Tomorrow, Henry Tang Ying-yen will make his first major policy announcement since becoming financial secretary two months ago. He is due to unveil the government's revised estimates on the budget deficit and a new timetable to plug it. Mr Tang could not have chosen a more opportune time to do so. The latest figures show that unemployment is definitely on a downward trend, with 8.3 per cent of the workforce jobless between July and September, compared with 8.6 per cent between June and August. That businesses are hiring again should mean higher revenue from taxes on profits and salaries. The buoyant stock market, as well as increased property transactions, will also boost receipts from stamp duties. All that has prompted accountants Ernst & Young to predict smaller budget deficits over the next five years and the possibility of balancing the books by 2008-09. Mr Tang's predecessor, Antony Leung Kam-chung, had set out to eliminate the budget deficit by 2006-07, but his plan was derailed by Sars. Even though the outbreak's impact was not as serious as feared, that has not stopped calls to ditch the timetable to provide further relief for the community. But as the South China Morning Post argued before, it would be a sign of political weakness if Chief Executive Tung Chee-hwa were to use Sars as a pretext to scrap the goal of bridging the budget deficit. No timetable to address any issue should be regarded as a sacred cow, as what matters is that concrete steps are taken to address the underlying problems. But having a schedule would impose discipline on the government to achieve a well-defined goal and force detractors trying to challenge it to understand what they are talking about. Sars did not change the fact that Hong Kong faces a structural deficit, a problem that can only be addressed by reining in expenditure and widening the tax base. The original 2006-07 deadline to eliminate the deficit is no longer attainable, but a new target is needed to demonstrate the government's determination to address the problem. Already, the government has taken steps to reduce expenditure, notably by reducing civil service pay, cutting the size of the bureaucracy and boosting productivity. It is also experimenting with new ways to mobilise private capital to build public facilities, such as inviting developers to bid for the construction of the West Kowloon Cultural Complex, using profits from adjoining residential developments as the carrot. A giant cultural complex will thus be built without the government spending a cent. Although the new formula has drawn criticism from those who are opposed to allowing just one developer and its associates to monopolise the project - and their concerns should be carefully considered - the new financial formula is a commendable breakthrough in the management of public finance. On the revenue side, the government is planning to leverage the cash flows from its toll bridge and tunnels by issuing bonds. It will also unleash the value of the Airport Authority by issuing shares in the lucrative operation. These moves will provide much needed one-off earnings to alleviate the deficit. But what these measures fail to achieve is to bridge the gap between recurrent spending, which needs to go down, and recurrent revenue, which needs to go up. That must remain Mr Tang's priority, and it can only be accomplished by overhauling existing government services, reassessing their manpower needs and reviewing pay levels with a view to achieving substantial savings, and by introducing new, broad-based taxes such as a sales tax to reduce dependence on direct taxes.