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about mid-January, at the earliest, and the Treasury are
likely to argue that we should not rule out the scheme until then (ie further delay). Mr Fish thinks the Treasury may have discussed the idea with the Bank of England this week.
6.
We are not yet in a position to rule out the commercial hypothecation scheme as categorically as governmental capitalization. But I recommend that we try to regain the initiative by pointing out to the Treasury that:
- the banks will only operate such a scheme if there is a margin, ie profit, for them;
HMOCS members might be willing to pay some insurance but, given the Carr-Robertson assurance and their
expectation of full sterling safeguards, will not be prepared to pay anything like the full cost;
HKG could not contribute, since any improvement in pensions terms requires Chinese agreement, which would not be forthcoming for this scheme;
so the scheme could only work for HMOCS if HMG made a substantial contribution. Are Treasury willing to contemplate this? Do they prefer to accept this real but readily quantifiable cost to the variable contingent liability in our proposals? If so we are prepared to consider the possibility in the light of the consultant's report. But if there is no possibility of an HMG contribution, then there is no point in waiting for the consultant's report: we should put the FCO proposals to Ministers now.
7. We should also ask the Treasury whether they would expect the banks to require HMG in the UK to guarantee the SARG's eventual payment of the commutable pension entitlement and
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