ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Mr Lew Syn Pau (Tanglin): Mr Speaker, Sir, we have had many good years and every year seems to be better budget-wise. Our budget surplus seems to be getting bigger and bigger, from $1-2 billion per year, we are now budgeting a surplus of $7.1 billion for FY96. This is no small sum, as it is 27% of the total budgeted revenue or 38% of the budgeted expenses of $18.9 billion. With such surpluses, the Government is left with a happy problem of thinking of new ways of distributing some of it back to the people to assist select groups of citizens, such as the Medifund for the very low income people, or to encourage and reward certain behaviour, such as the Edusave Fund to encourage our children to do well in school. I support these programmes because I believe and subscribe to the social objectives we aim to achieve.

However, the bulk of the budget surpluses, I understand, are invested to prepare ourselves for a rainy day. The question then arises as to how these surpluses are invested, and what kind of a return are we getting from these investments.

In the Budget book on page 53, our investment income is given as $3.87 billion. But we do not know if this is a good return considering the total amount invested, the types of investments and the risks we are taking. Are we generating better returns than the market benchmark for similar investments? If not, this leads me to the issue of whether we should collect less revenue, have less budget surplus and let the people invest their own funds to yield a higher return. I hope the Minister will look into this issue.

The Minister has also spent some time in his Budget Statement expounding on the need to price factors of production correctly to avoid distortions to the economy. Although I agree with it in concept, in practice, the prices can be very sensitive to how assets, including land, are revalued, especially for utilities that use a significant amount of land in their production. In most businesses in the commercial sector, most assets, including land, are carried at the lower of cost or market value. They are not revalued every year.

In the case of Singapore Power, I gather that because all assets have been revalued by the Government before transferring them to Singapore Power, the accounting return on equity drops, compared to other power companies, and we conclude that our tariffs are therefore too low. My question to the Minister is: firstly, are we comparing using the same base year for valuation of assets? Secondly, if we increase the tariffs first in order to get a higher return on equity before selling Singapore Power shares at a higher price, how do domestic shareholders benefit from privatisation, ie, if we exclude the portion sold at a discount?

Share value goes up only when earnings increase, which means when tariffs are raised and if we assume that the efficiency of the company remains constant. Perhaps some foreign shareholders who do not consume local power may benefit, but that is not the purpose of privatisation. The point I am making is that in the case of monopolies like Singapore Power, the Government may not need to privatise since it is not in need of funds as we have budget surpluses. Even without privatisation, Singapore Power could and should restructure and rationalise its mode of operations and management so that all factors of production are priced correctly. This argument applies to all statutory boards that are virtual monopolies.

Another issue of concern to me is the Government's role in helping our people to prepare for retirement. The average family income at today's cost of living does not leave much to be saved for retirement, apart from the 40% contribution to the CPF account by both the employer and the employee. With regular wage increases and concomitant higher CPF savings, the family usually upgrades to a bigger flat as the children grow up and require more space. When they retire, the children are usually grown up and married and have flats of their own. The couple's entire life savings are locked away in their 4- or 5-room flat with a small amount in the CPF Minimum Sum Scheme, adequate for only basic necessities. The Government does not budget for any retirement fund or welfare scheme for the old, and rightly so. The question is: how will the couple then enjoy their retirement, unless they can realise more cash by selling their flat in the open market and down-sizing to a small one? Alternatively, they could sell and move overseas to a place where the cost of living is much lower. This, I am sure, is not what we want to see. I am sure we do not want Singapore to be a place where only working people can afford to live in. Therefore, down-sizing to a smaller flat should be encouraged. My concern is that in the future, down-sizing to a smaller flat bought in the open market may be a problem, as the Government has stopped building small 2- or 3-room flats. Therefore, given the above situation, I would like to urge the Government to reconsider its decision to stop building small flats as there will be a greater demand for them as our society ages.

Next, I move on to our tax system which, I fully agree, should be simple to facilitate compliance and also to lower administrative and business costs. I would like to commend the Government for a very generous budget, especially for the individuals who will save from either tax rebates and tax cuts, or rebates from HDB rentals and/or service and conservancy charges, and rebates on PUB bills. We will be hard put to think of some segment of the people who will not benefit in some way, unless they do not live in HDB flats or they do not pay taxes.

Sir, I would like to use the opportunity to make a few suggestions. One of our core values is that the family is the basic building block of society. Given this core value, should we not tax the family as a unit, irrespective of whether both husband and wife are working, or only one spouse is working? This means that reliefs and rebates for the family should be allowed to be taken by both or either spouse. For example, in the case of the foreign maid levy, there is no reason why it should be allowed to be taken only by the woman and not by the man. In many households today, women stop working, not to do the housework and dispense with the maids, but to provide nurture for the children.

Mr Speaker: Order. Mr Lew, can you give way to the Leader of the House to move the exemption motion before 4.00 o'clock?