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7.
One positive element in the Chief Secretary's reply is his recognition of the inequity of the present operation of the SPOS regulations (deriving from UK pensions legislation) and his conditional agreement in principle to their being remedied.
8.
The Governor's advice has been that announcing our compensation scheme first would buy some time, but that if HMG announce they will not provide a sterling safeguard this would (a) negate the effects of announcing the compensation package; and (b) provoke a major row with HMOCS, possibly leading to the departure of several hundred senior police officers and civil servants (perhaps including members of the judiciary). In theory it would be open to us to try what the Treasury propose and watch the consequences. they were as damaging as we expect, the Government would probably feel obliged to intervene to safeguard other interests, whatever is now said in Ministerial
correspondence. But this would be an irresponsible
approach.
9.
If
The draft reply to the Chief Secretary therefore rehearses some of the arguments in the previous papers and sticks to our guns on substance, but proposes a
Treasury-style "compromise": that we should leave SPOS to one side for the present and that Lord Caithness should announce only the compensation scheme in Hong Kong next week (saying that SPOS and safeguards remain under consideration). It agrees to further official-level discussions on the details of compensation but puts down a marker about the principles.
10. The draft suggests that if the Chief Secretary cannot agree to our compromise, OD (K) should discuss the question. We have a long-standing contingency bid for an OD (K) slot. But in practice I assume it is unrealistic to envisage such discussion before Lord Caithness's visit. Thereafter we
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