January 31st, 2012

Parliament Primer: Debate over ministerial pay

The following are excerpts of speeches made by six female parliamentarians on the subject of ministerial pay. They spoke during the Jan 9 to 18 sitting of Parliament.

Denise Phua
Member of Parliament for Moulmein-Kallang GRC

Although I do not completely agree with the recommendations carried in the Report of the Ministerial Salaries Committee, I cannot, in good conscience, say that the Committee has done a poor job. By boldly recommending pay slashes up to 50% – measures which are hardly cosmetic – the Committee has moved in the right direction.

Like many in Singapore, I thought it was important that if reference was drawn from what I felt was a more punishing private sector in terms of pay and accountability, then it was only right that common compensation principles in that sector be applied.

I am heartened that some of the recommendations I made were considered and applied, and in some cases, enhanced:

  • An independent and external Salary Review Committee was set up, for the first time so that executives do not write their own paychecks
  • The line of sight linking an incumbent’s Pay and his Performance is now clearer
  • The previously simplistic link of Bonus to GDP growth rate is now expanded
  • The Salary Benchmarking formula now targets a much bigger group of 1000 instead of 48 top wage earners
  • Keeping the annual base pay package to comprise only monthly salaries and a 13th month bonus by removing items like Special Allowance and Public Service Leadership Allowances is a more acceptable compensation practice

I would like to offer 5 recommendations:

1. Peg political pay to a broader base of income wage earners and discard discount

The proposed salary benchmark of the entry level minister, is now pegged to the top 1000 wage earners, instead of 48, in Singapore. A discount of 40% is then applied.

The selection of the 1000 top wage earners, albeit more reasonable, is arbitrary and still smacks of elitism because the base is about 0.05% of the workforce, assuming a workforce size of 2 milion. The application of the discount, whether the current one-third or the proposed 40%, is also arbitrary and often forgotten and unappreciated.

I propose that political leaders’ pay be pegged to a simple top percentile income bracket, eg 10% of 20% of Singaporeans. Discard the discount feature. A quick poll I conducted revealed that more Singaporeans are likely to understand and accept that their leaders belong to the top 10-20% income bracket in our country.

2. Strengthen the line of sight between pay and performance

a. Remove 1 of the 3 components of the Variable Pay Component ie the Annual Variable Component (AVC) and retain only (i) Performance Bonus which relates to the performance of the individual portfolio; and (ii) National Bonus which is linked to how the country performs;

b. Publicise the Key Performance Indicators or KPIs for individual portfolios so that Singaporeans have a better understanding of how they are linked to Performance Bonuses of the office bearers. Developing and publishing KPIs that relate to both the routine operations and new initiatives in, especially essential services such as housing, transport, social services, and education, are important for better understanding of the size of the individual portfolios and promote better quality dialogues;

c. Expand the National Bonus indicators which are now 100% linked to jobs and incomes. This is to reduce the potential of excessive risk-taking or undesirable tactics to boost the numbers. For instance, starting a third casino to boost the economy may well boost all 4 components of the National Bonus – real median income growth rate; real grow rate of the lowest 20th percentile income; lower unemployment rate; and enhance real GDP growth rate; but the move may well be an easier path to developing or own tourism products and is detrimental to the long term competitiveness and social well-being of our people.

3. Review the benefits package and not over-extend the ‘clean-wage’ principle.

It is a little ludicrous that the dental benefit of our Prime Minister and Ministers is $70/- per year and outpatient subsidy capped at $350 a year. Consider the provision of common benefits such as car and annual health screening packages that are typically provided to executives. Let us not over-extend the application of the principle of ‘Clean Wage’ so far that it becomes artificial.

4. Clarify the job scope and expectations of political appointment holders.

One of the underlying factors leading to the constant unhappy undertone when the subject of political pay is discussed in our country is the lack of awareness of the duties of political appointment holders from Members of Parliament to Ministers and even Speakers.

Members of Parliaments have differing views of their roles. The latest episode during which several Opposition MPs opine that it is the job of Government, and not MPs, to directly help their poor and needy residents and referral is the key strategy; caused a debate of its own outside the House. The clarity of duties and goals would be useful even to MPs of the ruling party.

The man in the street, for instance, does not understand the role of the Speaker of the House and does not have sufficient information to comprehend how it equates to a Cabinet Minister.

Clarity is also useful in the case of office bearers who hold multiple portfolios, sometimes up to 3 roles. It takes more than a human being to do 3 roles effectively and leave little time and space for the incumbent to reflect and reform policies where needed.

Instead of sweeping these rumblings under carpet, it is needful to clarify the job scopes and expectations of political appointment holders.

5. Conduct a review of the civil service leadership pay

One of my deepest concerns is that the Review excluded the some 300 top civil servants in the elite Admin Service. The title of the Report is entitled “Salaries for a Capable and Committed Government” but the review has deliberately excluded top civil service leaders specifically the Permanent Secretaries and others in the elite Admin Service.

This is the group that has been often been kept below the radar from public eye though they play a significant role in supporting the Prime Minister and his Cabinet in the development and execution of national policies. Due to their critical role, some of these elite talents are pegged on the same salary band with the ministers.

If and when the recommendations of the committee of political pay review are accepted, some civil servants will receive much higher packages than their ministers. Unlike the political appointment holders, they will continue to enjoy the retention of benefits such as the pension schemes which will be removed from the former.

Paying for top talents especially for those who opt for a career in the civil service is not an issue. However, the same principles of rigour in job evaluation, accountability for KPIs and disclosure must be applied. If private firms and charities are expected to disclose the highest paid executives and their salary bands, there is no reason why there should be a cloak of secrecy over the Admin Service incumbents.

I ask the Prime Minister to commission an independent review of top civil service leadership that will go beyond pay to attract, develop and retain talent for a capable and committed government.

In conclusion, the review of political salaries is a work-in-progress. It needs refinement but it is moving in the right direction. To reject it and to wait for it to be perfect and acceptable to every interested Singaporean, simply may mean that the current system stays. And that to me, is not an option.

Read her full speech here.

Josephine Teo
Minister of State for the Ministry of Finance and Ministry of Transport; Member of Parliament for Bishan-Toa Payoh GRC

On the pegging of ministerial salaries to the income of the top 1,000th citizen taxpayer, it is incorrect to label it as “elitist”. By itself, the peg says nothing about the value and importance of people at whatever level of income. It makes no value judgement at all.

The correct way to think about the peg is “would we like to draw our top political leadership from that level in our population?” This is how sound HR practitioners think about salaries too, to peg them at the level which you want to draw people from.

Remember that we are talking about people with heavy responsibilities – to oversee defence, our reserves; to manage our economy, maintain law and order; to educate our young, to plan for an ageing society. Again, as HR people would know, having the right person in charge makes a big difference.

We can certainly peg political salaries to the 10,000th or 100,000th. But by doing so, we are also expressing a view that it is good enough for Singapore to draw from those levels for our top political leadership. Singaporeans will have to decide if that is so. Can we find people to fill Parliament and Cabinet at those salaries? Yes, of course. We will find people whatever the salary levels are. The question is whether we will be satisfied with the selection.

Read her full speech here.

Amy Khor
Minister of State for the Ministry of Health; Mayor of South West District; Deputy Government Whip; Member of Parliament for Hong Kah North SMC

We must bear in mind that this is the first time the review has been made by an independent committee comprising well respected and experienced individuals from the private sector, the labour movement and the social sector. The Report is not the work of politicians or civil servants who may be perceived to have vested interests.

This eight-member committee individually and collectively have impeccable management and human resource expertise. In turn, they are ably supported by Mercer, a firm recognised to be an international expert on remuneration issues. They spent seven months painstakingly seeking feedback and deliberating on the issue before coming up with the recommendations.

That this independent, expert committee has, after careful deliberation, chosen to affirm the three principles of competitive salaries, a “clean wage” and the ethos of political service which entails making sacrifices indicate that these are sound principles which we should not easily dismiss. I note that the Workers’ Party has also stated its support for these the principles.

We must also bear in mind that the contentious salary benchmark, the benchmark for entry level Ministers, has been broadened considerably compared to before, although some people take the view that this resulting salary is still too high.

A key contention is why the need to link Ministerial salary to the pay of the top 1,000 Singaporean earners? We should not forget that there is a 40% “public service discount” to the benchmark. The discount would effectively drop the effective salary to maybe the median of the top 2,000 Singaporean wage earners.

The Workers’ Party has proposed what it calls a more “people up approach” in setting Ministerial salaries following what they consider are practices elsewhere in the world. This is based on what they judge as a “reasonable” multiple of a Member of Parliament’s allowance, and this in turn is pegged to the salaries of divisional directors in the civil service, excluding the Administrative service.

The presumption that the Workers’ Party makes is that political service is in the genre of public service. That is only partly true. Political service is more than public service. Civil servants are not subject to the votes of citizens nor do they need to carry the ground in policy making. So, pegging ministerial salaries to civil service salaries is an inadequate mechanism to account for the burdens and responsibilities that come with the job.

In order for the civil service to draw capable people into the service as a career, it also adopts the principle of competitive salaries taking into account relevant private sector salaries at all grades. So why is this principle not acceptable to the Workers’ Party when it comes to pegging Ministerial salaries?

Instead of first pegging MP’s allowance to the pay of divisional directors which is already pegged to market norms, and then arriving at the Ministerial Salaries using some multiple, which is arbitrary, would it not be much more transparent to peg Ministerial salaries to the competitive salaries that the calibre of people we are looking for in Ministers earn, or have the potential to earn, coupled with a discount for the ethos of public service?

Currently as the MP allowance is a percentage of the entry level Minister’s salary (17.5% of MR4 benchmark), the latter is already conversely a multiple of the former! I do not see how their proposed formula is an improvement over the Committee’s recommendation.

What multiple should be applied to the MP’s allowance so calculated to arrive at the Ministerial salary? Arithmetically speaking, if the multiple is high enough, the outcome could be the same as what the committee is recommending which is so in this case where the Workers’ Party has come up with a similar base salary of $55,000 per month for a new Minister.

Another aspect of the Committee’s recommendations that deserves credit is the removal of the pension scheme, the replacement of the GDP bonus with a National Bonus that uses four socio-economic outcomes as measures and five yearly reviews by an independent committee.

All these are direct responses to public’s concerns about the previous salary formula. While welcoming the new national bonus, some economists feel that not all the four indicators reflect accurately citizen’s welfare and could be replaced with other indicators. Yet others feel that the four indicators could be prioritise and given different instead of equal weightage.

Ultimately there is no single formula that can satisfy everybody and a judgement call has to be made. The committee had noted that it had considered a wide range of indicators before settling on the four.

Moreover, the Committee’s recommendation for a regular five yearly review of the salary framework by an independent committee would ensure that the framework remains appropriate over time and that the process remains transparent to the public. The time frame of five years which is about equivalent to a term of government is reasonable as it provides a sufficient time horizon over the length of a typical economic cycle for the Committee and the public to assess the appropriateness of the formula and propose any changes to be made.

Read her full speech here.

Halimah Yacob
Minister of State for the Ministry of Community Development, Youth and Sports; Member of Parliament for Jurong GRC 

I hope that when we discuss this issue, we will look at it in the proper context. We need to link this salary system to the Government’s performance, especially in the effort to assist those who are less well-off. In fact, the Government had also enhanced support to the middle classes. As the proverb goes; the political leadership that fights for the people is like a big piece of wood in the middle of the field that provides protection from the sun and shelter from the rain.

In debating this issue, I also urge you to look at the outcomes that we had achieved over the years and how this leadership had served the people. In just one generation, this Government had completely transformed Singapore.

The Government plays a major role in re-distribution to ensure fair opportunity for everyone. And as we move ahead, I can see that re-distribution role expanding. Other than heavy investments in education, healthcare and housing, we also have subsidies in the form of Workfare, ComCare, Medifund and educational bursaries, to name a few.

I was also very happy to read about the Ministry of Finance’s recent study which shows that social mobility, a subject close to my heart, is still very alive in Singapore. The study shows that children from poor Singaporean families stand a good chance of moving up in life. The son of a father in the bottom 20% of the income earners has at least two-thirds chance of breaking out of his low-income group. And he has a 10% chance of moving all the way up to the top 20% of income earners in Singapore.

As social mobility is closely related to educational achievement, strong government efforts to uplift educational standards and help needy students have paid off. And we are not standing still. Like housing, healthcare and social assistance, education too has gone through a lot of changes, benefiting our people. And I welcome the recent announcements by the Minister for Education that it is looking at ways to help students study in private educational institutions pay for their education. As I know that parents of children cannot get into the public universities, really struggle to support their children. Again, such efforts require leaders in public service with vision and foresight as education is a long-term investment and we need to attract more of such people into public office.

Read her full speech here.

Lina Chiam
Singapore People’s Party’s Non-Constituency Member of Parliament

My first point relates to the formula of pegging the ministers’ base pay to 60 per cent of the median income of the top 1,000 Singaporean income earners. Mathematically, it is not clear how the salaries will go from here. Yes, this is a huge cut now. But there is a possibility that the new formula may even result in a higher base pay than what the old formula could provide, on a long-term basis.

There are many ways that the median pay for the top 1,000 earners can rise substantially in the next 5 years. Wealthy foreign business people could be given Singapore citizenships en masse. It could even be that the median pay for this group will rise much faster than the median of the top 48 earners.

But for me to form a more accurate opinion, I would need to see how the old and the new formulas would apply to the period from the year 2000 to 2010, on a backdated basis.

To do so, the Government would have to provide us with these figures. More importantly are the figures for the ministers’ bonuses as paid out each year according to the old and new formulas.

If the Government and the review committee are truly serious about promoting a ‘clean wage’ approach for Singapore’s ministers, without additional perks and allowances, then they must follow through with the spirit of that approach.

All these data on salaries and the specific amount of bonuses paid out each year must be published and made transparent for public scrutiny. To date, I believe such data is never released.

In the UK, the Freedom of Information Act allowed for the release of details of MPs’ expenses claim for the British public in the year 2009. If we in Singapore want to talk about ‘clean wages’, let’s go all the way – publish the bonuses paid out every year.

My second point, is that ministerial pay should be primarily driven according to KPIs that are specific to their ministerial portfolio.

Each ministry should create a set of KPIs for their minister, and the minister’s pay is to be objectively decided by a formula that is ministry-specific. As a guide, the KPIs for the Permanent Secretary of the relevant ministry, as the most senior civil servant, should be taken into account.

Yes, I know that there is the Performance Bonus component, which is rewarded based on the individual performance of ministers. But it is not clear what the criteria are in attaining this Performance Bonus. The review committee’s report says that “the Performance Bonus quantum will be reduced substantially”. I am not sure whether the bonus formulas are well structured to drive ministers towards fulfilling their portfolio KPIs, and for the purpose of accountability.

The committee’s recommended formula for the National Bonus may be an improvement on the old GDP Bonus formula, but it is still too broad. Some cynics have even speculated that the recommendation for the old formula to be changed has come at a time when Singapore’s GDP growth will be slowing down.

For example, the Minister for Trade and Industry’s KPI for all his bonuses could be Singaporeans’ wage growth. The Minister for Transport’s KPI could be tied with the Minister for National Development’s KPI to control population growth and thereby, vehicle numbers.

Otherwise, the bonus structure gives me discomfort. For example, our transport system might be in disarray, or a major terrorist might escape from prison, but the ministers responsible for these incidents may still collect a full National Bonus, just because the economy has done well due to the good work of other ministers like the Minister for Finance and the Minister for Trade and Industry.

And that brings me to an overarching point – if the Government’s decision is still to match ministerial pay to the top earners of the private sector, then their accountability measures and KPIs must also match the rigour of the private sector.

I turn the focus now to the junior minister’s new recommended starting salary of about $1.1 million per annum, bonuses included.

Mr Chiam See Tong once worked out what ministerial pay should be, in order that ministers would still be able to enjoy a comfortable lifestyle with hardly any “financial sacrifices”. He tabled the figure to be $50,000 per month, taking into account the mortgage and cost of a bungalow, the hiring of servants, two cars, annual holidays, and their children’s education. This was proposal was supported by then-NMP Professor Walter Woon.

To update that to today’s levels, the figure would be about $60,000 per month, or $720,000 per year. That amount, including bonuses, will be a good benchmark to prove their worth for a young minister with a young family. Moreover they still have their MP’s allowance of $192,500 to top it up.

This represents an approach that can be explained to people and be accepted by them.

For some of the new ministers, this new salary could be quite much more than their last drawn salary. Moreover there is no risk factor in the job like what stockbrokers face, for example.

Read her full speech here.

Indranee Rajah
Member of Parliament for Tanjong Pagar GRC

Everyone agrees that we should have a “clean wage” system. However I find that whenever there is a discussion on a “clean wage” system, there is always a distorted comparison with other countries. The Workers’ Party mentioned that their proposals were derived after reviewing the remuneration systems in 12 developed economies including the UK and US.

Now, the UK and US are the two most often cited examples of where their politicians earn far less than ours. And I thought that because they are cited so often, it is worthwhile to examine the politicians’ remuneration packages in these two countries in a bit more detail. And you will see that in these countries, political office is not only a privilege, it is also about privileges. In fact, our more is less, and their less is more, more or less!

When citing the remuneration of UK Ministers, one must take into account the Green Book. The Green Book is the Guide to the UK MPs’ allowances. The UK Ministers’ salaries may be lower but they get a whole host of allowances contained in the Green Book. Now, I encourage our MPs and members of the public to look up the Green Book 2009 Edition which is available online. It is seemingly transparent, yet totally opaque. It seems to be transparent because the type of allowances allowed are listed out, but it is totally opaque because you have no idea what amounts these claims come up to.

Workers’ Party has cited Britain as an example of a country where information on political salaries and allowances is available and they have stringent disclosure rules. The UK system is not transparent. Transparency on the allowances was only forced upon them after an investigative journalist pursued the matter and even then it was only after years of trying to force disclosure under the Freedom of Information Act. The House of Commons resisted it on the basis that it was “unlawfully intrusive”. It took a court action to get the information and it was discovered that the perks came up to millions of pounds.

So I know that the Workers’ Party is not suggesting that we should have the same kind of allowances provided in the Green Book. But the point is this: the UK Ministers have lower salaries precisely because their system gives them the Green Book allowances which are not transparent. So to cite one part of the equation without also citing the other part is not giving the Singapore public the full picture, which is not right.

I move on to the US. It is often said that our Prime Minister gets less salary than the US President. Our Prime Minister makes more salary but he gets far less in terms of the value of the total benefits package of the US President. There is an article on the Internet titled “10 Most Expensive Presidential Perks”. You should read it. It makes for interesting reading. This is what the US President gets and this list is not exhaustive. In addition to the US$400,000 salary, he gets US$100,000 for travel expenses, US$19,000 for official entertaining. The salary is taxable, the allowances are not. And I also saw in Tuesday’s New Paper that he gets an allowance of up to US$1 million a year for “unanticipated needs”. One has no idea what “unanticipated needs” are.

The point is that if you wish to compare what the US President gets against what our Prime Minister gets, then you must take these things into account.

At the end of the day, while I support the Committee’s recommendations and I would endorse the motion – because it significantly brings down the remuneration which was a cause of concern – but at the end of the day, from the public’s perspective, the issue of Ministerial salaries is not about logic, economics or formulas. It is about the connection between Singaporeans and their elected leaders.

In any age, in any country and in any culture, what do people want of their leaders? They want good, capable people of integrity who can provide leadership and have the right technical competencies. They want leaders who they can identify with and, more importantly, leaders who can identify with them. They want leaders who empathise with them, who feel their pain, their worries, will listen, address their concerns, and provide solutions to the problems that people face.

And the thing is this: most people do not earn this kind of salaries. So the instinctive feeling is: how can you connect with me? How can you feel what I feel when you do not have the same financial constraints that I have? How do you know what it is to feel like to live day after day in fear that you cannot pay your rent, your mortgage, or something as basic as food? How can you know what it is like to be afraid that you might lose your job because someone else, a foreigner who is a younger and cheaper option for your employer? How can you know this when your pay is so high? That, I think, is the real issue with Ministerial salaries.

And the answer does not lie in pegging Ministers’ salaries so low that everyone has to struggle alike. No, the answer lies in this. That the Ministers, with the abilities that you have, with the skills that you have acquired, that you place these skills and abilities at the service of Singaporeans and help solve their issues for them. People do not object to good pay when it is well-earned. And if they feel that a Minister is really working hard for the people then they are fine with that. Where they get upset is if they feel someone gets a good pay just because he or she happens to land the job of a Minister, and they do not see a real or visible effort on the part of that person.

What this means is that for each and every Minister, he or she must show that he or she is truly indeed deserving of the pay, and the policies that he or she initiates and implements must address Singaporeans’ needs. Equally important is the Minister’s connection with people. People respond well to Ministers who are in tune with issues of concern to Singaporeans, who identify the solutions and take action on behalf of the people. These are the ones that Singaporeans are happy to work with to achieve a better result for all.

Singaporeans do not appreciate it if a Minister talks down to them or in a way which they feel is patronising or condescending, or who brushes aside their concerns or worries. These, to me, are the key to public acceptance of high ministerial salaries: sincerity, compassion and high performance by Ministers, coupled with a real connection and close bond to the people they serve.

Read her full speech here.

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