8.
1.15.5.
HM Treasury
CONFIDENTIAL
Mr M Stone
Hong Kong Department
Foreign and Commonwealth Office
London
SW1
Mr Stone
Mark
Parliament Street
is a
London SW1P 3AG of this! Telephone 01 270 4902
cory
on file
arealy
18 May 1990
HONG KONG: COMPENSATION/INCENTIVE SCHEME FOR MEMBERS OF HMOCS
Thank you for letting me have a copy of Mr Paul's draft minute and the draft paper for OD (K). We have since spoken on the 'phone a couple of times, but I would like to record some of our concerns.
There are clearly a number of points here which require very careful consideration and I would suggest that it would be useful to try and sort these out before the matter reaches Ministerial level again. I understand that the draft has yet to go to the Governor of Hong Kong and you may wish to reflect on the points I raise below before you despatch it.
I would like to start by examining the assumptions underlying your costings. A key factor in determining the expected cost is the number of
HMOCS eligible officers who would stay on. I am not quite sure how the figures in your paper (and those quoted by the then Foreign Secretary in his minute to the then Chancellor of 24 November 1988) fit together. In paragraph 3 of Mr Paul's draft minute reference is made to 800 HMOCS eligible officers, but in paragraph 6(a) the figures which are quoted are about 500 HOMCS members and 390 officers who are eligible for membership making a total of 890. You estimate that some 585 individuals will stay on to 1997 to qualify for the first compensation/incentive payment. This seems to differ quite markedly from your previous estimate. In his minute to the then Chancellor of 24 November 1988 the then Foreign Secretary said there were likely to be 300-400 members of HMOCS in Hong Kong in 1997.
You then go on to predict the proportion of the staff involved who are likely to
leave immediately after the first compensation/incentive payment in 1997 (30%) and thereafter (40 per year). Again, these figures are crucial to calculating the costs involved and we will need to know the basis upon which they were calculated and your view of how robust they are. Could you supply a sensitively analysis which shows projections based on alternative assumptions so that we could see what the best likely case and the worst likely case would look like?
I have already mentioned to you that an aspect of the proposed scheme which causes us particular concern is the fact that the compensation/incentive to be paid would relate directly to the salary of officers in 1997 and thereafter. It seems to me that Hong Kong Government (and its successor) may feel bound
the
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