Q
008
that
16. I could say no more to the Associations than discussions are still going on and that we hope to be able to make an announcement in the near future. I am sure that they are still expecting a traditional compensation scheme and probably also that their pensions will be protected at at least the current rate of exchange. Although I was not in a position to be specific, I hinted strongly that their expectations might not be met. The Associations put their case with some vigour and my judgement is that, if visible progress is much delayed, they are likely to begin a serious campaign against HMG which could be embarrassing to all parties, including, they concede, themselves.
CONCLUSIONS
17. I have to conclude that the visit did not take us much
further forward, but it did bring home to the Treasury that we are dealing with a complex and highly sensitive situation. I continue to believe that we have a very strong obligation to HMOCS officers and that the package put forward to the Treasury is a realistic proposal which addresses the legitimate interests of all concerned. If this package is agreed, it will fall well short of the HMOCS officers' expectations but I think it is defensible both to them and to Parliament, which is important given that HMOCS officers would be certain to try to persuade MPS
to press for improvements.
18. The Hong Kong Government are determined to maintain the link with the US$ and this suggests that a sterling safeguard is most unlikely to have a significant cost for the period up to 1997. It is difficult to make predictions beyond that date but I feel that our best policy would be to limit the amount of discussion- with the Chinese on pensions issues. A-sterling safeguard can be presented as an historically based safety mechanism which: would have no impact on the provisions of the Joint Declaration: Capitalisation, either in conventional terms or by a back-door-