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after British rule ended. The maximum liability could amount to some £5.5m pa in the peak year of 2011, if we had set the trigger rate at HK$16:£1 and the dollar were to drop to HK$24:£1 (at present it is about HK$14:£1).
(b) Compensation: In 1988 John Major, as Chief Secretary, accepted Geoffrey Howe's proposal for a UK-funded compensation/incentive scheme. On the Governor's advice, and with David Mellor's concurrence, we decided earlier this year to begin consultations with the HMOCS Association about this scheme without waiting for decisions on the sterling safeguard. I have now reviewed the consultations which my officials held with the Association in Hong Kong from 7-11 May. I have concluded that the present proposal is inadequate: it falls far short of the reasonable expectations of the officers concerned; despite the good assurances in the Joint Declaration there are now real concerns about future developments in the administration and police force; it is not politically defensible to give officers only 10% of the compensation traditionally payable unless they agree to go on working under Chinese
sovereignty after 1997; moreover in terms of incentives, our priority is now to induce officers to serve at least until 1997, rather than for any long period thereafter, and the danger now is that many will otherwise leave before then. I therefore now propose the revised scheme set out in the Annex to this letter, which is closer to traditional schemes. The cost would probably be about £8m pa (in 1992 prices) over 5-6 years from June 1997.
3.
We are not in a position at present to give satisfaction to the HMOCS officers on the third main element outstanding from the traditional package of arrangements made at the time of constitutional change: right of early retirement with immediate payment of earned pension. This is a matter for the Hong Kong Government,
a
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