Tuesday, 27 March 2007

Budget 2007 Debates: Prime Minister's Office and Ministry of Finance, 2 March 2007

I've mentioned this before, the Committee of Supply debates (which are the part of the Budget debates focusing on the individual Ministries in turn) are done by way of "cuts", which are really proposed amendments to cut the budget of each Ministry. This is just a procedural device to enable a debate to take place within the context of the rules.

In the recent Budget debates, two of my cuts were for the Prime Minister's Office and the Ministry of Finance. I have published below my speeches for these two cuts, and the relevant part of the Ministers' responses.

The first cut, for PMO, was something I thought of when I was talking to someone about ministerial salaries. I knew about the benchmarking, but wanted to know whether performance bonuses were included in the benchmark.

Given the sensitivity of this entire issue, it is no surprise that the Government has always been shy about it, and so very little is known about how remuneration for Ministers and top civil servants is structured. That's why I asked the question, to get the answer into the open.

The second cut, for MOF, was the result of this being the first time I read the Expenditure Estimates (which is a 400-page book that contains a line-item breakdown of each Ministry's budget -- but don't be deceived, it's not necessarily as detailed as that sounds, because it depends on the level of generality with which the line-items are defined).

I noticed that each Ministry had KPIs, and that was the first time I had heard of such KPIs. So I wanted to find out more about them. In fact, I wanted to ask if a Ministry's failure to achieve its KPIs had any correlation with the personal performance evaluations of the leaders of that Ministry. But I was not called on during clarification time despite raising my hand, and I was not able to ask that question.

Public Sector Salaries

Mr Siew Kum Hong (Nominated Member): Sir, our Government's policy is that Ministers and top civil servants should be paid fair and competitive salaries. I support this. Ministerial salaries and Administrative Service salaries are directly benchmarked to top private sector salaries as declared to the IRAS. The Staff Grade 1 salary is pegged at two-thirds of the income of the 24th highest earner among the two eight earners from six professions. The Superscale G salary is benchmarked using a similar formula. I also understand that Legal Service salaries are pegged, albeit not directly, to the private sector.

Sir, the private sector salaries used as benchmarks will already include annual bonuses, such as performance bonuses, since these bonuses are assessable income. I would like to ask whether these officers, in particular, Ministers and Administrative Officers, are entitled to additional bonuses, including performance bonuses and, if so, how they are assessed and fixed.

I would also like to ask whether the award of such bonuses is consistent with the fact that the salaries used as benchmarks already include performance bonuses.

The Minister for Defence (Mr Teo Chee Hean): ... Mr Siew asked how we benchmark civil service pay. Each scheme of service is benchmarked to its equivalent in the private sector. For example, the salaries of accountants and lawyers in the private sector serve as benchmarks for the same professions in the civil service. If there are no directly equivalent jobs, we look at jobs in the private sector that are held by employees who have similar types of backgrounds and educational qualifications, eg, graduates or diploma holders. The salary comparisons are based on the total annual salaries which include all annual and performance related components. There are no other additional components.

The last major salary revision for the civil service, as pointed out by Mdm Halimah, was in 2000. But, since then, we have reviewed and made adjustments to specific schemes that have fallen behind their market benchmarks and to improve their career structure to make them more competitive. For example, last September, the Education Service revised its starting salaries, added promotional grades and increased the retention payment for teachers. Such recently reviewed schemes of service are not too far from their private sector benchmarks. Nevertheless, some services have fallen significantly behind the private sector, especially in the last two years. An example is the Administrative Service which is the key service, from which most top public sector leaders are drawn. Administrative Service salaries have not been reviewed since the year 2000 nor have salaries for the political, judicial and statutory appointment holders which are pegged to the Administrative Service salary structure.

We must ensure that public sector salaries stay competitive. Hence, the Government is currently reviewing public sector salaries. We expect to announce the revisions in April. Unlike the last round in 2000, there will not be a uniform, across-the-board large revision. Those services which are lagging significantly behind the market are likely to receive larger adjustments while those which are closer to the market will receive smaller adjustments. We will not just be adjusting salaries, but would take the opportunity to bring salary structures more in line with our philosophy of linking pay to performance. I would like to see as much as possible of the revisions paid in the form of performance-related components. This way, we reward deserving civil servants and sustain a high-performance culture in the civil service.

Key Performance Indicators for Ministries

Mr Siew Kum Hong: Mr Chairman, I noted that the expenditure estimates contain various key performance indicators (KPIs) for each Ministry. This, being the first time that I actually read the expenditure estimates, was completely new to me. These KPIs appear to be derived from the Mission Statement of each Ministry, in an attempt to quantify the essentially qualitative nature of Government.

Sir, in the private sector, KPIs are used for performance evaluation purposes. This is self-evident from the term itself. A target is set for the individual or organisation and then that individual or organisation's achievement against the target is assessed. Properly done, this is a fair and transparent method of performance evaluation.

It does seem that the KPIs for the Ministries are intended to serve such a purpose. If so, I think it will be helpful if the Minister could explain the consequences of a Ministry's failure to achieve its KPIs.

Of course, we must remember that Singapore, as a small country, is subject to external pressures. So, sometimes, a failure to achieve a KPI may not be attributable to poor performance. That will be so especially for KPIs related to the economy, such as KPIs tied to economic growth. But, surely, external circumstances cannot possibly explain all failures to achieve KPIs.

I would also like to ask the Minister to clarify how these KPIs are set. I ask this because some KPIs set for financial year 2007 are actually lower than the achievements from preceding years which does seem odd to me. I would give three examples to the House.

Firstly, MCYS has a KPI based on the recidivism rate of Mandatory Counselling Programme clients. In FY 2004 and 2005, this rate was 2.7% and 1% respectively. In FY 2006, it rose to 5%. For FY 2007, the target remains at 5%. That seems strange when we have previously achieved much lower targets.

Secondly, the Ministry of Home Affairs has a KPI for the number of fatal and serious injury road accidents per 10,000 motor vehicles. For FY 2004, 2005 and 2006, the actual percentage ranged from 3.4% to 3.9%. Yet, the FY 2007 target is 6.5%.

Finally, the Ministry of Manpower has a KPI based on the total upgrading supported by headcount. In FY 2006, this was 73,000, but the FY 2007 target is 64,000.

Of course, if the KPIs are not used for performance evaluation purposes, then I hope that the Minister would clarify the purpose of these KPIs.

The Minister of State for Finance (Mrs Lim Hwee Hua): ... I wish to thank Mr Siew Kum Hong for his interest in the KPIs or the Key Performance Indicators. I wish to add that some of the key indicators found in the Report Card to the Cabinet are actually reported in the Budget Book. Mr Siew has asked about the relevance of these KPIs. These KPIs are set with reference to our national strategic outcomes and formulated based on best practices from other countries and international organisations. Ministries continually review these KPIs in consultation with their Government Parliamentary Committees to ensure that they remain meaningful.

We employ KPIs in the same manner as many other countries do - to monitor performance and the achievement of stated outcomes. Salient KPIs are scrutinised by Cabinet and Members of Parliament may comment on them. The Ministry of Finance also uses KPIs to engage Ministries on whether they are measuring the right things, and whether their strategic outcomes are aligned with national priorities. It serves more as a dashboard.

Hence, we do not tie budgets to the meeting of KPIs. Budget should be seen as a means to good performance rather than a reward for performances. Indeed, if a KPI is not met, it could mean that the Ministry needs more resources than less. A more indepth understanding on why KPIs are not being met could then lead to more resource adjustments or programme. If there are questions on specific KPIs, Members of Parliament can raise these queries at the COS debate for the respective Ministries.


Aaron said...

It seems that the minister did not answer your question as to whether the fact that pte sector salaries used as a benchmark include bonuses?

Yawning Bread Sampler said...

More than that, while the question was focussed on salaries of the top ranks, the answer seems to be with respect to the middle ranks - "accountants and lawyers".

I read the answer 3 times and I still cannot figure out what it actually means.

Siew Kum Hong said...

To aaron and yawning bread sampler:The private sector salaries used as a benchmark do include bonuses. That has always been public knowledge.

I'll agree that the answer did not specifically mention ministerial and top civil servant salaries. Instead, it just generically referred to salaries in the public service, which I took to include those two categories of salaries.

That is why I did not ask a clarification. Minister Teo later (during a tea break the next day or the day after, actually) confirmed to me that the benchmarked figures for ministers and top civil servants do include bonuses.

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