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11 September 1992
CONFIDENTIAL
Foreign & Commonwealth
Office
File (578
HKA 233/1
London SWIA 2AH
Telephone: 071-
270-2650
K Woodfield Esq
HM Treasury Parliament Street London SW1
Dear Kenin,
HM OVERSEAS CIVIL SERVICE (HMOCS): OPTIONS
1.
Since we spoke on the telephone last week, Hong Kong have confirmed that they will let us know as soon as possible what sort of private sector scheme the Hongkong Bank consider feasible, eg over 10 years as Barings envisaged, and what the costs would be. For reasons of confidentiality they have not told the Bank that at this stage they are interested only in HMOCS officers, but the profiles of the officers for whom they have asked the Bank to work up a scheme correspond to the HMOCS profile.
2. You will have received a copy of Mr D J Hughes' (GAD) helpful letter to me of 9 September, with a wealth of useful calculations. We have not yet fully absorbed these, but I have some quick reactions and would be grateful for your views and any from copy recipients.
3. First, I think it would be helpful to Ministers if GAD could now prepare more graphs on the lines of the example enclosed by Mr Hughes. Just to give the total sum which might be paid out over 70-odd years from 1997 would not enable them to form a very clear idea of the practical implications in terms of the Government's annual expenditure. It would also be better to show a range of values for the Hong Kong dollar (eg $20 and $24 to £1, as we originally suggested) as well as the severe $28 to £1 and worthless possibilities. In his letter of 31 July, Grant Ballantine mentioned the possibility of showing different scenarios on the same graph: this sounds an attractive approach.
4. Next, Option B. It seems to me that we can now see that the potential annual savings from fixing different trigger-levels for the safeguard, depending on the exchange-rate on each individual's date of retirement, even if the level is set at 40% or 50% above the then prevailing rate,
woodfield.10sept/HMOCS/njc
CONFIDENTIAL