The financial secretary has ruled out a sales tax - calling it 'strong medicine' that would do more harm than good. But he warned of further pay and job cuts in the civil service to ease the budget deficit. Kicking off his pre-budget consultation at a briefing with legislators yesterday, Antony Leung Kam-chung called on the public to 'take a share of responsibility' for getting back to a balanced budget. The warnings came a day after ratings agency Standard & Poor's downgraded the currency outlook for the Hong Kong dollar because of persistent budget deficits. Mr Leung told the Legco financial services panel he was working on a three-pronged approach to tackle the deficit - reviving the economy, cutting spending and exploring more sources of income. 'The budget cannot be balanced without doing the three things together,' he said. Speaking at a separate press briefing, he said: 'Government effort is not enough. We need Legco and public support. Each sector of society has to share the responsibility. I hope the public will understand.' On the question of a sales tax, he said: 'As the economy remains weak and the gap between rich and poor is widening, we won't introduce a sales tax. It [would] seriously affect consumption [by] middle- and low-income groups. 'It is a regressive tax and will worsen deflation. It's not appropriate to introduce it now. 'For other strong medicines, we have to study the political and economic impact. 'The most important thing is the revival of the economy. It will affect economic recovery if measures to cut expenditure and raise revenue are not done properly,' he said. Since March, when he warned of a severe deficit, Mr Leung said the public had become more aware of the problem and the need for them to share the burden. 'There's a greater chance for a consensus on how to tackle the problem,' he said. This year's deficit would likely be bigger than the $45.2 billion estimated in March, mainly because of the fall in land premiums and the possible delay in the sale of Mass Transit Railway Corporation shares, he said. To contain public spending, bureau chiefs have been asked to cut expenditure by 1.8 per cent for 2003-04 and by one per cent each year until 2006-07. 'If there is a need to do more after listening to [legislators'] views, we may further adjust the [percentage] . . . If we want to balance the budget in 2006-07, it seems we must further keep [spending] lower.' At present, civil service pay accounts for about two-thirds of the annual government expenditure. 'On cutting spending, when staff salaries take up two-thirds of expenditure, it is unavoidable we have to take a look at this,' he said. Mr Leung had planned on a 4.75 per cent pay cut for civil servants in his March Budget, but this eventually came down to as low as 1.58 per cent. He said he and Chief Executive Tung Chee-hwa had held many talks about streamlining the government. 'We have already seen some mergers of bureaus and departments. It takes time. We are not driving a speedboat but an oil tanker. It takes quite a lot of time for it to change course. Once it's done, it will move rapidly,' Mr Leung said. On economic recovery, he said increased government spending would not necessarily stimulate the economy or create jobs.