The eight political parties in the Legislative Council formed a coalition last September with the purpose of reviving our economy after the terrorist attacks on the United States that triggered the global recession. We assessed our bleak situation and then forwarded some policy proposals to the Financial Secretary Antony Leung who has since adopted many of these for his first, and prudent, budget that seems to have the public's support and definitely ours.

The legislators' main objectives were to assist the government in balancing the budget, help our people through hard times, and initiate administrative reforms. The latest budget has met those criteria. Mr. Leung, heeding our advice, is determined to tackle the deficit by reducing public expenditure to less than 20 percent of GDP from the present, unsustainable 22.9 percent. Government share of GDP in Singapore and Taiwan, in contrast, is between 15 and 17 percent, excluding defense costs. He also agrees to keep fiscal reserves to 12 months of government spending rather than the previous 18 because the lesser amount is already enough to defend the Hong Kong dollar and assure foreign investors of our financial strength.

We said the sensible way to a balanced budget had to be a spending cut rather than new and higher taxes. We stressed that Goods and Services Tax now would only aggravate the recession, lose jobs, affect businesses, discourage consumer spending and scare away tourists. Mr. Leung shares our concerns about such a tax and has postponed any decision on it until he has doctored the economy back to health.

The only new tax he is considering is the land departure tax, called "the Boundaries Facilities Improvement Tax", for year 2003 and beyond. Legislators will work on a consensus to ensure that the tax, if implemented, is mild, does not disrupt cross border commerce and hurt commuters. We may not like increases on alcoholic beverage and tobacco duties and we will certain continue to debate whether to legalize football wagers. But neither can subtract from the substance of the budget, which is positive.

We support the decisions to freeze fees and charges for a year and reduce trade effluent surcharges and sewage charges that have hampered small businesses. We also applaud the waiving of business registration fees, a modest concession of $2,000 but can nonetheless make a difference to small businesses. Legislators unanimously back the government in reducing property rates by $5,000 for every household.

Mr. Leung, previously a banker, and the Chief Executive Tung Chee-hwa, previously a businessman, understand that small to medium enterprises need much more than praise and think tank advice to grow and provide jobs for our people. They need understanding, the right policies and tax breaks to tide them over their present difficulties. The momentary losses to the treasury can be made up with dividends when the economy recovers, which it is now doing.

The fact is the pay reduction could save the treasury $6 billion a year without serious impact on civil servants' living standards, which have in fact improved because of deflation. The cut would also comply with the Basic Law provision that civil servants' pay and benefits would be no worse after 1997 than before it. Some civil service unions have protested against the cut, alleging that it is biased against public employees. This is not true. The cut does not discriminate against but put their pay closer to private sector salary. I am cheered that many civil servants are not against making a minor sacrifice. Some had expressed solidarity with the rest of the community on Albert Cheng's morning after the budget program featuring Mr. Leung. Legislators urge the unionists not to take their case to court but their case to the people, to ask them whether it is right for civil servants to be sheltered from economic reality and be responsible in part for the $65 billion deficit.

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