Sunday, January 8, 2012

Insight: What price a minister? 42 years of controversy

Straits Times, Jan 6, 2012

Insight looks through records of parliamentary debates to find out when ministerial pay first became a contentious issue, and how the debate has shifted over the years

By Andrea Ong


MINISTERS' salaries are raised for the first time in independent Singapore, from $2,500 a month to $4,500.

Their wages were previously frozen to set an example of wage restraint for other Singaporeans in the young country.

Prime Minister Lee Kuan Yew tells Parliament that the salaries are being raised because he wants to appoint newly elected MP Hon Sui Sen, who used to head the Development Bank of Singapore, as the Finance Minister.

Earlier that year, Law Minister E.W. Barker had asked to leave politics as he could not afford his mortgage, which was based on his former income as a lawyer.

It is 'not fair' and 'unrealistic' to ask ministers to earn a wage 'out of all proportion to what they were earning outside the Government and whose family needs are also pressing', says Mr Lee in Parliament.

Also, it will be impossible to attract men of integrity and ability to become ministers with the existing pay once the current ministers leave office.

His own pay will, however, remain at $3,500 to demonstrate his commitment to the policy of no wage increases without productivity growth, he says.


The National Wages Council (NWC) is formed and recommends the payment of the Annual Wage Supplement - the '13th month bonus'. It is adopted by the civil service and political appointment holders. One reason cited is to reduce the gap between public and private sector pay.


First substantial wage increase for ministers and civil servants. Mr Lee's monthly pay goes from $3,500 to $9,500, while ministers' monthly pay rises from $4,500 to $7,000.

This kicks off a series of periodic pay increases for ministers and civil servants in subsequent years.


By March this year, ministers' monthly pay has increased to $11,500. Mr Lee's pay is now $16,500.

Mr Lee notes in Parliament that times have changed since the 'revolutionary conditions' of the 1950s and 1960s, when people were more willing to sacrifice for their ideals and ministers could be recruited from both Singapore and Malaya.

Said Mr Lee: 'Now, our selection is confined only to Singaporeans. This makes it all the more crucial that some six to 10 of the best in the professions, from banking, and from industry, be recruited into the political leadership. Otherwise the Cabinet will simply not be equal to the more complex tasks of government.'


During an extensive debate on ministerial salaries, Mr Lee introduces another reason for paying ministers a reasonably high sum: to keep Singapore's political leaders clean and corruption-free.

He was responding to Workers' Party (WP) MP J.B. Jeyaretnam's charge that ministers here were paid much more than their counterparts in Malaysia, Australia and Britain.

Mr Lee argues that ministers do not get hidden perks, unlike those in other countries. The clean wage paid to them helps preserve Singapore's 'most precious asset': an administration that is corruption-free.

Says Mr Lee: 'I am probably the highest paid in the Commonwealth if you go by official salary. But I am probably one of the poorest in the Commonwealth... I am one of the best paid and probably one of the poorest of the Third World prime ministers.'

Mr Lee says he has been a 'kept man' all his years in public service, with his wife and three brothers in the private sector all earning more than he does.

Mr Lee also challenges Mr Jeyaretnam, who earlier called for ministers to have a sense of proportion, to say by how much he would cut the total ministerial wage bill of $4.66 million.

To the reply of at least a third, Mr Lee retorts: 'So it will go down to $3.1 million... And then we all become honour-able men who have suddenly sacrificed ourselves for duty and public service. Let us have a sense of proportion.'


Ministers' pay rises to a gross monthly sum of $28,644. The prime minister's gross monthly pay is $49,608. Variable bonus is raised by half a month. A performance bonus of up to two months' pay is introduced for the first time.

Also for the first time, the Government introduces 'make-up pay' to attract talent from the private sector. When such people join as new ministers, they can be paid up to 90 per cent of the difference from their old wage for up to two terms of office. This draws much criticism from MPs.

The policy has never been applied.


An impending pay rise for ministers is announced in December.

Prime Minister Goh Chok Tong tells Parliament that while he cannot pay ministers what they would earn in the private sector, the pay must still be such that the younger generation would consider it worth sacrificing their previous comforts and privacy for.

He is already finding it increasingly difficult to persuade talented individuals to become ministers, he says.

While acknowledging the political cost of the pay increase, Mr Goh said: 'If we do not pay ministers adequately, we will get inadequate ministers. If you pay peanuts, you will get monkeys for your ministers. The people will suffer, not the monkeys.'


After the pay increase kicks in, ministers' gross monthly pay is $64,000, and Mr Goh's, $96,000.

In January, Senior Minister Lee Kuan Yew proposes a formula to peg ministers' pay to private sector incomes. Such a formula removes the need to justify pay revisions every few years as adjustments based on income tax figures could be made automatically each year.

'Ministers' pay will then go up or down with the private sector, and never get seriously out of line,' said Mr Lee.

In October, a White Paper on 'Competitive salaries for competent and honest government' is presented to Parliament.

It proposes a benchmark which sets a junior minister's pay at two-thirds the average principal income of the top four earners in six professions: bankers, accountants, engineers, lawyers, local manufacturing companies and multinational companies.

The one-third discount would be a 'visible demonstration of the sacrifice involved in becoming a minister'.

Three days of intense debate follow. Many backbenchers, including People's Action Party (PAP) MPs Wang Kai Yuen and Tan Cheng Bock and opposition MP Ling How Doong, express discomfort with putting a price to public service as ministers are not the same as top private sector earners.

Opposition MP Chiam See Tong and Nominated MP Walter Woon argue that ministers should be paid enough to lead a comfortable lifestyle but should not compete with top earners. Mr Chiam suggests a monthly pay of $50,000 for ministers.


In January, an independent panel sets the prime minister's pay at twice that of the most junior minister - a rule of thumb still in place today. Mr Goh, who earns $1.15 million a year, would see his pay increase to $1.6 million.

He also decides to forgo any salary increase for himself for five years.

In October, Dr Tony Tan returns to Cabinet as deputy prime minister and labour minister after having left in 1991 for OCBC Bank. He declines Mr Goh's offer of make-up pay, saying: 'I think that there has to be a financial sacrifice when one goes into the Government. I don't think that it is conscionable for me to expect the Government to pay me what I'm now getting at the bank.'


Asian financial crisis. Ministers' pay is frozen even though the benchmark rises. They take an extra pay cut in 1997 when employers' Central Provident Fund (CPF) contribution is slashed from 20 to 10 per cent to keep the economy competitive.


Extensive revision of the salary structure for ministers and civil servants. Junior ministers' pay lags behind at just 10 per cent of the benchmark. The benchmark itself is found to be too narrow and unrepresentative.

The benchmark for a junior minister's pay is changed to two-thirds of the median income of the top eight earners in six professions.

The new formula considers a broader sample - the top 48 earners instead of the previous 24. And to avoid being skewed upwards by a few extremely high earners, it uses median instead of average income and only considers half of the stock options awarded to the top earners.

The previous fixed salary points for ministers are converted to salary ranges. Junior ministers are now appointed at the MR4 range, a system still in place today.

The variable component of ministers' pay is increased from 30 to 40 per cent. This way, a larger part of a minister's pay will depend on his performance and the state of the economy, said Deputy Prime Minister Lee Hsien Loong.

For the first time, a new gross domestic product-related bonus of up to two months is introduced under the ministers' variable pay. It will later range from zero to six months.

The performance bonus of ministers also rises to five months' pay, from an average of four months' pay.

However, the President, Prime Minister and Senior Minister remain at fixed salary points and receive fixed bonuses.

After the revision, the Prime minister receives a yearly pay of $1.94 million and a junior minister, $968,000.

Again, the topic is hotly debated in the House. Many MPs criticise the timing of the raise, which comes after a transport fare hike and when workers' CPF cuts have not been restored.

Mr Chiam repeats his 1994 call for moderation and a monthly salary of $50,000 for ministers - enough to pay for a bungalow, servants, two cars, annual holidays and their children's education.


Ministers' salaries are cut twice, once in November 2001 after the 9/11 terrorist attacks, and once in July 2003 after the Sars outbreak. They are restored in 2004 and 2005.


Another salary revision. Ministers' pay now stands at only 55 per cent of the benchmark, and the Government moves to raise it to 73 per cent by the year end.

The variable portion of ministers' annual pay rises to 47 per cent - nearly half of their annual package.

The traditional car allowance is scrapped, but performance bonus is increased to a typical seven months, up from five months before.

The GDP bonus is also raised. It can now range from zero to eight months.

An acrimonious debate ensues in the House. Some PAP MPs say the raise is only pragmatic, while others like Ms Denise Phua and Mr Lim Biow Chuan argue in favour of the spirit of public service.

WP Non-Constituency MP Sylvia Lim says the average worker's monthly wage would be earned by ministers in two to three hours.

WP MP Low Thia Khiang argues that other countries like Finland and Denmark pay their ministers much less but do just as well as Singapore.

Minister Mentor Lee Kuan Yew rises for the first time in two years to rebut, saying that Mr Low's comparisons are not valid. Singapore's transformation from the 1960s to now 'requires an extraordinary government with extraordinary government officers to support it'.

And if Singapore did not believe in investing in top talent for its ministers, it might have ended in tatters: 'Your apartment will be worth a fraction of what it is. Your jobs will be in peril, your security will be at risk and our women will become maids in other people's countries.'

After the revision, junior ministers earn $1.59 million. The Prime Minister earns $3.09 million, up from $2.46 million. However, Prime Minister Lee Hsien Loong declares that he will donate the increase to charity for the next five years.


Ministers' pay in 2010 stood at 67 per cent of the benchmark after planned increments were deferred due to the 2009 financial crisis.

About 40 per cent of their pay is variable. Performance bonus can range from zero to 14 months, while GDP bonus varies from zero to eight months.

The issue of political salaries is a contentious one in the May general election and even in the August presidential election, when two of the four candidates pledge to donate part of their pay to charity if elected.

On May 21, PM Lee Hsien Loong announces that he has appointed a committee to review political salaries.

This week, the committee, headed by Mr Gerard Ee, releases its recommendations in a report titled 'Salaries for a capable and committed government'.

It proposes changing the benchmark formula for a junior minister to 60 per cent of the median income of the top 1,000 earners who are Singapore citizens.

The discount and sample size are bigger, and foreigners and PRs are excluded from the benchmarking sample.

The variable component in pay has been slashed to prevent large swings from year to year. The performance bonus is now smaller - up to six months instead of up to 14 months.

The GDP bonus has been scrapped. In its place is a National Bonus of up to six months which considers four indicators - economic growth, real income growth rates for average and poor Singaporeans, and unemployment.

The Prime Minister's salary has been slashed by 36 per cent to $2.2 million, while a junior minister's pay has been cut by 37 per cent to $1.1 million.

The report will be published as a White Paper and debated in Parliament on Jan 16.


In 1970, then Prime Minister Lee Kuan Yew told Parliament ministers' salaries were being increased because he wanted to appoint newly elected MP and ex-Development Bank of Singapore head Hon Sui Sen as the Finance Minister. It was the first time since 1955 that ministers' salaries were raised.

'If we do not pay ministers adequately, we will get inadequate ministers. If you pay peanuts, you will get monkeys for your ministers. The people will suffer, not the monkeys.'

Then Prime Minister Goh Chok Tong (left) addressing Parliament in 1993, when a pay rise for ministers was announced


'I am probably the highest paid in the Commonwealth if you go by official salary. But I am probably one of the poorest in the Commonwealth... I am one of the best paid and probably one of the poorest of the Third World prime ministers.'

Then PM Lee Kuan Yew (right) said this in 1985 in response to Workers' Party MP J.B. Jeyaretnam, who had charged that ministers here were paid much more than their counterparts in other countries like Malaysia, Australia and Britain. Mr Lee said Singapore ministers did not get hidden perks, unlike those in other countries, and the clean wages paid to them helped keep the administration corruption-free


In 2000, the variable component of ministers' pay went up from 30 to 40 per cent. This way, said then Deputy Prime Minister Lee Hsien Loong, a larger part of a minister's pay would depend on his performance and the state of the economy.


In 2000, opposition politician Chiam See Tong (right) called for a monthly salary of $50,000 for ministers - enough to pay for a bungalow, servants, two cars, annual holidays and their children's education.

What price political leadership?
ST Editorial

SEVENTEEN years after the 1994 White Paper on ministerial salaries, a new committee has taken another stab at a perennially tricky issue that has exercised the best minds here and elsewhere: What price political leadership? It should be commended for its efforts, given that the very matter of determining salaries of political office-holders is a sensitive issue that cuts close to the hearts of many Singaporeans. In its long-awaited report, the committee's recommendations included salary cuts of slightly more than a third for the Prime Minister and entry-level ministers. In so doing, it has tried to balance two contending schools of thought - pragmatism (the need to offer top dollar for top talent) and the philosophy of public service and sacrifice.

This wasn't an easy exercise. But the eight-member team didn't have to start from scratch. Singapore has had 17 years of trying out a formula and various permutations of it in its search for a workable system of rewarding political leaders. There have been two clear lessons from this experience. First, even the most elegant and logical formula is useless if it cannot be applied in practice. That was the case with the existing method. Because the benchmark salaries pegged to the top 48 persons in the selected professions raced so far ahead of the general population, they could not be implemented without creating a public uproar. By 2000, for example, actual ministerial salaries were only at 70 per cent of the benchmark.

This leads us to the second lesson - whatever the formulae, and no matter whether they achieved their desired objectives of attracting the most suitable candidates, they have to be acceptable by the majority of the people. The current benchmarks were clearly not, and had to go.

Is the new formula more acceptable? It is hard to say, given the emotional nature of this issue. Also, acceptability is not an unchanging condition. New circumstances, and a changing electorate, might make what is politically acceptable today, less so in the future. Hence, the committee's recommendation to have a new group look at the issue every five years.

All things considered, the changes recommended should remove some - but not all - of the unhappiness. However it turns out, one truism will not change: Singapore's success as a nation is critically dependent on having the island's best to lead - men and women who are committed to serving the people and have the intellect and the wherewithal to continue to make its success as long-lasting as possible. That, lest anyone forgets amid all the number-crunching, is the object of the exercise. Singaporeans have to be clear about this, or remain forever vexed by how much to pay their leaders.


Time for leaders to find the 'fire' again?

ON WEDNESDAY, a committee commissioned by Prime Minister Lee Hsien Loong to review ministerial pay issued a report recommending a raft of changes to how salaries should be calculated.

This is the second major report since the White Paper in 1994 that brought about the system of pegging ministers' pay to the private sector.

What has changed since 1994 and 1970, when ministers got their first raise? Insight looks at four burning questions over the years.

Does high pay = the best ministers?
ONE key principle behind paying ministers wages that are competitive with the private sector is the need to get the very best of Singaporeans to form the Government.

This principle has not budged over the years. Singapore's three prime ministers have emphasised repeatedly that good government - the nation's most precious asset - did not come about by chance.

It came about by getting capable and committed people to become ministers, a job more challenging and complex than being a CEO or doctor.

The Government believes that the opportunity cost for such talent to enter politics should not be too high. Besides sacrificing privacy and family life, they should not have to suffer financially too.

And as ministers need time to grow in their jobs, they must cross over to politics in their prime.

The review committee headed by Mr Gerard Ee emphasises this point in its report. 'While money should never be the motivation for anyone becoming a politician, the financial sacrifice should not be so large that it discourages outstanding and committed Singaporeans from devoting the best part of their lives to political office,' says the report.

However, detractors over the years have argued that the pay was just too high. Writer Catherine Lim argued in 2007 that the high pay contributed to the 'affective divide' between the People's Action Party (PAP) government and the people.

Others have warned that the idea of paying for the best to join politics may encourage people to join for the 'wrong' reasons, as PAP backbencher Denise Phua argued passionately in 2007.

'The lure of personal prestige and monetary gain can produce a dangerously intelligent and self-interested class of political elites who will readily compromise the national interest to satisfy their own needs,' said Associate Professor Kenneth Paul Tan from the Lee Kuan Yew School of Public Policy in a 2008 article.

However, then-Deputy Prime Minister Goh Chok Tong made it clear in 1989 that men who are in it for the money are unfit to be ministers. 'If you think that the salary is so attractive that you want to be a minister because of the salaries, you are unlikely to pass our screening test.'

Government leaders have also argued for 'a sense of proportion' by comparing ministers' pay to the size of the national economy that they are in charge of.

Does high pay prevent corruption?

ANOTHER reason for competitive ministerial pay is to prevent corruption and maintain transparency.

The committee's report highlights the need to pay ministers a 'clean wage' with no hidden perks.

While other countries may pay their ministers less, the ministers may in fact get much more under the table in benefits.

This argument has been used by government leaders to counter those who compare Singaporean ministers' salaries with those of their foreign counterparts.

A commonly cited example is the US President, who earns less than PM Lee on paper but whose expenses, including housing and his own plane, are borne by taxpayers.

In 2000, then Senior Minister Lee Kuan Yew said that only 'constant vigilance' had allowed Singapore to escape the corruption, collusion and nepotism problems which have plagued the region.

'Our market-based pay and allowances will give no excuse for any slippage,' he said of Singapore's good track record.

However, in a 2010 book on Singapore's public administration, political scientist Jon Quah points out that the PAP government had put in place stringent anti-corruption laws even before it began raising pay for ministers.

Former Potong Pasir MP Chiam See Tong argued on several occasions that high pay would not satisfy a minister bent on being corrupt. It would 'make him only more greedy for more money', said the opposition MP in 1994, citing the late minister Teh Cheang Wan who committed suicide in 1986 after being investigated for accepting bribes.

Should ministers' pay be benchmarked to private sector?
THE decision in 1994 to peg ministerial pay to the top income earners in Singapore has been one of the most controversial aspects of the debate over the years.

MPs have argued that the benchmark is unfair as the top earners in the private sector change every year, while ministers stay put in their jobs for years. The formula could also be skewed upwards as many of the top earners are extreme outliers.

Opposition parties have suggested pegging ministers' pay to the income of the poorest 20 per cent instead.

Other MPs, however, accept that pegging ministers' pay to the private sector is part of the 'market reality'.

The committee's report goes some way in addressing these concerns. It has widened the sample size of top income earners from 48 to 1,000.

Another point of disagreement is how much variable pay ministers should get.

A high variable component means larger swings in salary from year to year.
In line with private sector practice, the variable component of a minister's annual package increased from 30 per cent in 2000 to 47 per cent in 2007.
However, the committee has recommended cutting it.

A 'GDP bonus' introduced in 2000 was seen as an inducement to ministers to focus on economic growth at all costs. The committee now wants to replace the GDP bonus with a National Bonus which includes additional indicators like real income growth of the poorest 20 per cent.

What do we look for in our ministers?
THE debate over ministerial pay boils down, ultimately, to what Mr Lee Hsien Loong asked in 1993: 'What sort of men do you want to hold this job?'

On one side are those in favour of the spirit of public service and moral authority - two commonly used terms. Serving the people should not be about dollars and cents but about being honourable and sacrificing for the nation.

In the other camp are the more pragmatic PAP leaders, who question if it is realistic to expect to get a dream team of ministers without paying them more competitive rates.

The three prime ministers have all dwelt on the changing aspirations and nature of Singaporeans since the 1950s.

In those 'tumultuous times', Mr Lee Kuan Yew once said: 'Asia was in ferment: the shape of our lives was being altered irrevocably. In that revolutionary ferment, any man with any courage, any fire in him, would respond to the challenge.'

Times and the people have changed since. As PM Lee reiterated in 2007, the Government cannot expect everyone to be like that.

Still, the benchmark for ministers' pay has always included a discount from the private sector to signify the personal sacrifice involved in public service. The committee has now recommended increasing the discount from a third to 40 per cent.

Under the terms of reference given by PM Lee, ministers' pay has been reviewed and cut independently of that of the elite Administrative Service for the first time - a signal that elected political leaders should have a calling of their own.

The titles of the 1994 White Paper and the new report are also telling. Where the former emphasised 'competitive, competent and honest' government, the latter speaks of a 'capable and committed' one.

Perhaps it is time for Singapore's political leaders to find that 'fire' in them to shape Singaporeans' lives once more, as the Old Guard ministers did.

Additional reporting by Janice Heng

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