We must trust the new measures will bring our finances back into the black, so that when the appalling $70 billion deficit has gone, these increases will be scrapped, and Hong Kong can return to its traditional low-tax economy.

That said, I support Mr Leung's proposals with some reservations. My main concern is that the administration is taking too long to impose the most obvious solution to our ills. The Liberal Party has repeatedly pointed out that 70 per cent of recurrent expenditure is staff costs. We see Government plans to impose pay cuts of 6 per cent over two years as fiddling while Rome burns. There is no justification for keeping employees on the payroll when they are surplus to requirements.

If anyone is in any doubt about that, let me remind them of the pay differential between civil servants and the private sector. When the Hong Kong General Chamber of Commerce conducted a survey comparing civil service averages with the upper quartile in the private sector, it proved the total remuneration (excluding housing benefits) for civil servants is 17 to 40 per cent higher than in the real world. Add the cost of benefits (excluding housing and education) and the average total civil service salary is 40 to 80 per cent higher than the upper quartile in the private sector.

It is equally important that the Government does everything it can to protect the stability of our currency, which remains pegged to the US dollar. If it was attacked by speculators, attracted by a soaring financial deficit, interest rates would rise, and we would all face an intolerable burden. Interest rates could go higher than 10 per cent, and the people struggling with negative equity, would be under strain as never before.

That is why it is so crucial that this budget has the balance right - providing real stimulus for growth as well as revenue raising and cutting expenditure. My major anxiety is that the SME's could be adversely affected by increased fees and charges. Many companies have stayed afloat by slashing overheads to the bone and merely covering their expenses. Firms who have survived this way for four or five years may not be affected by a profits tax. But for them increased fees and charges could prove the final straw.

That was a concern I stressed to the Chief Executive when he met the Liberal Party late last month. He agreed that small businessmen and middle class professionals are the main pillar of our economy and need support. I believe our strong urging helped in the decision to phase in the increase in salary tax over two years. But the fear has been voiced in all quarters that if the Financial Secretary falls short of his target of raising an extra $6 billion through savings or earnings by 2007, this sector of society will be forced to bear the burden.

It is all very well to talk of revising 3000 fees and charges in accordance with the principles of user-pays and full cost recovery, but the essential move in helping SME's to continue to operate, is to cut the cost of services. They should not be forced out of business through unreasonably high government-imposed administrative costs.

I am now scrutinising the details of these revisions. The business community accepts the 1.5 per cent profit tax as a temporary measure to avert financial crisis. But if it brings in $3.5 billion dollars, and the rest of the $6 billion is raised through higher fees and charges, the same people will be footing this bill. This will cause a ripple effect throughout the economy, with an increase in unemployment. It must never be forgotten that SME's are Hong Kong's greatest engine for growth, employing over a million workers.

The only consolation from Mr Leung's analysis of our finances, is the 2.3 per cent growth rate last year, and the 3 per cent predicted for 2003. The economy is not stagnating. But it must be underpinned by prudent measures to bolster commerce and industry, as well as administering harsh remedies to speed recovery.

Our future depends on courageous Government action, just as much as it does on the proven hard work and enterprise of its people. Given those two essentials, we will overcome our present troubles, but not for some time yet.

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