HKG'S POLICY
CONFIDENTIAL
B
C
5. HKG's policy is that sterling safeguards is not a matter for them but is one for HMG for the following reasons:
6.
(a) HKG's responsibility, as the employer, is to pay its staff salaries and pensions in Hong Kong Dollars, and to maintain the value of pensions by adjusting them in line with the cost of living locally. This policy dates back to 1947 so very few, if any, officers can claim they were "misled " when they joined;
(b) It is also HKG's policy to treat both local and overseas officers equally in the payment of pensions. Any special arrangements for expatriates would be highly divisive and would cause serious problems with the civil service;
(c) The HKG cannot introduce any measures which could be construed as implying a lack of faith in the HK$/US$ link. Thus ExCo decided in January 1989 that there should be no measure to protect the value of pensions against currency fluctuations at this stage; and
(d) HMG has accepted a special obligation towards members of HMOCS and ExCo therefore considers the question of
sterling safeguards for them a matter for HMG. HKG see
no possibility of a change in this position.
We have not challenged HKG's views and neither have we disputed that they are right. Indeed it does appear that to require HKG to safeguard the sterling value of pensions of a small group within its civil service would be politically impossible. An extract of a relevant HKG ExCo memorandum
is attached.
RODACP/3
CONFIDENTIAL