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rates of exchange in excess of PERS, i.e. the current market rate, would be unacceptable.
14.
Sir Philip again stressed that, ever since the link system had been introduced in 1983, post 1976 expatriate pensioners had been exposed to an unexpected US dollar risk and the sterling counterpart of their HK dollar pensions had been artificially depressed, with no redress. At first, the impact of the link was masked because sterling depreciated, but as the US dollar depreciated from the mid-80s onwards, the risk became apparent and, now that sterling had entered the ERM, the old swings and roundabouts argument could no longer be invoked and the realistic prospect was for a permanent loss in the future.
15. Sir David said that he noted that existing pensioners were seeking compensation plus enhancement of pensions to take account of current losses, and remarked that should HMG be unwilling to pay then the HKG would have to look at the matter. He doubted whether the HKG could assist for a variety of reasons but principally on political grounds. He wondered if it would be an attractive proposition to pensioners to be offered the possibility of commuting the rest of their pensions. Mr Haye said that it would depend on the offer and Mr Blye said commutation might attract 25% or even 40% tax on the capital amount, which would reduce its attractiveness. This would need to be considered.
16. Sir David said that he felt the FCO were perhaps
unsympathetic because the
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petitioners were well off ". He
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felt it would be better to involve poorer pensioners. Sir Philip said that the present petitioners " had never stooped to invidious comparisons but that in any event losses were losses, it was only a matter of degree. Mr Haye added that when the FCO had first advanced the notion that HK - UK pensioners had little to complain about because they were relatively well off, Mr Burns, the Assistant Under Secretary, had been told in no uncertain terms that equity not envy ought to be his yardstick. The loss of any hard earned pension was unjust, but as losses now amounted to more than 30% the position had become intolerable. Retired Directorate officers might be able to manage on unfairly depleted pensions, but pensioners lower down the scale were in trouble. A modest £12,000 a year was now worth only about £8,000 in real terms. In any event present petitioners were speaking to principle on behalf of themselves and their less fortunate bretheren.
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17. Mr Blye asked whether it would be helpful to the Chief Secretary's attempts to assist if pensioners petitioned the Governor in- Council, and Sir David said that he felt this could do no harm. Mr Blye reiterated his contention that pension increases should take account of the sterling purchasing power of pensions at the time of retirement. Despite
all the papers that had been submitted by pensioners it seemed from what had been said at this meeting (by Officials) that those handling the issues did not understand the fundamental problem. In this context he asked for sight of the EXCO paper dealing with the problem so that the extent of misunderstanding and misinformation could be evaluated. Sir David regretted that this would not be possible.
18. Sir David said that unfortunately the meeting had to be cut short because he was catching a 'plane, but that he would bear carefully in mind what had been said. He was reminded by Sir Philip and Mr Haye that HK UK pensioners did not particularly like confronting the HKG but that they felt they had no option too much was at stake. They had lost a great deal over the last few years and stood to lose a great deal more unless something was done soon. If the HKG and HMG could share the responsibility that was clearly theirs to protect the sterling value of HK - UK pensions, compensate for previous losses and insure the future, justice would be done.
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19. As a post script to the meeting Mr Haye asked for a progress report on War Service Credit, which had been with the HKG for nearly two years. Mr Shipley said that it was ready at last to go to EXCO. Mr Haye hoped that it could be agreed before those who stood to benefit from it died.
CODE
Daca 10
18-77
Mr Paul
CC : Ms Marsden
Mr Furness
Ms Coglin
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Reference
Fio
OUTSTANDING ISSUES
1.
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The main activity for the last two days of this week and next week the period I will be away will be briefing for Sir John Coles and for the Governor's forthcoming meetings. I am taking forward some of the briefs myself today (Royal Naval presence afloat, ECGD and, possibly, PADS) but the others will need to be done in my absence. PADS and ECGD will also obviously have to be updated following the meeting today on ECGD and the Governor's meeting with Lu Ping on Monday. These matters aside, there are the following fairly minor outstanding pieces of business which you should be aware of :
(a)
British Investment in Hong Kong. You have asked for some bull points to counter Japanese assertions that British investment is falling. This will be difficult to produce and you may wish to discuss further with Mr Furness.
(b)
COCOM matters.
(c)
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(a)
(e)
There is a small outstanding matter as
regards Hong Kong's acceptance of US extraterritoriality in this area.
Lord Caithness' brainstorming lunch. Mr Furness is in the process of phoning around to secure attendence.
Air Freight Liberalisation. from Hong Kong.
We still await a reply
Hong Kong and Drugs. Hong Kong wish to become actively involved in the financial action task force against money laundering. We need to consider our position and possible Chinese reaction.
and on Ms Coglin's side :
(£)
(g)
Submission on Civil Service matters. Ms Coglin is in the final stages of submitting this. It is currently being looked at by Legal Advisers.
Crime Statistics. Again associated with Japanese enquiries, we are pursuing crime statistics with Hong Kong.
ROZAVZ
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