Under the original plan, the 4.2-hectare site would have housed a 1.72 million-sq-ft government complex, a group of Legco buildings covering 286,000 sq ft and a 172,000-sq-ft exhibition gallery.

The project, with tendering planned to start this month and construction planned to begin early next year and be completed by 2008, would have provided a new landmark for the city and relieved the over-crowded Legco Building.

Several construction firms have already been chosen in a pre-qualification exercise.

But the government said yesterday the plans would be 'temporarily' put on hold.

A spokeswoman for the government's administration wing said: 'The Sars outbreak has had a big impact on the economy. We are spending $1 billion to relaunch Hong Kong and we really have to review our spending priorities before deciding whether to go ahead with the project.'

Lawmakers were annoyed and surprised when they heard the news.

But the spokeswoman said the government could not have consulted legislators in advance due to the proposal's 'sensitivity'.

Executive Councillor James Tien Pei-chun, leader of the Liberal Party, said the government should have consulted lawmakers before making such a drastic decision.

'A new government complex and Legco building could last 50 or 60 years,' he said.

'The move certainly won't help to improve the executive-legislative relationship.'

Democrat chairman Yeung Sum said he was surprised to hear the news, adding that he feared the move could hit jobs. The government had said the project could create at least 3,000 jobs.

Ip Kwok-him, of the Democratic Alliance for Betterment of Hong Kong, demanded an explanation. 'Saving money is not reason enough to convince us to shelve the project,' he said.

Frontier legislator Emily Lau Wai-hing, a member of the Legco Commission, said the body, which administers the Legco Building and the Secretariat, had not been consulted.

'Tung Chee-hwa has made up his mind one day and changed it another,' she said. 'The lack of a new Legco building will severely harm the pace of democratic reform because the present building cannot house more legislators if Legco is enlarged in 2007.'

The commission will hold an emergency meeting today to discuss the issue.

But Lau Ping-cheung, representative for the architectural, surveying and planning sector, said the move could relieve pressure on the deficit and stabilise commercial property prices.

Anthony Lau Chun-kuen, director of valuations for Knight Frank, said it was unlikely the government would revert to a private sale and development of the Tamar site as the office market was depressed.

'Existing government offices are ageing and short of adequate facilities to cope with modern business,' he said. 'There is a genuine need to build new offices.'

ON THE BACK BURNER

January 1998: The government proposes that its new HQ will be built on the Tamar site

April 2002: Announcement is made that work will start in 2004

December 2002: Selection of design and building contractors is completed

May 2003: Tendering due to start

Yesterday: The project is put 'temporarily on hold' to review spending priorities