The top court's ruling yesterday that civil service pay cuts are lawful is a sensible judgment that should pave the way for wider reform of Hong Kong's overstaffed and inefficient government bureaucracy. The five justices held that laws passed to enable three pay reductions since 2002 were constitutional. Civil servants had argued that the ordinances breached Articles 100 and 103 of the Basic Law. The first guarantees that their terms of employment will be no less favourable than before Hong Kong returned to China in 1997. The second states that the pre-handover system of the civil service shall be maintained. The Court of Final Appeal ruled that under the Basic Law, the government has the power to legislate a reduction in civil servants' pay. It also ruled that the stipulated continuity of the civil service system does not mean that no element of it can ever be changed. The justices, in effect, rejected the narrow interpretation of the constitution pursued by civil servants and advanced a view of the Basic Law as a flexible, living document. Their ruling is also consistent with the language of the mini-constitution. This is the correct approach. It is not only unreasonable but unrealistic to suggest that every aspect of the civil service system should remain frozen in time for 50 years. This was not intended by the drafters of the Law. Over the past eight years, Hong Kong has undergone significant changes, but there is a widespread perception that the civil service remains mired in old ways and has an old mentality. In order to manage the city's affairs more effectively, it must catch up with the times - fast. When the suggestion to cut public-sector pay was first floated, Hong Kong was in the grip of a long recession and a deflationary spiral, which were putting intense downward pressure on businesses' profits and their employees' wages. The weak economy was also pushing the government's budget deeper and deeper into the red. Yet the civil servants continued to receive annual pay rises. Clearly, this was an untenable situation. In 2002, the government finally decided to impose a pay cut on its workers ranging from 1.58 to 4.42 per cent as part of its effort to balance the budget and to bring public-sector salary levels in line with those in the private sector. A further 3 per cent annual reduction was implemented last year and this year, returning salaries to 1997 levels. As a result, the government has saved $9.6 billion so far. Civil servants, however, fought the cuts all the way, doing no favour to their image as an out-of-touch and privilege-guarding elite. In 2002, some 30,000 of them took to the streets with their families to protest against the initial decision. Then they challenged the moves in court. This was their right. But if there was little public sympathy for them yesterday, such actions - which were taken at a time of collective hardship - are the reason. Following the Court of Final Appeal's ruling, Secretary for the Civil Service Joseph Wong Wing-ping said there would be no more pay cuts. Further reductions would be difficult in the light of the ruling, which said pay levels cannot be reduced below those existing before the handover. But the government should not stop in its effort to shake up the bureaucracy. For one, reducing its bloated headcount today of more than 160,000 should continue. Then there are the outdated perks such as overseas education allowances for children of civil servants and home-purchase subsidies. Yesterday's ruling paves the way for such benefits to be reduced or scrapped, although it may limit any scaling back to the situation before the handover. Certainly, the government is right to push ahead with its plans to cut back some of these perks. Public-sector reform is a challenge that will not go away. The government must keep doing everything it can within the bounds of the law to make its bureaucracy leaner, more efficient and better prepared to serve Hong Kong.