aef1.1g/kw/10.8.7
HM Treasury
DIEL
TIAL
Parliament Street London SWIP 3AG Telephone 071-270
HKA 233/1
4902
458
Peter Ricketts Esq
FCO
Foreign and Commonwealth Office
Room 316
3 Central Buildings
Matthew Parker Street
LONDON
SW1H 9NL
Dear Peter,
A HMG PACKAGE FOR HONG KONG HMOCS
Mr. Grx
You
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13 July 1992
in Stone Pe
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15/9
As you know, the Foreign Secretary and the Chief Secretary agreed at their recent meeting with Mr Patten that officials should work up a paper through the Summer on possible packages of HMG support for HK HMOCS. This should look at sterling guarantees including possible private sector capitalisation, the compensation/ incentive scheme, SPOS and the implications of any early retirement arrangements devised by HKG. The paper should set out a range of costed options for further consideration by Ministers later in the year.
It will be for the FCO/ODA to take the lead in this, in close collaboration with HMT and with GAD's advice. I thought it might be helpful if I set out the options we would wish to see covered in the paper.
These are listed in the attachment to this letter.
I have borne in mind a number of key considerations in drawing up these options. The first point, of course, is the policy goal, which we assume is to keep HMOCS in sufficient strength in Hong Kong up to and beyond 1997 to smooth the process of transition. HMOCS do have the option under the Joint Declaration to continue their careers in HK.
We are therefore in the position of providing incentives for them to exercise this option rather than compensation.
The appropriate policy response therefore seems to be to confine any incentive payments to those HMOCS serving on 1 July 1997 and after, and for payments to be triggered from that date onwards. The prospect of the HKG introducing an early retirement scheme runs an obvious risk of conflict with the incentives you are trying to build, and the paper will need to address the implications of this very carefully.
Early retirement would also have implications for a sterling safeguard. Mr Hurd says it would reduce the outstanding stock of pensions that would benefit from a post 1997 sterling safeguard, but it would also bring forward the cost of funding such a safeguard by creating HMOCS pensioners sooner. These factors will also need careful consideration.
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