Low taxes mean low spending and a trim and efficient Government. No doubt there will always be strong pressures for higher Government spending. We want better teacher-student ratios. We hope for more healthcare subsidies. We press for more public transport infrastructure, more train lines, unemployment allowances, more housing benefits and so on. They are all reasonable requests, and some of them are worthwhile public expenditures. Others are desirable, nice to have, but may or may not be sustainable. So, we have to review each proposal, decide whether it is something that the Government should do first. And if we think we should do it, then we rank it against all the other demands on the exchequer to decide where it ranks, how much we should support it, and whether it has to wait or not, so that we can meet all the pressing demands within our budget.

I therefore agree with Mr Inderjit Singh and Mr Chew Heng Ching that all Government agencies should review their missions and objectives periodically and assess the relevance of their programmes. First, we have to decide: are we doing the right thing? Then we can examine whether we are doing it efficiently or not. So, Ministries have to prioritise their activities, instead of simply employing more people to do new functions while retaining existing officers in old and outdated functions. They have to subject their functions to a market test to see which of them can be better done by the private sector. They have to restructure and streamline their operations and share resources in order to derive greater economies of scale and better efficiencies.

These are primarily Ministries’ responsibilities but also Ministry of Finance’s duty to ensure because we are guarding public money. So, MOF has been working with the Ministries on this and we will regularly and systematically review the functions and the activities of the Ministries and statutory boards, to make sure that they are effective - not just efficient, but effective, doing the right thing.

We need to watch the costs of Government, and one cost which we particularly need to watch is the rising manpower expenditure, which several MPs have mentioned. Our total Government spending is now about 18% of GDP. By world’s standard, this is not high. The OECD, typically, is 30-40% of GDP. But considering that we were at 14% of GDP just a decade ago in 1995, from 14% we have ballooned up to 18%, just in nine years, I think there is reason to be watchful.

For a long time, the civil service had a headcount freeze. Then in 1996, MOF lifted it, mistakenly believing that controlling budget dollars was enough. We thought that if we just limited the amount of money the Ministries had, they would spend within their means and make sure that they were lean. But it does not quite work that way and, as a result of lifting the controls, the public sector headcount has grown by 17% since 1996. In eight years, it has grown 17%. In other words, more than 2% a year. Some of the increases have been necessary, eg, teachers, we want to improve teacher-student ratio, and we have recruited more teachers. But overall, I believe there has been some slackening.