Hong Kong Government Bites Bullet On Civil Service Costs

by Mary Swire, Tax-News.com, Hong Kong

21 May 2002

A key part of Hong Kong's deficit reduction plan, and once whose importance has been emphasized by many commentators including the IMF, is a planned reduction in civil servants' pay. But this is something that is easier to plan than to execute; not even Mrs Thatcher managed to reduce the pay of her civil servants, rather than just reducing their number.

Hong Kong's Exco (Executive Council) is finding out just how difficult it is to get organised bodies of workers to give up existing entitlements, and is even facing possible defeat in Legco (the Legislative Assembly) from an unholy alliance of the Democratic Party, union leaders and several independent legislators.

Exco held a special meeting last Friday to discuss pay-cut proposals but did not reach a decision. It is understood that several proposals were discussed, including at one extreme the 4.75% across-the-board reduction floated by Financial Secretary Antony Leung in his budget speech, and at the other a mere pay freeze predictably proposed by civil servants' unions.

Exco met again yesterday to finalise a proposal to be put forward to unions for consultation and its understood that the decision was to suggest a cut in line with the results of the private-sector pay trend survey - a reduction of between 1.58% and 4.42% - but this would still leave a deficit of HK$3 billion to HK$4 billion. The government would then have to reduce numbers of civil servants in addition.

Whatever the Government does, it is open to a legal challenge from civil servants under the Basic Law. It may attempt to gain legislative approval from LEGCO to head off such a challenge, although it is not certain that it would win a vote on the issue. The Democratic Alliance for the Betterment of Hong Kong, which has eight votes in Legco, is crucial, but its chairman, Jasper Tsang, has so far been noncommittal on whether he would support the government.

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