CONFIDENTIAL
commit a future government would open a can of worms. ie Why not? hide?
be self evident and could Have we got something to
Mily oftare
V
M V Stone
•
Mr Paul
Mr McLaren
1. I agree with Mr Stone that we ought to be able to sustain our present line as long as the Hong Kong/US dollar link remains stable. There is no reason to suppose that over the long term, the US dollar will not provide at least as much stability and certainty as the pound sterling. Indeed with the Treasury's help, we might be able to demonstrate that despite short term fluctuations, on balance, the Hong Kong/US dollar link has worked to the advantage of Hong Kong pensioners since its introduction in 1983.
2.
It is significant, however, that Mr Fish believes we will eventually be forced to concede the principle of sterling safe- guards. I assume that the only circumstances in which we would seriously have to contemplate this possibility is if the Hong Kong economy took a serious down-turn (for example, as the result of a major capital outflow or a sharp increase in inflation) and the Hong Kong/US dollar link had to be adjusted or even abandoned. This is certainly not a contingency which we can afford to discount altogether.
3. In addition to his two letters to Mr McLaren, Mr Pusinelli has also raised the issue of sterling safeguards (albeit briefly) in his letter of 25 April to Mr Maude (attached). Before going any further with this correspondence, I wonder if we should therefore explore the wider implications of this issue with the ODA and the Treasury and ensure that Ministers are also aware of the position.
Rosalind Mand
R M Marsden
8 May 1990
It is clear that OSPA will be expecting from Mr Mande to their letter
an
early reply
of 25 17prac. It might be
better if the correspondence with Mr McLoren was subsumed
into the Ministerial reply.
it would be sensible to discurs with
ROBAVK
agree
On The Substance, desurs with Treasury and
Treasury and MDA, W/5
and then to consult Ministers.
that