Pay-cut ruling creates momentum for reform

PUBLISHED : Wednesday, 11 June, 2003, 12:00am
UPDATED : Wednesday, 11 June, 2003, 12:00am

The civil service pay-cut ruling delivered yesterday has done more than simply uphold the government's slashing of incomes last year. It has, hopefully once and for all, nailed the myth that the jealously guarded 'iron rice bowl' is made unbreakable by the Basic Law.

Mr Justice Michael Hartmann, in rejecting a challenge to the pay cut by a staff union, has made it clear that Hong Kong's mini-constitution protects the system by which pay is determined - not the amount of dollars thrust into civil servants' wage packets. He also held that the controversial use of legislation to enforce the cut - a factor which led around 30,000 civil servants to take to the streets - was valid. This was largely because the government was pursuing a legitimate aim in seeking to reduce public sector costs and rein in the spiralling fiscal deficit for the good of the community.

The judgment should be welcomed for several reasons. It ends uncertainty about the legitimacy of the pay cut, which reduced salaries by between 1.58 and 4.42 per cent last July. That was a necessary first step towards bringing civil service salaries into the real world of persistent deflation and plunging private sector pay. It was also a fundamental part of attempts to put Hong Kong's finances back on track, also a requirement of the Basic Law.

The Court of First Instance ruling also has important implications. It clears up nagging doubts about the extent to which the government's hands are tied by certain provisions of the Basic Law. Civil servants had clung to Article 100, which states that the pay and conditions they enjoyed at the time of the handover would remain 'no less favourable than before'. But, as this newspaper has argued in the past, this cannot be used as a justification for making them immune to a pay cut, particularly at a time when the rest of Hong Kong is suffering. As the judge found, the words are not to be interpreted literally. It is the system which is to remain unchanged. When it comes to pay adjustments, that system - long accepted by the civil servants - takes into account matters including levels of private sector pay and budgetary considerations. Salaries could have been cut before 1997, but favourable economic conditions did not warrant it. That has now changed.

Indeed, in light of the judgment, the deal struck between officials and civil service unions in February to pave the way for a second pay cut seems even more inadequate than it did at the time. That will bring pay levels back to 1997 levels, beginning next January and staggered over two years. In reaching that bargain, the government seemed to believe it could go no further - because of the Basic Law. Mr Justice Hartmann does not agree.

But the ruling should do more than provide the government with extra flexibility in determining public sector pay. It should help pave the way for much-needed reforms to make the service fit for the 21st century. Once the pride of Hong Kong, it has become bloated, inefficient, overpaid, overly bureaucratic and out of step with the times. Moves are already under way to reduce the headcount, currently more than 160,000, by 10 per cent and to cut costs. But much more needs to be done. It is time to take the steps required to turn the civil service into the lean, efficient, and modern operation which Hong Kong needs, and deserves. The first step would be a thorough review of the role and size of government. While the Basic Law must be respected, yesterday's ruling has shown that it allows for some flexibility. As the judge pointed out, the civil service before the handover was in a 'constant state of adaptation'. It has undergone further changes since. The ability to move with the times in order to better meet the needs of a changing environment is itself part of the system the Basic Law seeks to protect.