Why is it so long? Is it because the civil servants have no ideas? I assure him that it is not because the civil servants have no ideas. It is because we are dealing with long-term measures, having already dealt with the immediate measures last year, in October/November, in a $11 billion special off-Budget package. We are considering major changes which need to be carefully weighed. And we are taking our consultations extremely seriously. In fact, if we had acted sooner, he might have accused us of not taking the feedback with the seriousness which it deserves. But we have to take the consultations seriously and we have to take views and make sure that what comes out is in fact fully cooked and properly deliberated. The real constraint on the pace of our progress is not the Government; it is not the civil service or the bureaucracy. It is the people. How quickly can the people accept new policies and adapt to change? That is the question. Because new policies are unsettling, people need time to get used to it, accept it, understand it, and argue about it. And we need time to understand how to get the policies packaged, polished, rough edges smoothed off, and implemented. We are not sending all sacred cows to the slaughterhouse. Mr Lim Boon Heng said we should consider sending some sacred cows to the slaughterhouse. We are not sending all of them. But I assure you that we should send all our sacred cows, at the very least, to the vet for a thorough examination to make sure that they are healthy or, if they are not healthy, something can be done. We pride ourselves that in Singapore no issue is too sensitive to be talked about, nothing is taboo which cannot be discussed. If you raise a subject, we will debate it. If there is a problem, it will be solved. But still some issues are very sensitive - even to raise, never mind to tackle. But we are talking about a fundamental review in a new situation, in a different world, and unless we grasp the nettle and address these issues now, the problems are going to grow and are going to become even harder to tackle. The review process has to be managed. We are talking about many people. We are talking about many views. We have to discuss issues without alarming people. We have to implement issues without jarring the system, but we must be prepared to discuss many fundamental areas which we have taken for granted. As the President said, "No policy is so cast in stone that it can never be changed.". The challenge for us is to fix things that ain't broke yet. If something is broken, it is quite easy. Everybody can see it is no longer working, we have to abandon it, something has to replace it. But when something is not broken, but you can see difficulties and problems down the road, then we have to manage that, and it is not so easy. Because, first, we have to persuade people that we do have a problem. And they will say, "Why do you want to raise the subject at all? Matters are working fine." And, secondly, if our policies are still working, we want to make the changes and derive the benefits of making the changes without losing the benefits of the old policies because they are still working, they have served us well, and we do not want to change them. I think in the case of several major fundamental economic policies, we have to address them and approach them with this mindset. I will cite three just as examples, which are important ones: the CPF, our wage policies and tax policies. First, the CPF. It is one of the cornerstones of our social safety net. It provides for workers, for their medical benefits, for their housing, for their retirement benefits, even for their children to go to university, and to borrow from the CPF. It is funded, it is sound. It is a valuable instrument which we have patiently built up over many years. But we now have to look at it again. We have to reconcile business costs versus workers' needs. We have got to trade off multiple purposes to which the CPF might be put. How much to go into housing, how much to go into medical, how much to go into retirement, how to balance them, what are the priorities. We have to examine the structure of the CPF more closely, to balance between these different uses and to ask some basic questions. As Mr Lim Boon Heng suggested yesterday, are we investing too much money in housing? We should also ask, how do we get the members not just to leave the money with the Government in the CPF and earn 2.5% interest, which over 40, 50 years of our working life is really not enough, but to invest the money in pension funds for better long-term returns at acceptable risk, not to take it out and have a punt on the stock market, not to splurge it on a consumption binge, but to invest it prudently with a portfolio, with professional managers who will not guarantee you a return every year but over five, 10, 20 years, will offer you much better than the Government can offer at 2.5% interest. So we have to examine the structure of the CPF. We also have to examine the specific problem of older workers with CPF - older workers meaning those nearly 55, maybe from 50 years onwards - having difficulty finding replacement jobs, because the job market is changing, and they are not willing to work for low take-home pay because they still have families to look after. And if you say 20% knocked off for CPF, because that is his contribution, he says, "Well, take-home $700, not worth my while to work." Often, therefore, they are doing odd jobs for cash, with no CPF at all. And we see them, they come to our meet-the-people sessions, we ask them: What are you doing? And the standard answer is sua kang, which means working for cash rather than for CPF. For this group of people, nearly 55 years old, not very well-educated in many cases, would a lower CPF rate make them more employable? It is to be considered. What about their obligations? They may have committed to houses. They may not have finished paying for their mortgages. This is an issue which we have to think about. But, in my view, the overall CPF contribution rate, which is 40% as a target rate, is something which we should maintain. We are not there yet, we are back to 36% after the package in 1998. But we have stated that 40% is our target, and I think we keep that target. We promise to restore it when we made the CPF cut in 1998/99, and I think we should uphold our promise to the workers. And I do not see any justification to see the CPF below 40% in general, because if you consider the needs of the workers, housing, medical and pension, 40% is not excessive. So that is the first sacred cow which needs a medical examination. The second one which needs an examination is wages. One issue of wages is portable medical benefits. Members have talked about it. The unions and the employers have been talking about it for some time, and the issue is simply stated. A young worker starting out can work for any employer and the employer will take him. He is still healthy. If he falls ill, the employer bears the medical burden. An older worker, already with medical conditions, wanting to change jobs has a very serious problem, because no new employer wants to take him and carry that burden of taking on his medical benefits. So how do we provide workers with portable medical benefits so that when he changes jobs from one employer to another, he carries his perks with him, in the same way as he carries the CPF benefits with him? Right now, for employer-provided benefits, if the employer retrenches or goes bust, he loses it. But we need to move from that to something which is portable, which means a change from the existing employer-provided, employer-paid benefits, which means something for workers to get used to. Secondly, on wages, we have to think about retrenchment benefits. It is the traditional way for workers to tide them over a period of unemployment. It is based on length of service. The longer you work, the more your retrenchment benefits, and it is unfunded, which means that when the time comes, the company looks for money to pay for these retrenchment benefits. This causes a problem. From the point of view of the person who is retrenched, it is good, because he gets something. But the unions have found that sometimes the benefits of a long-serving employee are a huge drain on the company's financial resources. And the companies may be unable to pay or it could be that they can pay but it will endanger the jobs of the remaining workers, because if you pay the retrenchment benefits, you are no longer viable and able to continue operating. So the system has weaknesses. And as our business cycles become shorter as more workers find themselves in between jobs, we have got to find a better way to do this. One idea which the unions have thought about and have floated with the employers is to get the employers and employees to put aside a certain amount of money every year while the company is still in good health, for example, in an enhanced bonus system which will vest in their employees over a period of time. So you cannot draw it out straightaway. It builds up, it is yours. After a certain period of time, you can draw it. And you replace the traditional retrenchment benefits with such a scheme. It is an individual-based fund. Then when the employee is retrenched, you do not depend on the state of the company then, but you can draw down what you have earned earlier in this fund, in this enhanced bonus system, until you can find a new job. Some employers already do this. It is something which needs to be studied. It may not work for all of the companies. We should look at this as well as other ideas. But we have to examine the problem of retrenchment benefits. The key idea, when we talk about wages, is to free up the labour market, to create more jobs. The more restrictions we may have, the more rules we have, the more difficult it is we make for people to join jobs and leave jobs, the more reluctant employers will be to take on workers and the higher our unemployment rate will be. Mr Ahmad Khalis earlier this afternoon suggested, for example, setting up a mechanism for employers to have to justify to the Ministry before they can retrench their workers and must give reasons and also answer for how much they are paying their senior executives. It is a well-intentioned proposal, but it is a counter-productive proposal. Because the result of this is for companies when they would otherwise hire workers to ask themselves, "Do I really want to take on somebody whom I may not need for the long term, whom I may have difficulty letting go off when the business conditions change, whom I may be stuck with?" And the answer is, "Better not, work overtime with the existing workers, don't hire extra hands." This is not a theoretical risk. It is a real problem. In Germany, which has the tightest laws for firing workers and is the most difficult of all to let go of workers, they have the highest unemployment rates, and it is not a coincidence. It is because employers make the calculations: too hard to drop, better do not hire. So the key idea which we must follow is to free up the labour market, make it easy for people to change jobs and then we will be able to have high employment rates, not unemployment rates. The third issue which we have to consider is taxation. Lower direct taxes, lower corporate and personal income taxes are essential if we are going to prosper in the next phase. They are essential because of competitiveness reasons. Other countries have been bringing down their direct tax rates drastically over the years and continuing to do so, and we have to be competitive with them. The Europeans, some of them, the Germans are 30%-plus corporate tax. If we are equal to them, there is no reason why they will consider coming to Singapore. Others are bringing direct taxes down, we have to do the same. We have to attract talent intensive service industries to Singapore. We are not talking just about factories where hundreds of millions of dollars of investments, one or two employees ordered to go, he goes to Singapore. We are talking about fund managers, we are talking about IT companies, creative companies, people, movies, software. The people are the company. The people are high-earning people. If your tax is not competitive, the person says, "I'm not going to Singapore." The company will not be here. We have seen it. Our promoting agencies - MAS, IDA, EDB - repeatedly, when they want to try and bring activities to Singapore, they are asked, "How much more tax do I have to pay?" So that is a serious reason to bring down not just the corporate tax but the personal tax as well. We have to bring down direct taxes to encourage entrepreneurship because an entrepreneur goes in, if you want him to risk everything, then he must have the chance of gaining a great deal. And if you say, if you risk everything, you lose, too bad, I give you a pat on the back, perhaps a medal. But you gain, you win, I will tax you 30%-40%, you would not get entrepreneurship. It is one basic reason why there are not so many entrepreneurs in Europe as in America because, in America, tax rates are lower, and Europe is not worth your while. In short, we have to bring our direct tax rates down to encourage more investments to grow the economy and, ultimately, which is most important for us, to create good well-paying jobs for Singaporeans. Unless you bring the direct tax rates down, you cannot do that. At the same time, we cannot just bring the direct tax rates down. You have got to balance the budget. If we simply cut direct taxes, we will end up with a structural deficit, meaning whether the economy is up or down, the Government cannot balance its books and we will run a budget deficit. For example, Hong Kong now has quite a serious fiscal problem because they have lost one major source of revenue, which is land sales. Their tax rates are very low, their budget is in deficit. The Financial Secretary hopes to bring it back into balance over a period of seven years, but there are no easy solutions and raising taxes is very, very difficult. But we have to balance the budget and a balanced budget, in fact a modest surplus maintained over many years, has been one of the fundamental reasons why the Singapore dollar has been strong, why inflation has been low, why everybody's CPF balances and savings have had their value protected. So unless we protect the balanced budget, we are going to have a very fundamental problem. So if we are going to bring direct taxes down and we are going to balance the budget, there is only one conclusion, that we have to bring up indirect taxes. What are indirect taxes? We have car taxes. We could raise those if they are not high enough. But I am not sure many Members will agree that they are not high enough. And there is GST, a broad-based tax which applies to everything, paid by everybody, weighs lightly on the whole economy because it is very well spread, efficient to collect and a stable source of revenue for the exchequer, whether the economy goes up or the economy goes down. So if we are going to lower direct taxes, we will have to consider raising the GST. But before we raise the GST, we have to think very carefully about a couple of issues. One, timing, to be only done when the economy is on a firmer footing. We have to judge when we think that will be ready, because we do not want to put the economy back into a recession by an ill-judged move. Secondly, we have to consider the impact of any GST adjustment on the lower income group. Because the lower income group consumes a large part of their income or, in some cases, even all of their disposable income and so any extra tax is an extra burden to them. Therefore, if we are going to adjust the GST, we have to buffer the overall burden on these lower income groups. And we also have to address specific concerns over certain vital essentials - education, healthcare, public transport. So the way we did it in 1994 when we first introduced the GST was we had a comprehensive offset package so that we could make a calculation and assure everybody and show examples that if you are in a 3-room flat or 4-room flat, the offset which you get to tide you over a transition period is more than enough to offset the tax which you would have to pay in GST every year for every household. And in addition to that, we also had reassurance on education, on healthcare, on public transport, on specific critical items so that nobody will be alarmed, panicked into thinking that this is going to be an unbearable burden on him, which it is not. That was what we did last time when we have to do GST. This time, we must do the same. I think Members will agree with me that it is never popular to suggest the possibility of new taxes. But going forward, restructuring our taxes is a vital step for us to gear up our economy for the changed environment to create more jobs. I look back to 1994 when we first introduced the GST. We reduced direct taxes in 1994 and, in subsequent years, whenever our finances strengthened, we gradually brought direct taxes down again. So, today, our corporate tax is 24 1/2%, our personal tax is 26 1/2%. Because of that, our economy grew after 1994-1995, 1996; 1997, we did well; 1998, the Asian crisis came, we still had positive growth; 1999, we picked up; 2000, we had a boom year; 2001, the US economy tanked, the electronics sector went into a slump, we went down. But we went down from a high level, we went down from an economy which was strong, we went down with reserves in our pocket so that when we needed to help people, we could take some of these reserves and we could have generous off-Budget packages last year - the New Singapore Shares - and therefore, we could pull through the crisis and manage. If we did not have that, had we kept our tax rates around 30%, which is where they were when we first started this process, and just gone ahead, I think we would have gradually slowed down well before 1997/1998; and come 2001, we would have a serious problem and unemployment would have been much, much higher than it is today. So, these are the considerations which the Economic Review Committee is working through. The subcommittee is finalising their recommendations. The subcommittee on tax which Mr Tharman is chairing, I believe Mr Tharman intends to release his recommendations next week. When the Government receives his recommendations, we will consider them. Apart from the specific issues which we have to deal with, one broader issue which we should consider, as we look forward, is the question of our social safety nets. We have been careful over the years to avoid subsidising consumption in Singapore. We subsidise investments, broadly understood, education, housing, basic healthcare. It has been important to us that we did this because we are not just a free market economy, we are also a nation and we are also investing in our people and building a population together. These social safety nets will remain major elements of our social compact. It is part of the deal. You are a Singaporean, this is the package. You work, you do well, but to start off with, here are things which you will get, not quite a birth right, but which every Singaporean will get. The safety nets are especially necessary to protect the minority who cannot fend for themselves. But for education, housing and healthcare, our target group is not just the bottom 20% who cannot look after themselves. In order to fulfil our social objectives, we are aiming these expenditures on a broad middle ground of Singaporeans because we want full and equal opportunities for everybody. So everybody goes to Government schools. We want a home owning society. So 90% of the population lives in HDB flats. We want good basic medical care. So we have social policies which reach the vast majority of Singaporeans. These social supports are still important. But we have got to fine-tune them and especially, we have got to fine-tune the housing and healthcare part to keep them effective. The State must not over-provide because, by over-providing, we may undermine enterprise and self-reliance and we may create a dependence mentality. Our experience with the Economic Downturn Relief Scheme, which we introduced last year, is quite salutary. MPs will have first-hand experience. We did it because we needed to do it, because we were in a sharp recession. So we said up to $200 for three months. But quite a number of Singaporeans spread the word around that the Government is distributing money. And they came to queue up for the hand-out because it would have been remiss of them not to come and take this opportunity. And they came and we met them at the meet-the-people session. I had one young man come perfectly able-bodied, strapping, he said, "Where is my money?" I said, "What do you mean by where is your money?" He said, "I only got $100." I said, "Why should you have more than $100?" He said, "You said $200 x 3 months here." He produced me a newspaper cutting. I said, "It says up to $200 for three months." He looked at it, he said, "You said up to $200. You did not say up to three months." So I asked the grassroots leaders to review his case again very carefully to determine how much he really needed from the EDRS. But from his point of view, and many other Singaporeans', it is rational. "You are distributing, I better make a bid." So, if we are going to help people, we will have to be very careful to make sure people make an effort. And it is not just a hand-out. So we very quickly learnt. Now, when they come, all the MPs say, "Here you are. I have a list of jobs. Have you applied for any of them? If not, here is an application form. After you have tried, come back and look for me again." And even the new MPs have also learnt this technique, because this is the way human nature is and that is what we have to guard against. We are nowhere near that, but we have to make sure that our safety nets avoid that. And in the case of healthcare, we are making some adjustments and the Ministry of Health is introducing selective means testing to direct the benefits to where they are most needed and, in the case of housing, MND is also making some reviews. These are major adjustments which can only take place over a period of time because they affect a lot of people. But they are adjustments which we have to begin to think about and to implement carefully, step by step. Mr Speaker, Sir, may I now speak about the role of the Government. Dr Wang Kai Yuen asked what is the Government for. The people have elected us. What do you expect of the Government? I would say this is what the Government needs to do, as far as economic management is concerned. First, set the strategic direction for the country. Make this a prosperous developed economy, one where everybody benefits from progress, make this a stable and harmonious society where all the races and religions live peacefully together. That is the first requirement. Set the goal, set the strategic objective, persuade everybody, that is what we are working for. Secondly, pursue prudent macro-economic policies: be careful with our taxes; be careful with our budget spending; be careful with our exchange rate policy or monetary policy, meaning the Singapore dollar exchange rate; do not take liberties, do not take shortcuts, because if we decide to go for deficit financing, borrow money to spend or we decide to depreciate the currency as a way out of our troubles, the logical conclusion of that is Argentina. We are not getting there. Next, the Government has to set the rules for micro-economics, to make it efficient, to make sure that people can do business properly. So we liberalised telecommunications. You can have 001, 008, 018, any number of international telephone numbers. Let there be free competition. We cannot go and micro-manage who can charge you how much, but we can set an environment where there will be competition and that will bring the price down. So we are talking about petrol prices. We cannot decide how much the petrol companies can charge you. It is impossible. We are not operating the petrol companies. But we can say, "Here are white sites. Take them." If NTUC wants to run a petrol station and compete against the petrol companies, by all means may the cheapest petrol win. But please manage the queues outside the petrol station. So we need to have the right micro-economic rules. We set the rules. We do not play the game. Next, we have to invest in people, in infrastructure. That is critical. You could take a purist view and say, "Well, the market will do it. I will not build trains, I will not build schools, I will not fund education in university." But as a pragmatic approach, we think it is right, we think it is the best way. The Government will do this, because if the Government did not do this, quite frankly, I do not think it would be done and, certainly, would not be done as well. So, overall, we can foster a pro-growth environment in Singapore. You can go to China. Yes, it is cheaper. The land is cheaper. Many people brighter, some of them better educated than ours. But a whole pro-growth environment, that is not so easy for them to produce, and that is something which we can produce in Singapore. We have harmonious tripartite relationships. The unions work with us. The employers work with us. We have the whole system working, whether it is the banks, whether it is the telecommunications companies, the Government is predictable, there are no arbitrary impost, there is no red-tape. We have a pro-growth environment, but we will focus on what the Government can do but the private sector cannot do. If the private sector can do it, we will leave it to them. If they cannot do it, we will do it. What we cannot do, as a Government, is to be: employer of last resort - if you cannot find a job, I will hire you; investor of last resort - you need somebody to buy into your company, I will do that; or Father Christmas of last resort - nobody else will do for you, we will do that. Dr Wang Kai Yuen says how can we be going just on the basis of self-reliance, we are such a small country, small island without resources. I say, on the contrary, because we are a small island, because we have no resources, therefore we have to be self-reliant. If we were a big country, if we had oil, gas, timber and gold, then we do not have to be self-reliant. You just sit back, the Government will provide. But, lacking those, we have to fall back on our wits, our strength, our effort, and that means Singaporeans have to be self-reliant. Those were just the cards we were dealt with when we were created, and that is the way we are. Several MPs raised the question of keeping costs low. Mr Ravindran mentioned this first. He asked whether the Government departments were making huge profits. After that, Mr Steve Chia echoed him. I have a friendly word of advice for Steve Chia who may be new, that he should be careful when he picks up points from the PAP Backbenchers and uses them. Usually it is quite safe because our Backbenchers make good points but, once in a while, they are off target and then he will be in trouble. In this case, I think they are wrong. Singaporeans get Government cheaply. The total tax burden in Singapore is only 18% of the GDP. If we go for welfare programmes, if we have more subsidies, if we have unemployment benefits, if we go for free medical care like European countries or like Britain, then the burden will go up and the cost will go up. In Europe, the government consumes 45% of GDP. We are 18%. In America, which has much lighter burdens than Europe, the government consumes 30% of GDP. So the way to have low costs is for us to have a small Government and keep our subsidies to a minimum. There is no free lunch or, as the Opposition sometimes says, in Chinese, "yang mao chu zai yang shen shang", ie, wool on the sheep grows from the body of the sheep. Anything which the Government spends, it is the people's money. If we do not recover the costs of services, then the Government has to fund these services from taxes or from printing money. Our policy is to recover the costs, no more. We try hard to improve efficiency and cut costs further, and there are opportunities to do that. And I would not say that, in every single instance, we are as lean and as trim as we could absolutely be. But, by and large, we are not doing too badly in Singapore. But just to make quite sure, let me make you all a generous offer. Anybody who thinks that we are overcharging for any service and that you could do it cheaper, make us an offer, take over providing that service, and we will make a deal with you. You take it over, you make a reasonable margin, we will save some money and the public will also save some money. We are quite serious about that. From the Ministry of Finance's point of view, if people will come forward with such offers, it will make it much easier for me, as Finance Minister, to keep expenditures and taxes down. But, by and large, we are not doing badly and our policy, as stated in the Addenda, is not for us to make a profit from our services. It is just to break even and cover our costs. Finally, if I may put in a good word for civil servants. Assoc. Prof. Chin Tet Yung blames civil servants for rigid policies and for not listening with their hearts. Dr Amy Khor also asked for civil servants to be less rule-bound because, otherwise, they may be neither civil nor servants. After the former Speaker's speech yesterday, I hesitate to be misunderstood as being thin-skinned, but since the civil servants are unable to defend themselves, it is my duty to speak on their behalf. Civil servants do not always measure up to the ideals which we have set for ourselves in the Public Service 21, but we have set our ideals and we do try our best, first, to implement efficiently, flexibly and courteously policies and, secondly, to be transparent and to explain the decision and why we have reached a certain decision, even if we cannot accede to it. It is not always possible, because sometimes reasons are confidential, sometimes a matter of judgement and, if it is a matter of opinion, then a panel of decision makers has to look at the facts and decide. There is no right or wrong. If you are the appellant, you will say, "I want it"; if he is the decision maker, he has to make a decision. But, to the extent possible, we will explain, we will operate efficiently, quickly and we will give you a proper answer. But remember that the policies are decided by the political leaders, not by the civil servants. We, the Executive, have to take responsibility. If the policy is wrong, the MPs should raise it in Parliament and we can debate it and decide whether we are right, in which case, the policy stands, or, if we are wrong, in which case, the policy should be changed. In the specific case which Assoc. Prof. Chin raised about HDB not approving premature requests to sell flats because owners cannot afford it and they want to downgrade, it so turns out that it is not true that HDB never agrees. From time to time, HDB does agree. It examines all the cases and, in specific cases where there are good justifications, HDB will act. Last year, they had about 30 cases where the minimum occupation period was waived for financial hardship. So, if there is a policy which is not right, Parliament is the place to debate it. If there are cases which are not properly handled ---