Recently the Liberal Party announced a 10 per cent voluntary pay cut for all eight legislators with immediate effect. In the face of a huge expected budget deficit, there may be more symbolism than substance in the $560,000 we return to the Treasure. However, we feel it is important to demonstrate our readiness to ride through these difficult times by doing what we can to relieve the burden on the public purse. We hoped that the gesture would encourage civil servants to follow suit.

Evidence to date is pointing toward a structural deficit in Hong Kong's economy. We have already had an operating deficit since 1998-1999 and that will remain for the next 3 years. After the September 11 terrorist attacks, the amount is likely to go up from $3 billion to $70 billion according to the Financial Secretary.

One way to fix the deficit, is to look at ways of improving revenue. In a slowing economy, government revenue is bound to come in at a level below forecast in the budget, creating an even higher deficit. To introduce new taxes such as a sales tax in the current economic climate will not be effective either, as it discourages spending and therefore investment.

An alternative way around the problem is to curb government spending. However, cutting public programmes will hit the lower class hardest in bad times like these. Instead of scaling down on necessary services, it makes more sense to review civil service salaries.

Last year, civil service and subvented organization salaries accounted for $160 billion. That is to say, for every $10 of recurrent expenditure spent by the government, $7 goes into the pockets of our public servants. Behind this disproportionate allocation is a civil service that is, in general, over-paid. Taking comparable positions in the private sector as examples, junior typists in the government earn $12,000 a month, about 50% to 100% higher than in the business world. A fresh university graduate engineer makes $21,000 per month, or 75% more than his peers in private firms.

The blame for this disparity lies in the lack of a pay level review over the past 10 years. That has allowed civil service pay to remain at an unreasonably high level. At the same time, a flawed pay adjustment mechanism fails to accurately reflect pay trends in the private sector. Despite government claims that these mechanisms have been working effectively, the reality is that our civil servants have had increases of 18% and 15% respectively for senior and middle/lower grade since 1997 while the private sector has gone through massive consolidation and pay cuts.

The claim that civil service pay cuts will lead to lower private sector salaries is totally unsubstantiated. Pay in the private sector is dictated by supply and demand, and by employees performance, not by civil service salaries policy. In fact, many of our 3 million strong work force have already taken 10% to 20% wage reductions to help businesses weather the downturn. Rather than asking civil servants to take the lead, we are asking them to follow the private sector.

Unsurprisingly, there is strong public support for bringing civil service pay back in line with private sector salaries. In a random telephone survey our Party conducted recently, 78% out of over 1,200 respondents favoured legislators taking pay cuts and 62% would like to see the civil service do the same.

As civil servants, they have a basic duty to put public interest before their own --- a virtue that their counterparts in Singapore showed to a high degree when all senior staff agreed to a 10% pay cut. But so far, our civil service associations have registered strong disapproval of any such move. They claim it would have an adverse effect on their members' morale, unlike general workers who are more than willing to accept pay cuts and low morale in exchange for temporary job security.

In financial terms, civil servants are less economically vulnerable than most people. They have guaranteed job security, pensions and attractive fringe benefits, not to mention their increased spending power from the upward-only pay review after 1997 against a deflationary background.

Civil servants in Hong Kong have ample room to agree to a 10% pay cut should they choose to be more sensitive to what we, as members of society, see as "social responsibility". The $16 billion saved could be used on public programmes. It would lessen our sizeable deficit, thereby avoiding painful but unrewarding attempts to increase revenue by new taxes, including a sales tax. The choice is for our civil servants to make, but it is essential that they demonstrate accountability in their actions, to you and me, the people who are their paymasters.

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