Top official adviser Lau Siu-kai - the man who is supposed to be the government's eyes and ears, admits he did use the term 'critical point' - in relation to Hong Kong's governance - while talking to reporters last week, something which he had previously denied several times.

He said he realised his denials were incorrect when a colleague told him that he had used the term - and it was on video record.

But Lau (pictured), who is head of the key Central Policy Unit, said he did not use the term in relation to any grievances that might be being felt by Hong Kong people, as has been claimed by observers, but that he used it to indicate it was time people started thinking about the role of government in Hong Kong.

Lau is in Beijing attending the annual parliamentary sessions. He raised many eyebrows last Thursday when he told reporters that Hong Kong 'has reached a critical point'. A few hours after making the comment, however, Lau publicly denied he had used the term, and denied it again the next day.

That has triggered a furore over his credibility. Commentator and former legislator Albert Cheng King-hon called on him to resign.

Speaking to the South China Morning Post on Wednesday, Lau conceded he did use the phrase last Thursday when asked about people's dissatisfaction over the Hong Kong budget. He said he later forgot that he had used the term - until a colleague told him otherwise.

Lau blamed his faulty memory for the confusion. He said that what he really meant was that people should start to reflect on government's role. He was not suggesting grievances within the community had reached boiling point. 'Hong Kong has upheld the 'big market, small government' principle for a long time,' he said. 'But recently we have more people demanding the government take a bigger role in wealth redistribution.

'What I meant to say is that Hong Kong has reached a critical point and it is time for the community to discuss the role of the government. I did not mean that public grievances had reached a point that they were about to explode.' He said when he was pressed by media after he had first used the term, he denied using it because 'it is a phrase that I rarely use'.

'Normally, I will use phrases like 'new phase',' he said.

But some people remained unconvinced.

Civic Party lawmaker Audrey Eu Yuet-mee said Lau's U-turn involved a point of integrity and he was clearly talking about social grievances judging by the context.

'Let's be honest,' Eu said. 'People can forgive a slip of the tongue. I believe he meant social grievances when he mentioned 'critical point'.

'Last year he made a similar point in an article talking about social sentiment [in Hong Kong], while Central Policy Unit surveys have also been tracking them. I believe he knows about the boiling social grievances.'

The latest controversy also raised questions about the CPU's effectiveness at a time when the Hong Kong government is facing a budget debacle and an embarrassing defeat in Legco over a temporary funding bill.

It's not the first time Lau has found himself in hot water. In 2003, he predicted only 30,000 would protest against the proposed national security law. In the end, half a million people hit the streets to protest.