implied if any special steps, distinct from those which would normally be taken in a dependent territory, were to be taken in Hong Kong to safeguard the public sector pensions by, for example, establishing an external fund. I do not intend to take this argument further at present because ODM have only said that the previous exploratory discussions on this subject might be resuscitated. It would in any case be for the Hong Kong Government to say what the effect on political confidence would be if such a measure were adopted. But on the face of it it would be politically provocative to establish an external pension fund because this would provide the Communists with an excellent propaganda weapon. It could hardly be kept a secret.
This very simplified statement of the background leads to a number of awkward conclusions about the significance for Hong Kong of these pension proposals:
(a) They would lead to public ventilation of the
nature of HMG's obligations towards Hong Kong pensioners (both expatriate and Chinese) when the territory ceases to be dependent on us, in respect of pensioners' public services when the Colony was dependent. The case for accep- ting such obligations can only be reinforced by the new policy proposals.
(b) Nevertheless we must refrain from public acknowledgement of any such obligations. However gratifying it would be to Hong Kong staff it could only give rise to damaging speculation in the territory and would give too many hostages to fortune.
(c) Equally we must obviously not publicly dis-
avow our obligations.
5.
(a) For political reasons, we may well find it
impossible, however prudent it would be, to make external financial provision. (without knowing what sum an actuary would require to set aside to meet an annual pensions bill of more than £34 million it would nevertheless be interesting to calculate what effect it would have on the substantial Hong Kong reserves to fund the necessary sum.)
It is difficult to see how ODM is going to be able to announce the new policy without raising the reason- able assumption in still dependent territories that when their time of independence comes HMG will pick up their pensions bill in respect of pre-independence services by eligible staff. But it seems to me that the less expli- cit the announcement were in this respect the less embarrassment there would be in respect of Hong Kong. If the announcement were not explicit it would not rein- force to the same degree the case for accepting similar obligations to Hong Kong and we could deal with enquiries from Hong Kong by simply saying that when territories ceased to be dependent we would be looking at their cases on an individual basis.
The most awkward form of announcement for us would be an explicit assumption of future liability on any sort of blanket basis. Any such undertaking would
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