Tightening belts is never easy, particularly when essential services are mixed in with non-critical functions, as is the case in any government. Yet, that is what needs to happen, this year, if we are going to convince the world at large -- and ourselves -- that we are serious about rebalancing our budget.

Just cutting the pay cheque of our excellent civil servants is not the answer. What is needed is a new social contract, if you will, between Hong Kong and the people we employ. This contract needs, above all, flexibility.

Change is never easy, as we've seen in the private sector's adjustment to new realities. Times have changed, and we now need a commitment, from the community, the government and the civil service that shows our determination to overcome the challenges we face. The private sector has done its part, and now the civil service must be less rigid and more flexible.

First, we need a mental adjustment among the civil service, and in how the community views the civil service. Leaving aside the disciplinary forces, we should not be afraid to hold our civil servants to the same high standards as employees are in a reputable private sector company, and pay them accordingly.

Any reasonable comparison of pay for similar jobs in the public and private sector will show our civil service to be paid more than the private sector. But that doesn't mean we have to chop salaries in half. Rather, what we need is to be able to reward where people excel and reduce staff where work can best be done outside government.

Our civil servants should no longer expect a lifetime employment guarantee, regardless of performance or needs. It is unreasonable to insist that no civil servant be laid off. This smacks of the strong unions that demanded the new, electric railroads retain the coalman's job, just because it once was necessary.

Second, there should be a line-by-line review of all services provided by the government, with "sunsetting" of regulations and rules that hinder business. In good times, redundant and bureaucratic regulations are annoying to business, but in bad times, they can kill a business. Following a comprehensive review must be resolute action to delete regulations, reduce service, and to reduce personnel.

Third, more departments should be transformed into "agencies," and run more like private corporations. These agencies would have more operational flexibility, and more internal management autonomy in areas such as personnel, remuneration and out-sourcing.

Fourthly, more flexibility should be introduced in the employment, career progression and remuneration of civil servants. Employ senior civil servants on a contact basis, fill vacancies and new posts from the talent pool of our whole society, and give high-performance stars mobility both within the civil service and between government and the private sector.

It would be unfair to demand a full adjustment to private-sector pay levels in one fell swoop, and there are issues related to the Basic Law that must be taken into consideration. If our best-performing civil servants are paid in the top percentile for their positions, so be it -- they are worth it. At the same time, the civil service unions must show they are willing to share the burden with the rest of society, and not resist, delay or otherwise undermine efforts that are designed to bring Hong Kong back to fiscal discipline.

Finally, let the Civil Service Bureau focus on policy and on handling civil servants of grades such as administrative officer grade. Leave regulatory measures to the employer and the law, as with any business.