Dear Colleagues,

Measures to Tackle the Fiscal Deficit

Recently, there have been a lot of media reports on the fiscal deficit.  I write to put the matter in perspective.

The Chief Executive and the Financial Secretary have recently briefed Heads of Departments on the fiscal deficit and exchanged views on proposed measures to tackle the problem.  It is clear that the Government must tackle the fiscal deficit resolutely and proactively, otherwise the stability of our monetary system and economy will be at stake.  The Government plans to restore the fiscal balance by 2006/07 through a three-pronged strategy : reviving the economy, increasing revenues and cutting public expenditure.  Each sector of the community must do its best and contribute in this exercise.

This exercise is vital for all Hong Kong people and is by no means an easy task.  The Government must take the lead to demonstrate commitment and leadership.  As far as cutting public expenditure is concerned, the Government has decided, as a working target, to reduce its operating expenditure to $200 billion by 2006/07, or about $20 billion from the original estimates.  We have asked all Heads of Departments to critically review the operation, services delivery and cost structures, both staff and departmental expenses, of their respective departments to identify possible savings, and to consult staff in the process.  I urge you all to take part actively in this exercise.  Your support is indispensable for the success of our cost-saving measures.

As regards the pay adjustment for 2003, it is reasonable to factor in the potential impact that any salary reduction may help in meeting the target of cutting operating expenditure, as compared with the impact of other measures.  But I wish to reiterate that we have not taken a decision on the matter.  We shall conduct full and extensive consultations with staff, and we shall start the process shortly.  I shall ensure that every one of you have the opportunity to express your views before we take a final decision.

The fiscal deficit is by no means the civil service's making.  Civil servants are not the cause of the problem but we can be part of the solution.  At present, the community is facing unprecedented difficulties.  I am sure our civil service colleagues will rise to the challenge and demonstrate our commitment and compassion towards this place we call home.

Yours sincerely,

(Joseph W P Wong)
Secretary for the Civil Service