The
argue that the safeguard should only come into effect at a rate considerably below either the current exchange rate or "historical" rates. The current exchange rate is HK $12.5:£1.
The historical rates are, pre-1967, HK$16: £1;
the 20 year
average HK$11.54: £1 and the 1991 average HK$13.76: £1. Government Actuary Department have now done work for the Treasury which shows that, to eliminate the differential between Hong Kong and UK civil service salaries, a "fair" rate would be approximately HK$22:£1. We believe this assessment to be reasonable. If pension earning differentials are also taken into account the rate would be considerably higher,
possibly in the region of HK$30:£1.
6.
The HMOCS Association will be expecting pensions to be safeguarded at either a current rate or an historic rate: they would be shocked to know that consideration was even being given to a rate above HK$16:£1. But we would be hard-pressed to sustain the argument, on the basis of this new evidence, that 16:1 is justified when compared with the levels of pension earned by UK civil servants.
7. I do not believe this is the time to concede any ground to
the Treasury on this issue. It is still by no means certain that the Treasury see this trigger level option as the only way in which to safeguard pensions: apart from the other options in the paper, they could argue that this question could be settled nearer 1997 or that HMG should simply agree
to consider cases of individual financial hardship. But if we can bring the Treasury to accept the principle of an HMG-funded sterling safeguard, we and the Governor may in the
end have to concede that this would operate at a rate of
something like 22:1.
In the current climate on public expenditure, I see very little chance that Mr Portillo will agree our preferred
8.
hk.arr.ADM
SLM
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