In his Budget speech in March this year, the Financial Secretary Antony Leung forecast that the deficit for 2002 would reach HK$45.2 billion. However, the deficit had already reached HK$56 billion by the first five months of the year. Admittedly, the government usually receives the lion's share of its income in the later half of a financial year, but the Budget situation is not expected to get much better, because the sale of MTR shares is likely to be postponed and revenue from land sales has been lower than expected.

Many economists estimate that this year's deficit will surpass last year's HK$63 billion. The government's shrinking coffers worry many people, because this will adversely affect Hong Kong's credit rating and give speculators an opportunity to "attack" the foreign exchange peg. Given this scenario, the local financial market and the entire economy will be badly hit.

As I have said on countless occasions, the government's payroll costs, which account for 70 per cent of its recurrent expenditure, is the main cause for the deficit. Even though the number of civil servants has been reduced from almost 200,000 a few years ago to 180,000 today, the administration is still too big and needs to shed another 10 per cent of its workforce. I agree with the idea of encouraging more "iron bowl" civil servants to leave the government through voluntary redundancies. This may add to the burden of the government in short run, but it will be beneficial to its finances over the long run.

It also needs to cut civil servants' wages, which are 30 to 40 per cent higher than those of the private sector. The government has been dragging its feet on this matter for far too long and needs to act now to conduct a pay-level survey. Hopefully, data showing wage discrepancies between the public and the private sectors will lay the foundations for further payroll cuts.

I think the government should also plug the holes in the CSSA Scheme. Currently, there are over 260,000 claimants on the scheme, an increase of 11 per cent over last year, among which 38,000 recipients are unemployed, 50 per cent more than a year earlier, which is clearly a big burden on the government.

I am not against social security, but payments should be kept in line with domestic wages. Though the level of payments has been frozen for several years, the spending power of recipients has actually increased due to persistent deflation, which totals about 12 per cent. For example, the HK$10,000 monthly assistance provided to a family of four is in fact more than the monthly salaries of many workers. Little wonder then that some prefer living on social security rather than making a living on their own.

To raise additional tax revenue, I support the introduction of an HK$18 departure tax for residents crossing the border into the Mainland. This will bring in more revenue and also encourage more residents to stay in Hong Kong during the holidays, which will in turn help boost our economy.

I also agree that the government should reduce allowances for salary taxpayers and raise slightly the profits tax rate to boost its income, but only if it has already made every effort to reduce the Budget deficit and, in particular, its staff costs.

As for the introduction of a consumption tax, I am against this move because I believe it will only dampen consumer spending, especially as the economy has yet to recover.

In sum, allowing the Budget deficit to swell in recent years has put our economic future at risk. The government must meet its Budget targets and reduced spending to avoid exacerbating the problem.