CONFIDENTIAL
XCCI(92)46
19
An alternative proposal to scale down the pension reserve fund to cover only one year's pension expenditure has also been considered. However, a one year pension reserve is unlikely to meet deep seated staff concerns about the security of pensions. Staff will instead press for a three or five year roll forward fund, which we cannot afford.
Assessment
20
There is genuine difficulty in identifying a practicable and affordable way of providing additional pension safeguards. Our position remains that existing safeguards are adequate. Nevertheless we have felt obliged, in view of the strength of staff feeling, to discuss the problems with staff and to allow them the opportunity to react before any final decision is taken.
Im
Staff Reaction
21
We are accordingly in the process of briefing the Staff Sides of the Central Consultative Councils on our assessments of the various options which have been considered. The Staff Sides have initially expressed deep disappointment. They profess not to have faith in the assurances we have given (along the lines of paragraph 2 above). They contrast the Government's willingness to spend huge sums on infrastructure projects with its unwillingness to set aside any sum to safeguard existing commitments on pensions. They point out that this issue is fundamental to the maintenance of Civil Service morale over the next few years.
22
Individual Councils have requested follow-up sessions with Civil Service Branch and these will take place shortly. The Staff Sides may have counter-proposals to make. Although the chances are slim that any such counter-proposals will be practicable, it would be prudent to give the staff a hearing.
The China Angle
23
The Chinese indicated at earlier JLG meetings that in their view there would be advantages in setting up a $15 billion reserve for the partial funding of civil service pensions. Their proposal was made contemporaneously with the airport talks last year, and was no doubt a part of their overall objective of getting us to set aside as big a sum in our