Last month, I informed you that the Government had decided to bring the salaries of the civil service back to the June 30, 1997 levels in cash terms and that we were to implement the pay reduction by legislation. The draft legislation is now under preparation.

We shall consult the staff sides on the draft legislation before introducing it into the Legislative Council sometime in May this year.

In parallel, we shall take forward our work on the development of an improved civil-service pay-adjustment mechanism.

The new mechanism will comprise the periodic conduct of pay-level surveys, the conduct of annual pay-trend surveys based on an improved methodology as well as an effective means for implementing both upward and downward pay adjustments.

A steering committee under my chairmanship and comprising members drawn from outside the civil service will be set up to oversee the exercise. This steering committee will provide independent and professional advice on the conduct of the pay-level survey and the review of the pay-adjustment mechanism.

I shall also set up a consultative group, involving representatives from the staff sides of the central consultative councils and the major service-wide staff unions to provide input to the deliberations of the steering committee.

Allowing time for the necessary preparatory work, I intend to commence discussion in both the steering committee and the consultative group in April. Our aim is to have the improved civil-service pay-adjustment mechanism in place by around mid-2004.

In response to a question raised by a Legislative Councillor on the Government's expenditure on overseas education allowance for civil servants at the Legislative Council meeting this afternoon, I announced that the Administration would conduct a review of all the existing civil-service allowances.

It is stated Government policy to keep our civil-service management system under review and to make improvements from time to time in keeping with changing circumstances. As part of this effort, we reviewed and adjusted downwards the duty mileage allowance last year.

In December 2002, we embarked on a six-month moratorium on job-related allowances payable to civilian staff to facilitate a detailed examination of individual allowances. We aim to finalise the improved arrangement for these job-related allowances by the middle of this year.

Given the Government's commitment to achieving economy in its operating expenditure in the next few years, it is incumbent upon us to examine all possible options of reducing expenditure. It is against this background that we have undertaken to carry out a comprehensive review of civil-service allowances.

We shall take careful account of the legal considerations governing these allowances and consult colleagues fully in the process. We shall adopt the principles of lawfulness, reasonableness and fairness in taking forward the matter.

Letter issued by Mr Wong to all civil servants on civil-service pay and allowances on March 12.