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Executive and Legislative Councils would not permit the use of Hong
Kong funds for the exclusive benefit of a group of expatriate
officers. The Chinese would also be intensely hostile to the
transfer of Hong Kong reserves to the UK for this purpose.
6.
The FCO and HM Treasury agreed in 1988 that HMG should fund a
compensation scheme, framed in a way which would provide an
incentive to officers to continue to serve after 1997. This scheme
envisaged a payment in 1997 followed by a series of payments over a
number of years for officers who continued to serve under Chinese
sovereignty. The HMOCS Association rejected this proposal, arguing
that it was inconsistent with past practice and would effectively compel officers to serve on after 1997 against their wishes.
7. Since then, we have been discussing with the Treasury an improved package of measures which would fulfil our obligations;
provide a robust position from which we would not again be driven back; and be as proof as possible against judicial review. FCO and Treasury officials have agreed the attached paper setting out a
full range of costed options for both compensation and pension safeguard. I have discussed this paper with the Chief Secretary
but we have been unable to reach agreement on a revised package.
8. This is a complex subject and I would not suggest that OPD(K)
discuss the details. But we need now to take political decisions on the issues of principle. I have examined carefully the options.
My conclusions are as follows.
Compensation
9.
The HMOCS Association rejected our first scheme, which was
designed to encourage them to serve after 1997. We must now move
to a position on which we can stick, ie a scheme on traditional
lines. This would involve compensation payments, calculated on the
basis of full compensation factors, for HMOCS officers still in
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