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appropriate level at which to fix the Hong Kong dollar.
However if we you were
to offer this compensation scheme at
the current Hong Kong dollar/pound rate (13:1) we would come
under intense pressure to use the same rate, should the Hong
Kong dollar collapse in the future.
The two main considerations for fixing a rate are that it might
be attractive to some members of HMOCS and that it safeguards
us against the Hong Kong Government awarding its staff high pay
adjustments and therefore increasing a commitment for HMG
over which we have no control. The former is unlikely to
appeal to HMOCS officers since comparable UK Civil Service
annual wage increases and UK inflation have both in recent
years been lower than in Hong Kong, so forward projections
would look very unfavourable.
scenario to be unlikely and if it happened would reflect a high
inflation rate and, eventually, a weakening of the Hong Kong
dollar, thus reducing cost to HMG.
On the second, we consider this
ACTION REQUIRED
8. Now that we have finalised arrangements with Hong Kong, and
have kept the financial implications close to those previously
notified to the Treasury, I recommend that the scheme should be
taken forward in the form of a paper to OD(K). The attached paper
reflects the contents described above.
Consultation with the Chinese
·
We have consulted Peking and Hong Kong on whether and how we
should consult the Chinese on this scheme. The Chinese are likely
to be instinctively suspicious of the scheme, coming as it will
soon after the nationality scheme. The Chinese may well view this
proposal - which will involve HMG making payments to serving members
of the SARG - as yet another attempt by Britain to continue to
exert her influence in Hong Kong after 1997. We believe however
that we can make a convincing case that our proposals are condusive
to prosperity and stability. The bull points of the scheme are that
it will be fully funded by HMG and that it is patently designed to
anchor administrative and police talent in Hong Kong. We will also
need to stress that the scheme stands from obligations enter into
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