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the assurances about security of pensions in the Joint
Declaration.
Capitalisation (b)
11.
This scheme would cost HMG nothing, and would give
HMOCS members the protection they seek. However, it
presents problems for the Hong Kong Government.
Capitalisation of pensions is precisely what local Hong Kong
civil servants are after. For the Hong Kong Government to provide this for a small group of expatriates without providing the same for the great majority of civil servants
would be highly divisive. HKG cannot afford to fund the
HK$120 billion needed for capitalising the whole Civil
Service Pension Scheme. The Governor's considered judgement
is that the Legislative Council would not be willing to vote
the money for a capitalisation of HMOCS pensions alone. The
Governor of Hong Kong has no reserve powers over finance.
It would be possible in theory for HMG to amend the Letters
Patent to provide such powers and then to direct the Governor to provide the funds, but this would provoke a constitutional and political crisis, perhaps obliging HMG to impose direct rule.
12. Chinese views have not been tested. But the advice
from Peking, Hong Kong and our Delegation to the JLG in Hong
Kong is that the Chinese would be deeply suspicious of such
proposals for Hong Kong to pay for disproportionately generous arrangements for expatriate civil servants and that it would be dangerous to raise the idea with them. The
Chinese have also shown intense interest in the level of
Hong Kong's fiscal reserves in 1997, cf the airport negotiations. At the least they would engage us in lengthy dialogue: at the worst they could accuse us of trying to
renege on the Joint Declaration and could withdraw
co-operation in other areas, despite the damage this would
do to the prospects of a smooth transition in 1997 and to
the authority of the Hong Kong Government. If we sought to
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