Press Statement on The Report of the Cost Review Committee
1996
INTRODUCTION
- The Cost Review Committee, first set up in September 1992
to study public concern over the rising cost of living, was reconvened
in July this year to look into claims made by the Singapore Democratic
Party (SDP)-Pertubuhan Kebangsaan Melayu Singapura (PKMS) that
the rise in the cost of living in recent years has been "no
less than phenomenal".
Key Conclusions from 1993 Report of the Cost Review Committee
- The CRC had concluded in its 1993 Report that costs had indeed
risen in the 1980s and early 1990s, particularly in a few key
areas such as housing, health, education and transport. It identified
several reasons for this, including Singapore's limited land and
labour resources, the move to lower government subsidies for some
services, as well as the shift among Singaporeans to a generally
better, but more costly, lifestyle. It also proposed measures
in response, such as urging the Government to introduce price
increases gradually, and taking steps to ensure that basic health,
housing, education and transport remained affordable. The CRC
also called for an independent consumer watchdog group to be set
up.
- The CRC also concluded in its 1993 Report that, despite the
higher costs, Singaporeans were generally better off. This was
because workers' salaries had risen over the years. It noted
that the better lifestyles that most Singaporeans were enjoying
- more were moving into bigger flats, owning cars and consumer
goods, and going on holidays abroad - were clear signs that they
were better off even after accounting for the higher costs.
Members of the Cost Review Committee
- The members of the CRC are drawn from across the economic
and social spectrum of society. They include Members of Parliament,
trade unionists, business leaders, grassroots leaders, academics
and journalists (see Annex A). Their collective experience
enables them to bring a range of opinions and perspectives to
bear on the issue of rising costs.
- In 1992, the SDP and the Workers' Party (WP) were invited
to sit on the CRC to contribute its views on the issue of rising
costs and its ideas on how these might be resolved. While the
WP agreed to take part in the CRC's discussions, the SDP chose
not to do so. They also did not actively take part in discussions
of the 1993 CRC Report in Parliament in October 1993.
RECONVENING OF THE COST REVIEW COMMITTEE IN 1996
- In June 1996, the SDP-PKMS published its Cost of Living Report
1996. Although many of the issues raised by the SDP-PKMS had already
been debated at length by the CRC in 1993, the SDP-PKMS Report
chose to disregard the CRC's findings. Instead, it painted an
alarming scenario of the "disturbing" extent to which
costs had risen, and played on public fears that housing, health,
and education were moving beyond the reach of Singaporeans. Further,
it raised doubts about the accuracy of the Consumer Price Index,
suggesting that there had been a "statistical massage of
the numbers" to hide the rise in costs from the public.
The SDP-PKMS further claimed that rising costs accounted for most,
if not all, of the 76% rise in household spending between 1987/88
and 1992/93.
- This raised the question of whether costs had risen "phenomenally"
since the CRC produced its report, or whether the CRC had failed
in its earlier effort to study the rise in the cost of living.
CRC members were thus recalled to examine the claims made by the
SDP-PKMS. Annex B provides the Committee's terms of reference
in 1996.
- As the issue of rising costs is one which affects many Singaporeans,
the CRC approached its task of studying the allegations made by
the SDP-PKMS seriously. It met with SDP-PKMS representatives
to clarify the nature of, and grounds for, their allegations.
However, the representatives from the parties were vague, evasive
and refused to give straight answers to Committee members' queries.
- The Committee thus proceeded with its examination of the SDP-PKMS
assertions independently. It also sought to review and update
its findings in 1993. It held 5 public hearings, each stretching
over several hours, between July and October 1996. It called
on senior officials from various government ministries and various
private groups and academics. During these sessions, it examined
arguments made and data provided. It examined the factors behind
the rise in spending and then zeroed in on 4 areas of concern
it had identified : public housing, health care, public transport
and education.
DID COSTS RISE PHENOMENALLY?
Singaporeans are Shifting to a Cosier but Costlier Lifestyle
- The CRC noted that studies by the Department of Statistics
had shown that while Singaporeans' spending had risen by 76% between
1987/88 and 1992/93, the prices of the basket of goods it tracked
rose by 14%. Other factors, therefore, accounted for the remaining
62% point rise in spending. Data from both DOS and retailers
(NTUC FairPrice and Emporium Holdings), confirmed that part of
the higher spending was the result of a general shift among Singaporeans
towards more "cosy-but-costly" lifestyles. Singaporeans
were buying better quality foods and clothes. They ate out more
often, and more employed maids. All of this added up to more
bills, and a higher cost of living.
Middle-Age Squeeze
- The figures also showed that more Singaporeans were moving
into the middle-aged stage of their lives. At this stage, in their
40s, they faced the "middle-age squeeze" - more bills
and commitments. Younger Singaporeans (in their 20s), on the other
hand, were also setting up homes at an early stage, opting for
bigger HDB flats, and even private properties, as well as stocking
these with the usual complement of household goods. These added
to their expenses.
DESPITE COST INCREASES, BASIC HEALTH CARE, PUBLIC HOUSING,
PUBLIC TRANSPORT AND EDUCATION REMAIN AFFORDABLE
- The CRC then focused on the 4 areas of concern it had identified.
After a careful study of the figures, it concluded that while
prices have risen, the increases since 1992 were by no means "phenomenal".
Between 1992 and 1995, annual increases in costs were 4.4% for
hospital charges, less than 2% for public transport and 3.7% for
university fees, with most other school fees hardly rising at
all. Housing costs rose more sharply, by 5.4 % for four-room flats
and 11% for executive apartments.
- In particular, the Committee noted that despite the rise in
costs, basic health care, public housing, public transport and
education remained within the reach of most Singaporeans. The
Committee found that 2 factors were responsible. These were heavy
government subsidies and measures to moderate cost increases.
Heavy Government Subsidies
- These had helped to ensure that a high standard of essential
public services remained affordable. These took care of Singaporeans'
medical needs, provided almost all with their own homes, gave
all children educational opportunities, as well as provided inexpensive
bus and MRT services. Those who wished for higher levels of services
were required to pay their own way. This approach has enabled
heavy subsidies to be focused on those who needed it most, and
helped keep government spending in check. This is important as
higher spending ultimately has to be recovered from the people
and businesses through taxes. Prudent spending also enabled the
Government to keep taxes low, which has spurred Singaporeans to
work hard. There is a basic philosophy underlying government
policies: provide a good standard of basic services at subsidised
rates, requiring those who wish for better services to pay for
the costs, thereby maintaining the motivation to strive for better.
The CRC endorses this approach and urges the Government to keep
up its practice of ensuring that the basic services remain within
the reach of the broad mass of Singaporeans, even in the face
of rising costs.
Measures to Moderate Cost Increases
- The CRC noted that, despite moderate recent cost increases,
many Singaporeans continue to worry that costs would rise uncontrollably.
This was ironic as the Government had implemented several measures
in recent years to moderate cost increases and keep basic services
affordable. These included :
- Healthcare : Capping hospital revenues and setting
up a three-tier medical safety net;
- Housing : A firm price pledge that 3- and 4-room
HDB flats will remain affordable, and that 5-room flats will remain
subsidised;
- Education : Offering Edusave scholarships to
ensure that needy students were not deterred from attending independent
schools; and
- A call on CASE to review fee increases by government departments.
Wider Publicity for These Measures Is Needed
- The CRC believes that many Singaporeans are unfamiliar with
these measures. If more of them were aware that these steps had
been taken to fight inflation, fewer would be alarmed about costs
rising uncontrollably. It therefore calls for these measures
to be given wider publicity, as well as efforts to help Singaporeans
to come to a better understanding about the nature, extent and
causes of cost rises.
RECOMMENDATIONS OF THE COST REVIEW COMMITTEE 1996
- The Committee's deliberations which followed the public hearings
saw vigorous debates on the submissions received. Opinions were
raised by Committee members based on their various experiences
and the public feedback they had gathered.
- As a result, the CRC has proposed 35 further steps with regards
to health care, housing, education and the poor and the elderly
to help moderate cost increases, and help Singaporeans cope.
As much of the Committee's discussions were conducted in public
and received wide media coverage, this report focuses on the views
expressed by CRC members, the conclusions reached, as well as
the recommendations they now propose (see end of each chapter,
as well as Conclusion of the Report). They include allowing the
use of Medisave funds for some outpatient treatment, facilitating
reverse mortgages on housing, urging the Government to reconsider
its decision to reject the CRC's earlier recommendation to maintain
the subsidy rate for university fees. Details of these recommendations,
as well as the rationale behind them, are spelt out in the Report
of the Cost Review Committee 1996.
- These measures, the Committee believes, will go some way to
alleviating public concerns that costs would rise beyond their
means.
OTHER REASONS FOR COST INCREASES : HOSPITAL WORKERS, TAXI DRIVERS,
HAWKERS, BARBERS, AND TAILORS ALSO NEED WAGE INCREASES
- While the Committee's study has highlighted efforts made to
curb cost increases and thrown up further recommended measures,
Committee members also recognised that some costs would continue
to rise over the years. In particular, costs would have to rise
if Singaporeans wanted to enjoy wage increases from year to year.
Those providing services, such as hospital workers, taxi drivers,
hawkers, barbers, and tailors, also desired to have their wages
and standards of living raised from year to year. This, the Committee
felt, was only fair. As not all of these cost increases could
be offset by higher productivity, the charges for such services
would rise. The Committee thus could not back popular calls
for measures to prevent hospital charges from rising from year
to year, nor go along with those who complained that hawker prices
or bus fares had risen over the years. The only way for the costs
of these services to be held down to levels of the 1970s would
be for Singaporeans wages to be frozen as well. This, the Committee
felt sure, was not what Singaporeans wanted. Thus as Singapore
moved towards first-world standards in its living standards and
lifestyles, some costs would also rise.
- The CRC was of the view that these reasons cited above offer
a more complete explanation for the rise in Singaporeans' spending
in recent years. It agreed that rising prices have played a part.
However, it is not the only, or even the major, factor. Most
Singaporeans have enjoyed this shift to the so-called "cosier-but-costlier"
lifestyle. The Committee thus urges Singaporeans to reflect on
how their lifestyles and spending patterns have changed over the
years by considering the food they bought in supermarkets, the
dishes at hawker centres, the higher quality finishing in their
homes and the wider ownership of household goods. Many items
which were once special treats have become commonplace these days.
Committee members felt that there was nothing wrong with Singaporeans
desiring this better lifestyle. But they must recognise that
this comes at a price: higher spending, more bills and a sense
that the cost of living was rising. It is quite all right to
aspire for better, but we should not be overly disappointed if
we do not achieve them as quickly as we aim for.
ACCURACY OF THE CONSUMER PRICE INDEX
- The Committee also reviewed its earlier study in 1992/93 on
the accuracy of the Consumer Price Index and found it to be calculated
using methods which were sound and in line with international
standards. Allegations that the index is "massaged"
proved, upon scrutiny, to be utterly baseless. The allegation
is a serious one, which could tarnish the reputation not only
of the DOS, but also Singapore's standing as a country where the
business of government is taken seriously and is not subject to
manipulation by corrupt officials for financial, personal or
political gain. The SDP-PKMS, for their part, would have Singaporeans
believe that they live in a place where official statistics is
routinely "massaged''. This would be a matter of utmost
concern if the parties had produced evidence to prove their charges.
But as they have not, the Committee considers the allegation
a matter of grave regret.
CONCLUSION
- In view of these findings, and in the absence of the SDP-PKMS
offering any concrete evidence to the contrary, the CRC saw no
grounds for the parties' allegation that the cost of living here
had risen "phenomenally" and that rising prices was
the cause of this.
- Such allegations, not backed by evidence and at odds with
the real situation, could lead to wrong and harmful policies being
undertaken. This would prove very costly for the country in the
long term.
- To prevent this, efforts would have to be taken to plug the
perception gap on inflation. The Committee hopes that its deliberations
have gone some way towards this process of airing the issues.
Singaporeans now know that there are more reasons why costs and
spending have risen, as well as the range of options open to them.
- But this is just a start. To get the message to the people,
sustained follow-up action will have to be undertaken by MPs,
grassroots organisations, trade unions, government departments,
the Feedback Unit, and the local media. Only when Singaporeans
understand the reasons why they are spending more these days and;
are fully aware of the measures in place to protect them from
costs rising uncontrollably, as well as the further steps proposed
by the CRC to help them cope, would public concern over the cost
of living in Singapore be addressed and allayed.
COST REVIEW COMMITTEE
1 November 1996
ANNEX A
MEMBERS OF THE COST REVIEW COMMITTEE 1996
Mr Lim Boon Heng (Chairman) Minister without Portfolio
Prime Minister's Office
Dr Ow Chin Hock MP for Leng Kee
(Deputy Chairman) Chairman, Feedback Unit Supervisory
Panel
Chairman, Government Parliamentary
Committee for Finance and Trade &
Industry
Mr Chia Shi Teck Executive Chairman
Heshe Holdings Limited
Prof. Chia Siow Yue Director
Institute of South East Asian Studies
Mr Warren Fernandez Assistant Political Editor
The Straits Times
Madam Halimah Yacob Central Committee Member
Consumers' Association of Singapore
Mr Freddy Lam Fong Loi Group Chairman
Solid Gold Group of Companies
Mr Stephen Lee President
Singapore National Employers'
Federation
Nominated Member of Parliament
Dr Lee Tsao Yuan Deputy Director
The Institute of Policy Studies
Nominated Member of Parliament
Mr Lim Jim Koon Editor
Lianhe Zaobao
Mr Nithiah Nandan General Secretary
Union of Power & Gas Employees
Mr Victor Pang Koon Seah Vice President, National Trades Union
Congress
General Secretary, Singapore Airport
Terminal Services Workers' Union
Madam Tan Poh Hong Member
Changkat Citizens' Consultative
Committee
Mr David Wong Chin Huat Chairman
Bedok Citizens' Consultative Committee
ANNEX B
TERMS OF REFERENCE OF THE COST REVIEW COMMITTEE 1996
- To examine the following claims made by the SDP and PKMS with
respect to increases in the cost of living and the Consumer Price
Index (CPI):
- For basic necessities such as housing, health care, transportation
and education, "the increase in the cost of living has been
no less than phenomenal", as shown by the sharp increase
of 76% in Singapore Households' Average Monthly Spending between
1987/88 and 1992/93.
- The CPI is the result of "statistical massage of the
numbers"; and
- It is "nonsensical" to use the single figure of
the CPI to represent the increase in the cost of living, because
"you lose information when you lump all the data into one
figure and it does not give an accurate picture".
- To review and update the findings and recommendations of the
Cost Review Committee Report relating to the cost of living, in
the light of changes and new data available since 1993.
- To examine the gap between public perception of increases
in the cost of living and the inflation rate as represented in
the official statistics.