Leung became the Financial Secretary on 1 May 2001. When in office, he proposed, in 2001, to cut the salaries of civil servants by 4.5%. However, in the face of strong opposition, the cut was reduced to 1.8–2.3% and enacted through legislation. After that, the government proposed a further 3% in salary cuts over the following 2 years, 2005 and 2006. He also stated that the government should succeed in balancing the budget by the 2006–07 fiscal year due to the recovery of the economy and further cuts in government expenditure. He claimed that it was necessary to balance the budget as quickly as possible so as to maintain the stability of the economy. He suggested expenditure cuts in different sectors, including university funding. In September 2002, new
HK$10 notes were co-issued by the
Hong Kong Monetary Authority and the Hong Kong government in response to the problem of fake 10-dollar coins. About 10 special features were applied to the new notes. By the end of 2002, in response to the "
penny stock" incident, he set up a 2-person commission, which he was in charge of, to investigate the incident.
Harbour Fest After the outbreak of SARS, Leung was responsible for taking action to reinvigorate Hong Kong's economy. After receiving funding of HKD 1 billion from the Legislative Council, Leung was able to launch several initiatives including the "Harbour Fest". Following his resignation, however, the Fest became mired in controversy regarding the chaotic arrangements made with overseas artists like the
Rolling Stones, and the financial relationship between the government and the American Chamber of Commerce in Hong Kong to which inexperienced body had been entrusted the Fest's organisation.
Henry Tang, who became Financial Secretary after Leung, said in a TV interview on 29 October 2008 that the contracts between the government and AmCham were signed when Leung was still in office. "AmCham came up with this creative idea for a musical event,... [which] required us to grant it five years' custodial rights, I believe then financial secretary [Leung] thought it was reasonable." Tang later clarified that the contracts were signed by Rowse and not Leung. Tang said Rowse was a civil servant and as such was not required to be held politically responsible.
CEPA Before his resignation, he signed the
Closer Economic Partnership Arrangement (CEPA) with China, which, it was believed, could help Hong Kong get out of a prolonged economic downturn.
The "Lexusgate" scandal and resignation Leung came under severe criticism in January 2003 when he bought a HK$790,000 (US$101,282)
Lexus LS 430, just weeks before he raised the tax on new vehicles in his March budget. Although Leung claimed that he had decided on the tax increase after buying the car, which he said his family needed because of the arrival of his first-born in February. Leung denied that he was trying to avoid the new tax, which would have cost him an additional HK$180,000. (US$23,000). However, unlike other members of the Executive Council, Leung had failed to disclose the purchase to the council. In view of the public outcry, he tried to defuse the controversy by donating money to the
Community Chest, a local charity. He also submitted his resignation in March, which
Chief Executive of Hong Kong Tung Chee-hwa refused to accept at the time. On 16 July 2003 Leung resigned with immediate effect in the wake of mass protests over the government's handling of a
controversial anti-subversion bill, having failed to reduce record high unemployment and revive battered consumer confidence. His resignation came just hours after Secretary for Security
Regina Ip said she was stepping down, for personal reasons. On 15 December 2003, the Department of Justice announced that it was dropping the case against Leung. ==Return to private sector==