While the Government has decided to table the pay-cut legislation to the Legislative Council for approval on July 10 as scheduled, a handful of civil service unions delivered their last shot against this and called for a major street demonstration today.

The pay-cut proposal is a vital measure enabling the government to trim its huge budget deficit.

For the fiscal year 1992-93, recurrent public expenditure was around $105b. Ten years on, it has doubled to $220b. Seventy per cent of this sum is spent on so-called civil service related "staff costs", including personal emoluments, pension, and subventions.

Ever-expanding staff costs are the biggest obstacle to Government's balanced budget. The fact is, we are paying civil servants much higher than the market rate, even without counting their generous and numerous fringe benefits.

Article 107 of the Basic Law requires the Government to "follow the principle of keeping expenditure within the limits of revenue in drawing up its budget. It must also strive to achieve a fiscal balance, avoiding deficits and keeping the budget commensurate with the growth rate of its gross domestic product."

However, there have been operating deficits for four consecutive years since 1998-99. The budget deficit for 2001-02 hit a record-high $63b, and a further $45b for this year was forecast.

Since civil servants are in permanent jobs, their employment is guaranteed. It follows that their pay and benefits should be within reasonable limits, set maybe just a little higher than those in the private sector. But now salary and benefits have reached a very high level -- so high that the tax-paying public may regard it as altogether unrealistic and unsustainable.

The Liberal Party's wage survey in February showed, for instance, a junior Government clerk with a Form 4 education earns $12,000 a month but his private sector counterpart makes only $8,200, a difference of 46%. A government experienced computer operator with Form 5 education earns $17,000, while his private sector counterpart only $12,300. Most strikingly, a newly qualified university graduate is currently offered $10,000 or less for a general administrative post in the private sector, but the government offers the same position at $16,000.

Why have the salaries of civil servants rocketed over the decades? I think the snowball effect of the private sector "Pay Trend Survey", which distorts the true situation and is weighted in favour of the civil servants, is the main reason.

The survey limited itself to 91 large enterprises all employing a minimum of 100 staffs, and asked how much their workers made compared with last year. The survey did not consider how many workers those companies had been laid off in that period, how much more work was done by fewer hands, and how many highly paid workers had been replaced by less costly ones.

A more comprehensive and objective survey would have confirmed that companies in the private sector are hiring people on lower pay and have enhanced productivity. Has the Government followed suit?

Time and again, the Liberal Party has urged the Government to revise and readjust the Pay Trend Survey (PTS). Now it has embarked on a comprehensive review of the civil service pay and policy system, and contends that a PTS review cannot be implemented in isolation from the broader reform agenda. This is a good move but it means many more months or years are needed to review and reform the entire system.

Based on the latest distorted findings of the Pay Trend Survey, the Government decided to set the pay cut at very modest 1.58% for junior ranked civil servants, 1.64% only for the middle ranked, and 4.42% for the senior ranked, bringing an annual saving of only around $2 billion. Considering the aggregate deflation of 10% over the last four years, and the average 10% salary increase over that same period, the cut would not adversely affect the livelihood of the civil servants.

We also hear a lot of talk about civil service morale. It's on everybody's lips. I agree that Hong Kong is very lucky to have a civil service that is honest, efficient, energetic and is conscious of its need to serve the community. This is one of our great assets. But the big question is how much should they be paid?

Civil service is part of the wider Hong Kong society. It cannot expect to remain aloof from the problems and challenges that everyone else has to face.

These have been tough years for business. The global economic slowdown has seen profits slashed, often drastically. Many firms have had to get smaller or to go out of business entirely. Naturally, this has had a severe effect on staff. There are many people in Hong Kong who are in bad financial shape, through no fault of their own. These are the backbone of our community, workers, artisans, owners of small businesses, executives whose firms have closed, moved or downsized.

These decent, honest people now find themselves without jobs. Some cannot afford clothes for their children. The good life that many in Hong Kong came to take for granted has disappeared, for a lot of people. Many are struggling to pay mortgages. Some have had to take children out of private schools. Family relations are strained. What about their morale?

Civil servants should not expect to be totally removed from the harsh realities of the present economic situation. In the good times, government paid public servants high salaries with very generous fringe benefits. In these hard times, it is vital to cut spending. We have to tighten our belts. It is unrealistic for civil servants to expect to be immune from the real world. They must, at least in part, share some of the pain.

I am not suggesting mass reductions in the civil service and their pay. The proposals are for modest cuts in both size and pay. These are reasonable, the majority of the civil service, should accept this necessity.

They have to remember that hundreds of thousands of their fellow Hong Kongers are suffering in silence. There are a lot of people in our housing estates and in privately owned homes who would pray for the chance of having a job and facing only a 1.5% pay cut.

However, civil service unions refuse to accept even this. They object that a law be drafted that would require them to surrender 1.5% of their wages. However, the contractual arrangements between the Government and the civil servants do not contain an express provision authorising the Government to reduce their pay. The proposed Bill is therefore a piece of one-off legislation which legalizes the pay-cut. Put it another way: we simply had no choice but to proceed with legislation, if the pay-cut is to be fully implemented without having government being sued.

What the public hear from the civil servants now is the opinion of their unions. I doubt the majority of civil servants would totally agree with them. I believe many civil servants would accept the current pay-cut proposals, which mean they only have to surrender 1.5% of their extra earnings following the 10% pay increase of the last few years.

Civil servant unions leaders are irresponsible in calling for a demonstration. They fail to heed public sentiment over the budget deficit and the over-generous pay packages of their members. If there are tens of thousands of civil servants marching in the street against this move today, it will only call into question their commitment to the people of Hong Kong, in spite of their claims of efficiency and social responsibility.

Hong Kong's civil servants have to make their choice. Either they are with the community or against it. Whatever their individual positions, they need to speak their own minds. It would be sad for Hong Kong if it were true that the morale of its highly-acclaimed civil servants rested solely on how much they are paid.

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