CONFIDENTIAL
BACKGROUND
1.
On the advice of the Governor (Lord Wilson) and with the agreement of the Treasury, we split up our package proposal to deal with what arrangements to put in place for Hong Kong HMOCS as a result of the change of sovereignty in 1997. We left sterling safeguards to one side, because we could not agree with the Treasury on how to deal with it, and consulted the HMOCS Association on our very limited
compensation/incentive scheme. This would provide 20% of half of the "traditional" compensation as a right for those who were in service in 1997, with the rest payable in 8 annual instalments of 10% only to those who stayed on.
2. We presented proposals (significantly less generous than in other territories) on compensation to HMOCS officers earlier this year. They were very badly received. They were taken as forcing loyal servants of the Crown to work for a foreign (and communist) government in order to get a pension and any reasonable compensation.
3.
Ministers therefore agreed that we should revise our compensation proposals so that full compensation would be paid, over 5 or 6 years, to all who were serving in 1997, irrespective of whether they stayed on, and that the sterling safeguard element was vital as the other main plank of the package. We continue to resist the HMOCS demand that they should be allowed to retire in 1997 with early payment of pension.
4. The Chancellor has kept clear of these issues to date but it would be worthwhile flagging up for him the political dangers of allowing this to drag on for much longer. There is a strong pensions lobby in parliament and the HMOCS could mobilise a lot of support if our revised package is seen as niggardly.
hurd. Lamont.HMOCS.MS
CONFIDENTIAL