CONFIDENTIAL
BACKGROUND
HER MAJESTY'S OVERSEAS CIVIL SERVICE (HMOCS)
HMG'S OBLIGATIONS AND PAST PRACTICE
Two White Papers of 1954 and 1960 set out HMG's obligations towards HMOCS officers. Subsequent practice in some 42 territories established a clear pattern of arrangements for them when British rule ended. These included payments of compensation (for loss of the Secretary of State's protection, and of career prospects), provision of a
sterling pension safeguard and the right to retire with full payment of pension.
HONG KONG
There are roughly 700 HMOCS officers in Hong Kong, occupying key positions in the police and administration.
It is not possible for the HKG to fund arrangements for HMOCS officers: Hong Kong has a unified civil service and ExCo and LegCo would not permit the use of Hong Kong funds for the exclusive benefit of a small group of expatriate officers. The Chinese would also be hostile to the transfer of Hong Kong reserves to the UK for this purpose.
THE PACKAGE OF PROPOSALS
Compensation
The HMOCS Association rejected our first proposal in May 1992. The FCO has now proposed a scheme along traditional lines ie use of full compensation factors with a cap of £120,000 on the size of compensation for each individual; payments would be phased over six years starting in 1997. This would cost £48 million spread from 1997 to 2003.
The Treasury are proposing a scheme using half traditional factors with a cap of £120,000. This would cost £33 million.
Sterling Safeguard
The FCO and the Treasury have agreed in principle that the package should contain provision for a sterling pension safeguard. The HMOCS Association are likely to argue that pensions should be protected at the present exchange rate of HK$12:£1. The FCO have proposed a rate of HK$16: £1, which takes into account the high average salaries enjoyed by Hong Kong HMOCS officers. The potential total liability for this scheme is big (£250 million over about 50 years), but it is wholly contingent.
The Treasury have proposed a trigger level of HK$26: £1 to take account of the difference in salary and pension levels between Hong Kong and UK public servants. The maximum contingent liability would be £100 million.
CONFIDENTIAL