CO129-601-1 Salaries Commission- currency basis of emolument 9-1-1948 - 5-6-1948 — Page 11

so opt), when they change over to dollar salaries, have their pensions, based on their new dollar salaries, paid in sterling calculated at the rate of dollars 16 to the £ (i.e. Government rate of 1/3d. to the %). The difference between this

proposal and what we agreed to in (9) is that in the latter case we agreed that "the Government rate" might be used as the basis for this calculation. So long as the Government rate remains what it is now there will be no difference in effect between what we have agreed to and what the Governor now proposes. There will be a difference only if the Government rate changes. We have been told by Mr. Butters (minute of the 3rd February) that to contemplate a variation from the present Government rate is not practical politics. But, whether through misunderstanding or otherwise, it is obvious that the Governor and the officers in Hong Kong do not feel so happy about it.

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4. The Hong Kong dollar is tied to sterling so that the devaluation of sterling, if this took place, would not affect the value of the Hong Kong dollar in terms of sterling (as the Governor himself notes in the first sentence of paragraph 6 of (6)). There is thè possibility of Hong Kong leaving the sterling area. In this event the Governor says (in the same place there is a possibility that the Hong Kong dollar might appreciate in terms of sterling. I do not know whether the opposite might also be a possibility, but this may be one of the doubts behind the plea for a guaranteed rate of 8-Sterling exchange for pensions. The only other possibility which occurs to me is that which we have already considered - the possibility of the rendition of Hong Kong to China. If such rendition actually took place, then, as we have said in the last paragraph of (9), a situation would arise which would have to be dealt with quite separately. But there would still be a period (see last sentence of paragraph 6 of (6))

"as the date for the implementation of the decision approached"

when, in the Governor's words, "it might well prove impossible to maintain the Hong Kong dollar rate". This is another doubt which must be behind the plea for a guaranteed rate

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