FINANCIAL Secretary Mr Hamish Macleod has the same trouble as his predecessor Sir Piers Jacobs in predicting the annual budget surplus. This financial year, it is expected to exceed $24 billion. In his budget last March, Mr Macleod predicted revenues would exceed expenditure by $5.1 billion. Instead of being a cause for congratulation, however, this excess is regarded as unhealthy. It reflects massive under-spending on projects to which the Government is committed, punitive stamp duties imposed to put the lid on an overheated housing market,and higher than expected revenues from land sales at inflated prices. It is not a windfall of which the Government can be too proud. The Secretary for the Treasury admits lack of internal co-ordination between Government departments was a major reason why around 40 per cent of non-airport public works projects were behind schedule. Mr Macleod's expected announcement of measures to curb future delays is long overdue. They must be directed at his own colleagues in the administration, not at by-passing directly elected legislators who take seriously the scrutiny of public works spending. Nonetheless, the Financial Secretary must decide what to do with his embarrassment of riches. Some $6 billion has already been mopped up by the Governor's spending pledges of last October. There is a great deal more still unspent in the kitty. Prudent management might suggest the entire sum be added to the reserves in the time-honoured Hongkong manner. With a directly elected legislature, however, Mr Macleod can no longer contemplate such an unpopular solution. On the contrary, the danger of asurplus of this magnitude is the pressure it exerts on government to spend as if there were no tomorrow. The most popular move Mr Macleod could make would be to give the entire working population a one-year salaries tax holiday - a decision which would mopup roughly the equivalent of the present surplus. Sadly, he is unlikely to oblige. However, he does have a range of more conservative options, which if mishandled could still boost inflation and store up trouble for future years. The danger of increasing personal tax-allowances, or pumping money into under-funded social welfare and education programmes, is the knock-on effect such commitments would have on Government finances in years when spending on the airport is already predicted to produce a budget deficit. The Government must balance generosity and populism with restraint, and spend wisely. If it chose to spend rather than save, most of the surplus would go on one-off projects. More environmental works are an obvious good cause, but the Government appears to be having difficulty finding other acceptable outlets. Another contribution to the Lotteries Fund for non-government welfare or education programmes might be a way out.