CONFIDENTIAL
BACKGROUND
1.
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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 how to deal with it, and consulted the HMOCS Association on our very limited compensation/incentive scheme. This would provide 20% of half or the "normal" 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.
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We prevented piirall (rismificantly less geve our Han olly territories) a compensatio lo mmars
our proposals 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 persion and any reasonable compensation.
2.
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 in post 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 firmly 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 the Package HMG is prepared to agree is seen as niggardly
our revised package j
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