Updated at 6.30pm: The government was reducing spending on civil servants' salaries - and planned to reduce civil service numbers to around 160,000 by 2007, Financial Secretary Henry Tang Ying-yen revealed on Wednesday. Mr Tang was replying to a question in the Legislative Council from lawmaker Abraham Shek Lai-him, who represents the real-estate and construction sector. The high cost of civil service salaries and pensions is a controversial issue in Hong Kong - which has some of the world's most highly-paid civil servants. In recent years, the government has implemented civil service pay cuts to reduce the size of its fiscal deficit. Mr Shek reminded Legco on Wednesday that from 2000-2004 civil service pay accounted for over 34 per cent of the government's operating expenditure. Pension payments for civil servants had cost about $13 billion in 2004. The legislator asked the government how it was progressing in reducing the high cost of civil service pay. He also asked whether the government had any plans to review the pension system of civil servants. In reply, Mr Tang cited latest statistics to show the government had already slashed staff-related spending on the civil service. 'In 2005-06, the estimated staff-related expenditure on the civil service was about $65.3 billion [or 31 per cent of the government's annual operating expenditure], down from $71.3 billion [or 36 per cent of the government's operating expenditure] in 2001-02,'' he said. Mr Tang said expenditure control measures adopted included streamlining the civil service and reducing civil service pay as well as reviewing civil service allowances. 'For example, by implementing a general freeze on civil service recruitment, two rounds of the Voluntary Retirement Scheme and keeping vacancies under critical review, we have reduced the civil service establishment by about 17 per cent from 198,000 in early 2000 to the present level of about 165,000,'' he said. Mr Tang said the government was now on target to reduce the civil service to about 160,000 by March 2007. 'In overall terms, we are satisfied the present level of civil service-related expenditure, accounting for about 31 per cent of the government's annual operating expenditure, is necessary to implement government policies and deliver quality services to the public,'' the Financial Secretary said. He defended a current pension increase policy, saying it was 'prescribed in pension increase legislation'. The legislation would provide that pensions will be increased in accordance with increases in the consumer price index (CPI). 'The government conducted a review on the pension increase policy and mechanism in 2000,'' explained Mr Tang. He said the government had concluded that there were 'strong justifications' to maintain the prevailing pension increase policy. 'We have no plan to change the current pension increase policy and mechanism or introduce any related amendments to the pension increase legislation,'' he added.