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Following is the full text of the letter issued by the Secretary for the Civil Service, Mr Joseph W P Wong, to all civil servants today (March 6):

Dear Colleagues,

Today in delivering his 2002-03 Budget Speech at the Legislative Council, the Financial Secretary (FS) explained that he had assumed, for financial planning purposes, in the Medium Range Forecast that civil service pay would be cut by 4.75% and concurrently subventions on personnel-related expenses for subvented organisations reduced by the same rate. The FS also made it clear that the Government would in accordance with the existing mechanism on civil service pay adjustment consider all factors and make a final decision after the outcome of this year's private sector pay trend survey is known. Any decision on a civil service pay cut needs to go through the legislative process before it can be implemented. Assuming that the pay cut takes effect from 1 October this year and the level of reduction is 4.75%, the Government will achieve savings of about $ 3 billion in 2002-03 and about $ 6 billion in a full year.

As you would be concerned about the FS's announcement, I wish to make the following points:

(a) As I have pointed out in my letter to you on 27 October last year, the Government will, before deciding on an annual civil service pay adjustment, take into consideration the results of the private sector pay trend survey and other important factors, including the state of the economy, its budgetary position, the morale of the civil service, the staff sides' proposals, changes in the cost of living and the views of the public. We shall continue to adopt this policy and mechanism in deciding this year's civil service pay adjustment.

(b) The Government's budgetary position is one of the key factors which have to be taken into consideration under the existing mechanism. As we all know, the Government is facing a serious budget deficit this year and the situation is likely to persist in the next few years. In view of this, the FS considers it necessary to control the growth of government expenditure in money terms. Personnel-related expenses for the civil service and subvented organisations account for 70% of government operating expenditure. The FS has therefore assumed, for financial planning purposes, in the Medium Range Forecast that civil service pay will be cut by 4.75% and concurrently subventions on personnel-related expenses for subvented organisations reduced by the same rate.

(c) A cut by 4.75% has been assumed in order to take into account the accumulated pay increase for certain ranks (i.e. D3 and above) since July 1997. The Government will make a final decision on the actual adjustment for each salary band after it has considered all factors in accordance with the existing mechanism.

(d) The existing pension legislation stipulates that pension and annual allowance are to be calculated on the basis of the highest substantive salary drawn by an officer in the course of his service. Hence the amount of pension and annual allowance to which a serving officer is entitled will not be affected even if there is a salary reduction this year.

The current economic situation has put the wisdom, determination and commitment of the people of Hong Kong to the test. In the past, we have experienced harder times, and every time we were able to surmount the difficulties with unflinching will and concerted effort. Every time the civil service remained the cornerstone of the community and won the admiration of the public with unfaltering commitment. Now the Government is facing a serious budget deficit. If a moderate civil service pay cut can alleviate the situation and revive the economy for the good of the community, we civil servants will also benefit.

Since I assumed office one and a half years ago, I have visited almost all the departments, and met and listened to the views of numerous staff union representatives and colleagues of all ranks. In recent months, many colleagues told me that they were willing to share the burden with the rest of the community and were ready to accept a reasonable pay cut if need be. I am therefore confident that colleagues on the whole will understand the assumption made by the FS in his forecast and support the Government's future decision on this year's civil service pay adjustment, so long as we adhere to the principles of lawfulness, fairness and reasonableness.

I call upon every one of you to adhere to the fine tradition of the civil service by rising to the challenge and sharing the burden with the rest of the community in this time of difficulty.

End/Wednesday, March 6, 2002

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