CO129-601-1 Salaries Commission- currency basis of emolument 9-1-1948 - 5-6-1948 — Page 33

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officers would be allowed to opt in the event of any serious fluctuation in the relative value

and

of the Hong Kong dollar and the £ sterling;

he goes on to argue that this would nullify the

effect of having a fixed rate at all. Obviously

there would be no point in having a fixed rate

if it was intended to abandon it the moment there

was any fluctuation in relative exchange values; but

that was not in fact our proposal. The operative

words in paragraph 4 of my letter of the 22nd April

were "resulting in a substantial increase in the

nominal value of Hong Kong dollar salaries", and

later on "in the event of any future revision of

the salary rates for civil servants in Hong Kong".

The point is this. Officers who opted to convert

their pensions at the fixed rate would thereby

safeguard themselves against having their sterling

pensions reduced as a result of any devaluation of the Hong Kong dollar (though by the same apt they

would deprive themselves of any benefit from a trend

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in the opposite direction). If, however, a devaluation in the Hong Kong dollar as against the £ sterling were

indeed to take place, it is likely that sooner or

later Hong Kong salaries would be correspondingly

revised in an upward direction. Since pension is based on salary in the concluding years of service, pensions would be correspondingly increased, and

unless we safeguard the position in advance,

this would mean that officers already in the service

who have opted for the fixed rate would benefit twice

over both by the fixed rate itself and by the

increase in pension resulting from the increase in

salary designed to offset the devaluation.

Our/