CONFIDENTIAL
2.
The main sticking point is likely to remain a sterling
safeguard for HMOCS members pensions. The Treasury are dismayed by the size of the worst case contingent liability
if the Hong Kong dollar became worthless or dropped
significantly in value. But given Hong Kong's geographical position, at the heart of the world's fastest-growing
region, this risk must be very low. It is more likely that
the sterling safeguard would not be invoked and would cost
us nothing. HMG have made arrangements to protect the
sterling value of pensions in all 42 previous decolonisation
cases: we have an obligation to do so in the case of Hong
Kong also.
3. The consultations with HMOCS officers in Hong Kong
showed that we must also improve our proposal for
compensation. The total expenditure commitment now
envisaged is £41-£47 million (spread over 5 or 6 years from
1997) at 1992 prices or £37-£43 million at 1991 prices.
In his letter of 11 February to the Chief Secretary, the Secretary of State stated that the maximum cost would be £39
million, and the likely cost between £20 and £30 million.
The improved offer would not, therefore, cost more than about £2 million a year extra.
Vickett
PF Ricketts
PJZAYO/2
CONFIDENTIAL