6 January 1992
CONFIDENTIAL
Foreign and Commonwealth Office
London SW1A 2AH
4
J V Kerby Esq
Overseas Development Administration
94 Victoria Street
94V502
London SW1
Dear John,
HONG KONG: HMOCS MATTERS
HKCA 233/1
16AMRO
Me for am
Da
Mr Stand
Qw
1. I have not yet thanked you for all the sterling help which David Fish gave with the recent team visit to Hong Kong to try to take this vexed issue forward. I found his report on the trip most helpful in preparing for the recent meeting with the Treasury and I believe he was instrumental in persuading them to meet the Staff Associations in Hong Kong: I know the Associations will have appreciated this
2.
244 HKB233
(1991)
As you will have seen from my letter to Sandra Brown of 24 December, we are pressing on with this. Lord Caithness and I will be able to talk over the issues with the Governor next week. We then intend to draft an options paper and clear it with your Wing before trying it on the Treasury, in time for the Governor to discuss it here in late January.
3.
I think we need to flag up six options on how to deal with sterling safeguards: a traditional scheme; a decision to do nothing; a decision to defer a decision until closer to 1997; the capitalisation proposal; the loan proposal; and the ODA/FCO package. The aim would be: to rule out the first three now; for the capitalisation proposal to be seen as politically out; and to get a firm view from the Treasury on the loan option as soon as possible.
4. We shall however need to give the Secretary of State a concerted DW/ODA view on whether, if a sterling safeguards scheme is not a starter, he should press the Treasury to announce at least the compensation scheme. David Fish was quick to argue that this was so inadequate as not to be worth offering on its own; no doubt the Treasury would see this ploy as unacceptable salami tactics. But is it such a bad deal? The Governor thinks it is better than nothing, and I should prefer to announce compensation arrangements whether or not we have to reject or defer sterling safeguards. What do you think?
TUGABA
CONFIDENTIAL