Let the healing begin (27 July 2005)

It is like winning the lottery, but with a much bigger jackpot. The government woke up recently to find itself $10 billion better off after its Court of Final Appeal victory over civil service pay cuts.

Success was far from certain and, a day before the judgment was handed down, the administration appeared to be bracing itself for defeat. It had, after all, already been defeated in the two lower courts, and Financial Secretary Henry Tang Ying-yen had indicated that officials were prepared for a similar ruling this time.

As it turned out, the judgment was good news for the government, for common sense and for everyone in Hong Kong. It established that the move to scale back the historically high salaries of civil servants was within the Basic Law, and it avoided the nightmare budgetary scenario that defeat would have invoked.

The heavy cost of defeat would not have stopped at $10 billion. If the staff of subsidised organisations are included in the equation, the bill would have climbed to about $20 billion. On top of that, the government would have had to pay $4.2 billion more to its civil servants every year as salaries returned to 2002 levels.

It would have put an enormous strain on resources, and that cost would have had to be borne by the people through reduced public services and possibly higher taxes.

Now, like a lottery winner who only days ago was fretting about how to cope with a burdensome overdraft, the government can relax in the knowledge that its economic prospects are rosy. The original target for eliminating the budget deficit - the 2007-2008 financial year - looks like being met, and even achieved ahead of schedule. It is important, however, that the government uses its windfall wisely. It has a duty to show that it has a better use for what is, after all, public money.

Hong Kong is emerging from a painful and prolonged economic downturn, and the benefit of the court ruling should be shared with the middle class. They have been the cornerstone of Hong Kong's revival and the backbone of its rising prosperity. After the increases of the past two years, Chief Executive Donald Tsang Yam-kuen promised to lower salary tax for the middle class. He should fulfil that pledge in the coming fiscal year.

It is equally important that those of us enjoying the fruits of economic recovery do not forget the victims on our doorstep. I would like to see the government deploying more resources for poverty relief, in particular, to help the elderly, single-parent families and the children of poor families.

We cannot afford to leave these people behind or to forget their hardships.

Finally, the government and civil servants must ensure that there is no lasting feud over the salary-cuts ruling. The top court's decision must be accepted gracefully by the civil service unions and used by the government to start the process of mending relations.

There has been friction bordering on outright hostility between the two sides over the past three years. It has been divisive and damaging, and the bickering must stop. It is time for the healing process to start.

The government must build bridges and find a way to involve civil servants in a more consensual and consultative manner as it presses ahead with important reforms to the civil service pay structure.

At the heart of it must stand the principle of small government. The challenge ahead is to build on the common-sense victory of the ruling and continue to reshape our civil service so we can work together towards the goal of making total government expenditure account for less than 20 per cent of gross domestic product.