Hansard, 1957-07-29

PERMISSION TO MEMBERS TO BE ABSENT The following Members have, under the provisions of subsection (3) (i) of section 47 of the Singapore Colony Order in Council, 1955, obtained from the Speaker, permission to be or to remain absent from meetings of the Assembly: Mr G. A. P. Sutherland - from 10th August to 15th October, 1957; Mr Seah Peng Chuan - 29th July (afternoon) and 30th July, 1957; Mr Lee Kuan Yew - 29th July, 1957.

LOCAL GOVERNMENT BILL Order for Recommittal read.

Committee Clause 81- Amendment proposed - [26th July,1957] - In page 107, line 18, to leave out "nor, except in special circumstances, the period". - [Mr John Ede]. Question again proposed, "That the words proposed to be left out, be left out."

Committee Mr Chairman, if I may borrow a cricket metaphor, I feel rather like an overnight not-out batsman who has to get his eye in before attacking the bowling of the Hon. the Financial Secretary, and I regret that it will be necessary to recapitulate, to some extent, the arguments on this clause 81 which I expounded on Friday afternoon. The Government looked, pardonably, a little bewildered at the gloomy prognostications of the Financial Secretary as a reaction to my quite simple proposition. Let me make it as brief and as clear as possible. We want clause 81 to read as follows: "Every sum borrowed under section 78 of this Ordinance shall be redeemed within such period not exceeding sixty years as the City Council, with the sanction of the Governor in Council, may determine: Provided always that such period shall not exceed the estimated useful life of the purpose for which the money has been raised." In other words, we agree that 60 years is the outside limit for the redemption of any sum borrowed by the City Council. We further agree that if the estimated life of the purpose for which the money is borrowed is less than 60 years - and I quoted, as an example, 40 years for an extension to our power-station - then 40 years should be the outside limit for the period of redemption. The Hon. the Financial Secretary spent most of his speech establishing these points on which we already were agreed and on which there was no argument. Where we disagree is on the further proviso, namely, that the period of redemption should not exceed the period of the loan raised under section 79. I gave the House one example. I stated that if the City Council wished to raise a loan on, say, $10 million to extend the power-station, the period of the loan being 10 years, the period of the estimated useful life of the extension being 40 years, then the period of redemption should be related to the period of the estimated useful life, namely, 40 years, and not to the period of the loan, namely, 10 years. Because in this case repayment from your electricity revenue account will be at the rate of $250,000 per year spread over 40 years, instead of $1 million per year spread over 10 years, a saving of $750,000 per year. And a saving of $750,000 per year in the electricity account could mean a reduction in the unit price of electricity. I went on to argue that it was the declared policy of the Government to encourage the setting up of more industries in the colony and that cheaper power would be a very important contributory factor. Two months ago I pointed out to the Minister for Commerce and Industry, in the income tax debate, that the right hand of his Ministry did not know what the left hand of the Treasury was doing. Since pointing out that many businessmen prospecting in Singapore had been discouraged and indeed disgusted at being sent Income Tax Assessment Forms under, I think, section 12 (4) of the Income Tax Ordinance after spending five days in the colony, instead of being welcomed to this island and treated as visitors under, I think it is, section 13 (3) of the Ordinance, many fresh cases of this ridiculous persecution have come to our knowledge. I shall be filing a further question on this matter in the very near future. This is one factor by which the encouragement of fresh industry is being strangled before birth.

Committee On a point of order, Sir. May I ask, Mr Chairman, whether reference to the activities of the Income Tax Department is relevant to this question of funding a loan?

Committee I understood the hon. Member to be mentioning that topic only in passing, to illustrate the point being made. It is not of course open for debate.

Committee Thank you, Sir. The point, in our view, is entirely relevant. I was pointing out that this is one factor by which the encouragement of fresh industry is being strangled before birth. The other question is the question of cheaper power which will be thwarted if the Government does not accept this amendment. You and I, Sir, and every citizen and every existing industry in Singapore are paying more for electricity today than we need, because of this policy of relating the period of redemption of electricity loans to the period of the loans, instead of to the period of the estimated useful life of the power station for which the loans have been raised. But it should be remembered that the only occasions on which the City Council have applied for loans were applied in order to raise loans for electricity, or for water, and for very few purposes other than these. The Financial Secretary's only answer to our plea for greater financial flexibility is: firstly, a recital of words like "prudence", "caution", "foresight", "possibilities", "probabilities", "imponderabalia" of all kinds, and so on; and, secondly, the proposition that we should not give the City Council carte blanche in this matter; and, thirdly, that it might not be easy to raise loans in future. Our answer to this argument is as follows: Firstly, we are not proposing to give the City Council carte blanche. Clauses 78, 79, and 81 are hedged around with the necessity for obtaining the sanction of the Governor in Council, so the necessary safeguards are there. Secondly, if in 10 or 20 or 30 years' time Singapore cannot raise loans, then it means that Singapore is sunk anyway; and I refuse to share the Financial Secretary's pessimism on that. Thirdly, the best way to ensure that we are financially flourishing in 10 years' time is to increase our industrial potential today, and one of the factors to attract new industries is a more flexible financial policy in matters such as the one before us today. One last point: The amendment to clause 81 has been advocated by the City Council representatives, and their submission to the Select Committee can be found in col. 156 of the Report as quoted by the Attorney-General: "With regard to clause 83, the City Council in its Report No. 4 stated: 'Under the provisions of the present Municipal Ordinance any sums borrowed must be redeemed within the period sanctioned for the raising of the money, i.e., the redemption period is related to the borrowing period rather than to the estimated useful life of the purpose for which the money is utilised.'" Sir, I will not quote the whole passage, but only the last sentence which states: "'It is hoped that the Governor in Council will consider sympathetically any representations which may be made in the future for a redemption period longer than the borrowing period.'" Once again, let me emphasise that this submission was made by Labour Front Councillors and Liberal-Socialist Councillors in equal numbers. I hope that once again the Labour Front Members opposite are not going to repudiate the recommendations of their own Party.

Committee Mr Chairman, Sir, the Hon. the Financial Secretary dealt very fully with this matter in his speech on Friday afternoon, and, in rising to oppose the amendment, I wish only to supplement his remarks on one point, which point, it seems to me, is the only one on which there is major disagreement between the hon. mover of the amendment and the Government. I refer of course to the fact that if this amendment is carried, the City Council will be in a position to fund loans over a period equivalent to the life of the physical assets to which they are related, rather than to the period from issuance to redemption as has hitherto been the case. Sir, I should like to say that, in spite of what the Member for Serangoon and the Member for Telok Ayer have said in the last few days, this nominated Member's vote cannot be counted upon by the Government. But in this instance I am wholly on their side. In the past, it has been the practice in the City Council - and a good practice, too - to fund any loan in such a way that the sinking fund at the time of repayment was in a position to take care of all outstandings, either by putting money in there or by buying up script as it came on the market. To my way of thinking, any departure from this practice would be unwise in spite of the very cogent arguments which the Member for Tanglin has put forward this morning in respect of the future of industry, and the fact that electricity would be made cheaper to the consuming public. Mr David Marshall, the former Member for Cairnhill, once said in this House that every Member of it, with the exception of myself, is a Socialist, but I would appeal, Sir, to this wholly Socialist Assembly for a conservative approach to this matter. The most powerful point made by the Hon. the Financial Secretary was that, if loans had not been fully funded at redemption date, the City Council would be obliged to convert or to raise money by new loans, and he said it might be very difficult for them to do so. He did not say where it would be raised, but whether it was in local markets or in foreign markets, I agree absolutely that it might be difficult to do so. The future for long-term borrowing in this country is not very bright. Now to this the Member for Tanglin has said that if a time should arrive when Singapore would be unable to raise loans, Singapore might as well pack up, or words to that effect. The fact is that such a situation has already arisen. To my knowledge, the Municipality and the City Council have been continuously going to the public for loans from 1951 to 1956 and, in respect of the last two loans, it is well known that the public were very poor investors. In fact, had it not been for certain central institutions, quasi-governmental, coming to the rescue, some of them would have flopped. 10.15 a.m. In the past, a large measure of support for these loans has been given by banks, but with the advent in the near future of a central banking institution or institutions, such support can no longer be counted on. Besides, I think, as I have said once before in this House, support for government loans by banks is inflationary. The root of the trouble, Sir, lies in creeping, somewhat accelerated recently, inflation and the ever-diminishing purchasing power of money. "The Economist" of 20th July in a leading article which I recommend to all Socialists says: "Inflation is like sin. Everybody is against it, but it goes on." The present low levels of gilt-edged securities in the London market clearly indicate the pessimistic attitude of the public to the future of Government stocks. This is partly due, of course, to political fears and the fear of devaluation of the pound by the British Government. Sir, I am not making a political speech even in the widest sense of the word "political", but the Labour Party in England in its plans for nationalisation is talking of the intention to permit Labour's new national pension fund to be invested in equities. Inflation, in fact, has worn the gilt off gilt-edged. Members of this House doubtless know that the current price of 3½ per cent War Loan is £67. This of course is in irredeemable stock. But there is another 3½ per cent Government loan - admittedly the redemption date is 1999, so that on the Stock Exchange it is known as the "Eternity Loan" - but even so its price is only £71. Yes, the public are not so keen on Government and Municipal bonds and the long-term borrowings at fixed rates of interest by Governments and Municipalities is coming to be regarded by the public - and I quote from a well-known financial journal - as "nothing short of an organised swindle". Unless a brake can be put on inflation and faith in Government bonds restored, more and more people in every country will tend to invest in equities in order to preserve their capital; in other words, they hope that the assets of the relative companies will appreciate in value as the currency depreciates. When all is said and done, any government or municipal bond is merely an undertaking to repay at a fixed future time the amount originally borrowed; in other words, a sum certain in money whose purchasing power in the meantime is quite certain to be vastly diminished. Unfortunately the outlook for halting inflation is pretty bleak. I therefore oppose this amendment and urge that, in terms of the existing section, the City Council continue to fund loans within the period for which money has been raised. One has to remember too that the moneys are not lying idle as they are doubtless being employed by the City Council in the ways permitted in subsequent sections of the Ordinance.

Committee Mr Chairman, Sir, I rise to meet a few of the points mentioned by the Hon. Mr Sutherland. Mr Sutherland and the Hon. the Financial Secretary are always looking at the problem from the point of view of bankers. It is a useful and a correct way of looking at these financial problems. But I think at the present day their equilibrium has been upset by this creeping inflation, as has been described by Mr Sutherland, and like all good men, when they lose their equilibrium, they tend to fall backwards and sit tight instead of moving with the times. Sir, a new problem is with us today and we have to face it in a new light. With all this closing down of factories in Singapore - and some more are closing down - we have to take steps to encourage industry and I think one of the best ways to encourage people to carry on in industry is the cheapening of power for the use of industrial units for industries which want to start again. Our trouble is that we have been paying for posterity. We are now making short-term loans confined to the term of the loan rather than to the usefulness of the project, and by doing so we bring up the cost of the project - the $60 million which has been thrown into the new power-station - and this now has to be repaid within a short time by us instead of repayment being spread over the term of the project's usefulness and shared by posterity. Inflation should make us build more now, because whatever we build now is going to be paid for in less valuable money. And whatever we pay now is much less than what we shall have to pay in 10 or 20 years' time. That, to my mind, is a very cogent point for saying that we must carry on and build what we can and spread out our payments, rather than within the term limited by this section. Then the question of the difficulty of raising loans arises. Every country after it has got on its own feet will have many people who are frightened of the course that the nation will take. To a certain extent, that will affect the case of obtaining loans. Now that we are going to achieve self-government and independence, we shall have to look for means of financing our own projects. There is, for instance, all the money - millions and millions - coming in every month into the provident funds. Why should not that be diverted and used for financing the industrial schemes of the City Council? Then again a lot of money is being sent abroad that should be invested locally - I refer to life assurance premiums. I think part of those premiums could be invested locally, and they should be made to help the public services of this country.

Committee Mr Chairman, the Member for Tanglin has put up good arguments why latitude should be given to the City Council to fund its loans over the period of the life of the asset, but he has taken the provision in this clause in a very pessimistic light. The words which he seeks to omit are: "nor, except in special circumstances, the period". When the special circumstances are there, I am sure the Governor in Council would give sanction for the extension of the redemption period. The provision of these few words in the clause is made because the credit of the city depends on the credit of the Government and of the country, and therefore it is up to the Financial Secretary, or whoever may be in charge of the treasury of the country, to correlate all the financial undertakings of the City Council, the Government and so on, which are required for the public sector, and to see that there is no overlapping. Otherwise what might happen is that the City Council may have three issues of loans over a period of three years for the same asset, the life of which may be 40 years; then during the 40 years you have to fund all these three yearly loans, and if you cannot fund it at that time, you will have to go out to the market to get the balance, which means that you will have to do it in a big way. So to prevent all this happening, that power is provided for in the clause, but it does not follow that the Governor in Council would refuse to give that power when the special circumstances are there. The Member for Paya Lebar, in a sweeping statement, referred to the closing down of factories. I refuse to admit that there has been such a vast scale closing down of factories as suggested or implied in his sweeping statement. There has been some closing down of factories, but to a greater extent there has been an opening up of new factories. If the hon. Member has any information on this, I will be glad to receive it. The hon. Member also criticised the Hon. Mr Sutherland about his fear of the creeping danger of inflation. Sir, let me make this plain: the creeping danger of inflation is world-wide, but there is a bigger creeping danger today in Singapore, and that is irresponsible politics. That can do us a lot of harm - irresponsible statements by politicians who do not care whether they are damaging the country's economy and credit in the eyes of the world. It can not only stop people from coming here and opening industries, but it can also stop our credit from working on the London market and other foreign markets. We should be very careful of that. We should never make sweeping statements which may be quoted the world over and be a pointer to those who wish to come here and invest money, because that will prevent them from doing so. Sir, in the past the people of Singapore have, comparatively speaking, been living on a bed of roses. They have had nothing to worry about in the economic set-up. We have had our entrepot trade, but now with the growing population the time is coming when we will have to fight for our survival, and that is why it is important that because of this fight we should prevent irresponsible statements.

Committee Mr Chairman, Sir, I have a great regard for the financial knowledge and ability of the Hon. the Financial Secretary, an ex-officio Member of this Assembly, but his utterances the other day would have had a very bad effect for Singapore on the financial market overseas. Sir, what is the credit of Singapore? Have we any vast lands and resources, any big reserves? I can say almost Nil. 10.30 a.m. We have to depend on our wits, how to make money through entrepôt trade. We have no credit whatsoever as far as resources are concerned. We can mortgage nothing. Now, Sir, in order to maintain industry and to make the existence of the people easier, it is necessary to bring down the cost of water and power. That is the point made by the mover of the amendment - if the life of the project is 30 or 40 years, why float a loan for 10 years and have its redemption paid up within ten years and put up your charges to that extent? Suppose the loan redemption is spread out over many years, the cost of the power will be cheaper. That goes without saying. In other words, if you have a short-term loan and you want to redeem it early, say 10 years, the cost is higher because you have to pay into the sinking fund for the redemption of the loan. That is very simple arithmetic. And that is why the mover has time and again emphasised the necessity of taking away this proviso. Sir, the hon. Mr Sutherland did have an optimistic outlook for the colony. As a banker, he is in the driver's seat, but there is a well-known saying that the banker is the first to withdraw the umbrella even before the first sign of rain. Credit in many countries is being cut and even here we are feeling the cutting off of the credit. That is a fact, that the merchants are suffering. As democracy progresses and Singapore gets internal self-government and independence - of course, we are going to get it some day, I hope it will not be in the very distant future - then we will have to depend more on our resources than on the United Kingdom or any other country. And what can we depend on, unless we cut our cloth according to our needs? That is the only remedy, and here is one remedy suggested - that if the loans are spread out, the cost will be cheaper. What I meant the other day, and I always mean, about nominated and ex-officio Members is this: let them not frustrate democracy and throttle the elected Members' votes by voting on the other side.

Committee Mr Chairman, I must assert my right as a nominated Member to take a full part in this Assembly. In fact, I have sworn an oath to do so, and I cannot possibly under pressure from the Member for Telok Ayer abandon my oath or say that I will not frustrate him. When he is wrong I will of course do so. But if he is in the right, I will support him. I merely rise to make this point, Mr Chairman. Now I would like to make one or two comments on the speeches we have had from the Liberal-Socialists on this question of loans - whether they should be paid off as quickly as possible, or whether they should be paid off as slowly as possible. The Member for Paya Lebar said that we had new problems and that we must face them with new ideas. I am afraid that that is what the Liberal-Socialists are not doing. This idea of a long-term loan is an old one which is tending to get out of date. As the hon. Mr Sutherland pointed out, the whole trend nowadays is otherwise. The remark that we sometimes hear around Singapore "A dollar saved is 50 cents wasted" is one that is often in people's minds and undoubtedly has an effect on the willingness of the people to put their money aside for this sort of investment. Savings take place largely in the insurance type of saving - contractual saving where you pay so much per month or per year in return for certain guaranteed benefits. And that aspect is one which the hon. Member is overlooking. Quite apart from whether you can get the money for a long-term loan, I personally feel it is highly desirable that we should, as far as we possibly could, in both public and private investments, make our capital investment out of revenue or profits, and not out of loan money, committing ourselves far into the future. The whole tempo of industrial economic growth is changing in the world today. The turnover of equipment is changing; there is need to revise our ideas as new methods of producing wealth are developed; and to tie ourselves up with extremely long-term loans seems to me to be out of date. It is a very limiting factor on economic growth. The Member for Tanglin is proposing to cheapen costs by spreading the load over a longer period of years. That is one way of doing it. An alternative way is to spread your costs over a larger number of consumers. As the number of people making use of the services expands, so the proportion of the costs which are accounted for by overheads is reduced, and costs can come down. You can also cheapen your costs by higher efficiency, and that is of course the most desirable thing of all - productivity should be maximum, efficiency should be maximum, and then the rate of costs is of minor importance.

Committee Mr Chairman, Sir, I am no economist, no financial wizard. I am going to speak from the point of view of the man in the street. I am going to be charged for the services rendered, and I am of the opinion that they should be as cheap as possible. I am not going to say that financial matters are not going to affect me. Today I have heard arguments from the hon. Mr Sutherland as well as Members of the Labour Front. They seem to speak on one theme, and that is, we must not make the people who have money invest in our projects and then make them lose their money - for every dollar, collect 50 cents. "Every dollar saved means 50 cents wasted." Now, of course, that is contrary to their principles of Socialism. If a few rich men must lose their money and if benefit can be given to everybody in Singapore, then I am all for it, and anybody who is trying to protect them is not one who is for the people but really one who is for vested interests. Then the argument is again advanced about inflation - that you will have less value for your money. They have said that if you are going to prevent inflation, the most important thing is to step up production. But how are you going to step up production, Sir, if you do not have the necessary means of helping to step it up? If you do not provide efficient and cheap services to encourage people to come along and increase production? Well, there are two courses open today. One course is to hold your hands and say, "Let us watch, keep our money, and see how things go." In that way, money will also go down because there will surely be inflation. The other way is, "Well, there may be inflation, but let us try and see how we can stop it." We can step up industry. At least we are trying to do something to stop inflation and not just hold our hands. The second course is definitely preferable to the first course of holding our hands, sitting down and saying, "We can do nothing. We will not do anything."

Committee Just one word, Sir. The Member for Serangoon seems to have misunderstood the Socialistic principles of the Labour Front. He says that if rich men lose money and the people benefit, he is all for it. First of all, Sir, looking at the way things are moving, I doubt if rich men will invest in Singapore for long, and therefore we will have to look to the poor men to invest their savings in the City Council and Government loans in the future. It is the men and women of Singapore, the workers, who must invest and we do not want them to lose their life savings, whether or not that is contrary to Socialistic principles, as the hon. Member thinks. But there is one thing Sir, and that is, whether it is the poor men or the rich men, if you consciously evolve a policy so that the person investing his money loses it after a period of years, you are cheating, and we do not stand for such cheating. If we want to make the rich men pay for the benefit of Singapore, there are other ways of doing it, Sir. You can nationalise, you can do a lot of things, but not cheating in this fashion.