Debated in Parliament on 10 Mar 2017.
Debate resumed.
Senior Minister of State Desmond Lee.
Madam, I come now to the points raised by Dr Teo Ho Pin and I thank him for highlighting issues surrounding the handover of new developments to Town Councils. A moment ago, I talked about the handover between Town Councils. Now, I am talking about the handover from HDB of new BTOs to Town Councils. We accept there is always room to do better. HDB is continually seeking to improve its handover processes with Town Councils. As Members know, HDB has developed a handover procedure booklet which details various proposed improvements to the handover process. The proposed improvements are as follows.
First, HDB will notify Town Councils of the completion of common property three months in advance, so as to allow Town Councils to plan their resources early and to arrange for subsequent meetings. After that, HDB will arrange for a briefing to the Town Council on the essential mechanical and electrical (M&E) systems that are developed. It will also arrange for a meeting with the Town Council on site one month before completion so that the Town Council can take a look at the development and raise feedback early. This draft booklet was sent to all Town Councils on 1 March this year for comments. We hope Town Councils will give HDB their feedback and work with HDB to refine the procedures, which we will continue to improve along the way.
Various members also raised concerns about the performance of lifts in HDB estates. We have covered this fairly comprehensively during MND's Committee of Supply (COS) debate a few days ago. In essence, our approach is to ensure that our lifts remain safe and reliable, an approach which requires multi-pronged support from the Building and Construction Authority (BCA), HDB, Town Councils and the industry.
Madam, I thought it would be useful, since many Members asked about LRF and the long-term sustainability of lifts, to talk about this so that all of us here understand the challenges that we collectively face. As I have said at MND's COS, as our estates age, all of us, including Town Councils, will need to do more in maintaining and replacing our estate infrastructure, such as lifts, facades, water tanks and roofs, so that our estates remain liveable and safe. It is easy to build and continue to build and to agree to requests to build. It is less attractive to talk about the long tail of maintenance. But let us accept that this is an essential part of city living.
Since Town Councils bear the responsibility for the eventual replacement of estate infrastructure and such expenditures could be large and backloaded, Town Councils need to take a longer-term view of their finances, plan ahead and start saving today for the expenditures. A good example is the maintenance and replacement of lifts, which many Members talked about. To keep them reliable and safe, lifts need to be maintained regularly and replaced every 25 to 30 years, depending on specifications.
Mdm Speaker, with your permission, I will show a slide very quickly on the screen that will expedite the explanation.
Yes, please. [A slide was shown to hon Members.]
Lift replacements require significant expenditure. Based on our projections, over the next 30 years, Town Councils will need to progressively replace about 24,000 lifts across all HDB estates, at an estimated cost of about $6 billion. Many of the costs are backloaded, occurring beyond 2025. So, therefore, while Town Councils' current sinking fund balances, which may total up to $1 billion, seem healthy, they are not sufficient to cover the cost of future lift replacements, let alone other works like cyclical repainting and replacement of other key infrastructure.
Last September, we asked Town Councils to give us a sense of their financial projections over the next 10, 20, 30 years. We accept that the further you look ahead, the less reliable are your projections. The Town Councils are aware that at their current levels of income and sinking fund contribution rates, they are unlikely to have sufficient funds for the replacement costs for the long term. Some may even fall into deficits even earlier.
That is why we have reviewed the Town Councils' projections and announced some changes earlier. As the chart on the screen shows, Town Councils will have to set up a dedicated LRF, which will be created by this Bill, that is ring-fenced for the replacement of lifts and lift parts. Town Councils will have to set aside a minimum of 14% of their S&CC income and Government grants into LRF and a minimum 26% to the general sinking fund.
The minimum contribution rate for the LRF could have been higher if we had sized it based on a full lifecycle costing approach for lifts, a point which Mr Ang Wei Neng had asked about. However, we decided to ease in the changes for Town Councils and provide significant Government financial support to help Town Councils and residents with these costs.
MND had earlier announced the set of new grants and measures to provide additional financial support for Town Councils. First, a $450 million Lift Enhancement Programme over 10 years to help Town Councils fund the cost of lift enhancements. Second, additional matching grants to match half of Town Councils' quarterly contributions to their LRFs to help Town Councils build up their LRF more quickly. This will cost over $50 million a year to the Government. Third, a Lift Maintenance Grant to help Town Councils cope with higher lift-related servicing and maintenance costs, estimated at about $13 million a year.
As the chart on the screen shows, the extra funding that Town Councils will receive adds up to more than $100 million a year, or a billion dollars over the next 10 years. This is a substantial package, which is on top of the current S&CC Operating Grants that we issue to all Town Councils, and Goods and Services Tax (GST) Subvention Grants and the S&CC rebates, all of which amount to more than $120 million a year. This effectively doubles the amount of annual funding that Town Councils currently receive.
While the Government has taken the lead to share significantly in the costs of maintaining and replacing estate infrastructure, this is very much a shared responsibility. Town Councils need to do their part, to plan our finances, start saving now and gradually build up our sinking funds and LRF over time. This is a responsibility for all Town Councils to do.
We have seen how the dynamics have played out in private condominium estates. Immediate pressures from residents at annual general meetings (AGMs) to cause Management Corporation Strata Titles (MCSTs) to kick the can down the road and avoid raising their sinking fund contributions. But when there are major estate infrastructure works, these MCSTs find themselves unable to carry them out. All residents living at that point in time at the estate will then have to cough up a tremendously large amount of money to replace, say, a lift or an old water tank.
This is not how we should operate in our public estates. We should prepare and save for our collective future and not kick the can down the road, with everyone contributing their fair share towards improving our living environment rather than leave future generations to bear the costs.
Madam, I would round up by outlining what this Bill means for Town Councils and our residents. First, the new provision holds Town Councils to higher standards of governance, transparency and accountability in carrying out their duties. This is the right thing to do and Singaporeans expect this of Town Councils.
At the same time, the Bill puts in place a system for regular reporting and calibrated actions along with the necessary levers for enforcement. These will allow more timely and effective interventions to be taken when residents' interests are put at risk.
Mdm Speaker, I believe all Singaporeans elect their MPs in good faith. But recent developments suggest that we cannot assume that MPs will always act in the residents' best interests.
Our Town Councils continue to have broad autonomy and latitude in deciding how best to manage the estates under their charge. The Government also has a responsibility to put in place a framework of good governance and accountability, and to request for information, investigate and intervene when the trust is breached or when things go wrong.
Taking a light-touch approach does not mean that the Government adopts a no-touch policy. At the end of the day, the Government's overriding considerations must be to safeguard residents' interests and public funds. This Bill will set a strong foundation for the good governance of our Town Councils, taking into account developments over the years and building on 28 years of experience operating Town Councils. I thank Members for their support. [Applause.]
Mdm Speaker: Mr Pritam Singh.
Mdm Speaker, I would just like to clarify with the Senior Minister of State the early suggestion of the AGO doing rotational audits at various Town Councils, would the Ministry consider that as a way to improve the current Town Council governance structure?
Madam, I said earlier that for section 43B, which is for investigations, they will be carried out by independent professionals and auditors or by AGO.
Mdm Speaker: Ms Sylvia Lim.
Madam, four clarifications for the Senior Minister of State. Earlier in his speech, he alluded to the Court case which MND brought against AHPETC and the position that we took at the time. I would like to clarify that we took the position based on legal advice and, as it turned out, the Court did rule that MND was not the proper party to sue the Town Council in that instance.
Secondly, regarding civil servants, the Senior Minister of State seems to suggest that I am implying that civil servants are not responsible or somehow biased. Let me just clarify that as a former civil servant myself, I do recognise that civil servants do their best to act responsibly. But in this case, what Part IVA is expecting HDB employees, for example, who are appointed as inspectors, to do is to possibly make adverse findings against their political masters. The investigation will be triggered by the Minister for National Development himself. While he may want to do the right thing or the public servants may want to do the right thing, the reality is such. I think those of us who are realists will know the problem.
Thirdly, regarding the issue of whether MND is the proper entity to implement or to supervise Town Councils as such, as the Senior Minister of State has repeated many times, fundamentally, Town Councils are political institutions. To vest a political officeholder with the decision-making power over political institutions, is just not tenable. As I mentioned in my speech, it is not just my view, but it is also the view of some corporate governance observers who have mentioned that, at least in terms of perception, it just does not look right. He also mentioned that MND has also been so-called quite nice to AHTC by writing to us to tell us that our accounts, maybe there are some things that we need to clarify but, at the same time, we see a media release yesterday, nicely timed for today's debate. So, this is just another example of the Ministry's behaviour.
For now, one last clarification. I am not too clear about what the Senior Minister of State meant regarding the conflicts of interest and the C-suite, which he talked about in his opening speech. Currently, the way the provisions are worded, so long as this person has a significant influence over the business of the MA, that person would not be able to be a Town Council Secretary or GM. The point is, is it just the Chief Executive Officer (CEO)? What is the meaning of significant influence? It cannot just be at that level.
Madam, the first question was about whether MND was the right party to sue, what the Court found and what her lawyer said. AHTC, when it was brought to Court, was asked to respond to an application by MND to let the Court appoint an independent auditor to look into its difficulties. It was not a case of MND asking the Court to allow MND to go in. It was MND asking the Court to appoint an independent auditor. The first key point that struck us was that AHPETC or AHTC resisted that Court application as framed.
The point about MND being found by the Court not to be the right party had nothing to do with this point about whether anything could be done if there was mismanagement. It was purely based on the Court's reading of whether it was MND or HDB, and ultimately, they said it was HDB. And HDB made the application to the Court of Appeal.
The key point I would like this House to take away is that while Ms Sylvia Lim talked aspirationally about the need for independence, an independent oversight, what the Town Council was arguing in Court was that, where there was mismanagement of funds, nothing could be done beyond the ballot box.
The second point was about civil servants and about whether they are prepared to make adverse findings against political masters, I think she has just contradicted herself. First, she says on the one hand, she said her former colleagues are people of integrity and of spine and steel, and will do what is right, as is the ethos of this Public Service. And on the other, in a backhanded way, she says they will kowtow their timorous souls. In fact, that is what she is saying.
I think we object to that. Our officers are brought up with an ethos of integrity, service and excellence. There is, indeed, now ongoing, a CPIB investigation into certain individuals, or an individual in the Ang Mo Kio Town Council. That is reported in the news. What is Ms Lim's analogy extending to that case going to be?
Third, MND being political because the Minister is a politician and that Town Councils are political and, therefore, the Ministry should not be a regulator. The Ministry has been the regulator for 28 years. Yes, we have more powers today to intervene, but these powers are because the unspoken compact when the Town Councils were formed 28 years ago has been broken. That compact is premised on Town Councillors and elected Members, recognising the electoral accountability, the visibility to the residents, would do what is right to fix the problems and would proactively do it, as has been wont of many Town Councils by the Government who would report to CPIB and the Police when things are wrong.
But in AHPETC's case, despite its external auditor's findings, despite the AGO's report, despite the findings by the High Court and Court of Appeal, and despite KPMG's report, take the view that, "Come, the reports do not say that definitively; yes, there is a cloud, but you prove it and I will sit tight."
Even today, we have to wait for an independent panel, external from the Town Councillors, to take decisive action.
So, when it comes to whether MND is the appropriate regulator, I think it is. We have indicated to Mr Pritam Singh that in regard to clause 43B, it would be an independent auditor, independent individual, who will conduct investigations of all Town Councils.
As to conflict of interest, Madam, we have to decide where to draw the line. Where there is a conflict of interest, the first basis, the first thing you do, is to declare it, have it registered and recuse yourself. Do not take part in the decision because you are conflicted.
But we have gone much further to say that if you are a person wielding significant influence over the MA, you are not allowed to occupy key offices in the Town Council. We have to strike a balance between a recusal process and an absolute prohibition. And I think we have taken a high-water mark.
Ms Lim, we are going around in circles, as you can see. Do you want to make another clarification?
To ask a question, Madam.
Yes, please proceed.
Yes, Madam. To follow up on what the Senior Minister of State mentioned about the AGO, our proposal is that the AGO does rotational audits of all Town Councils. I think what the Senior Minister of State is responding to is that he is saying that under Part VIA, if the Minister should instruct so, the AGO may be activated. Fundamentally, to ensure an even keel and uniform standard throughout all the Town Councils, we see great value in getting the AGO to do rotational audits of Town Councils, whether or not the Minister triggers them.
Madam, each year, Town Councils already have to be audited by external auditors and the AGO has decided that individual Town Councils can suggest auditors, which have to be approved. That is the case every year.
Madam, Ms Lim is confused between the annual financial audit and the audit in Part IVA. In Part IVA, there are two kinds of interventions. One is health checks, compliance reviews; and the other is where there are investigations arising from a reasonable suspicion of wrongdoing. In the latter, I have explained to Mr Pritam Singh that in regard of the investigation into Town Councils, it will be carried out by independent professionals. The AGO can already be triggered under the clauses in the Audit Act, as had been the case for AHPETC.
*Question put, and agreed to. (proc text)]
Ms Lim, do you wish to record your dissent?
Yes, Madam, we would like the WP Members' dissent to be specifically recorded that we cannot accept the Bill because of Clause 24.
Can those who wish for their dissent to be recorded please stand up?
Hon Members Mr Low Thia Khiang, Ms Sylvia Lim, Mr Png Eng Huat, Mr Muhamad Faisal Bin Abdul Manap, Mr Chen Show Mao, Mr Pritam Singh, Assoc Prof Daniel Goh Pei Siong, Mr Dennis Tan Lip Fong and Mr Leon Perera stood at their seats for their dissent to be recorded.
Bill accordingly read a Second time and committed to a Committee of the whole House.
The House immediately resolved itself into a Committee on the Bill. – [Mr Desmond Lee.]
Bill considered in Committee; reported without amendment.
Question for Third Reading put, and agreed to.
Members who are against it, please stand up. Yes, your dissent is recorded.
Hon Members Mr Low Thia Khiang, Ms Sylvia Lim, Mr Png Eng Huat, Mr Muhamad Faisal Bin Abdul Manap, Mr Chen Show Mao, Mr Pritam Singh, Assoc Prof Daniel Goh Pei Siong, Mr Dennis Tan Lip Fong and Mr Leon Perera stood at their seats for their dissent to be recorded.
Bill accordingly read a Third time and passed.
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