CONFIDENTIAL
to offer payments and guarantees which would substantially exceed those available to comparable UK officers. They argue that that would be poor value for money at a time of heavy pressure on UK public expenditure, and would be inconsistent with the Government's current policy of public sector pay restraint.
26. The sum at issue between Treasury and FCO on compensation
£15m in total spread over 6 years
is relatively small. That at issue on pensions safeguard is more significant at some £150m in total. But it would be payable only in the event of collapse of the Hong Kong dollar or if the Chinese Government reneged on its commitment to pay pensions, and would be spread over a period of 50 years or more.
27. The available legal advice is that, if the Treasury approach were adopted, the Government could be at greater risk of successful challenge on the compensation element than on safeguarding, but would stand a good chance of winning on both.
28. Against this background, Ministers will wish to consider
whether:
1
the extra costs of the FCO package are necessary; or
the Treasury proposal would be defensible; or
some intermediate arrangement would be acceptable.
Cabinet office
12 May 1993
CONFIDENTIAL