PROCEEDINGS ON THE ESTIMATES OF EXPENDITURE FOR FY 2005/2006 (Business Motion)

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PROCEEDINGS ON THE ESTIMATES OF EXPENDITURE FOR FY 2005/2006 (Business Motion): Resolved,

That, notwithstanding the Standing Orders, the proceedings on the Estimates of Expenditure for FY 2005/2006 be taken till 6.45 pm on the days allotted to the Committee of Supply on the Estimates for FY2005/2006. - [Mr Mah Bow Tan].

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ANNUAL BUDGET STATEMENT: Order read for Resumption of Debate on Question [18th February 2005].

"That, Parliament approves the financial policy of the Government for the financial year 1st April, 2005 to 31st March, 2006.". - [Prime Minister and Minister for Finance].

Question again proposed.

Miss Penny Low (Pasir Ris-Punggol): Mr Speaker, Sir, riding on the back of a strong 2004 full-year economic growth rate of 8.4%, the Prime Minister and Minister for Finance has delivered a stock of goodies and hope in his Budget announcements. However, the real test of a Budget is not in its popularity or short term feel-good factor. Neither is it just about dollars and cents. The litmus test of a Budget is whether it moves our economy and society towards its goal and towards Singapore 's vision as a "land of opportunities for all".

This Budget, right down to the way it was delivered, sets the tone for a softer and people-oriented approach in governance. From a reduction in personal income tax to the various top-ups that aim to benefit many segments of the population,

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from economic restructuring to payment systems to help the less fortunate obtain their utilities and services, Budget 2005 does inch us closer to this vision. And I applaud the Prime Minister and Minister for Finance's consistency.

But there is one issue which I feel deserves a more holistic approach. PM Lee, in his swearing-in ceremony, spoke about the need to deal with complex and sensitive issues, such as our ageing population. I am heartened by the Minister's effort to encourage savings for retirement in his Budget, but the ageing population issue deserves a much more holistic approach than a piece like savings alone. Sir, the ageing population issue is not just an elderly's problem. Neither is it about simple retirement savings. It is a complex social, economic and political challenge that may threaten to derail our nation-building efforts at economic growth and social integration, and it will, if not addressed, lead to an ultimate drop in the standard of living. Let me explain.

Sir, the Singapore economy is heavily dependent on its human resource pool. If the present demographic trend of low birth rate and fast ageing population continues, we may experience a lower labour force participation rate, as well as a drop in overall productivity of goods and services. The demand for goods and services, especially geriatric services, will certainly increase. The net effect is that we may move from a producer-based economy, to a consumer-based one. As in financial planning, when expenses exceed income year after year, the result is deficit financing and debts. Singapore can hardly afford that, because we are not natural resource rich. Debts today will have to be paid for by the next generation. Worse still, the quadruple whammy of delayed marriage and procreation, prolonged dependency of youths and prolonged life expectancy, will certainly suffocate the sandwich generation who will face more challenges

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and frustrations in keeping pace with workplace demands and family financial needs.

We will face severe labour shrinkage and dilemma in allocating the fruits of our labour amongst the various segments of our society when that time comes. There will be many daunting questions for political leaders, business and society to answer, while tensions mount between the working population and the non-working population. For example, should we tax more on the income earner? Should we allocate more to the Ministry of Community Development, Youth and Sports and less to the Ministry of Defence? Or should we keep taxes low but allow casinos - in fact, more casinos - so that goodies can be announced in the Budget, year after year? Indeed, workforce crises have forced many governments, eg, Australia, Italy and even Japan, to consider introducing drastic overhaul to their industrial relations and welfare legislation to try to build a bigger labour pool and ease tensions. A World Economic Forum - Watson Wyatt study in 2004 concluded that, if the current economic and demographic trend continues, by 2050, EU and Japan's total global output will actually drop from 18% to 10%, and from 8% to 4%, respectively. It makes me wonder: what about Singapore? How will our economic pie shrink? Has there been a thorough study and projection, so that we may know what lurks at the end of the tunnel?

Sir, the fire is not at our doorstep yet, but it is spreading fast. Years of tackling the procreation issue in a piecemeal fashion led us nowhere. Let us learn from that lesson, and urgently address the multi-faceted ageing population issue holistically, as we did with the procreation issue.

For today, let me focus on just two most critical challenges in the ageing

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population issue, ie,

that of labour shrinkage and retirement funding.

Labour issue: Jobs, Jobs, Jobs

Labour shrinkage issue can be overcome by raising immigration quota, increasing human resource, increasing capital and technology investments to improve productivity, or we can also increase retirement age and work hours, as well as increase the overall workforce participation rate. Obviously, not all of those are desirable. But in terms of improving our infrastructural capital investments, MOM, as well as MTI has run a lot of programmes to that end. But the same cannot be said for improving overall labour participation rate. Over the last 11 years, from 1993 to 2004, our labour participation rate dropped slightly, from 64.5% to 64.2%. Over the same period, the median age rose from 34.7 to 38.8 years old. Female participation rate increased painfully slowly from 50.6% to 54.2% over an 11-year period. In short, there is tremendous scope to address the labour shrinkage issue via the expansion of jobs for the ageing population, females and, I would add, the mildly disabled or disadvantaged but not unable to contribute. This entire group of people is a tremendous labour pool for us to tap on.

What is needed, however, is a fundamental paradigm shift to see the ageing population not as an opportunity cost, but as an opportunity to reform the job market. For too long, the workplace has been designed to be rat race tracks, where the most competitive survive. Only people in the 9-to-5 jobs, those who work from an office building or work-only premises are deemed to have "proper" jobs. Singapore, in fact, ranks at the same level as China in having one of the smallest informal economies in Asia, whereas Thailand has the highest. Even until recently, entrepreneurship was not "cool". In fact, it was "cold". The concept of retirement, too, has to change. In the old days, retirement was a time to look

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forward to, because it means pensions or income without having to work. But in Singapore today, where traditional pensions are rare and CPF withdrawals are not tied to a person's employment status, perhaps we should also change the definition of retirement. It is not a time to retire from work or life, but a time to "refire" one's passion!

With the foreseeable shortage of young talents in the coming years, employers will have to begin addressing this demographic reality and be prepared to introduce flexible employment arrangements, such as flexi-time, part-time, contract work, telecommuting, virtual office, phased retirement, etc, to keep people on the payroll. Most people, especially city folks, do not really want to stop working totally. What they want is some time to pursue their goals and passions, or simply spend more time with their families. This is also why there seems to be an increase in the number of stay-home mums. This is also supported by the results of a survey conducted by the Consumers Association of Singapore (CASE) in 2002 on retirement issues. Almost 30% of the interviewees would like to continue working during retirement, not for monetary reasons, but to remain socially engaged and mentally agile.

Hence, moving forward, there is a need to create a conducive environment to enable the retirees and retirees-to-be, non-working females and also the disadvantaged but not disabled, to return to the workforce. That will give them a chance at becoming financially independent and, at the same time, give Singapore a chance to create more wealth for its people. I hope that the relevant task force or agency would look into a fundamental revamp of the job landscape, as we move into the realities of the 21st century economy.

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Let me next move on to another critical challenge in the ageing population, which is that of resource allocation. If our ageing population is not capable of taking care of ourselves, then, certainly, there must be more budget allocated to support these people in their old age. Fortunately, although the time bomb may be ticking, it can be prevented from exploding. There are generally five options to fund retirement.

First option: If they do not have the money, then perhaps they cannot retire. No choice; have to keep going. But is this a viable option? My assessment is that, unless health permits and jobs are available for the ageing population, this option will remain a tall order.

Second option: They can also rely on family support and children. But with the trend of a smaller family and weaker kinship, the tax and expense burden on the young and sandwich generation will be tremendous and perhaps not immediately available to most people. The report by the Inter-Ministerial Committee (IMC) on Ageing Population revealed that old-age dependency ratio will grow from 1:10 in 2003 to 1:3.4 in 2030. In other words, there will only be 3.4 young persons to support every elderly person aged 65 and above. How many of us are currently fully supporting our parents? How many of us would be looking to our children to take care of us fully when we retire?

Hence, my verdict for this option is that the traditional family helping-hand approach may not be immediately accessible to many people. Even with the Maintenance of Parents Act, very few will bring their children to court to embarrass them. And it may not pay as well.

The third option then is to rely on state support. This will obviously lead to more budget expense allocated for this purpose and create a higher tax burden on

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the working population, and the result could be more social tensions and even disintegration. Therefore, the charity or welfare state helping-hand approach should be viewed as the least desired option and, perhaps, an option of last resort.

The next choice is for the retiree to rely on his own nest-egg. The biggest nest-egg for most Singaporeans is the CPF. But, Sir, our CPF

has been shrinking. First, the total contribution fell from 40% to 33% and the income contribution ceiling also fell from $6,000 to eventually $4,000. While I understand the economic sense of flexi-wage system and keeping business costs down, which is very important, it really does not make any financial sense for the CPF member who faces employment uncertainties and smaller retirement dollars. It is a known fact that the CPF alone is not enough! The globally accepted retirement income benchmark is 66% of last drawn pay. However, a study by Price Waterhouse Coopers revealed that after an adequate property purchase, CPF may provide only around 20% of last drawn income. The MCYS' website also listed that with regular contribution to CPF, a member may only yield enough for a 40% income replacement rate. Whatever the case may be, if the retirees today already fall short of the global benchmark, what more can the retirees of the future expect? Sir, we are staring at a serious drop even if there is a future drop in the standard of living in retirement.

Obviously, no one owes us a living. Every individual is responsible for his or her own financial well being. Financial concepts and issues can be complex but it remains a personal responsibility to become financially literate and make responsible decisions. Financial planning, my pet subject, is a life skill that everyone should start acquiring from young. But on the other hand, the financial service providers and their representatives also

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owe professional responsibility to the general public in providing adequate disclosures and accurate information. The recent calls for transparency and disclosures in the sale of financial products are important steps in building our wealth management industry. The MoneySense programme can certainly do much more in cultivating good financial planning habits, and guide consumers in the purchase of financial products and services.

All said, it is not possible to make everyone a financial expert. CPF money alone is not enough, and people generally lack the discipline to save, invest and accumulate wealth. There is a need to put in place a more robust and sustainable long term retirement programme which will supplement both the CPF and personal savings. I recommend a total framework in what I term as the ReCeSS time - comprising a capital R for Revamped, capital C for CPF, and double capital S for SRS and Section 5 plan.

I will not elaborate too much on all of these. I will say a few words on what I intend to raise in a motion that I will move at a more appropriate time. But, in short, the ReCeSS time would permit a more flexible employer-employee contribution regime and offer a variety of retirement plans to the individual. With the revamp, the CPF will remain a mandatory scheme while the SRS will still remain as a voluntary individual-based account with a whole spectrum of investment choices, and the Section 5 plan will be a voluntary company-based, portable scheme with limited fund types. Let me give a very sneak preview on what I would be looking at.

First, on CPF. The proposed changes to CPF would include the raising of CPF voluntary contribution ceiling to the original 40%, not anything to tax more on the employers, but as a voluntary contribution from the employees. Second,

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spread the withdrawals at age 55 instead of allowing lump sum withdrawals. The CPF Board could also play a more active role in providing good CPF fund investment advice and allow more generous top-ups for loved ones.

On the SRS, like my GPC Chairman, Dr Ahmad Magad, I would like to champion the urgent set-up of a Special Task Force to revamp the SRS. The SRS has great potentials, but it is crippled by its own complex mechanism. The current mode of setting up the account only via banking accounts also builds in the vested interest of the banks, which leads to product pushing and partial advice, as bank officers are likely to push only their own products. The complexity of the scheme, insufficient tax benefits and the relatively high costs, rendered the SRS a non-starter. To say the least, the Budget proposal to increase the contribution cap to $12,750 is unexciting. A major revamp to make SRS a viable vehicle for retirement and wealth management can add a lot more not just to the individual account but also to our wealth management industry.

Finally, the Section 5 plans. The Section 5 plans are a superior way for employees to save for their retirement through a company-sponsored plan, where pre-tax dollars are allowed to accumulate tax-free. Section 5 of the Income Tax Act permits companies to establish retirement savings plans for their employees and enjoy tax deductions on the contributions. This is actually a better option compared to the current SRS because of its collective nature of the investment and regularity of contributions, thereby giving economies of scale and keeping costs down. Besides, the company is in a position to hire superior investment advisors and managers. Because of the lower costs involved and perhaps better investment management,

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the investment returns can be expected to be higher. Investment choice can be given to employees, eg, a list of 5-6 portfolios with varying risk levels for the employees to choose from.

But despite its many advantages, the Section 5 plans are not widely implemented due to the currently complex approval procedures and high establishment and administrative costs. A check with an accounting firm, Price Waterhouse Coopers, which has some experience in undertaking such work, revealed that the establishment costs, in other words, the start-up cost, itself can range between $12,000 and $15,000. These charges, together with the ongoing administrative costs, may be peanuts to large companies, but are significant to SMEs. The current approval procedures and conditions need to be updated and simplified to reduce the associated costs in order to encourage more companies to set up Section 5 plans.

There could also be a case of collaboration between various employers, especially the SMEs, through a multi employer master trust policy to reduce the cost and also reap the economies of scale. Another disadvantage of the Section 5 scheme at the moment is the exit strategy where it advocates only lump sum withdrawal, which attracts taxes and defeats its original intent in retirement funding. This could be modified to allow gradual withdrawals at retirement, so that retiring employees can always reduce the tax payable by spreading the receipt of the benefit payments over a number of years, or even by transferring the money to a lifetime annuity.

If successfully implemented, the ReCeSS package will give us a much more comprehensive framework not only to fund our ageing population, but also deepen our retirement investment tools market. We can even become a global or

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a regional leader in this fast growing segment of the wealth management industry.

In conclusion, I believe that we need to take a holistic approach to meet the needs of our maturing society. We need to tackle the challenges of an impending shrinking labour force via a paradigm shift towards more job innovation and diversity to include all those who can contribute. Imagine if we can convert the stay-at-home mums to work-from-home-mums, convert the young retirees to re-enter the workforce and enable the disadvantaged to become contributors, then the aging population problem will already be halved.

We need to step up on financial literacy and responsibility programmes, and establish a long-term sustainable retirement financial model via the ReCeSS time that I spoke about. Just like the focus on healthcare, long term care and MediShield, the Government has decided to fund these programmes to varying degrees but for the same reason. So why not 'Wealth Care'? The costs of granting all the proposed tax shelters and holidays may lead to a drop in revenue collection, but will certainly encourage more retirement funding and cultivate responsibility in individuals. It will also lower overall budget expenses. Overall, this will help to balance the budget of both the individuals and the state in the long term.

But ultimately, the success of our ageing population policy rests on the actions taken today by our 3Ps - the private sector has to facilitate it, the Government, which is the public sector, has to provide some incentives as well as facilitation through lower legislation. But the magic wand is with the people who must act on these opportunities. This indeed is the many-helping-hands approach, which will help us to surf from peak to peak.

Mr Speaker, Sir, I support the motion.

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Mr Wee Siew Kim (Ang Mo Kio): Mr Speaker, Sir, thank you for allowing me to join in this debate. I support the motion.

The measures in this new Budget touches almost every citizen, from the school-going children to the elderly, from the salaried worker to the entrepreneur. For people to hail it as an election year budget just about sums up the sentiments of the masses. It is a compliment of the new Budget measures.

By and large, the economy and the job markets are doing well, offering job opportunities to one and all. Thanks to continued sound governance and solid infrastructure, the majority of our Singaporean families enjoy a good standard of living and can look forward to a bright and exciting future.

Hence, today, I will focus instead on a comparatively small group of Singaporeans - the disadvantaged. And I will also speak on helping our small local enterprises.

In a recent debate on the President's Address, I had referred to Singaporeans "over by the window" - the disadvantaged ones amongst us who, for one reason or another, have fallen behind and who need our help.

The Prime Minister's call to make Singapore a more caring and inclusive society could not have come at a better time. It has a strong resonance in the hearts of Singaporeans. He signals a paradigm shift. It used to be a singular focus on economic development, productivity and efficiency. So while writing this speech, I was reminded of a song by the British band, Queen, "We are the champions", the one that goes by "We are the champions and no time for losers".

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So in Singapore, there is actually a difference. There is now a difference. There are champions but no one will get left behind. The task of helping the disadvantaged members of our extended Singapore family is now firmly on the national agenda.

The newly announced $500 million ComCare Fund will certainly be a boost to our needy families and the elderly. I support the Government's decision to focus on getting these families to be self-reliant and to minimise the adverse impact on their children's education and health. It is imperative that we break the vicious cycle of poverty which can have such far-reaching consequences. While we await the proposals from MOS, Mrs Yu-Foo Yee Shoon's Committee, I echo the hope expressed by Mr Iswaran that much flexibility must be given to the local CDCs and grassroots so that at the local levels, they can tailor their assistance and apply the resources where they are identified to be required.

Recent reports on abused children pointed to a correlation between low-income and child abuse. Of course, there are other contributing factors, but it is widely acknowledged that financial stress is a common trigger. It was heart-wrenching to read about how 500 children tried to call the Police or intervene in their parents' fight only to get themselves hurt in the process. There is a sharp increase in their numbers over the last few years. Here again, the grassroots, given the right resources, in conjunction with social workers, could assist.

A holistic approach to helping needy families with children is necessary. I urge the Government to allocate more resources to our supporting counselling services. Poverty is, in many ways, a mindset issue. Often, when the adults in the needy families modify their attitudes

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and mindsets, they would be able to overcome their own limitations and become independent and self-reliant. However, these changes require time and would greatly benefit from expert professional counselling. These families need someone, a guardian angel or cheer leader, if you like, to walk with them through a successful transition. We need more of these social workers. My discussions with some of them indicate that much as they have a passion for their work, they too seek adequate compensation and recognition. We must have the ability to attract the right talented and passionate people into this vocation. Attention must be paid to their career development and conditions of service.

Next, Mr Speaker, Sir, I would like to move deep into our HDB heartlands - our neighbourhood shops. Can you imagine what our HDB estates would be without our HDB shops and eateries? They are an inseparable part of life in the heartlands. Yet, in recent years, many of them have folded up and closed.

Over the last eight years, 5,000 of them had terminated prematurely.

In an answer to a recent question, MOS Cedric Foo had commented that the top three causes for the turnover of HDB retailers and eateries are (1) merchants getting old and desiring to exit; (2) relocation; and (3) they have gone bust. Hence, one cannot imagine the hope generated amongst the 15,000 retailers in HDB estates when the Prime Minister announced in his Budget Statement that there would be a package of measures to help the retailers relocate, restructure, upgrade or exit. This itself, I believe, is another good example that the Government listens to feedback. The Feedback Group had asked for the retailers to be allowed to opt out of the HDB leases early, freeing up space for new tenants to come in with new ideas. To quote, "Opting out is beneficial not only to those who want to cut back on their losses, but

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it will also generate new entrepreneurs", according to Mr Abraham from the Feedback Group.

Member Arthur Fong spoke on Monday. I too hope that the package does come with also a measure of flexibility, for this may be a case in which a one-size-fits-all approach may not be the best approach. Shops in old towns and new towns face different challenges. The residents in new towns clamour for different shops and express different needs from those of the mature estates. Merchants in new and mature estates also face different problems.

I also speak of flexibility from another perspective - to find a way to break free from the rigidity of the tender system. From what I have seen in my area, one of the reasons that these heartland businesses have become untenable is that they had tendered with high rentals and now struggling with the high overheads. I have a case of a woman who dumped all her CPF withdrawals into a salon and now bemoans that she cuts and washes just a couple of heads a day. She is no longer in business. Then there is a case of a coffee shop that has seen three owners in three years.

I believe that all these are the result of "the winner's curse" - a term which economists use to describe successful bidders who had over estimated the potential of a site or a project. Much as we can admonish them that they bid with their eyes open, I can put myself in their shoes. If they bid low, they never get started. I hope that the Government could assist those who are trapped in this unfortunate situation, for I believe that it is not only the winner's curse but also the seller's curse. In this case, it is the Government agency, as its purpose is to provide amenities and services to the residents. Nobody gains if the turnover of tenants is high and the shops go empty time and again.

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Minister Lim had suggested that the Government be allowed to get an upside when the going is good if it even contemplates dropping rents when the business takes a downturn - a two-way traffic. This could be the gem of an idea. It returns us to the beginning. HDB shops that were set up in the early days have both economic and social perspectives. Let us move back the pendulum that had over swung to the economic end and re-emphasise more of the social objective. Why not the Government heed the call to be a partner, which could be one interpretation of what Mr Lim had suggested on Monday? Why not experiment with approaches like taking a percentage of revenue, for example? In such instances, when the immediate environment changes on a HDB retailer, whether it is positive or negative, both the retailer and HDB are affected, positively or negatively.

Take the actual case of a coffee shop owner, that in the span of a three-year tenancy, he faces a drop of customers as the factories around it closed down. Or that with the recent adjustment of rentals by JTC by up to one-third downwards, he is suddenly less competitive, as in this particular case in my estate, HDB land abuts on JTC land. Could the retailer have foreseen this? I do not think so. Hence, my call for flexibility. And sitting out the three-year term for these retailers is extremely painful.

This approach is not novel. I believe private landlords practise this as well - renegotiating and readjusting as conditions change - contract or no contract. I hear that even in food courts today, taking a percentage of the takings by the main operator from the individual stallholders as a means of risk sharing is no longer an exception.

In addition, may I suggest that the Government consider reviewing the tender process for HDB retail shops? The tender

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system presumes rationality on the part of the bidders. My little research into the winner's curse phenomenon suggests that this assumption is not exactly tenable. A 1988 research paper on oil field bidding over 15 years in the Gulf of Mexico by Prof. Taylor of Cornell University suggests that over the long run, there is an aggregate loss.

So what are the alternatives? There may be other solutions but I just suggest two, hopefully, to start a discussion. It is for the winner to pay the second highest bid upon success, or the second highest bid be awarded. The latter alternative results in the successful bidder having a higher chance of succeeding with a more realistic rental. It has the effect of removing the irrational high bidder. It may motivate people to bid more realistically. More caution would be at play as one runs the risk that a wild, high bid would be thrown out.

Studies have shown that when the winner's curse is allowed to perpetuate, everyone - in our case the HDB, the residents and other potential shopowners - all stand to lose when the winning bid fails. In the HDB heartlands, these are the people who can least afford to fail time and again. There are high opportunity costs and inconvenience to all parties. Let us attempt to make a change.

With these comments, Sir, I support the motion.

Dr Warren Lee (Sembawang): Mr Speaker, Sir, in the wake of the consolidation of the banking industry, many people with skills, previously in great demand, suddenly found themselves without suitable employment. While we needed to consolidate the local banking industry to make our banks globally competitive, I am heartened to see that the incentives to develop Singapore as a

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place to locate charitable trusts, wealth management services, capital markets and Islamic banking have been put in place to help bring back jobs to this sector along with an increased demand for supporting services.

I am also happy to see that we are trying to improve Singapore's attractiveness as a logistics, transhipment and shipping hub. Singapore faces great competition from ports in the region that can take away our transhipment business. Every little bit helps. Having a superior total business environment and an efficient and non-obstructionist bureaucracy will be crucial to maintaining our port's attractiveness.

I would also like to address the issue of saving costs in an effort to be more efficient and also the principle of transparency and value in Government procurement contracts. Perhaps we need to make a distinction between the lowest price versus the lowest cost measured over the expected life cycle of the building or product that we are buying, and the economic cost of the end user having to arrange for rectifications and replacements should the original products go wrong.

I think Members know what I am talking about. We have many instances. Recently, people talk about suicide bids, especially in the building industry. Our system is open, transparent and based on lowest tender, unless a good reason can be found for not going with the lowest tender. This is good. But, unfortunately, this system may not always give the intended results. What could happen is that the contractor could then go bust or survive by giving a sub-standard job or sub-standard fixtures. So it is actually very costly if the product was obtained cheaply but is defective and needs rectification. In such cases, the true cost is high, as the problem then needs to be corrected. People need to take leave to

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chase contractors, chase the Town Council and so on and so forth. And not all defects might be detected during the warranty period. Some might become apparent just after the warranty period is over. Others even more slowly. Perhaps we may need to disqualify unrealistic tenders. What Member Wee Siew Kim has talked about awarding the second highest tender for purchases might also be applicable.

Yes, implementing this will be difficult, but it would be false economy to carry on with what we are currently doing. As Mr Alex Chan said yesterday, we must not confuse efficiency for effectiveness.

Sir, some grassroots leaders have fed back that they felt that the middle class was squeezed in this Budget, and that the poor have many concessions to keep them afloat, the rich have tax breaks to keep them contributing to Singapore. But for the middle income earners in 5-room and Executive flats, it seems that they are the ones whose tax rates will rise since the CPF contribution ceiling has been lowered, and they do not get the generous rebates nor the larger portion of ERS shares.

Sir, their sense of pain is understandable. However, I support the notion that this Budget is meant to leave no one behind by ensuring that all have the opportunity to progress. We have to ensure that we are a nation that looks to the welfare of its citizens even as we should be a nation that does not seek to be hobbled by an entitlement mentality. I feel, in some ways, that those who are asking for more breaks even when they have enough are actually demonstrating the very entitlement mentality that they say they do not like to see in poorer people. In particular, I would applaud the move to promote civil society by making contributions to a wider group of societies tax exempt. Private giving is a mark of many developed societies. As a means of

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redistributing wealth within society, it allows the individual greater say in where his or her charity dollar should go, unlike in many welfare states where the tax burden is higher but one does not think so hard about where to put the charity dollar. It also presumes that the individual accepts the need and responsibility to contribute back to society. I hope we move more in this direction.

Like many other Members, Sir, I think we need to examine the question of whether we are providing sufficient safety nets in an efficient and effective way and to ensure that in our pursuit of efficiency, we do not unwittingly cause those who are most needy to lose out, such as those low income families who already have more than two or three children. We should not punish the children for the sins of the parents by denying them timely help.

Sir, in the old days, we had schemes to give needy children food and milk rations. Maybe we should consider bringing back some of these schemes. Children who lack proper nutrition during their early years in school will not reach the full physical and education potential. This would be a poor use of our most precious resource. The cost will not be high but the impact would be greatly felt. We need to see how we can help those children who live in homes where the power supply has been cut off. How can we ensure that they are still able to do their homework and get the help they need? We had many children who had to stop school prematurely during the 60s and the 70s due to family poverty. We must ensure that the children of today are able to take full advantage of our improved educational systems.

Sir, I have seen residents coming to me saying that they have turned down jobs paying $600-$700 because they feel that after deducting transport and CPF, they have almost nothing left. Perhaps we

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should encourage them by making it easier for the families of those who are actually in employment to receive financial aid, in order to signal the value that we place on individual responsibility as opposed to just looking at pure earning capacity.

Sir, HDB makes many rules to make it hard for people who sold their flats to quickly rent or buy another one from them. That was in the days when people were making profits. But now we are seeing people selling their flats out of sheer desperation. We may need to bring back rental flats for those who have no way to go and ease the rules for those who are genuinely trying to rebuild their lives, instead of giving them long debarment periods.

I remember a now successful doctor friend of mine telling me how during her childhood, there was a period when her family had no money even to pay the rent. They got through that period, and her father later recovered to head a financial institution. So, I think it is very possible that the people we helped are not down and out but people who would be the success stories of tomorrow.

We must instil financial discipline in all our borrowers, but we must also have a heart. If we have asked commercial banks to take on HDB mortgages and the banks have no choice but to take back the flats of those with non-performing loans, we need to ask ourselves what alternatives we need to provide for those who have lost the roofs over their heads. I think that if we need to bring back the 1- and 2-room flats of old, perhaps we should face up to it and do it. While many of us can remember the days when 12 to 13 people lived in one flat out of sheer necessity, we need to ask ourselves if this is still a viable option for modern Singapore. There is, after all, one important difference

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between the Singapore of old and the Singapore of today. We can no longer go and farm a small piece of land or put up a shed somewhere.

The march of globalisation and structural unemployment will mean that some families who have escaped poverty for one or two generations will once again feel poor in relation to their neighbours. Some children may once again know the disappointment of having had to put their plans for higher education aside to provide for the family. As a nation, we know we are much better off now than we once were. Many have and still will continue to benefit from bursaries and scholarships, but others will still need to choose to work to support the family. We need to allow these young people who have put their own dreams aside for now to rejoin the race at some future date. Present poverty should not be a bar to a brighter future through further education, if one is allowed some detours taken for good reason. I hope that the Government will announce initiatives to give hope to these affected children.

I would like to applaud the Prime Minister's baby-friendly initiatives, including the decision to reduce the maid levy. This, Sir, would reduce the burden of many families now struggling with stark choices. In the end, it is not so much of how much the wife currently earns vis-a-vis the cost of employing a domestic helper but, really, the question of what the future will bring if this lady was helped to remain in the workforce.

In an age of uncertain jobs and globalisation, it is perhaps unwise to have only one wage earner in a family, especially when they are well qualified. And one must also consider that the working mother might bring a wider view of the world to her children. Whatever the reasons, these initiatives seem to be working. I count now, over 14 colleagues, male and female, among my department

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and clinic staff, are expecting babies this year. I hope that many more will be doing so before the year is out, and certainly more than last year.

Next, Sir, I would like to touch on the problems our citizens face when retrenchment or other job losses strike and the family quickly gets into arrears of school fees and utilities bills. I eagerly look forward to the details of the ComCare Fund, as what we seek to do is to try to help those that need help most. Often, people have genuine needs that deserve help, but they may not fall nicely into permissible categories. There should be a distinction between trying to help people and trying to achieve a population policy objective. For example, currently, some of the funds will only benefit nuclear families with two children. But as MPs and grassroots leaders know only too well, the ones in trouble are often precisely the ones in de facto single parent or single wage earner households with more children than they can afford to look after. These children have already been born - they need help - and they cannot go back into the womb. I hope that when the details of the ComCare Fund come out, MPs and grassroots leaders will have some discretion to meet urgent needs on the ground within the context of available resources.

Sir, one of the issues that really concerns me right now is the slowness of Singapore Power to implement a system of cashcard or coin-operated power and utilities supplies, rather than just to take the option of cutting off power and water completely. While I know that much has been done in this area and they have tried very hard and have been very, very understanding to-date, I fear that, if we are simply prepared to leave households without power, gas or water, we will eventually reap the harvest of disease, loss of educational potential and hopelessness that will far outweigh the cost of efforts to solve the problem for

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our poor. Yes, I realise that those whose power supply has been cut off have been caught in a trap of their own making. Some of my residents with large unpaid bills still persist in using their home air-conditioners. Some do need to be taught a lesson. Yet, others simply do not know where to turn to. Since they are poor, they cannot afford energy-saving light bulbs as these are more expensive. They use old power-hungry refrigerators because these are what were donated by well-meaning friends. They may have no money to pay a plumber to replace a leaked tap or water closet and sometimes, what they truly have may be a malfunctioning meter, and they can find no one who will believe them. If they have no power, they find it hard to rent out a room to earn more money. They cannot cook cheaply but must use the meagre money to eat out. If they have a young child, they cannot sterilise the milk bottles effectively; so the child falls sick and incurs more expense. It just does not make sense in modern Singapore.

Talking about the economic recovery to these Singaporeans seems like a cruel joke. Why are we driving fellow Singaporeans to the wall when we can send aid elsewhere? Why are we spending money on IUPs to ensure that neighbourhoods do not deteriorate if we are at the same time prepared to countenance the whole family living in filth and darkness in our newly-built blocks of flats? Are we really trying to force people who can actually pay up to pay up? Or are we merely blinding ourselves to a problem that will not go away in some of these families?

If Singapore Power feels that they are not able to help residents with inexplicably high utilities bills, to check their meters and their premises without payment of a fee, perhaps Singapore Power can empower consumers and grassroots leaders by publicising simple reproducible test methods and statistics

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which residents and grassroots leaders can use to test expected consumption rates for themselves. For example, if I switch everything off, except the refrigerator, the lights and fans, at what rate is the meter expected to turn, how many digits will they change in four hours? And if I turn all the taps off, just how slowly will the meter run? With this kind of information, at least grassroots leaders can do a little bit of checking themselves and maybe vouch for the residents whose bills are unreasonably high to say, "Please, SP, can you send somebody over to check the leak?"

I appreciate Singapore Power for having thought of the vouchers scheme to tide some residents over. Yet, this cannot be the only solution. In fact, this solution has stopped. Yes, some residents have temporary cashflow problems and, yes, some will rather smoke cigarettes than pay their bills. But as many have said, this is not a one-size-fits-all problem, and you cannot have a one-size-fits-all solution. Some of my residents earn only $600 and they need to pay arrears of power supply bills amounting to $200-$300, town council bills amounting to $60-$100 each month, just for repayment. When they have to pay for their own transport, food and children's needs, what is left? If they pay PUB, they cannot pay someone else. They cannot pay school fees or they cannot buy food. So, what do they do? They pay each debtor in turn, on a round robin basis. But the people we meet at various places, like Singapore Power, seem to be, in their description, the personification of somebody out of a Charles Dickens' novel, "pay up, or else", never mind what your MP's letter says, never mind that you seem to have been trying to pay something every month. This fact seems to be the most cruel cut, especially for those who have genuinely been trying to pay something every month out of what little meagre salary they have.

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No, I am not advocating for forgiveness, but I think that we should at least offer a moratorium or suspension of credit and convert some of these people from a post-pay power supply or utilities supply in favour of a pay-as-you-go system. In this way, we would be better able to direct the money currently spent on utilities rebates towards those who are in greatest need - those who are literally living in the dark and the dirt.

Is this method expensive? Perhaps. Does it make commercial sense to spend money on serving customers who already owe you money? Not if you are a purely commercial company, with not a shred of social conscience. But if you are a company with a local board of directors and local roots, then, perhaps, we should look harder to try and find the solution that fulfils a triple bottomline - financial, environmental and social. Please, Power Supply, as a Government-linked company, with a duty not only to its shareholders, as has been said, but its stakeholders - the people of Singapore - do not undermine PM's efforts to create a more caring Singapore with the current method of doing things.

Sir, as a country, we took on the challenge of SARS and came up with solutions very quickly. Perhaps we can also address some of these problems equally quickly. We did not present the people of Meulaboh with a price list before we extended our help. Those people were clearly not in the position to pay up. I think there are some Singaporeans who are in the same boat.

Finally, Sir, many MPs have been approached regarding the stand on the casino proposal. Much has already been said. I just feel that we cannot have our cake and eat it. The Government derives much money from taxes on horse-racing, alcohol and tobacco. Well, many of our citizens will patronise the numerous casinos in neighbouring lands that offer

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free food and drinks, transport and accommodation in return for their custom. In fact, some of these are where it was leaked, if gaming revolution comes back to Singapore.

If we are to have a low direct taxation regime and yet keep up spending on welfare, education, defence and infrastructure, that money has to come from somewhere, either in GST or in the sin taxes. Given the propensity for Singaporeans so inclined to seek out opportunities to gamble, I feel that we need to give the proponents of an integrated resort a fair hearing, at least, before dismissing the idea out of hand. I would, in fact, ask if an upward integrated resort will be able to pull in those who may still feel more comfort in the anonymity and local flavour of existing casinos in neighbouring lands, whether legal or otherwise. In fact, many seem to have the opinion that the Government has already decided on the outcome of the discussions regarding the casino proposals. In fact, I think this consultative exercise allows Singaporeans of all stripes a chance to stand up for their views and allows the Government to engage its citizens in a major policy decision and gauge public opinion.

At the end of the day, however, the Government must make a decision based on what is best for the majority. If opinion is divided, 90:10 or 80:20, I believe few governments will not take heed of the clear majority. But what if public opinion is really divided, 20:60:20 or 30:40:30? Should the vocal minority have precedence over the undecided or non-vocal majority? In such an instance, the Government must balance the risk, estimate the true level of popular dissent or support and make the call. What is important is that the Government has raised the issue for public debate. The public has made its viewpoints heard and the democratic process has been preserved.

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Sir, I support the motion.

Dr Tan Boon Wan (Ang Mo Kio): Sir, I thank you for allowing me to join in the debate. For the past two days, my parliamentary colleagues have dissected and discussed the Budget Statement in-depth. It has been a long session and I will confine my remarks to the efficacy of the Government.

A good and capable civil service is crucial to the well-being of a nation, and Singapore is indeed fortunate in this aspect. However, besides being lean and productive, our civil servants must be able to empathise with the feelings, needs and hopes of our people. In this area, the civil service can do better by improving its communication with the public and by being more people-centric in implementation.

The people, through experience, have built a great deal of confidence in our civil service. Civil servants were seen as being very thorough in the formulation and implementation of Government policies. Unfortunately, many people also say that they are not well informed of these policies. They say that they would like more information on them.

Some even claimed they have learned of policy details under difficult, often unpleasant circumstances. Let me give an example. Two years ago, the HDB opened up the housing loans of its flats to banks and financial institutions. Since then, several people have approached me to appeal to the Board to grant them its housing loans. One such group of people comprises those who have omitted an existing co-owner, included a new co-owner or both to the same flat. When they now apply to buy another flat, the HDB insisted that they get the housing loan from a bank or financial institution as they are deemed to have already taken two subsidised housing loans from the

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HDB. The appellants said that they thought that it was the same loan but varied to take into account the name changes. They have thus thought they had taken only one loan. They all claimed that they were not told of this otherwise. It may well be that the HDB officer did tell the applicant but this did not register. However, the point I want to make here is that this lack of information has resulted in a subsequent problem.

Another instance where the efficacy of a policy could be improved by the availability of information is the Baby Bonus Scheme. Many grassroots leaders told me that their residents do not know much about the scheme, how to apply or where to apply for it. Although mothers-to-be are likely to be given the details when they visit the clinics for their medical checkups, the availability of such information among the public is also important as it can encourage more people to hasten their decisions to have babies. This wide availability of information will most certainly improve the efficacy of our procreation policy.

It is also necessary and important to note that there is still a large number of people who are more conversant in their dialects than in English or the other official languages. This was clearly evident during the SARS crisis when information about the virus was more effectively disseminated using dialects. Many of my residents were very happy and grateful to be informed through dialects. They could understand the messages directly without help from others. They said that they felt a sense of inclusion. Hence, where there is a need to reach out to the older and dialect-speaking public, the Government should not shy away from using dialects. I would urge the Government to make greater efforts to share and disseminate more useful information to the public. If the

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public understands what the Government is doing, what it intends to achieve, we can help get the desired results.

The public has also expressed the hope that the civil servants could be more people-centric in the implementation of its policies. They would like civil servants to understand how the policies affect them from their perspective, not just from the planners' perspective. One area where the public finds civil servants unhelpful is the very rigid adherence to rules, not willing to exercise flexibility. One example is the provision of interim financial assistance. The apparent rule is that if anyone in a family is working and the family thus has an income, interim financial help would not be granted. However, the only working member in a family could just be earning a few hundred dollars a month, certainly not enough to maintain the family. The applicants remarked that the Government does not understand their plight.

The business sector would also like the civil servants to understand their needs when they apply for various financial incentives and support schemes. Surely, the intent of these incentives and schemes must be to help companies to achieve some desired goals, such as to venture overseas, or to overcome some problems such as the need for finance, but these schemes and incentives come with conditions. Often times, if these companies can strictly meet all these conditions, then they would most probably not need these incentives and schemes. Businesses thus see civil servants as unhelpful. It thus appears to the businessmen that the incentives and schemes exist for themselves, rather than to help them. Hence, businesses hope that, in the implementation, civil servants remember the true intent of the incentive schemes and policies and the needs of recipients. If they can do this, then the policies, schemes and incentives will be more effective.

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In conclusion, Sir, let me reiterate my appeal to the Government. First, to improve communication with the people by making available more information and widely to the public and, second, to be more people-centric in implementing its policies, schemes and incentives.

Sir, I support the Budget Statement.

Mr Andy Gan Lai Chiang (Marine Parade): Mr Speaker, Sir, I stand in support of the Budget Statement.

Being the last speaker in this Budget debate and after 49 of the hon. Members of the House have spoken excellently before me and with interesting anecdotes, I thought it would be useful to wrap up by commenting on the budgeting philosophy of the Government.

Sir, let me begin by saying that those who were expecting a windfall tax-free year from the Budget Statement, from a change to a current year basis of tax as an opportunity to build up their wealth, were disappointed. The philosophy that wealth has to be created from hard work and opportunities arising from economic activities that command competitive advantages has remained so. As the Prime Minister has said, "every dollar spent must be earned". To do so, wealth creation and job opportunities are important ingredients for the economy to thrive upon. This year's Budget emphasis then has been correctly entitled "creating opportunity, building community".

This year's Budget is basically tidying up some loose ends, such as consolidating Singapore's position as an international financial centre with an array of measures. These include further tax exemptions and incentives to foreign funds managed from Singapore, such as enjoying a tax rate of 10%, instead of 20%, on fund management fees earned.

And in keeping with the promise to maintain Singapore as one of the most

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competitive tax regimes globally, the top marginal tax rates for individuals have been reduced in two phases to 21% for the Year of Assessment (YA) 2006 and further to 20% for YA 2007. All other income brackets have their marginal tax rates reduced as well.

It is not surprising that the Prime Minister and Finance Minister took a cautious view in cutting personal taxes. It will be difficult to expect much more changes to such taxes since Singapore has already the lowest taxes among the countries in the Asia-Pacific region.

We have accumulated budget surpluses for many years with the over 8% growth on the average over the 1965-1996 years. Now, growth has moderated to about 4-5% (as was pointed out by the hon. Member Mr Iswaran) and is likely to be volatile from year to year. This would mean that unemployment will be on the increase from the low of 2% over the last decade to what seems to be 4% over the next foreseeable future. In the meanwhile, Government's operating revenue seems to be declining since the middle of 1990s to about 23% of GDP to 15% in 2004. This drop in income may have been partly due to the Government's shift in position in revenue collection, forming structural changes, such as a reliance from direct taxes to one that is indirect. Government expenditure at the same time has been about the same level at about 15% to 20% of GDP.

If this trend continues, then the pressure of meeting a budget surplus in future years may be unrealistic. If long-term unemployment rises and economic growth moderates, a possible structural shift to a trend of budget deficits may be seen in future.

With such a scenario it is heartening to see that the Government is making a tactical shift by using this year's Budget

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to create opportunities for the services sector and financial sector as well as logistics and tourism to spread the dependence on manufacturing and exports in order to create jobs and revenue. Such a move will also help to mitigate the structural unemployment scene for the short-term by providing the opportunity for job retraining from manufacturing to other sectors.

The caring side of the Government is evident in the importance that this year's Budget places on redistributing Government surpluses. And this is done in a well-intended and targeted approach towards helping the less well-off and senior citizens through top-ups in the Lifelong Learning Fund, ComCare Fund, Edusave, Medisave and Medifund, rather than across-the-board cash handouts as in the past, which may not have served its well-intended purposes. It is also important to note that such redistribution of surpluses may not be possible in the future if expenditures tend to move higher while income is moderating as Singapore moves towards a highly competitive economic climate.

Not surprising then that the budget also aims to cultivate a more charitable society through private sector giving to supplement the Government's efforts in reaching out to the less fortunate and senior citizens.

Tax concessions have been implemented to promote the spirit of philanthropy, for example, incentives, such as double tax deductions for qualifying donations as well as charities that promote the advancement of sports.

While Singapore is recovering from poor growth over the last three years and having learnt to overcome it, opportunities arise for a structural change in the budgeting philosophy which takes into

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account shorter economic cycles and conservative accounting, such as relying only on a portion of Net Investment Income to balance the budget. But with an ageing population and increasing expenditure, the pressure will be on the Government to utilise additional sources of income other than its yearly operating revenue to finance the ever increasing public assistance programmes.

So to avoid the temptation of moving on to a dependence on non-traditional sources of revenue, such as revenue from sale of land and dividends, the challenge will then be for the Government to balance its budget within its means. This will mean that the economy must continue to grow to create more opportunities for more people to continue to earn a good income and for there to be lower percentages of less well-offs to be reliant on Government handouts.

Although Government policies are targeted to promote creativity and flexibility among the people so that the country can meet ever changing economic conditions, this may at times be constrained by the stiff and inflexible attitude of the bureaucracy. Examples of such behaviours were well demonstrated by the hon. Member Ang Mong Seng yesterday and, today, by Dr Tan Boon Wan, when he cited examples of rules that are contrary to small business practices.

VWOs can play a big part in helping the Government look after the less well-off as they supplement the various Government public assistance programmes. Less Government agencies will need to be created for this task and hence less cost for the Government. Here, I join the hon. Member Dr Chong Weng Chiew's call for the Government to reduce certain regulatory requirements on the VWOs so that their running cost will not be unduly increased as a result of tight compliance.

Then more self-help groups can be

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encouraged to mushroom, and charitable giving will take place naturally.

Finally, I believe that this Budget is well crafted, and it is now up to us all SMEs and the public at large to take advantage of the various pro-business initiatives and social support measures to strive for a better tomorrow. The way for us to move then is summed up by the Prime Minister in the Budget Statement, ie, for there to be "Singaporeans' support for a social compact that looks after the vulnerable in society that will make us a caring and inclusive community".

Sir, I support the motion.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 1.30 pm.

Sitting accordingly suspended

at 1.16 pm until 1.30 pm.

Sitting resumed at 1.30 pm

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[Mr Speaker in the Chair]