VOLUNTARY SALARIES/ALLOWANCES REDUCTION (Motion)

5.32 pm

Mr Speaker: This motion is subject to signification of support by at least one other Member. Does it have the support of any Member?

Mr Low Thia Khiang: I support.

Mr Jeyaretnam: Mr Speaker, Sir, I beg to move,

That this House resolves that, as representatives of the people, in order to show our solidarity with them in their hardships during the current financial uncertainty, we should voluntarily take a reduction of 25% in the salaries and allowances drawn by us as Ministers, Parliamentary Secretaries and Members.

Mr Speaker, Sir, Members present in this House and who were Members in 1985 may recall that I moved a similar motion in the 1985 recession. The Leader of the House recalled that immediately when I mentioned it to him when I met him at the Australian Day function.

[Mr Deputy Speaker in the Chair]

5.34 pm

Mr Jeyaretnam: I could, Mr Deputy Speaker, Sir, read what I said then because a lot of what I said then is relevant to this motion as it was when I spoke in 1985. But I do not propose to read what I said then. I do not wish to burden Members who heard it once to hear it a second time. I said then, however, that I was quite sure that the then Leader of the House would have withdrawn the Whip to leave Members to vote according to their own conscience. But, of course, that was not the case. So I do not know whether it is too vain a hope now that the Whip has been withdrawn and that Members would vote according to their own conscience.

Mr Deputy Speaker, Sir, I have said more than once that we in this House, I suppose excluding those who are here by nomination, by appointment, who have come into this House after going to the voters to be chosen, to be in this House as their representatives, are the people's voice. We are here as representatives and when we went to them to seek their vote, we were identifying ourselves - let me make that quite clear - with their problems, with their hopes and with their aspirations. So when seeking their vote we were claiming to be one of them, to represent them in this House and to speak on their behalf on matters that affected them or their families. So that is the central point - that we identified ourselves to be with them in their problems and in their hardships when we went to seek their votes. And that must not be lost sight of once we are in the House. As I said, this is the people's House, not anyone else's. It is not the Government's House; it is the people's House. And we are here as people representing the people outside this House.

May I make another observation, and that is, it was suggested in 1985 that my motion was a silly one because it was no cure for the ills the country was then facing. May I assure Members if that suggestion is going to be made again, that this is not being proposed as a cure for our economic ills. It is proposed simply and solely out of my conviction that we should try and identify ourselves with the people in everything. There are, of course, two differences between this motion and the motion that I moved in 1985. One is that whereas that motion sought to make the resolution a binding one on Ministers and Members of the House, this motion makes it a voluntary gesture, a decision to be made by each Member for himself or herself. It is not a resolution to bind all Members but leaving it entirely to the conscience or the political will of the Member concerned. And the other difference, of course, is that, and I shall be coming back to this, there is a huge difference now between the salaries that we were drawing in 1985, particularly Ministers, and the salaries we are drawing today in 1998.

That motion in 1985 was, not that I expected it to be accepted, not accepted, was dismissed ,and I expect this motion will probably suffer the same result. And I expect that the same jibes will be made, as the jibes have been made even in this present session of Parliament, that it is all publicity and it is all politics of envy. Whatever may be the result, whatever may be the jibes, will not deter me from doing what I think is right, because in the final analysis, Mr Deputy Speaker, Sir, it is doing the right thing by the people. That is the final analysis - doing the right thing. And the question that has to be answered is whether it is the right thing to do at this particular moment in our country's history for the leaders voluntarily to take a reduction in their salaries or allowances.

I do not have to dwell at length on the reasons for this motion. I think Members are only too keenly aware and we have heard it in this House, and we have read about it, of the economic downturn that this country is facing and of the difficulties that our people will have in trying to make a living in this place. Of course, I am not talking about the people who draw huge salaries and have wealthy incomes. I am talking about our citizens who draw $1,500 and less. And may I remind the Members, as I did when I moved a motion on Ministers' salaries that 62% or so of our workers are earning less than $1,500 per month. They will find it very hard. It is not just them. There is the loss of jobs. We heard and read of people being laid off, retrenched. I thought I might be able to give Members the numbers that have been laid off since July last year. I wrote to the Ministry of Labour and I had been told I could not have it now. It would be released at the end of the month. I do not know why I could not have had the figures to release to the Members at this particular moment. It cannot be an official secret. But be that as it may, there are many who have lost their jobs and there will be very, very many more who might lose their jobs, maybe not in the same degree or level as the people in Indonesia and in other countries who may lose their jobs. But there will be people who will suffer, who may be thrown out of employment. What are we going to say to them?

Then there is the problem of re-employment for these people. I have come across several people, especially those who are over 40 or 45 years, who have told me that it is virtually impossible to get another job and yet, we hear from time to time, "Oh, re-employment is quite easy." But we never have the figures as to how many of them have been re-employed and within what period of time. Only last week or so, we saw in the papers that 62% of our workers or the less well-to-do in our society have savings which will tide them over only for three months at the most. This was an independent survey that was carried out and is not something that I am just plucking out of my head. But it may very well be that 10% or even 20% may not have enough savings to tide them over even for one month. But 62% have savings which can only tide them over for three months.

Then there is the drop in the businesses. And we heard this afternoon from the Minister that there was a drop. I do not know what percentage he mentioned. So life is going to be much harder for most of our citizens. For at least 60% or 65% of our citizens, life is going to be much harder. We can only hope that it will not be a very long time, it will be fairly short, and that we could perhaps get back on the road. But we have got to deal with the situation as we now see it, and not just tell our people, "Well, it is all right. Don't worry. We will be okay in 6 months' time." They want to know what is being done for them at the moment and how they are going to be helped.

Apart from this downturn in business leading to loss of jobs, parallel to it is the rise in the cost of living. Since the last elections, price of almost everything has gone up. I mentioned this when I asked for a Parliamentary committee on prices. Transport, education, health, everything is going up. And only very recently, there was the announcement of the polyclinic charges going up. I had a question for the Minister for Health to ask him by how much had the cost increased. But my question was not reached. So I am not able to deal with the increase in the cost and how much is being collected by way of the increase in the charges.

Again, I meet people from time to time who tell me of the heavy cost of health care and particularly for the older citizens who need more health care than the young ones. And they say, "We try and avoid going to the doctors as long as possible. We try and avoid seeking medical treatment because of the cost involved." I do not want to labour this. I am saying that it must be quite clear to all of us that life is going to be very hard for 60% of our citizens in Singapore.

The Deputy Prime Minister announced on 19th January this year, that there would be a cut back in the expenditure because the Government expected a fall in the revenue. It feels that it would not be able to collect enough. He announced that the Government proposed to cut back on the expenditure except on defence and education. My Party responded to that announcement and expressed its disappointment that whilst the Government was prepared or getting ready to cut back on expenditure for the people, there was no suggestion or proposal that there would be a cut back on the Ministers' salaries or the allowances paid to the Members. There was no response from the Deputy Prime Minister on that. But we had a response from the Minister without Portfolio and his reply was that any saving by reduction in the salaries was not going to help. That it is negligible. We do not know what the saving will be. We have got to tot it up and see what the saving will be and see whether it is so negligible that it is not worth implementing it. I am sure it is not that negligible.

As I said earlier, I shall be reverting to this topic, and that is, the salaries drawn by our Ministers are way beyond anything drawn by ministers outside so that any saving by reducing their salaries by 25% is not going to be that negligible. Of course, it may not run into billions of dollars. But I am sure it should run into one or two million dollars at least. But the point is not whether it is going to be of any help. That is to overlook and to ignore the other point and, that is, the identification of us and the Ministers equally with the people. That is the point that has to be met squarely. We have seen the PAP's slogan "More Good Years" and we said in our press release that it would appear to be that it was always more good years for the Ministers and people in high places whatever the economic situation in the country is.

We have got to somehow get across the message to the people that we do care about them in their situation, that we do know of their difficulties and their problems and to show our appreciation and our knowledge, we would ourselves identify with them in their hardships. But as I said, I cannot see the 25% reduction in salaries for Ministers is going to impose any hardship on them. So it is, as I said, simply a question of doing the right thing, and I am sure that Members here would like to be seen as doing the right thing and identifying themselves with the people.

May I assure the Members of the People's Action Party, who are here from Cheng San, that the voters of Cheng San will be watching very closely as to what their elected Members are going to do. Here is an opportunity. Here is a wonderful opportunity for them to show themselves as identifying themselves with the people. We will have to wait and see. I see Mr Zainul Abidin is trying to get on to his feet. But hold on for a while. So here is a wonderful opportunity. Are we going to seize this opportunity and show our oneness? That is it - show our oneness with the people, not that we are a people who are set apart from them, not telling them, as it were, "we are all right, Jack, it's your problem." We have got to show them that we consider their problem our problem and we are prepared to identify ourselves with them.

What I am proposing is not just a cut-back and the money remaining with the Consolidated Fund. I am proposing that the saving resulting from this voluntary cut-back in the salaries be paid into an unemployment benefit fund for workers who are thrown out of employment or into a needy welfare fund, so that some use is made of the savings, so that the sacrifice, if it is a sacrifice, of the Ministers is put to good use to alleviate the hardship of people who need help. That is my proposal. Let it be paid into an unemployment benefit fund or a needy fund. Will the Government accept that?

As I said in the 1985 motion, whatever the outcome, I propose to do what I say. If the Government does not set up an unemployment benefit fund, then I have to see into what fund the reduction in my allowance by 25% may be put to. But I hope the Government will be able to find this channel for me and say, "Look, we are setting up an unemployment benefit fund, Mr Jeyaretnam. Here you are, you can pay your 25% reduction into this fund." If, as I say, the Government proposes not to do anything of that sort, then I have to try and see how my saving can be used in any way and show my identification with the voters in Cheng San and elsewhere in Singapore.

Question proposed.

The Parliamentary Secretary to the Minister for Education (Encik Mohamad Maidin B P M): Sir, I will be brief.

The Member has asked that we in this House do the right thing and that this motion rests also on the need for us to identify ourselves with the people of Singapore, with the voters, because we are all representatives of the people.

Sir, I did not realise that the Member would really stand up here this evening to talk about possible miseries and difficulties of the people in Singapore only to score some political points. Earlier, I thought there were some sincere and genuine reasons on the part of the NCMP to table this motion. May I say to him that over the last 40 years, the first group of PAP leaders and those in the Government had done what he has proposed. They had exactly done what he is proposing today, ie, doing the right thing and identifying ourselves with the people, but not by way of moving a motion designed to score a political point. What the PAP has done, which I thought I must say, so that it could be of some use to Mr Jeyaretnam is that

Mr Jeyaretnam: Raise charges, taxes!

Encik Mohamad Maidin B P M: over the last 40 years, the PAP has done its best to provide good government in Singapore. By governing the country wisely, it has done over the last four decades its best to promote investment in Singapore, to create jobs and to provide job opportunities for our people. We have done our best. Our earlier generation of Ministers and MPs has left this House but I think we should not forget that under the PAP Government and leadership, we have provided education and training for our people so that they can fit themselves well in the new and modern economy. And over the last 40 years, we have done our best. The PAP Government has done its best to improve the people's income and the standard of living. We have done our best to build almost one million flats in Singapore as part of a long-term effort to promote home ownership at affordable prices. We have done our best to encourage savings to be used in good times, to be used on rainy days and to be used in future when they retire.

I think all these are efforts that will probably continue. I hope we will continue to have good government in the future And it also shows that the PAP Government actually cares for the people. I believe we have done the right things over the last 40 years which is one of the few reasons why today we have not been badly affected by this economic turmoil or crisis. I think that is the best way to identify ourselves with the people, and not by moving a motion to score political points.

Mdm Claire Chiang See Ngoh (Nominated Member): Mr Deputy Speaker, Sir, thank you for allowing me to share my views.

It is by no means clear that a national crisis has now occurred which requires collective sacrifice by every Singaporean. Individual companies may have their own problems. They have to deal with them. And every company and even households should spend prudently as the economic situation is unclear. But if a collective sacrifice is required by all Singaporeans, eg, a cut in the CPF rate, a freeze on all bonuses and salaries, or even a cut in salaries by all companies, the civil service and GLCs, then Parliament should take the lead by example and be the first to undertake the sacrifice. Unless Government intends to call for a nation-wide collective austerity measure, it is not necessary, in my view, not even desirable, for Parliament or Ministers to unilaterally take pay cuts.

I appreciate Mr Jeyaretnam's compassion for the hopes and dreams of the people of Singapore. But extending compassion must be an equitable exercise for all including the Members in this House. Is it fair that we ask the Government to shoulder this responsibility alone? What about those businessmen and professionals who earn even more than Ministers?

Furthermore, such symbolic populist actions are undesirable because they appear emotional, without addressing the fact that the measures which will really benefit our economy have nothing to do with a cut in Ministers' salaries. The right thing to do is to find solutions to cure the ills of the economy. There is no running away from this.

Mr Jeyaretnam's motion perhaps implies that while other Singaporeans suffer a drop in standards of living, our Ministers are unfairly insulated. This is not the case from what I understand, because our Ministers' salaries are benchmarked to a set of private sector criteria. As private sector salaries drop, so do Ministers' salaries. Our leaders, like other Singaporeans, do see their incomes rise or fall depending on the state of the economy. I hope the Minister will clarify this point and in response to the motion state when and how much the last adjustment was made on Ministers' salaries.

When I was sampling for opinions on this matter, I gathered different views. There are those who feel that if the Government wants to be seen as leading by moral standards - and moral leadership is important - then Ministers, Permanent Secretaries and MPs should take a pay cut to show their solidarity with the people. Hence, reaping political capital from this gesture. There are those, including myself, who reject this view because we do not agree to Government making symbolic gestures in policy decisions. Among these, some even think that Ministers' wages should not be a political issue in the first place. Even as a political issue, it should be a separate evaluation exercise from this concern on the financial uncertainty of the region. However, if Ministers and all Members in this House would like voluntarily to donate 25% of their salaries to charity to express their solidarity with Singaporeans, it is their private commitment. It is a personal gesture.

Most of us would agree that the job of this Government is to govern, to find the most effective measures to address the current banking and economic difficulties. A symbolic measure such as cutting Ministers' salaries has limited impact on the scale of events to justify its adoption.

We should look at other measures, more significant ones, to moderate the difficulties ahead. In the next few weeks, during the Budget debate, I think a lot more attention will be paid on this concern. Yes, there are difficulties ahead and I think Mr Jeyaretnam has rightfully pointed out that there will be possible unemployment and the rest of it. All the more, we need to stay rational and identify concrete and constructive measures to ride out this difficulty.

Sir, I raise some concerns for this House to debate on and I would like to hear more persuasive reasons from Members to help clarify and reinforce my own. But at this juncture, I hesitate to support this motion.

Mr Chiam See Tong: Sir, the point I was trying to raise has already been mentioned by the Nominated Member. Ministers' salaries are in fact pegged to the top earners of the six professions in the private sector and if the private sector is doing well, I believe Ministers' salaries will go up and if the private sector is not doing well when there is an economic downturn, accordingly the salaries of Ministers will also go down.

As we know, there is now a downturn in our economy. In fact, we have heard just now from Deputy Prime Minister, BG Lee, that the banks' business had dipped 30%. We have also read in the papers that about 200 lawyers have left the profession. Probably those who have left were doing conveyancing and conveyancing is rather slow these days. We also see that there are in fact retrenchments in the electronics sector. We have heard that the retail trade is down and that the stock market is also not doing that well.

Definitely, there is evidence that businesses are going down. If that is so, I would imagine that the salaries of the top earners in the private sector would also drop accordingly. If indeed the salaries of top people in the private sector have dropped, then the Ministers' salaries should accordingly be scaled down. The question is this: Have Ministers' salaries been scaled down? If they have been, how much? If not, why? Ministers cannot give an excuse and say that their salaries need not be scaled down because it makes no difference to the economy or that they have done a good job and Singapore has weathered the currency turmoil relatively well compared to other countries in the region or that our currency has not been devalued as much as the others vis-a-vis the US dollar or that Ministers' salaries comprise only a small percentage of the GDP. But the point is that the standard has been set by the Ministers themselves. If this standard is to be adhered to, then if the salaries of the top earners of the private sector have gone down, the Ministers' salaries should drop accordingly. I would like the Minister to let us know whether or not Ministers' salaries have been scaled down. If so, when and by how much?

BG Lee Hsien Loong: Mr Deputy Speaker, Sir, what we are facing is not an ordinary cyclical downturn in the economy. This is the most serious crisis which the region has faced since at least the 1960s.

One country after another has succumbed to the contagion, starting with Thailand, then Malaysia, Indonesia, Korea and Hong Kong. The country now facing the most serious situation, whose well-being will affect the region and Singapore the most profoundly, is Indonesia. We have fully discussed this earlier.

Singapore has been lucky to be spared the worst of this crisis. But it has not just been luck. We are different, and people have recognised that we are different. And if Members read articles in the foreign media who are not by any means uncritical admirers of Singapore, they will see that they have recognised this. I just cite you four examples.. One in the Financial Times earlier this month, an article entitled: "Singapore's strengths protect it from turmoil" by Sheila McNutty. She wrote:

`In spite of its sound economic fundamental, Singapore's exposure to the region is dragging it into the turmoil. But the very strengths that put the city-state ahead of its neighbours before the crisis began its eagerness to adjust to changes in the world around it have convinced economists it will emerge even further in front when it ends. . The Singapore Government is, meanwhile, moving to widen the competitiveness gap its neighbours had been closing before the crisis began. . Singapore . has pressed on with plans to open up. Economists say foreign investors cannot help but be impressed.' This is the Financial Times reprinted in the Straits Times.

The New York Times, also not an admirer of ours, Thomas Friedman writing in an Op-Ed column earlier this month about the crisis in an article entitled "Good governance only protection" said:

`Of those Asian nations who were fully plugged into the market, those with the most non-corrupt, transparent and accountable financial systems Taiwan, Hong Kong, Singapore have been hurt the least.' That is in the New York Times. Analysts write us up. They have to tell as it is because otherwise nobody will read them.

Independent Strategy is one of them and last year in July it reported on emerging markets and the title was: "Singapore Sun-drenched in a grey sea". They gave the reasons why this was so:

`Singapore does stand out in the continuing Asian currency crisis. It runs a surplus when other countries run deficits. Singapore's balance sheet with the rest of the world is also super strong. Nor does Singapore have an asset bubble or any sign of a major overhang of unproductive capital as in most other Asian countries.'

That was in July. Come October, Jardine Fleming Research published two reports. One said: "Singapore Distinct from the ASEAN-4" and the other one said, "Singapore's monetary policy is different". It said:

Singapore was the only Southeast Asian country which had a correct currency policy, one sensitive to global financial dynamics with practically no barriers to trade and capital flows and because it uses currency to check imported inflation, Singapore's policy is aligned to the global inflation profile. Of the region's central banks, only the MAS has its currency policy in tune with the underlying fair' value.'

So whatever Mr Jeyaretnam says about inflation and the state of the economy, the analysts know the true state. What has made this difference? Clean, competent Government. Why do you think we have a financial system which has been tightly supervised, a property market where the incipient bubble was pricked in time and a prudent budget surplus with no foreign borrowing? By chance? Because of the quality of the NCMP in the House? No. Because there have been capable committed men in the Government who will pursue sound policies, anticipate problems and find solutions to them in good time.

We have been able to deliver this quality of Government precisely because we have paid Ministers and civil servants properly. We did this, opposed by opposition MPs like Mr Jeyaretnam at every step. But the policy has worked and it has made Singapore different.

Now that we face a major regional crisis, what has the opposition done? Has it called on Singaporeans to close ranks and work together? No. Has it produced any useful ideas to tackle the problems? Neither. No opposition MP has filed any questions in Parliament on this momentous development, except to query the constitutionality of the Government's actions on totally spurious grounds, and then failed to follow up in the courts when challenged to do so. Instead the task of raising the issue in Parliament and debating it, explaining it and reflecting people's views and concerns has been left to PAP MPs and Nominated MPs.

Mr J.B. Jeyaretnam's only contribution to this debate has been to cut political salaries by 25% and he had the honour and the courtesy to remind us that in fact it was an old record from 1985 which he was rehashing again. It is a meaningless populist gimmick. If everybody has to tighten belts, then naturally Ministers and MPs should also do so.

Mr Jeyaretnam: I say Singaporeans will have to tighten their belts. I am saying that.

BG Lee Hsien Loong: For example, in the 1985 recession, there was a CPF cut and it applied to everybody. If Mr Jeyaretnam had suggested that everybody in Singapore should have wages cut by 25%, then we could have a serious debate. We would disagree with him that this was necessary, but it would not be an absurd proposition. But how does cutting political salaries help us to tackle the regional crisis? Indeed, Mr Jeyaretnam, in moving the motion, concedes that it would not, but presses on in characteristic fashion nevertheless.

We must focus on the real problems. The crisis has not hit us directly. But we will still suffer the side effects of the region's problems. Trade and tourism are down. Uncertainties in Indonesia and other countries will affect the whole region. Loss of confidence affects our stock market, and also our exchange rate, although less than other countries. There may also be direct spillovers to us if there are more serious problems. For example, the latest Political and Economic Risk Consultancy (PERC) Report on Singapore speaks of the possibility of a "population exodus that could result in thousands of economic refugees with little money or marketable skills seeking food and shelter in Singapore".

It is an alarmist prospect. It may not happen, but you cannot tell what may happen. The crisis is far from over. Nobody predicted the last eight months of turbulence. Not the IMF, not the World Bank, not the pundits, neither the countries and the Government, not even the hedge funds. If Indonesia stabilises after the elections in March, the rupiah recovers its value, companies can service their debt, workers have their jobs and can earn a living and buy food and essentials, then the situation in the region will gradually return to normal. But if Indonesia's economic problems continue, and there is high unemployment, inflation, food shortages, and people cannot afford to buy oil or flour or milk powder for their babies, or sugar or medicines, then we too will feel the effects. Nobody can predict how events are going to unfold over the next year.

What are our priorities now? I would put three: First, to rally Singaporeans to be prepared for rough weather, to keep Singapore on an even keel despite the storm. Second, to help to restore stability and growth in the region, within the limits of our capabilities, eg, through our active diplomacy, discussing the matter, lobbying, suggesting proposals to other countries, through visits, as the Prime Minister has visited Indonesia three times, and Malaysia recently. Third, to prepare ourselves for the longer term and strengthen our competitiveness, so that when the region starts growing again, we will be well poised to prosper for the region. So despite the uncertainty, despite the mood of gloom and despondency, Mr Peter Seah published his report on financial services, and the Government has responded, accepting nearly all its recommendations, not to deal with this year's growth rate for the financial sector or the GDP, but to position us for the medium term when the region recovers for us to have all the pre-conditions in place, engine already running, step on the accelerator and you are off.

We have got to work together as one country on these urgent tasks. It is not going to be an easy year. Growth is going to be slower. Companies will make less profits. Workers will receive smaller bonuses. Some will be retrenched. The Government budget will be tighter, leaving a smaller surplus available for asset enhancement.

Luckily we are competitive, compared to other countries. Unlike in 1985, our costs are not out of line. If you measure exchange rates against the US dollar, the baht, the ringgit, the rupiah and the won have all gone down much more than the Singapore dollar. This had made these countries cheaper than us, in a way, more competitive than us. But the effect is smaller than these numbers suggest, because, firstly, these countries have not been able to increase their exports sharply. They lack trade financing (which our multilateral trade guarantee proposal is meant to deal with). And also the lower exchange rates have been offset by very high interest rates and a credit crunch. So they are unable to export and therefore our exports are maintaining market share.

Secondly, we export a different mix of products than the countries do. We are higher end, more technology intensive. They are still mostly in the textiles and garments. So the competition is less. There is some overlap in electronics, in disk drives, which has been affecting us. But it is a partial overlap.

Thirdly, over time high inflation will erode the cost advantage of their sharp depreciation of their currencies. Already this is happening in Indonesia. Between December and January, the inflation was 7% in one month in consumer prices. In fact, the risk is hyperinflation. So although the cost may have gone down temporarily, it is not an advantage which can be sustained because workers need to be fed, need to live. If they cannot eat, they may riot. And if they are paid more, then that would spiral through, and you will be back at your starting point but with an extra zero on your currencies and on your salaries.

So overall, although the exchange rate of the Singapore dollar has gone down much less than our neighbour's, I am still confident that our exporters can compete. They have problems if they are working in the region. They have problems if they are in difficult businesses, like disk drives. But it is not because we are out of line and uncompetitive.

Nevertheless, we should still watch our costs this year, to make sure that we do not stray out of line. One cost factor which we can control is Government rates and charges. As Dr Tony Tan said, the Government will be careful not to raise fees this year, except where it is essential. So, for example, as the crisis developed last year, JTC and HDB took steps to moderate or defer rental increases for its lessees and tenants. But the rise in PUB water tariffs, announced last year, to be phased in over three years, with another adjustment this year, will continue. Firstly, because water is a vital strategic resource. And secondly, because the impact of the increase in water rates on lower income households will be fully offset by the Government rebates for utility bills. So we have to proceed, and we have seen to it that we are proceeding in a way which does not hurt the lower income groups.

Another key cost factor is wages. In the 1985 recession, when wage costs became too high, we had to cut employers' CPF contributions by 15% points, from 25% down to 10%. But we learnt from that experience the importance of wage flexibility. So we have used the good years since 1985 to build up the flexi-wage system, precisely to meet a situation like this one.

A significant part of wages is now in the variable component, both public sector wages and also private sector wages. And as a matter of policy, we have kept the variable component separate from the fixed wages, so that employees will be psychologically prepared for it to go down as well as to go up, depending on economic conditions. We have not consolidated it. We have not built it in. We have kept it separate, and we have marked it separate, and every time we have increased the amount we have reminded people this is variable - it can go up, it can go down. It is a cushion which we can trim back, if necessary, without causing too much hardship to workers.

In the public sector, the variable component makes up at least 20% of wages. Civil servants and ministers receive an Annual Variable Component of two months' salaries per year. They also receive a monthly Non-Pensionable Variable Payment (NPVP), which includes all the NWC adjustments since 1993.

So if it becomes necessary for us to reduce wage costs, the public sector will do so by trimming the Annual Variable Component, which will not affect the monthly pay packet. And if we still need to trim by more, we can adjust the NPVP.

We will know if it is necessary to trim the Annual Variable Component or the NPVP for Ministers and civil servants by the time the NWC makes its recommendations for the year. The Government will as usual decide on its NWC payment for civil servants and Ministers after that. It will then decide whether to trim the Annual Variable Component or NPVP.

As Mdm Claire Chiang and also Mr Chiam pointed out, Ministers' and civil servants' salaries are not fixed. They rise and fall automatically with private sector incomes, because they are pegged by a formula to salaries in the private sector, and they are revised every year.

So Staff Grade 1 is set at 60% of the average of 24 people (the top four individuals from six professions: bankers, accountants, engineers, lawyers, local manufacturing companies and multi-national companies), ie, the average principal earned income of the top four in each of these six professions. And Staff Grade 1 is 60% of that, and we have said eventually it is to reach two-thirds of that over four years from1997.

Superscale G is the average principal earned income of the 15th person who is aged 32 years old, belonging to the same six professions, because that is the point where a young civil servant should be reaching at that age and is making a critical comparison at a key point in his career. So compared with his cohort, 32 years old, let us get the people in these professions ranked at 15th. If you can make it to "G" by 32, you should be equal to them and deserve to be paid as well as them.

There is a two-year lag in this formula, because we need two years to work the data. The 1998 adjustment this year is based on private sector incomes which were paid in 1996, and assessed by IRAS in 1997, and would be adjusted by the civil service for Ministers in 1998. But despite this two-year lag, the formula maintains the right relativities between Ministers' salaries and private sector earnings, whether the economy is up or down. So, for example, last year (1997), the benchmark declined, so the Ministers' salaries were cut by 7%. It happens automatically.

This year the benchmark would be based on 1996 private sector earnings. On that basis, the average 24, which means the Staff 1 benchmark, has increased by 12.8%, and the 15P32, the Superscale G benchmark, has increased by 4.0%. If we subtract from these two figures the 4.5% NWC wage adjustment in July 1997, then this year's Staff 1 salary, which also carries with it Ministers' salaries, should go up by 8.1%, just to maintain 60% of average 24. And the Superscale G salary should come down by 0.4%.

These adjustments would normally take place on 1st July. But this is an exceptional year. We still expect the economy to show positive growth, not negative growth or a recession. However, there are major uncertainties ahead. And if events take an unexpected turn, all bets are off.

Therefore, the Government has decided to suspend this year's adjustment for the Staff 1 benchmark. In other words, the Staff 1 salary will be frozen this year, instead of increasing by 8.1% on 1st July. The 0.4% reduction in the Superscale G salary will proceed. This applies to both civil servants and political office holders. Other grades will be correspondingly adjusted. In effect salaries of all grades will be frozen or very slightly reduced this year. Promotions and normal increments will continue, and if there is an NWC adjustment this year, it will apply to all officers, including Ministers and MPs. Next year, when we have the IRAS figures for 1997 earnings, we will review the situation.

Some employers have already decided to freeze their salaries for this year. Others who are still doing well will want to reward their workers. The NWC will deliberate on the guidelines which employers and workers will follow. But by suspending this year's salary adjustment for Ministers and civil servants, we will set the tone for the private sector as a whole.

The tone should be restraint and caution. We must take the crisis seriously but in our stride. We did not wish for this crisis, but it will draw us together. Let us work together as one people to tackle this challenge. Then we will sail through the storm safely, and emerge ahead once more. [Applause.]

Mr Jeyaretnam: Mr Deputy Speaker, Sir, I do not propose to detain our Members much too long from their dinners. Yes, it is long enough. They do not like to hear any proposals for taking a reduction in their salaries. Of course, they do not wish to hear that. They do not wish to hear anything about being setting an example. That is the last thing they want to hear. So, of course, the response, "Shut up! Mr Jeyaretnam, and keep quiet. We don't want to hear all these. It is painful to us that you ask us to set an example."

May I say, Mr Deputy Speaker, Sir, that this debate has run true to form. There is nothing that I have heard this afternoon in answer which I did not expect. I knew what was coming. It has run true to form. The Deputy Prime Minister says it is a rehash of my 1985 motion. What is his? If it is not a rehash of what we heard in 1985 from the then Minister of State - he has of course gone up the ladder, he is now a Cabinet Minister, and I see he is not replying - what is it, but a rehash. But before I reply to the Deputy Prime Minister, may I make a few responses to the others who have spoken. Again, as I said, this is nothing new. It is running true to form. The first speaker tries to dismiss it as mere politics, trying to make political capital. I think perhaps he would do well, if I may just say to him to go and speak to his own constituents and find out for himself, at first hand, whether it is political capital or whether it is something quite different. It is a call for him to identify himself with the people. I suggest he goes and speaks to his own constituents because I have heard this I cannot call them "my constituents" from the voters in Cheng San, when I go round, they know what I am talking about. It is not political capital. You will find out for yourself, if you do go round and mix with them.

As I said, running through to form, he says, "Oh, the PAP Government has done all this, done all this, done all this." This is what we have heard ad nauseam. And the people of Singapore also know what the PAP Government has done all these years. Why do you not go and ask them what the PAP Government has done? The cost of living has gone up. Life has become more and more a struggle. Life is too regulated and controlled. Why do you not go and ask them instead of trying to score political capital in this House in front of the Members here?

So I do not think that I need to waste any time with the first speaker's reply. It is nothing new. But may I ask him this? He says the PAP Government has provided all the savings that they can use during their hard times. What savings are there for the people during the hard times that lie ahead? Let us have some concrete proposals instead of words, words, words.

Then we have the Nominated Member of Parliament, Mdm Claire Chiang. I was surprised that she took up cudgels on behalf of the Government. That was to be expected, Nominated MPs.

Mr Shriniwas Rai: Sir, I take exception to that remark by Mr Jeyaretnam.

Mr Jeyaretnam: Well, I am not withdrawing. I said this was to be expected.

Mr Shriniwas Rai: You are not being fair to the Nominated Members of Parliament. We are here not to represent either the PAP or the Opposition.

Mr Jeyaretnam: I have the floor.

Mr Shriniwas Rai: Mr Deputy Speaker, Sir,

Mr Jeyaretnam: I have the floor.

Mr Shriniwas Rai: Well, if you want to have the floor, continue to do so.

Mr Jeyaretnam: Again, the Nominated Member of Parliament repeats what we were told in 1985 and what we heard afterwards from the Deputy Prime Minister that if it is necessary for a national reduction in salaries, then perhaps Ministers should set the lead. There you have it. "No, we are not going to be the first. You do it first. If you do it first, then we will follow." That is the sort of leadership we have got. It is not, "We will set you an example so that others may follow." That is the kind of leadership one expects.

The Nominated Member of Parliament asks: will the others also follow suit? Well, who knows, they will follow suit if they see that the Ministers have decided to set an example, people in the industries and people in the banks may follow suit and decide that they will make their contribution as well because you have the Ministers setting an example and the Members of Parliament setting an example. So do not, please, wait for someone else to set you an example. You set the example yourself first.

The Nominated MP again says my motion is a political or emotional issue. This is not just a gimmick. The British Cabinet, the Labour Government and, in particular, the Prime Minister, after he was elected - and that country is not facing any crisis or economic downturn - said he would not take any increase and, in fact, would take a cut in his salaries. Then it was followed by other Ministers because the people could see the great disparity between the ordinary salaries and the Ministers' salaries.

Then we have the example over the Causeway, which I mentioned in 1985. Immediately upon the commencement of the crisis, the Prime Minister announced he would take a reduction and he was followed by other Ministers and even judges of the High Court. So let us get it right. Everyone will follow if we lead instead of waiting for somebody else to start. And is it to be suggested that the salaries have not gone down or beenreduced in the private sector? Mr Chiam was talking about earnings of lawyers but I am not just concerned with lawyers. Is it not a fact that people who are earning are earning less now than what they were? So have they not taken a reduction? And I see that the Deputy Prime Minister has attempted to answer the question. But Mr Chiam's question was, if the salaries in the private sector have gone down, are the Ministers prepared to take a lower salary?

BG Lee Hsien Loong: Mr Deputy Speaker, Sir, perhaps Mr Jeyaretnam will allow me to clarify the point which he has just raised. As I have explained, the Ministers' salaries are pegged to the private sector. When the private sector's salaries go down, the Ministers' salaries will also go down as soon as we ascertain what the private sector's state of affairs is.

Mr Jeyaretnam: Have you ascertained now, because they have gone down?

BG Lee Hsien Loong: As I have just explained, the latest data we have are 1996 salaries reported to the IRAS in 1997, and declared in 1998. So in 1997, I imagine that wages would have gone down some, because the crisis started in mid-year. In 1998, it would go down some more. So correspondingly in 1999, Government's salaries will go down, and in the year 2000 also. It follows. So there is no magic to this. If you have a formula and the peg, you have to follow up and you have to follow down. So I do not see what the difficulty is.

Mr Jeyaretnam: I am afraid the Deputy Prime Minister does not see the import of my motion and, that is, action now in the midst of a crisis, not action in the year 2001 when we will see whether we need to take a reduction in our salaries.

BG Lee Hsien Loong: Mr Deputy Speaker, Sir, I have explained what we are doing, which is to suspend the adjustment which is due this year, and we will watch the situation and decide what happens next year. The test of the policy is not whether you have done a histrionic gesture and the Prime Minister has taken the lead and he has volunteered; and then his Deputy Prime Ministers volunteer; his Cabinet Ministers volunteer, and the MPs do, and even NCMPs hasten not to be last. The test is who gets into a bigger hole and who has avoided the hole and got out faster.

In 1985, he moved a motion to cut salaries. We turned it down. But we did not stay in the hole. We got out of the hole, which is why we have had 12 years of growth since then until this regional problem came. That is the test of good government, identification with the people and the competence of the team in charge.

The import of Mr Jeyaretnam's motion is that we will make voluntary cuts. He says it is not a political gimmick. What is it? If he wants to make a voluntary cut in his NCMP's allowance, he can do it. Why does he have to tell the whole world? Why does he have to wait for the whole world? Why does he care whether anybody else makes voluntary contributions or otherwise? There is a Malay saying that when a turtle lays eggs, it lays 100 and nobody hears about it. When a chicken lays eggs, the whole village is awakened by the cackling of the hen.

Mr Jeyaretnam: Yes, that is very funny, Mr Deputy Speaker. Mr Deputy Speaker, it just shows how the whole of the import of this motion is lost. It is just evasive, because that is all that the Members of the ruling party are capable of, evade and nothing else, not capable of any reasoned answers. The Deputy Prime Minister says the answer is to try and get out of it. What is your message? What is your message to those who have lost their jobs and who find that they cannot make their ends meet? They have no savings at all. What is your message to them? The Deputy Prime Minister says we have got to rally Singaporeans. But what is your message to these people?

BG Lee Hsien Loong: The message is very simple. We have been broadcasting it for years except that Mr Jeyaretnam has not heard it. It is that life is uncertain, the international economy is uncertain. No job has security. Ministers do not have job security. If you are in a job which pays well today, you cannot be sure that it will be there for the rest of your working career. You must be prepared for an upset, you must be prepared for something which is unexpected, and the way to prepare for it is to train, to gain skills, to have something valuable which you can contribute to. So when you lose one job, you can get into another one, and to put aside and save for a rainy day, instead of saying, "I will spend this. The Government will provide." And that is what we have done.

We have retrenchments. Can we avoid it? Yes, by not having disk drive companies, by not going regional, by going back to farming in your backyard and planting potatoes and tapioca. That is possible. But if you want to plug into the world economy, then you must be prepared to see the ups and the downs, and you must provide for these downs when they come. The same MP who complains about the nanny government is also the one who says, how about coming to do something straightaway.

Mr Jeyaretnam: Thank you very much, Mr Deputy Prime Minister. We have had it again from the horse's mouth. The Government's answer to these people would appear to be, "It's just tough luck, old man. Tough luck, old chap. Hard times, you just have to put up with it. We hope we will be able to get you round to good times. But at the moment, you just stay in your little hole and suffer. Whereas we are all right. We are not going to do anything to alleviate your suffering."

BG Lee Hsien Loong: Mr Deputy Speaker, Sir, perhaps Mr Jeyaretnam might suggest to the House any other country in the region where we might be better off than in Singapore.

Mr Jeyaretnam: Again, that is not the answer. I cannot see that taking us very far. It is just that you are not grasping the whole point of the message. And that is to give a message from this House to the people who are facing economic problems and difficulties. They have heard ad nauseam how well the PAP has managed Singapore. They have heard ad nauseam about the GDP growth, but that is not what they want to hear now. What they want to hear now is this: "What are you going to do for us in our present situation? How are you going to help us?" And I have suggested that even if it is a little, even if it is a gesture, that you set up an unemployment workers' benefit fund. What is wrong with that? Then at least the people will see that there is some sincerity, some determination to help them. May I know what steps the Government is going to take to help those who are thrown out of jobs and perhaps do not have any savings, other than to preach and to sermonize and say, "It's just hard luck. It is an economic downturn. You wait for the economy to pick up and then you'll be all right." May I know what message you have?

I have a message, ie, do something, set up a little fund from the reductions that you voluntarily give up and help these people.

Mr Deputy Speaker: I must remind hon. Members that actions or words they use should not border on imputations or accusations.

Question put, and negatived.

Motion accordingly negatived.