CONFIDENTIAL
66
132121
MDHOAN 0701
CONFIDENTIAL
FM FCO
TO IMMEDIATE HONG KONG
TELNO 372
MAN
OF 02170OZ FEB 92
3/3
INFO PRIORITY PEKING, UKREP JLG HONG KONG
TOP COPY Q DIST?
HKA 233.
02 MAR
HMOCS: COMPENSATION/INCENTIVE SCHEME
1.
PENDING MINISTERS' DECISIONS ON THE OUTSTANDING ISSUES OF PRINCIPLE, AND WITHOUT PREJUDICE TO THEM, WE HAVE HAD A FURTHER DISCUSSION WITH TREASURY OFFICIALS ABOUT THE DETAILS OF OUR PROPOSED COMPENSATION/INCENTIVE SCHEME.
2. WE ARGUED STRONGLY THAT OUR PROPOSAL REPRESENTED THE MINIMUM WHICH COULD ADDRESS OUR OBLIGATIONS TO HMOCS OFFICERS AND PROMOTE OUR OBJECTIVES OF MAXIMUM PUBLIC SERVICE CONTINUITY THROUGH 1997: THAT THE REFERENCE POINT OF THE HKG LIMITED SCHEME FOR OFFICERS SUPERCEDED FOR PROMOTION, AT ROUGHLY 50 PER CENT OF TRADITIONAL ACTUARIAL FACTORS, WAS DEFENSIBLE IN A WAY THAT OTHER PROPORTIONS WOULD NOT BE: AND THAT PHASING OVER 8 YEARS, WITH 20 PER CENT OF THE MAXIMUM IN THE FIRST YEAR, WAS ALSO A SIMPLE, JUSTIFIABLE APPROACH. TREASURY OFFICIALS TOOK NOTE BUT ALSO PROPOSED SOME ALTERNATIVE FORMULAE, AIMED AT REDUCING THE COST OF THE SCHEME TO THE UK TAX-PAYERS. THEY LEFT US IN NO DOUBT THAT IF, AS A RESULT OF OUR CONSULTATIONS WITH THE HMOCS ASSOCIATION, WE EVENTUALLY PROPOSED A SCHEME MORE EXPENSIVE THAN OUR PRESENT PROPOSAL, THEIR MINISTERS WOULD RESIST IT VERY STRONGLY: WE MAY THEREFORE NEED TO CONSIDER BEGINNING THESE CONSULTATIONS ON THE BASIS OF A CHEAPER SCHEME THAN THE PROPOSAL WE PUT TO THE TREASURY. SUBJECT TO THE OUTCOME OF MINISTERIAL EXCHANGES, WE SHALL REFLECT FURTHER ON THIS AND THEN SEEK YOUR ADVICE ON THE TACTICS.
3. A MORE URGENT POINT WHICH AROSE IN THE DISCUSSION IS THE POSITION OF THE LARGE NUMBER OF POLICE OFFICERS ON CONTRACT TERMS WHO HAVE THE RIGHT TO TRANSFER TO PERMANENT PENSIONABLE TERMS AND BECOME MEMBERS OF HMOCS. CLEARLY THE COST OF ANY HMG ARRANGEMENTS FOR HMOCS OFFICERS WILL BE REDUCED IF THIS GROUP, OR MOST OF THEM, DO NOT REPEAT NOT JOIN HMOCS. WE ASSUME THAT THERE WOULD BE LEGAL DIFFICULTIES ABOUT OUR NOW UNILATERALLY DENYING THEM THE RIGHT TO JOIN HMOCS (GRATEFUL YOUR VIEWS ON THIS), BUT WOULD IT BE POSSIBLE FOR YOU TO OFFER THEM NEW