COST REVIEW COMMITTEE REPORT (Motion)

Debate resumed.

Mr Dhanabalan: Sir, the CRC Report is a balanced and thorough analysis of the question of rising costs. I think many Members here have admitted so. The Committee has not shied away from pointing out some very hard choices facing Singaporeans. Its measures to keep inflation low are sound, and the Government will definitely continue to make low inflation a priority.

The CRC has made recommendations in six specific areas. The Government's detailed responses are given in a paper (Annex A (Cols. 867 - 876)) that was circulated earlier in the day. I will now highlight some of the key responses. Annex A - GOVERNMENT'S RESPONSE TO RECOMMENDATIONS OF THE COST REVIEW COMMITTEE (Cols. 867 - 876)

Firstly, on the CPI, the Government accepts the Cost Review Committee's recommendation to compute different CPIs for different income groups. On health, the Government accepts five of the seven recommendations. Further details on how the Government proposes to keep health care affordable will be released in a White Paper containing the recommendations of the Ministerial Committee on Health Policies. A number of Members have spoken extensively on health and have asked questions on how do you define basic health and so on. Please bear with us. When the White Paper comes out, we can have a full debate on the subject of health.

On the recommendation to retain at least one Government hospital, ie, Alexandra Hospital, it is in fact the only Government hospital that we expect to retain over the long term. Changi Hospital will be closed and the Communicable Diseases Hospital will be combined with Tan Tock Seng Hospital. At the present moment, the Government does not have any plans to restructure Alexandra Hospital. If experience shows that Alexandra Hospital is able to provide the same level of service at lower cost than the restructured hospitals, then obviously we will not restructure this hospital. But if restructured hospitals are more efficient, then retaining a Government hospital will not help to keep costs low.

On the extension of visiting hours of Government outpatient clinics, private clinics and the A&E services in hospitals are sufficient to meet demand and we do not see the need to extend the hours in Government outpatient clinics.

On the subject of housing, the Minister of State for National Development has already dealt with it and given Government's views on the CRC's recommendations.

On education, the Government cannot freeze the subsidy rate for university education at 79%, as recommended by the Committee. All of us, I am sure, accept that university students form a minority of students and that after graduation they can earn good incomes, much higher than those who do not go to university. It is entirely equitable that university students pay 25% of the cost of their education. However, despite this, the Government will be able to keep future increases of university tuition fees moderate, because the actual subsidy rate for undergraduate courses is now at 76%, ie, close to the target of 75%. The 79% that the Committee used in its Report is the overall subsidy rate for both undergraduate as well as postgraduate courses. There has been some cross-subsidy from undergraduate courses to postgraduate courses, which are more heavily subsidised. So the fees for graduate courses will be progressively adjusted to reach the target of 75%, but this should not affect the majority of university students.

There is no evidence that paying 25% of the cost will deprive anyone who qualifies for a university education from in fact having a university education. There are sufficient scholarships, bursaries and loan schemes to ensure that anyone who gets a place in the university can afford the fees. If a case can be made out that the repayment of the loan is too burdensome in the first years of working life of a graduate, I am sure the Minister for Education and the Minister for Finance will be prepared to make further adjustments to ensure that they can afford to meet the repayments of the loan.

On Goods and Services Tax, the Government accepts the Committee's recommendations. I have already explained during the debate on GST the actions we will take to ensure that prices do not increase unreasonably.

I would now like to make some general comments on the issue of rising costs.

Rising cost of living: Is it a myth or a fact? The Prime Minister appointed a Cost Review Committee. It deliberated for a year and has produced this very detailed Report. The debate here in this House and the reports over the next few days will be so extensive that anyone who is new to Singapore, or a visitor coming to Singapore for the first time, may very reasonably come to the conclusion that Singapore is in the throes of sky-rocketing prices and that inflation has seriously eroded Singaporeans' living standards.

A visitor would be very hard put to understand all this emotion and excitement in the light of the fact that inflation in Singapore has been low in the past 12 years and the average inflation rate over the last 12 years (1980-1992) was only 2.4% per year, among the lowest in the world. To have a feel of what this means, compare the inflation experience of Singapore and Hong Kong, which I have distributed in Annex B (Cols. 877 - 878). Hong Kong's higher overall inflation rate translates into a rising cost of daily living. In the last five years, HongKongers saw significantly higher increases in prices of fresh pork, fresh poultry, seafood, vegetables, cooked food, water and electricity charges, bus, MRT and taxi fares, and costs of health care. Singaporeans did not face the same increases. Even in the sensitive areas of bus fares, MRT fares and health costs, our increases have been lower than Hong Kong. Annex B - COMPARISON OF PRICE CHANGES PER YEAR IN HONG KONG AND SINGAPORE, 1988-1993 (Cols. 877 - 878)

More importantly, wages have been rising consistently faster than prices in Singapore, so that real standards of living have risen. Compare the 2.4% price increase with 8.9% per year rise in nominal wages during the period 1980-1992. Even a casual observer who has not studied the wide array of statistics in the CRC Report can see the improvement in living standards for himself, in the quality of our housing, in our possessions and in our lifestyles. Yet some people choose not to believe this, pointing instead to defects in the Consumer Price Index. The CRC, after 10 months of careful deliberations, has concluded that the CPI is sound. This has to be so, not because the CRC members (including Mr Low Thia Khiang) are simply mouthing the Government's stand, but because the CPI is computed in accordance with international convention and sound international practice, accepted by economists and statisticians.

Mr Low has complained in his minority report, which I have discussed earlier, that the CPI is not a true Cost of Living Index (COL). His implication is that if we compute a true Cost of Living Index, it would show that the Cost of Living in Singapore has gone up by much more than the CPI. Mr Low is right that the CPI is not a true Cost of Living Index. But he is wrong that if we computed a true Cost of Living Index, it would show things to be worse. As the CRC Main Report points out, and as I mentioned earlier, the CPI over-estimates the true increase in COL. Even if we did compute a COL index, it would show that inflation in Singapore is even lower than the 2.4% increase in CPI.

Mr Low is shaking his head. I have asked him to come out with his methodology. He has not been able to do so. The Committee gave him a lot of time and he was not able to do so. As I said just now, it is no point saying this is his view. The view must be based on sound arguments and facts. And he has not produced sound arguments and facts. There is no point saying this is his view, that the COL has in fact had a higher inflation rate than the CPI. You have got to show that it is so.

In the 1991 General Election, Mr Low argued repeatedly and forcefully in election rally speeches that costs were sky-rocketing in Singapore, and that people could no longer afford basic necessities. Let me quote some of the things that he said. In a speech he made on 22nd August 1991 in a rally in Bukit Merah, he said this in Mandarin and I assume the translation is correct:

`Only the Government benefits from the country's prosperity. The people do not, because prices have been increasing, but their salaries have increased only marginally.'

Mr Low has sat in the Committee. He has seen the price increases. He has been shown figures of wage increases. Does he still hold on to this? In another speech in Hougang, he said, "What has happened to people's life? What has happened to the people's life after Singapore achieved growth in the economy? Why are the prices of commodities all gone up?" He has looked at the figures of basic essential prices. What is his view?

He quoted a Chinese poem, "There is a goose in the sky. PAP has money, but the people, no money. PAP has levied too many taxes, and the people have tightened their belts to the extreme." What does he now say? He has had a year in this Committee. He has asked for figures. The Statistics Department and others have produced figures. He has looked at them. What is his view? What has he done? The Government has given him full access. He has had all this time to study. He has failed to substantiate his wild allegations. The only thing I find in his report is that the CPI does not measure the COL. He picks on items like rentals and other little things like that.

I think Mr Low should explain to this House and to all Singaporeans why this has happened. Perhaps, after all these studies in the Committee, he now realises that his earlier views were mistaken, that there are some technical problems with the CPI, but basically the CPI is a true measure of price changes; people's incomes have gone up higher than prices and the wide array of statistics in the Report, I hope, convinces him that Singaporeans have benefitted. Even the very low income groups, their possession of consumer durables, which is also indicated in the Report, if we had used only one measure, is more than enough to prove that in fact people's lives have improved.

Does he agree that, after studying the matter in the CRC, incomes have in fact gone up more than prices? If so, should he not publicly apologise to Singaporeans for misleading them and creating unnecessary alarm? I think Singaporeans have a right to know. Would Mr Low like to reply?

Mr Low Thia Khiang: Yes.

Mr Dhanabalan: Okay. I will give him a chance to reply.

Mr Low Thia Khiang: Sir, is it a fact that, in absolute terms, wage increases for the lower income group have been lower than the higher income group? From what I know, between 1980 and 1990, the wages of the lower income group only increased $350 compared to the higher income group of $3,680. So the lower income group, relatively speaking, is not better off by today's standard. Of course, I do not deny the fact that, generally, the whole of Singapore is better off. I do not deny that in terms of consumer durables, yes, we have improved. But please bear in mind that if you compare the lowest income group in developed countries, they also have these consumer durables. And we are looking forward to a developed country status - a Swiss standard of living.

Sir, on the other hand, in terms of the middle-income groups, they are affected because of their lifestyle. They are affected also by other increases, especially the lower middle-income group. I believe it is because of their expectation and lifestyle in relation to their wages. I think they also may not be tightening their belts, but it is quite tight, I suppose.

Mr Dhanabalan: Thank you, Mr Low. But that was not what Mr Low said in the speeches in the Elections. He did not say Singaporeans are not enjoying Swiss standards of living. That was not what he said. But I am glad that he has now admitted that, in fact, everybody is better off. Of course, the wage increases of those at the bottom are less. But the important thing is: are they better off? Wage increases of everybody cannot be the same. But is everybody better off?

Mr Low Thia Khiang: Could I clarify? It could be that everybody is better off. But, eventually, you still suffer the kind of pressure. Yes, wages increase, coupled with increases in costs. But you are still struggling.

Mr Dhanabalan: But my point, and I think Mr Low has admitted, is that, in fact, wages increase more than the costs. That is the point.

Mr Low Thia Khiang: Average.

Mr Dhanabalan: Average. Even for the lower income. But if he says the lower income group is not having the same kind of things that the Swiss or the Germans have, that is another matter. We have not come there yet, admittedly. But, certainly, people are not tightening their belts, as he alleged.

Mr Low Thia Khiang: It is still tight.

Mr Dhanabalan: Maybe they are putting on too much weight!

The CRC has identified the reason for the perception gap. There is a misunderstanding about what the CPI is supposed to measure. The CPI is designed primarily to measure price changes, with changes in lifestyles and tastes being captured in periodic revision of its weighting pattern. But people expect the CPI to show large cost increases that come with more expensive tastes or a more expensive lifestyle, or with lumpy expenditures, like buying a house or having a big hospital bill, to be reflected in the CPI when, in fact, it must be averaged over a number of years.

Let me give Members an example. An acquaintance of mine told me that his driver had been complaining about his increasing cost. The reason is not that the driver is unable to afford to pay for his children's school fees or to put food on the table. His complaint about rising cost is that he cannot afford to run his air-conditioner every night and it is very warm. He complains about the unfairness of PUB's electricity bill. How can one expect to have a small electricity bill if the air-conditioner is on every night? The CRC Report has an interesting chart (Chart 1.3 on page 20) which shows electricity tariffs falling but consumption rising. Bills are higher not because cost per unit has risen, but because people are buying and using more electrical appliances.

One has only to walk into any HDB neighbourhood or town centre and look at the goods on sale to realise how much people's consumption habits have changed. People do not eat only bananas, as Mr Maidin says, or ikan bilis. They want hami melons from China, musk melons from Japan, XO brandy from France, abalones from Australia. These and other food items which in the old days could only be found in the Orchard Road stores, like Cold Storage or Fitzpatricks, can all be now found in the HDB neighbourhood shops. What does that mean? Shops are not just displaying these as museum pieces. People are obviously buying them.

There is nothing wrong with drivers wanting air-conditioned bedrooms or for people wanting to eat exotic fruits. If they work smarter, harder and earn more, they have every right to improve their standard of living. There is nothing wrong with the rising aspirations. But we must be clear that when people complain about rising cost, it is not because the same lifestyle which they enjoyed cheaply in the past costs more today. That is not what they are complaining about. It is really because the higher standard of living which they now enjoy costs more than their old, simpler standard of living which they have left behind. That is what they are complaining about. Furthermore, they fear that what they aspire for the future, which is even higher than what they enjoy now, would remain out of their reach. That is their fear. So it is not as if costs are going up and they cannot afford to maintain the present lifestyle or the lifestyle that they used to enjoy. They are complaining about something quite different.

On reading the CRC Report, it is also clear that much of the public unhappiness is centred on prices of services provided by the Government. People somehow expect services provided by the Government to be different - that the Government services should be exempted from cost increases; that the Government service level should be high and improving, but the charges should be low and preferably fixed. Therefore, we get a situation where parents willingly fork out anything from $60 to $130 per month for three hours of private kindergarten classes, but they complain loudly about $70 to $200 fees for independent schools, because independent schools are associated with Government; private kindergartens, that is another matter.

There is an illogical assumption here - that Government should not only subsidise services, but entirely offset any cost increases. People forget that subsidies are financed by taxes and that if we do not keep subsidies under control, taxes will rise inexorably.

There is also a related argument that a little more subsidy will not hurt since the Government runs a budget surplus. Whether the Government has an overall budget surplus is a separate question from whether the Government should subsidise a particular service which it provides. For some services, like telephone services or PUB utilities, there are no good social reasons for subsidies. The individual who uses the telephone or consumes water and electricity is the one who benefits directly from these services and he should therefore pay the full cost.

But in the case of other services, like basic health care, education and housing, there are good social reasons for the Government to make them available to the whole population. When a citizen is healthy, not only is he himself and his family better off, but others are also less likely to catch, for example, diseases from him. When a person is well-educated, he contributes to society more than what he himself earns in wages. When the citizens own their own HDB flats, the resulting sense of ownership and social stability benefits everyone. The Government will subsidise such services, and even subsidise them heavily, provided the budget can afford it. But even these services like basic health care, education and housing, should not be provided totally free. Wherever possible, we should charge a fee, even if the fee covers only a small part of the cost. This serves two very useful purposes. First, it makes clear to the public that there is a cost incurred in providing the service. Second, it helps ensure that the service is only used when really needed.

Let me give an example. For a long time, Government outpatient clinics dispensed medicines free of charge. Patients often did not use the medicines as seriously as the medicines that they paid for when they visited a private general practitioner. They either accumulated the medicines in the cupboard at home or simply threw them away. When the PAP first formed the Government in 1959, it introduced a $1 fee for a week's supply of a particular medicine. Immediately, patients not only regarded the medicine as more effective because they had to pay for it, but in cases where they still had supplies at home they told the clinics, "Please don't give me the medicine. I have some at home."

To make services like health and education available to the population at large, the fee must be fixed at a level that the overwhelming majority can afford to pay. Let me repeat that - the fee must be fixed at a level that the overwhelming majority can afford to pay. This will naturally depend upon the income levels and affordability of the majority of consumers and not on whether the Government has a budget surplus or not. That is completely irrelevant.

There will always, of course, be people who may not be able to afford even the low fee that is fixed in relation to the affordability of the general public. But I think we need to have a balanced perspective of what is happening in our society. Neither the rich at the top nor the poor at the very bottom are representative of the average. We do have some very poor at the bottom - old folks with no jobs and no children to support them, people with physical or mental problems who cannot hold on to a job, and so on. We do have such people. But we should recognise two facts about such poor people. First, they are decreasing in numbers and in proportion. Second, even the very poor are not so badly off as they used to be in the past.

Let me substantiate this by reciting just one fact. The very poor now live in 1-room HDB flats with running water and electricity. They used to live in crowded and unhygienic slums on tenements in Chinatown. So we should not get so immersed in the problems of the very poor that our entire perspective gets distorted. Even worse, the better off should not use the plight of the poor to advance their own concerns about the prices of cars and private properties. The really poor, we will always have with us. Government accepts that such people must be given special help. That is why there are various schemes tailored to meet specific needs - schemes like Medifund, the 25th Anniversary Charity Fund, Small Families Improvement Scheme, and so on. It is more cost-effective to have specific assistance schemes to meet the needs of a particular section of the population than to make services cheap for all, including those who do not need subsidy. We should not just give subsidy to all. We should keep the subsidies to the minimum for all and then identify those who require special help and have special schemes to help those people. The Government has a sound approach to helping the weaker members of our society and we should not let the difficulties, sometimes temporary, of a small group to cloud the overall picture of a better life for the vast majority.

We have continued to enjoy economic growth because we have followed sound policies, including a conservative fiscal policy and a policy of heavily investing in our people. These policies have been well tested and are now generally accepted as pre-requisites for growth, whether in the developed countries trying to unwind their welfare systems or in developing countries wanting to break out of poverty. We should stick to fundamental policies which have served us well.

Mr Deputy Speaker, Sir, in conclusion, after putting under the microscope for one year, I hope that Singaporeans are now better informed about the facts. I do realise that facts would not satisfy everybody emotionally. But there should be enough common ground for us to work as a team, to do what is most important for our long-term prosperity, that is, compete in the world economy and make a comfortable living. [Applause].

Mr Low Thia Khiang: Mr Deputy Speaker, Sir, may I seek clarification from the Minister? I have the impression from his speech that it seems that Singaporeans are being accused of living a lifestyle which they have chosen, and then blame the Government for the cost increases. And when he talked about going to restaurants, having XO brandy, eating bananas or something else, I think Singaporeans do know that if they choose to live a certain lifestyle, they pay for it. But I think they have been living a lifestyle which they are incapable of carrying on or maintaining it.

In the Minister's speech, he compares also the living standard now and in the past. Of course, no one denies the fact that it has improved. But the fact is that now you are living, let us say, in a 3-room flat, and if you do not live in an HDB 3-room flat, if your income is more than $800, where else do you live? You have no more slum to live in. So you have to live in a 3-room flat with the kind of expenditure and standard of living that you have now. Then you may find it is rather tight when it comes to the income that you have and thereby you find that costs have increased. That is how they feel.

Mr Dhanabalan: I did not accuse the population about doing anything or that they are wrong in wanting to aspire to something better than what they have now. What I said was that when people complain about rising costs, they are not complaining that what they used to enjoy is costing more today because their lifestyle today is much better than their lifestyle in the past. And what they are saying is that today's lifestyle, which is much better than in the past, is costing them more today. It must. What they are also saying is that they want to enjoy an even higher lifestyle and that is going to cost more. It must cost more. There is nothing wrong with aspiring for better lifestyle, to enjoy a better lifestyle today than in the past, as long as people are prepared to work hard, work smart and earn more. There is nothing wrong with that. But I am trying to pinpoint what is the actual nature of their unhappiness. It is not as if prices have skyrocketed and that people's real incomes have gone down. That is not the problem. As long as people aspire to things which are realistic and are prepared to work hard, I think Singapore will continue to do well.

Mr Chia Shi Teck: Mr Deputy Speaker, as a privileged member of the CRC, I cannot sing praises for the Report. But I can confirm what Mr Lim Boon Heng said yesterday that the 16-member committee did not come in to rubber-stamp. In fact, we also have Mr Low Thia Khiang's strong views. And it is only fair to speak out for the other members who are not represented here. We have unionists, grassroots leaders, employer group, academia, journalists and they represent a very wide section. And they do, at times, try very hard to pin the officials down when they come in with the numbers. So the numbers given were correct, are correct and the CPI is correct.

The point is that the CPI represents the average. It is a general indicator and it is not the end-all and answer-all. I think Minister Dhanabalan has said it yesterday too that many Singaporeans come with a mindset and, in fact, if you get to the bookshop, you can buy a poster (I did not bring it along) which reads, "My mind is made up, don't confuse me with the facts". And that is the kind of poster that is being sold. That is true of many of us when we read the Report. The mind is fixed and they just do not want to be confused with the facts. But I think we have to look at the facts.

Here, I would like to praise the Government for tackling this explosive and emotional issue straight on and, no doubt, this cost of living issue will continue to surface again and again. I think it is good to reflect on how well or how badly we are performing. And if we look at the report card, definitely it is straight `As' score. Life expectancy is 76, as we have just read recently. Quality of life is first class. We are talking about fresh food, fresh fish, fresh crabs (I have been asked about female or male crabs. For crabs, I like the male crab because there is no roe), poultry and fresh vegetables, all these are available at the wet markets. Our health and hygiene is clean, green and first class. We fall sick because we are fat. So our belts are tight because we are fat, not because of malnutrition. The clothing is fashionable and we wear branded goods. My brand is also branded. Housing is the world's best. In Japan, they talk about rabbit hutches, and it takes three generations to buy one apartment. In Singapore, in one generation, you are talking about three or more private properties. Posh cars, all the big cars you can see in the world, appear in Singapore very quickly after the models are introduced. We have airconditioned buses and MRT.

We have been accused of not honouring human rights. The West said that human rights are important but the dignity of living is important. We have full employment. In the West, they have lots of unemployment. People are out of jobs, so what dignity do they have? Our place is safe, secure and the people are harmonious. When they accuse us that we do not have the freedom of speech, I do not agree with them. Even if we accept that our freedom of speech is less, what about freedom of movement? If we ask our Prime Minister, or any Minister, who walks through any part of Singapore ---

Mr Low Thia Khiang: Mr Deputy Speaker, Sir, point of order. I think he is out of order. What have human rights got to do with the Cost Review Committee Report?

Mr Chia Shi Teck: The cost of living is the measurement of how well or how badly we live. And I think that is important. When people said that we have no freedom of movement, I challenge them by saying, "Ask your leaders to walk through your streets and see if they will survive." Here, all of us can survive, so we have the freedom of movement. The Minister is correct when he said that not too long ago we were all cramped up in Chinatown and kampongs, poorly-ventilated lodgings and no modern sanitation. However, a straight `A' does not mean a perfect score. So there are rooms for improvement and that is precisely what this argument is all about.

There is this question of distribution of wealth, which Mr Low and many of us are concerned, ie, whether the gap is widening. I just read a USA report recently about the government talking about their poor. 14.5%, or something like 37 million, Americans are considered poor and the blacks and Hispanics are three times more likely to be poor. One third of the blacks are considered poor and almost 30% of the Hispanics are also considered to be poor in the United States. So I think Singapore is doing much better than them.

The Government's wisdom is in following certain principles, one of which is meritocracy, but tinted with compassion. And I think this part is important. Having served in the Feedback Unit, I realise that for some people who have made it, the way they talk and their comments are lopsided. There is this Government's programme in upgrading the HDB flats, where $10-15 billion would be spent over the next 10 or 15 years, as announced by the Prime Minister. There was a complaint from a doctor in a feedback session and he said, "We are the ones that are paying the income taxes and property taxes. Why doesn't the Government also include the private properties in the refurbishing scheme?" So that is the kind of professional we have. On the other hand, we also have feedback from some professionals who come up and tell me, "Why is the Government giving $100 under the Edusave scheme to my children? I don't need it." So the schools actually ask them to contribute. "Why is the Government giving us $200 under the Top-Up Scheme when we don't need it?" So you do have a balance. And we want more of these people who feel for the lesser well-off. So meritocracy is good, rewarding for performance but, at the same time, we should have compassion.

The desire to have good things, as the Minister said, is all right. We have got to work for them. Greed is not all right. Envy is not all right. So our dreams and aspirations, they are all right. But we have got to match them with realism and that is what the Cost Review Committee is all about. The Cost Review Committee Report did not ask people to give up aspirations, or did not ask those journalists or those who were born in the 1960s, who were the PAP generation, as we call them, to accept the fact that their future will not be as rosy as their forefathers. We have to accept the limitations but, at the same time, we have got to work within the limitations. If we kill the very motivation, then we are killing the very spirit that drives Singaporeans to continue to prosper or continue to work. And that will spell disaster.

Sir, amidst the limitations, I think we should then manage the increase in prices while accepting that prices must go up. The next guiding principle that the Government follows or adopts is the market forces, the market prices. And this is one point that many of us feel a little uneasy because it is not a perfect market, and because there are limitations with a small size, I think cornering can take place. The Government has, I think, got to be careful over here when we just leave things simply to market forces. We feel that the Government policies sometimes may unwittingly drive up prices faster than what they should be. In the case of the Government's tender of land, the feeling is that, with each tender, the prices are being shifted up and the developers actually have a boom time, not out of their hard work that they put in but simply out of the way that tender prices have been moving up. For example, if a developer has tendered for 300 units, worked out at a certain price, say, a selling price of X dollars, and he goes in to tender, but subsequent tenders show that the cost of the next developer is higher than his X dollars, then he could easily just move his prices up to X plus whatever factor, and that is the windfall that the developers are getting now. So my suggestion is that this is no fault of the developers. Developers are in the business to develop properties. When they tender, say, X dollars, they are going to price X plus five, but subsequent tenders show that it is double X, so it will be double X plus five. So the suggestion I would like to make here is whether HDB could ask the tenderers to also put in the range of prices that they want to sell so that subsequent tenders or prices that have gone up will not bring up this selling price. We may laugh at the suggestion but then it is a market that is not perfect, and that is dangerous.

Mr Low Thia Khiang's report suggested that HDB goes into building of condominiums. My point has always been that the Government may have unwittingly push up the prices of the private sector because of HDB's prices. There is a floor price. And as HDB proceeds to build bigger and bigger units, the private sector prices will also be driven up because we are not comparing apple with apple. But to take Mr Low's suggestion that the HDB goes into private housing is a serious matter, because HDB will then move into the private sector which may not be what the Government wants.

The other matter is COE. COE was introduced to control the number of cars on the road. I think nobody argues about road congestion, or the number of cars on the road has to be controlled. The Government's argument about changing the scrap system to the COE is that the right given to existing car owners is a perpetual one and that the second-hand value of cars becomes an investment, so therefore it is a bad system. But with the change to COE, it does not help the situation because the prices continue to go up and the fear in the new entrants is that they will wake up one day having to pay $100,000 just to get a COE, or $1 million just to get a small apartment. This is what the people are unhappy about. A better system would be to actually allow part of the rise in prices to be given back to the car owners. If we feel that the existing owners have a benefit perpetually, then the same can be said of housing. People who are born into families with houses will, of course, have a benefit over those who are born into families with no houses. So are we going to also cut it down and make it to be a one generation house? We just cannot do that. I hope the Government can look again into COE because it is a living thorn that will affect the Government's popularity.

On health care, the Minister has asked us to be patient, as we will discuss it when the White Paper on health care is introduced. On education, I share the Minister's argument that university education only benefits the creme de la creme. The percentage of GDP that the Government commits to education has not been reduced and I think that is important. If that can be increased to 6% of GDP, it will be very welcomed that more money is spent to benefit the majority of Singaporeans. The university students can look after themselves as they are the creme de la creme.

I like to pay tribute to the hawkers. On the Government's good policy of selling HDB shops, and now selling hawker stalls, the intention is good, and the hawkers are keeping the cost of living low and they actually feed millions of Singaporeans daily. So would the switch to sell the stalls to the hawkers result in hawker prices actually moving up too quickly? What moves up never comes down. We said that even for GST, it is a once-off increase. Each time, we have a once-off escalation, we start off at a higher base and that is the fear because, at the end of the day, we are talking about maintaining the competitiveness of Singapore, maintaining the jobs that we have and creating new jobs for our children and for future generations. So each time when prices move up, we are starting off at a higher base, and we are talking about competitiveness with other countries.

I read a report recently on Pusan, Korea. Just a few years ago, Pusan was the number one production base for sports shoes - Reebok, Nike, and what have you. Today, Pusan is practically a dead town with almost 30% unemployment and all the shoe factories have moved out to places like China and Indonesia. These are high-tech machines but very little labour needed, and they have just shifted away. So what happens?

In today's report, Sony's chief, Akio Morita, said that, in fact, the Japanese are moving and they are trying to retain the higher value added things. Unless the two go in tandem, we may price ourselves out of the market and I think that is the fear. Each time prices move up, our level becomes higher, and I hope that this matter will be studied by the Government.

My plea to the people out there, people in Singapore, is look at the facts. The facts do not confuse us. We have to accept that prices must go up and that we have to work for it. The Government must be mindful that the good intentions that we have may bring us the side effects of pushing up prices unintentionally.

Mr Low Thia Khiang: Sir, may I have a point of clarification with the Nominated Member?

Mr Deputy Speaker: Yes.

Mr Low Thia Khiang: Does the Member agree that the Government should help the weaker members of our society?

Mr Chia Shi Teck: Sir, the Government must help. Those who have made it better must also help. And MPs and Opposition MPs also must help to explain the truth.

Some hon. Members: Hear, hear!

The Minister for Health (Mr Yeo Cheow Tong): Sir, as Mr Dhanabalan has explained just now, we will address the issues on health care when the White Paper is tabled next month.

I would like to take this opportunity to reply to the point raised by Dr Toh Keng Kiat when he spoke just now and presented a Table on the subsidies for B2 and class C patients in the Singapore General Hospital. He claimed that his calculations show that SGH is subsidising the B2 patients much more than class C patients. His calculations are totally wrong because he has used a very simplistic approach. For example, he has taken the class C ward fee of $23 and multiply that by 0.8 - 0.8 being the 80% subsidy. From there, he said that the subsidy for a class C patient is $18.40. Similarly, he has done it for B2.

Sir, the fees are the actual payment from the patients. The subsidy part is invisible. This is the part that has been absorbed by the hospital. I would like to show the actual figures. Fortunately, this morning, in preparation for the Oral Answer to Dr Vasoo, I brought along some data with me. The 75th percentile bill size, the amount of money that the patient pays, in the B2 ward is $815 for his entire stay in the hospital. Based on the subsidy rate of 70% for SGH, this works out to an actual subsidy of $1,900 for the patient during his stay in hospital. So the Government absorbs $1,900. The patient pays only $815.

For the 75th percentile class C patient, his bill size came to $533 and the subsidy from the Government is about $2,130. For the class C patient in SGH, the subsidy at $2,130 is far greater than the subsidy received by the B2 patient. I would like to clarify that, Sir, and put the subsidy figure in the right ballpark.

Sir, the other point is that he obviously has not understood that the total bill size or the total expenditure incurred by the patient is more than his ward charges, because the total expenditure will include medication, various treatments, investigations and X-ray that he has taken. Therefore, we have to look at his total bill size and not just at the ward charges that have been imposed. 4.20 pm

Encik Othman bin Haron Eusofe (Marine Parade GRC): Mr Deputy Speaker, Sir, a careful reading of the Cost Review Committee Report will enable us to get a better understanding of the factors which have caused the cost of living to increase as well as factors which have helped to moderate inflation. The members of the Committee come from a wide cross-section of Singapore society and they have addressed the issues involved thoroughly. They have made sound recommendations which can help us to ensure that future rises in the cost of living can be made even more manageable.

Sir, we cannot avoid future cost increases. Wages will rise. And as we progress, there will be greater demand on our limited resources. The question is how can we manage ourselves so that inflation and increases in the cost of living can be effectively controlled and kept as low as possible. The Government has already given its response to some of the recommendations. I think these are positive responses and I hope that the Government Ministries will work on them on an expeditious basis.

Sir, now, I would just like to make some very general comments. First, on the CPI. This has been thoroughly discussed in the Report as well as the debate in the Chamber. There are still many doubts. The Committee has recommended that measures be promoted to enable better understanding and also that there will be separate CPIs calculated and published for different income groups. This will help promote more understanding but, at the same time, I think it will also create more confusion, because there will be further disagreement as to how these new calculations are made. Nevertheless, the point is that we know that the Government is prepared to provide more information to help people understand the issue better and, in this connection, it is prepared to open the books.

The other point which I would like to make relates to the wages of the lower income workers, particularly the wage gap. Members have commented on the widening wage gap. As a trade unionist, this is certainly a matter of great concern to me, but I think we should look at this issue in perspective. Chapter 3 of the CRC Report noted that the relative gap had narrowed slightly, but the absolute gap had widened. I believe that international comparisons on the wage gap is normally done in relative terms and the average income of the top, say, 10% is divided by the bottom 10% to give an indication of what is the income distribution.

It is heartening to note that the relative gap measured in this way has narrowed even though it is a slight one. Some other countries are not so fortunate. In fact, in the United States, the relative gap has widened. This would mean that the absolute gap would have been even worse.

Sir, I am happy to note that the relative gap has not widened over the past 10 years but, at the same time, I am rather worried that the same may not hold true in the future. Today, investments are sought after by all countries. They have liberalised their economic policies. They are making great attempts to make it attractive for investments to come to their country. There are hundreds of millions of workers needing jobs and they are prepared to work for much less than what our workers are getting. In other words, the labour market is now internationalised. Professionals here will compete with professionals elsewhere and unskilled workers with unskilled workers, whether in the first world or in the third world. Our professionals and executives are already earning first world wages and if they continue to work hard, they can maintain their wage levels.

However, can the same be said of our unskilled workers? When the labour market becomes internationalised, our unskilled workers' wages will be dragged down by what unskilled workers elsewhere are prepared to accept. Do we have any control? I do not think so. It will be futile to push up low-end wages artificially, ignoring world-wide competition. Sir, there is only one effective way to counter this problem, ie, to raise the skill levels of our workers.

Members of the House, as well as many members of the public, have expressed their concern for the lower income. In the labour movement, we have continuously pressed for training of workers. Progress has not been satisfactory so far. Some people argue that training is the prerogative of management. I agree it is their responsibility. They should train their workers. But when they do so slowly and we do not see much progress, and in order to protect the interest of the workers, the labour movement has to step in quickly. Sir, I take this opportunity to call on all those who empathise with the low income to join us in a national effort to accelerate the pace of training and re-training.

Sir, the Cost Review Committee has made various recommendations in the areas of concern - health care, housing, education and transport. On health care, there will be a Government White Paper and I hope that when the Paper is produced, it will address all issues and propose comprehensive measures which can help check the rise in health care costs. Sir, people's confidence in the affordability of hospitalisation fees was shaken because of sharp revisions in the Government hospitalisation fees in 1989 and 1990. I think we have to make sure that when there are increases, they should adhere to the recommendations of the CRC that these increases be made in a gradual way. There must also be adequate class C wards in all restructured hospitals and assurance given that patients in these wards will receive quality health care.

On public housing, I support the recommendation that the Government should focus its building efforts and subsidies on providing affordable housing to the workers, to the low income and especially to provide more 3-room flats as well as 4-room budget flats to meet their needs. And any increases in housing costs or prices of flats should be evenly spread over a period of time. I think the Government should also provide some subsidies for HDB 5-room flats so that workers who have worked hard can satisfy their aspirations for better housing.

Sir, on public transport, the CRC's recommendation that future increases be made in smaller steps of perhaps 5 cents or even 1 cent will help workers to adjust to fare increases in a confident way. Here, it is important that the Government should monitor changes in the routing patterns or rationalisation made by bus companies to ensure that it will not lead to any increase in the cost of bus and transport services.

Let me now comment on the question of rising expectations. Here we have to accept that high expectations and high aspirations are necessary to motivate Singaporeans to work harder. I think it is a desirable attitude. But at the same time, we have to pay due regard to the constraints that we have. We have to be realistic as to what can be achieved. The Chairman of the CRC, Mr Lim Boon Heng, has put it in an honest way. We have good facilities, we enjoy first class facilities but at a cost which is affordable. I think we should be happy with what we have. But we will try and aspire for something more, provided that we work hard and we improve our skills.

Sir, in conclusion, I support the recommendations of the Cost Review Committee and I urge the Government to have its recommendations implemented as soon as possible. The Government should also monitor inflation closely and consider new measures to be taken to tackle rising costs. Increases in public sector services should always be made in smaller steps so that the public can make adjustments to meet cost increases. More importantly, there should be adequate choices available for those who are less well off so that they can have reasonably good alternatives in terms of transport, housing, health care and education. We have to ensure, Sir, that those who have not done so well will not feel that they have been left behind.

Sir, I support the motion.

Mr Kenneth Chen Koon Lap (Hong Kah GRC): Mr Deputy Speaker, first, let me join in to thank the Minister and his Committee for putting up a most comprehensive Cost Review Committee Report, which I am sure the whole Singapore will be richer by it.

The Report has been extensively debated and many Members have expressed their views and suggestions on the subject. Therefore, I will not comment on what has already been exhaustively debated. There is one minor, but important, point which, in my opinion, has been omitted. I am referring to the four root causes of inflation identified in the Report, ie, the scarce resources, timing of fee increases, reduction in subsidy rate and the "expectations" factor. I would like to add one more cause, ie, the spending habit of the average Singaporean. In a buoyant economy like ours, it is understandable that we become very free with our money. This has caused us to have a mindset that we do not have to be thrifty and that we have plenty of options and choices. This has resulted in us developing a very unhealthy spending habit. To put it simply, we have become very wasteful. In order to limit the ever increasing cost of living, we must change this mindset and develop in ourselves certain constraints in our spending habit. The old virtue of being thrifty should always be maintained. Let me give a few illustrations.

In housing, let us assume that all of us decided not to upgrade to bigger flats or to private housing, unless it is absolutely necessary, and our children, even if they are married, stay with us in the same dwelling. I am sure the property prices would immediately stabilise, not to mention the saving of household expenditure that can be achieved. You only have one TV, one fridge, one PUB bill to pay. Even in cars, the COE. Let us say, next month, there will be only one-quarter of the cars being tendered out of the total available number. Immediately, the car prices will be reduced by $20,000-$30,000.

I wonder nowadays how many housewives would take the trouble to look for the cheapest price of an item before buying. We have now got into the habit of paying for convenience. We would not want to walk a hundred metres even though we know we can purchase the same item cheaper. In the US now, I understand that quite a lot of housewives would look for the magazine and the newspaper every morning to cut out food stamps and coupons to save a few dollars in marketing and shopping. We often assume that more expensive items are better. Therefore, we give in to our children's requests to buy Nike shoes. Whatever happen to the old Bata shoes? Are they really that different in terms of quality? Perhaps the only difference may be that for every pair of Nike shoes we buy we would make Michael Jordan richer.

If one goes around the hawker centre, a bowl of prawn noodles can cost between $1 something and $4 or $5. The fact that some hawkers can charge $4-$5 for a bowl of prawn noodles is because some of us are willing to pay the price. If none of us wants to pay the price, then the price of that bowl of prawn noodles would come down, either by cutting the quantity or they would give you a few prawns less. Nevertheless, what I am trying to say is that, to a great extent, the rate of increase in the cost of living depends very much on ourselves. We must develop the philosophy of appreciating the value of money and guard against unnecessary wastes. It is sad to note that people nowadays lament the uselessness of the value of a dollar. However, if one wishes, a dollar can actually go a long way if only we try to stretch it.

Therefore, whatever we decide on the ways and means to arrest the high increase in the cost of living, whatever mechanism the Government introduces to curb the increase in the cost of living, ultimately, it is not the developer, the supermarket owner, or the restaurant owner, who would dictate what we have to spend. It is our own decision. And if you were to be careful and calculative in spending your money, it will go a long way to contain the cost of living.

Lastly, I would like to appeal to the Opposition Members, especially the three SDP Members, not to be obsessed with criticising the Government or echoing mindlessly the misconception of some of our people on the perception of the high cost of living or, worse still, further distort these misconceptions, but to concentrate on spreading the message on the importance of good finance planning, not to be over extravagant and to spend their money wisely. I am sure the battle to contain the increase in the cost of living can be won. This is of utmost importance to the future of Singapore and should be above party politics.

I support the motion.

Mr Chay Wai Chuen (Brickworks GRC): Mr Deputy Speaker, Sir, after all the days of debate and the straight As from Mr Chia, I hope we do not have the mindset that everything that has been said has been said about this Cost Review Committee.

I wish to speak in support of this motion in the name of the Member for Tampines GRC. I have gone through the Report and the minority report of the Opposition Member of Parliament. I must say that while the Opposition Member of Parliament has recorded his views in a minority report, we should not be detracted from the main substance of the issues that is found in the Cost Review Committee. The Minister for Trade and Industry has also addressed these issues just now.

However, I consider that the recommendation by the CRC for avoiding the bunching up of cost or fee increases by the public or former public sector bodies to be a most significant recommendation of this CRC. Unfortunately, this point was not addressed by the Minister just now in the Government's reply. The timing and schedule of administering cost increases are very important. I can understand the urgency Government departments or public service bodies feel, once policy decisions are made, to achieve some target solutions; such as raising of some necessary charges, they would do so soonest. We have to realise that adjustments and the impact of any such public sector goods pricing would ultimately be felt by the people, and that they are the rich and the poor.

There was a time not so long ago when increases in taxes, statutory charges, or fees in public health, education, transport services, etc, were long awaited and tolerated on Budget Day, when the Minister for Finance would announce from his bag a variety of tax and revenue raising changes on public sector goods and services. This list of such increases would be scrutinised and debated in Parliament. As we progress more and more towards a market-driven economy, many of such increases in former public sector goods and services are no more matters of fiscal consideration, but left to the variety of bodies and corporations concerned to administer, being no more affecting revenue. This scrutiny list on Budget Day for the Finance Ministry is no more. Although people do not like increases in charges, there is something to be said about such charges being announced by the Minister for Finance on Budget Day so that the whole array of increases in public sector goods and services charges can be seen by all at one time for the year.

With off-budget increases in public sector or statutory charges becoming the rule, and many public sector services privatised, the cost of services are being passed on, although with capped subsidies. It is not surprising, therefore, that at some stage public perception of such cost increases can be disturbing, especially when a variety of such cost increases from education, transport, health, for example, hit the people in the same period. Therefore, some coordination in the timing of such price or fee increases is necessary, as identified by the CRC.

The CRC calls for a more gradual increase, phased over a period of time for such goods and services, as education, health and transport expenditures. But who is to coordinate this? Every one of these bodies has a right to fix their own price. It used to be in the Addendum List of the Minister for Finance on Budget Day. Presumably, the Minister for Finance looked at this and presumably a good Minister for Finance did not want or need a long list. But now it is no more. I suggest that an appropriate council be formed within an appropriate Ministry to look into this issue. After all the quantum and the timing of such former public sector goods and services increase, ultimately the effect must be on the people. There is no guarantee that such bunching of price increases would not affect this in the future.

Part of the problem has to do only with the increases in the cost of operations. The other part of the problem really is the phasing in of a deregulated market-driven economy from a formerly regulated environment, especially in the area of public sector goods. It is not as easy as a change of clothes, as the Russians have learnt. As we embark more and more on a market-driven economic environment and cap our subsidies to the former public sector goods and services, some decision must be taken on the timing and the increases in the charges of these former public sector goods and services. Otherwise, we can see a repeat of this bunching phenomenon, as identified by the CRC. No market in these areas of education, health, public transport can be completely free. Such a proposed council - another one of this idea was formerly presented by the Nominated Member of Parliament, Mr Robert Chua, yesterday - is not responsible for the cost increases. The respective agencies or the bodies' corporate are directly responsible. But in implementing price increases over these former public sector goods and services, someone has got to coordinate the time and the phase, so as to avoid this bunching phenomenon we saw in 1989 to 1991. Perhaps, this council can also query the bodies to justify their increases of fees in the same way that the Government departments justify their requests for more subsidies and allocations from the Finance Ministry.

The CRC also addressed the issue of taking care of the less well-off members of society, such as the retirees and the aged, through various schemes which have been effected such as Edusave, Medifund, the Small Families Improvement Schemes. Various measures have been introduced over the past few years to look after this sector of the population. I recall the Prime Minister has announced a few years ago that the Government intends to uplift the bottom 20% of the population through assistance schemes such as these, without obliterating the underlying challenge of market competition and economic reality.

In estates where it is known that large numbers of the aged and the poor reside, it is not unwise for bus services to consider serving the aged and the retirees. Polyclinics and post offices, cheap food centres, markets and other public sector agencies should be retained and not be relocated at the first moment in the name of development and efficiency. These facilities being nearby mean a lot to lowering the cost of living for these people. They go a long way to maintaining the low cost of living for many of these residents whose income levels are low or who are retirees and aged.

I hope the Government will consider the points raised. I support the motion.

Mr Chng Hee Kok (Tampines GRC): Mr Deputy Speaker, Sir, after this inflation of words, I am sure I must be quite a welcome sight, and I shall be very brief.

Sir, let me take this opportunity to thank all my colleagues, more than 30 Members, who spoke on this very important and key subject. I hope that the CPI will no longer be an issue in future, but certainly questions of rising aspirations, rising expectations, as we grow economically, will continue to bother us, and I do not think that this is the end of the subject.

There are highlights and disappointments in this debate. The highlight for me today is the speech by the Minister for Trade and Industry. When I focused on the question of subsidy in my opening speech, I felt that this is really the key issue pertaining to Government services. And I think this is the first time that I have heard a very comprehensive reply from the Frontbench. The principles on subsidies, how and when you would or would not apply subsidies, and to what extent, have little or no bearing to whether we have a surplus or deficit in our budget. I think it is a key and very important speech as far as I am concerned. The Minister has been very modest though in that the subsidy is much higher than what he is prepared to admit, especially on the question of housing. Considering the fact that 60% of our house owners are actually upgrading, ie, they have already benefited from the subsidies on HDB once, I think the Government subsidy is more than adequate and more than generous than he is prepared to admit.

Sir, the other highlight is that Members, despite the various meetings, and deliberations of the Committee over one year, have brought up some valuable suggestions which I think the Frontbench will best direct Ministry officials to look into. Some of the suggestions from my colleagues are worth looking into and implementing. And even those suggestions which the Chairman of the CRC has said that they have considered and rejected, I think they should still be looked into and a full explanation be given to the public by the Frontbench at some future sessions.

For me, the greatest disappointment is the debate of the two SDP Members of Parliament. Unfortunately, the two leaders are not here now. Given the opportunity to state their stand, I think they have failed to do so. They did not take the opportunity to use the basis of the CRC Report to even make suggestions on what is their stand and what are their recommendations. We do not expect them to produce a report, like what has been done by the CRC, with the full support of Ministry officials and a wide cross-section of society. But, at least, I thought they could have actually used that Report as a basis to turn it around and tell the people and this Chamber how they would have tackled the problems differently.

I think they owe it to the members of the CRC, the representors, Ministry officials and the man-in-the-street, which they profess to represent. These people deserve better.

Sir, we lament at the comments of some of the better-educated who were reported in the press, and those are the comments made supposedly without any reading of the Report. I think those people whom we have directed our comments against can now take consolation in today's Straits Times' column by Sumiko Tan. To them, this headline is a vindication of their stand and the headline of Sumiko Tan's column today says, "Let those who want to speak for the people read CRC report first." At the same time, I think this headline is also an indictment of those politicians who are here, who profess to represent the man-in-the-street, but have not taken the trouble to read the Report.

Sir, on this note, let me, on behalf of the House, express our appreciation to Mr Speaker and to you for your very kind patience over the last few days.

Question put, and agreed to.

Resolved,

That this House endorses the conclusions of the Cost Review Committee contained in Paper Misc 5 of 1993 and calls on the Government to accept the Committee's recommendations to contain rises in the cost of living.