Exco 'to back civil service pay cut today' amid warnings on deficit

PUBLISHED : Tuesday, 21 May, 2002, 12:00am
UPDATED : Tuesday, 21 May, 2002, 12:00am

The Executive Council is expected to approve pay cuts of between 1.58 per cent and 4.42 per cent for civil servants today, according to an informed source.

The source warned there would be further spending cuts and new taxes if the lower-than-expected reductions in wages were blocked by legislators.

The Government aims to implement the pay cuts, which would save about $3 billion a year, through legislation. The reductions are in line with a survey of private sector pay trends that recommended pay cuts of 4.42 per cent, 1.64 per cent and 1.58 per cent for the top, middle and lower salary bands respectively. However, in his March Budget, Financial Secretary Antony Leung Kam-chung assumed a pay cut of 4.75 per cent, which would have saved $6 billion a year.

Officials hope the bill, to be gazetted next week, will be passed into law by mid-July and take effect from October.

The source said the Government needed to convince the international community of its determination to tackle the deficit - $65 billion at the end of the last financial year.

However, it is far from certain that legislators will back the move, with many remaining unconvinced about the use of legislative means to introduce the cuts. Civil Service unions have said they will only accept a negotiated deal. Most pro-democracy legislators are opposed to the legislative move, while the Liberal Party and pro-business members support it. The Democratic Alliance for the Betterment of Hong Kong, which holds 10 votes, remains undecided. The Breakfast Group of independent legislators is split.

The source admitted last night it was 'now very difficult to fight for 4.75 per cent, plus support for legislation'.

'The pay trend survey still forms the basis . . . Our inclination is to follow the pay trend survey findings. But if even a penny cannot be cut, our fiscal situation will become doubly serious. More radical measures have to be considered.

'We do not rule out the possibility that some services will have to be cut immediately . . . And we have to study revenue measures such as a sales tax and soccer betting tax,' he said.

The source cited concern raised recently by international rating agencies, including Moody's and Standard & Poor's, over Hong Kong's deficit.

DAB vice-chairman Ip Kwok-him said the party was prepared to consider supporting the legislation if the Government convinced it this was the only way.

'If they can give concrete justification, let's say they have a 50 to 60 per cent chance of losing in the courts without the legislation, then we are open to further dialogue. But right now we are not convinced,' he said.

The Civil Servants General Union, which has threatened to sue the Government, claimed last night that officials were putting unfair pressure on lawmakers. Its chairman, Felix Cheung Kwok-biu, said the need to introduce legislation showed the Government had no firm basis to cut salaries.