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compensation would be paid for the lump sum transfer payment made by India
in 1955 when Her Majesty's Government took over pensions liability (paragraph 6 above). India's neighbours, Pakistan and Burma on the other
hand would be eligible for inclusion in the new scheme and, when the Indians
realised this, they might consider themselves unfairly treated. The Foreign and Commonwealth Office and Ministry of Overseas Development believe, however,
that the principle that the cost of pensions taken over would be taken into
account in determining the aid allocation to a particular country would weigh
considerably with India. She is our largest single aid beneficiary,
receiving at present 240 million a year, and attaches importance to continuity
in aid. The High Commission in Delhi do not believe that serious difficulties
will arise.
16. The Foreign and Commonwealth Office and Ministry of Overseas Development
consider that there should be no difficulty over retrospection. It is
possible that certain governments might argue that since we were now ready to
accept liability as from 1st April 1971 for expatriate pensions earned prior
to independence, they have been bearing an unfair burden in respect of these
pensions in the past. We should be safe in refusing any claim that might be put forward on these grounds since there can be no default on pensions already paid.
Treasury View
17. The Treasury are concerned about the cost to the Exchequer and to the balance of payments of these proposals to assume new pensions obligations and to waive compensation and commutation loan repayments. Furthermore, while the expenditure would be within the aid programme, the future totals for this after 1973-74 have yet to be decided; and we might find ourselves having to provide a substantial part of our aid in a form less likely than others we should have chosen to serve Britain's economic and commercial
interests. The Treasury are also concerned that even at this high price we should fail to secure a new clear-cut line of policy which would not be vulnerable to attack on behalf of categories of pensioners excluded from the scheme or to pressure for retrospection (see paragraph 16), thus risking a still higher cost. And even within the scope of the present proposals there are problems and anomalies. In reckoning the possible cost it cannot be safely assumed that the Indians would decide not to claim the sum of
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