Public hospitals will be forced to cut staff and services because the Government has refused to finance a $900 million annual pay increment, it has been claimed. Hospital Authority board member Michael Ho Mun-ka said Treasury officials had told the board the Government would stop providing the budget between 2000-01 and 2002-03. However, the Government says the authority must pay the annual salary increment to its staff because of contractual obligations. Along with civil servants, public hospital staff are entitled to an automatic annual increment. About $23 billion, or 80 per cent of the authority's $27.3 billion budget, is spent on salaries and staff allowances. It is estimated the authority's pay increment budget will eat up an extra four per cent, or more than $900 million, in the coming three years. Mr Ho, the legislator representing nurses, said the new policy meant the authority would have to cover the cost. 'It is impossible for us to save that much money. It is likely that the authority will have to cut staff because staff costs take up most of our budget. 'As a result, the quality of service will definitely be compromised,' he said. Mr Ho said the Government should not take more from the authority, which is being forced to shave five per cent of its total budget under the Government's cost-cutting programme. Secretary for Health and Welfare Dr Yeoh Eng-kiong told the Legislative Council health panel yesterday that details had still to be discussed with Treasury officials.