A landmark deal has been struck to cut civil service salaries back to the level they were at during the handover, a move that will ease the soaring budget deficit to the tune of $7 billion by 2006. The government hopes the reduction, which will be implemented in two phases beginning next year, will put an end to long-running pay disputes. The deal marks the first time that the Hong Kong government and civil service have agreed on a pay cut amid growing pressure to tackle the deficit, which is estimated to top $70 billion. Moves to cut pay by between 1.58 and 4.42 per cent without an agreement last year prompted 30,000 civil servants to take to the streets in protest. Under yesterday's deal, civil servants will have their pay effectively frozen until the end of this year. The salaries will then be restored back to the 1997 level within two years. Subject to final approval by the Executive Council on Tuesday, the pay cut decision will be implemented by legislation. Chief Executive Tung Chee-hwa said the consensus had demonstrated the spirit of shared responsibility in tackling the deficit. 'This will be the principle we will use as we move ahead with further efforts in balancing, and eventually eliminating, the budget deficit,' he said. 'This is done in accordance with the principle of sharing responsibility. We all share this responsibility.' Secretary for the Civil Service Joseph Wong Wing-ping said going back to the handover level was all the government could do. He was referring to Article 100 of the Basic Law, which says civil service pay and benefits should be no less favourable than they were in the pre-handover period. As most of the staff have received an accumulated increase of 6 per cent since 1997, officials are to have their pay reduced by 3 per cent each year. Permanent secretaries at D8 level, who only had a pay rise of 0.33 per cent, will have their salaries reduced by $650 to $181,050 a month. Officials at D2 will have a pay cut of $7,500 a month to $116,800 while those at the bottom of the pay scale will earn $550 less at $8,150 per month. Mr Wong said the deal had sent a clear signal to the community that an issue as controversial as pay cuts could be resolved in a harmonious way. 'In this community, which is already full of conflicts and finger pointing, I believe we have set a good example,' he said. Liberal Party chairman and Executive Councillor James Tien Pei-chun, who has been pushing for an immediate cut of 6 per cent, questioned if tax increases and other spending cuts should also be spread into phases. A senior government source said top officials had taken into account the argument that people would demand a similar step-by-step approach to raising taxes and cutting welfare subsidies. 'We can only trust the wisdom of the financial secretary. But Mr Tung has said we would consider the aspirations of different sectors in beating deficits,' he said. Asked if further pay cuts had been ruled out, he said: 'Yes. We've put a full stop to the pay cut row.' Civil service unions hoped the deal would mean an end to disputes. 'No matter what new circumstances may arise in future, we hope that there won't be further calls to cut civil service pay again,' said William Chiu See-wai, head of the Government Disciplined Services General Union. The cross-party coalition in Legco has in principle welcomed the consensus, saying it will smooth the legislative work to implement the pay cut. Coalition spokeswoman Selina Chow Liang Shuk-yee, of the Liberal Party, said the agreement would prevent a row developing similar to that which erupted when the previous pay cut law was tabled to Legco last year. Graphic: SPLA22GET
