CONFIDENTIAL
11.
but might be overcome if carefully handled.]
(iv) it could be expensive. In 1985 it was calculated that the cost at maximum would be £10.5 million per annum
(at 1983/84 salary levels and exchange rates) if the HK
dollar became worthless. [Comment: no Brownie points
about complaining over a relatively small and unknown
sum.]
(v) there is no need to introduce a safeguard at this time and indeed such safeguards in the past were only introduced at the change of sovereignty. The HK$/US$
link is currently firm and exchange rate fluctuations are
inevitable in the modern financial world.
[Comment:
valid point but it is the assurance that HMOCS members
are looking for.]
The telling arguments for introducintg a safeguard are that it is likely to keep more HMOCS members in Hong Kong during the difficult transition period; and that HMG will be seen as reneging on a commitment HMOCS members have always received in the past.
12.
The most telling argument against is that it could lead to widespread demands from local Hong Kong civil servants for the same treatment, thus destabilising Hong Kong. HKG suggested in December 1987 that one way for HMG to give the safeguard while causing "no repercussions locally" would be for HMG to assign a notional sterling exchange rate for pensions and then adjust SPOS to take account of fluctuations against that exchange rate. Whether HKG still feels the same, in the current climate, and whether the ODA
consider such arrangements to be possible would need to be
explored.
RODACP/6
CONFIDENTIAL