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Friday, 4 March 2011

Budget gives more than required - Ministers' Pay?

In March 2007 while the Budget was debated, I wrote to TODAY regarding benchmarking of top civil servants and Ministers' salaries. That was several months after the 2006 Election and then our Govt increased the pay of top civil servants and Ministers.

Specifically in the conclusion of my letter (Reference #01), I wrote :-

"Perhaps, a new benchmark should have another factor linked to how much the average Singaporeans' real income and quality of living has improved. Thus, if the life of the average Singaporean improves, so will the pay of ministers and top Government servants."

On Monday, Opposition leader Low Thia Khiang also referred to the salaries of political leaders during the Budget Debate. Mr Low noted a 30-per-cent increase in FY2010 in the estimated salary for political appointments.

"Unfortunately, the incomes of Singaporeans do not grow 30 per cent just like that," Mr Low added.

In contrast, just imagine the Govt now trying to "increase real income by 30% over the next 10 years" for Singaporeans by boosting national productivity by 2~3% annually. Let me repeat, it is over "10 years" not in "1" year.  Is our real income improving and our quaility of life any better?

Now just because productivity rose by 10.7% last year on the back of our stellar economic recovery, the senior government officers are entitled to "GDP-based" Bonus equivalent to 30% more salary. The DPM explained :

"GDP bonus is zero if GDP growth is 2 per cent or below, but accounts for a maximum of about 1/4 of the annual salary of senior officers, or 8 months, when the GDP growth exceeds 10 per cent. This links the annual salary automatically to GDP growth, which makes it more responsive to actual market rises and falls than having the salary relatively fixed."

I am not sure if nearly half of the $1 billion in National Productivity Fund disbursed so far has helped to boost productivity by 10.7% last year. Even given benefit of the doubt, I doubt its impact is so fast and great when its "ripple effect" is yet to materialise and with more than half the Productivity Fund still not yet disbursed.

Imagine S$1 billion of taxpayers' monies is used to boost productivity leading to GDP growth which then help the PAP Govt to be paid as much as 8 months of GDP Bonus when the ordinary Singaporeans have to slave for 10 years to enjoy a 30% increase in real income. This is notwithstanding that our Ministers' salaries are already the highest in the world.

Imagine the further shock when Mr Low asked if gambling revenue could be used to reduce reliance on GST revenue, the Finance Minister echoed Jalan Besar GRC MP Denise Phua's call against an addiction on betting taxes, and I quoted :

"Don't bank on large casino revenue forever and base your fiscal policies on that, and make permanent changes that assume casino revenue will continue to roll back."


Why Govt's bonus is directly linked to revenue from the 2 casinos which contributes to GDP?
All Singaporeans would know that the stellar GDP growth last year must be significantly due to the opening of the 2 casinos, so why is the PAP Govt banking on the casino revenue to determine and pay its own BONUS and pay hikes which are linked to our fiscal policies?

Ironically, TODAY's article is captioned "Tharman : Budget gives more than required." He certainly did.

It is no wonder that Harvard management guru, Professor Michael Porter; commented in 2006 that :

"the era in which Singapore's Government could drive its economic development was passe" and that "top-down from the Government is not working any more".

Hence, will the "top-down" approach work for boosting productivity and then real income?

When the private sector is usually more hard-driving, is it then fair for top civil servants' and Ministers' salaries to be benchmarked to the private sector's top earners. Imagine also the extremity in the current court case involving Dr Susan Lim who is also amongst our top earners?


Visit the Singapore General Election Portal (SGEP) for more interesting reads.

Reference #01:-
My Letter to TODAY
Wednesday • March 28, 2007
Ministers' pay should be performance-based

I REFER to the commentary, "One missing piece in the jigsaw puzzle of civil service pay" (March 26), and Mr Tan Kin Lian's letter, "Try different benchmark for ministers' pay" on the same day. I tend to agree with Mr Tan's comments that the Government should search for a good benchmark.

I recall with interest an article in this newspaper last year, "Bigger strides on smaller legs" (Nov 29), in which Professor Michael Porter from Harvard University commented that "the era in which Singapore's Government could drive its economic development was passe" and that "top-down from the Government is not working any more". The professor saw the increasing need for "a mobilisation of the private sector itself".

Losing a few bright sparks from the civil service to the private sector may well see Singapore's economy performing better to sustain growth as this brain drain is necessary to ignite this new "mobilisation" in the private sector. When ministers retire from politics and join big corporations, the private sector gains.

But who will initiate this transformation for a breakthrough in our economic action plan?

In light of what the learned professor said, it is hard to reconcile the latest proposal for another revision of civil service pay to match more closely that of the private sector.

The Government has advocated that pay should be "performance-based". The civil service should also follow this maxim. Hence, there is a need for a new benchmark based on transparent key performance indicators. Basing it on the median of the top eight earners from the private sector would be ambiguous.

Within the private sector, there are differences in wage levels between different industries. One sector's pay can never be effectively linked to another sector. Similarly, civil service pay should be de-linked from the private sector unless new key performance indicators and a new transparent benchmark can be identified.

Why should civil service pay be directly linked to an external factor that is not truly reflective of its actual performance?

The top management staff in the private sector are directly answerable not just to the board but also their stakeholders. The civil service has the primary function to serve the public.

Perhaps, a new benchmark should have another factor linked to how much the average Singaporeans' real income and quality of living has improved. Thus, if the life of the average Singaporean improves, so will the pay of ministers and top Government servants.

Reference #02:-
TODAY Mar 03, 2011
Low supported benchmarking and variable pay for Civil Service

Reference #03:-
TODAY Mar 03, 2011
Tharman : Budget gives more than required

Visit the SGEP for more interesting reads.

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