they are told and go where they are sent." So should good Administrative Officers.

Dr Dixie Tan asked how much do Permanent Secretaries earn from directorships. This is one way we try to make up, but the amounts are relatively small. They are nominee directors. The Government appoints them. They are generally not shareholders. We give them an allowance out of a divided pool. A committee decides how it is shared out. I forget the exact numbers now, but I think the limit is about two months of salary. It varies depending on how many directorships he holds, whether he is an Executive Chairman or whether he is just sitting as one member of the board. But it is not a large amount. We will review this as one additional avenue for flexibly rewarding civil servants.

Mr Speaker: I think I will allow another two questions as this subject is slated for discussion next week in the Committee of Supply, when Members can then make their points.

Mr Chiam See Tong: Thank you, Mr Speaker. Can I ask the first question in regard to the top salaries of Executives in Annex C? I did not realize that top Executives in Singapore were earning that much; in fact, the figures there are really mind-boggling. I was going to ask the Minister where the source of all these salaries came from. But he did mention that it was from the IRD. He also said that probably it took into account some of the shares that these Executives got. But in that case --

An hon. Member: Share options.

Mr Chiam See Tong: Share options, or whatever. So that would mean that only in good years these Executives will get a higher salary. Whereas in the Civil Service, once you are pegged as Superscale, you remain there. The Government always makes money. So I think there is no comparison. Can the Minister comment on that? I think it is not really a fair comparison.

I notice from the scheme that the Government is proposing so many variables performance bonuses, annual discretionary non-pensionable bonus, end-of-the-year bonuses, other than the end-of-the-year variable bonuses. And in the case of the Legal Service, they have got the special non-pensionable allowance. Now that you have all these variables and it depends upon the senior officer to decide whether a person should be entitled to this bonus or not, would it not make the junior officer ingratiate himself to the senior officer? In fact, I think the Government has already introduced such a scheme, and it failed. I understand that in schools it was difficult for the principal to decide who to give these additional bonuses to. And I am surprised to learn that SJI is introducing this scheme which failed before. My question is: would it not, in fact, lower morale in the Civil Service?

The third question is whether there is a ratio or quota to take in foreigners into our top Civil Service posts.

Dr Lee Siew-Choh: Mr Speaker, Sir, I just want to ask two questions? First, how many of those who have resigned have emigrated? Second, amongst those who have remained in Singapore, has the Government made investigations as to why they really left the Government Service? Was it entirely because of the salary? Third, was it because they could not agree with their superior's assessment of their CEP? Was it because they feared favouritism? Was it because they found they had no chance of getting promoted because they did not happen to belong to a certain party? Was it because they also found it difficult to gain chances of study leave for their personal advancement?

BG Lee Hsien-Loong: Mr Speaker, Sir, both Members have points which are valid. Mr Chiam is right. In the private sector, salaries vary from good years to bad years. I am surprised that he is surprised by these numbers, because he has seen them before in 1985 (earlier numbers for 1983). In fact, the earlier numbers in some cases were higher than these, because some of these earnings had been affected by the recession and had not fully recovered. So the amounts vary from year to year, but the average is very high. And overall, this is not untypical. If there were years when it was zero or even minus, and people have to claim back income tax, well, all right, then maybe, "Nobody might want such a career." But despite the variations, the trend, remains so consistent that people know there is not that much risk going into it.

By the way, the data come from Inland Revenue Division. People do not lie about their income tax returns, generally speaking.

Some hon. Members: Some do.

BG Lee Hsien Loong: Some lawyers do, in which case the lawyer's real earnings should be higher. I do not know whether Government always makes money. If it did, we would not need to worry about having a second key on our reserves. But this Government has always tried to keep the country straight, and the civil servants who have performed well have made a large contribution. They should not be penalized for keeping economic growth up.

Having complained that civil servants receive a fixed amount, Mr Chiam, then complains that there are so many variables in a civil servant's pay. I would have thought if a fixed amount is no good, variables are good. But he prefers neither fixed amount nor variables. So I do not know what he prefers.

Mr Chiam See Tong: Put it up.

BG Lee Hsien Loong: Put it up. He prefers a fixed amount.

Mr Chiam See Tong: After all, you get the people you want.

BG Lee Hsien Loong: That is a good philosophy. In fact, we are putting it up, but we prefer to do it in a flexible way. The amount may be the same. But the mood is different, in a Civil Service where a person knows that his superior can affect his advancement and his reward, from a Civil Service where he gets paid the same amount of money, knowing that performance does not matter, he cannot be sacked, he cannot be demoted, he cannot have his bonus removed. That is an iron rice bowl. Socialists used to believe in that.

Mr Chiam See Tong: You have selected him.

BG Lee Hsien Loong: We have selected him, true. Once in a while we make mistakes.

Mr Chiam See Tong: Small numbers.

BG Lee Hsien Loong: I am glad Mr Chiam has such confidence in the system. It is so, but no private company pays people automatically, regardless of performance. So why is the Government special? Yes, performance bonuses have failed before. And in certain schools, teachers did not want to assess and did not want to be ranked. Everybody is a good teacher. That is why we are starting small with Superscale officers and the Administrative Service, and only taking steps which we are confident of taking. Beyond that, let us prove the scheme first. When it works, we will extend it further. Just because it has failed once does not mean it is a bad idea, because we are not the only people in the world to use performance bonuses. All private companies do, big ones even. So if they can tell who is good and who is bad, why should the Government be so blind as to be unable to distinguish? In fact, one of the complaints which many people have is that in the Civil Service, we are not discriminating enough and many free riders benefit when the deserving few are rewarded. So we have to find some way. I do not minimize the difficulties, but a way has to be found around it.

I do not know how many foreigners we recruit. I think we take those who are suitable and capable, and for the key services, of course, being a permanent resident or being a citizen is a consideration, because we might be in a difficult position if we had a Permanent Secretary of Defence who is not a Singapore citizen. And there are some other sensitive jobs too. So we do watch it, but when an able person comes in, we bring him in.

Dr Lee asked how many resigned and emigrated. I do not have the numbers. I think many have remained. We have asked those still in Singapore why they left the Civil Service. I have given you the reasons slow promotions, better prospects outside, some felt that their CEP was unfairly assessed, which really meant that they were promoted too slowly. I have not heard of anybody who left because he belongs to the wrong political party. And in any case, the Government does not promote. The Public Service Commission promotes. And I do not know which political party the PSC belongs to, unless Dr Lee is making the same suggestion apropos the PSC, as his colleague and he himself was making apropos the Supreme Court. But I take it that he isn't.

On study leave, Dr Lee has a point. It is a great desire of officers to go on study leave. They have got Bachelor degrees, they want Masters degrees. It is like collecting stamps. If you have one, you want another one, and want to collect it at the right point of a person's career. There are people who say, "We want to go on study leave." That's all right. "I will send you when you are 33 years old." He says, "Too late." Why? Wives have jobs, children born. "So when do you want to go?" "Must be at the eighth year." I am not sure that we can be so generously accommodating as all that. It is subject to the exigencies of the service. But I think study leave is one area where we can be very competitive, relative to the private sector. I told you that the SAF is going to do this. And I think the Civil Service will do this. But let me also tell you that we have already been generous. The trouble is not that we do not have scholarships but we do not have people to give the scholarships to, because the worthy candidates have resigned by the time it comes to go on mid-career programmes. So it is a really serious problem.