TNAG-0789-FCO40-993-Development-of-social-policy-in-Hong-Kong-proposed-contribut-1978 — Page 167

CONFIDENTIAL

4. AT OFFICIAL LEVEL WE TOO INCLINE TO COMPULSION FOR ECONOMIC,

HOWEVER BEFORE FINANCIAL, ADMINISTRATIVE AND SOCIAL REASONS.

SEEKING A REMIT FROM EXECUTIVE COUNCIL TO DRAW UP A DETAILED COMPULSORY SCHEME, WE WISH TO BE SURE THAT THERE WILL BE NO POLITICAL REPERCUSSIONS.

5. AS I SEE IT THERE ARE THREE POSSIBLE POLITICAL PROBLEMS WHICH THE COULD BE RAISED BY A GOVERNMENT-IMPOSED INSURANCE SCHEME. FIRST IS THE RISK OF SPARKING A PUBLIC DEBATE ABOUT THE LEASE AND THUS DAMAGING THE FEELING OF CONFIDENCE WHICH HAS RECENTLY AND SLOWLY BEEN GROWING. CONVENTIONAL WISDOM IS THAT THE BULK OF PEOPLE IN HONG KONG ARE NOT INTERESTED IN LONG-TERM INSURANCE

INSTEAD THEY PREFER BECAUSE OF LONG-TERM POLITICAL UNCERTAINTY.

THE OPINION POLL

TO RETAIN THEIR SAVINGS IN A MORE TANGIBLE FORM.

MARGINALLY SUPPORTS THIS VIEW IN THAT. A SLIGHT MAJORITY OF THOSE QUESTIONED SAID THEY WOULD NOT WISH TO CONTRIBUTE TO A VOLUNTARY SCHEME. A COMPULSORY SCHEME COULD RAISE AWKWARD QUESTIONS, PARTICULARLY FROM THE YOUNG, ABOUT WHAT GUARANTEES THE GOVERNMENT COULD PROVIDE FOR BENEFITS AFTER 1997. A VOLUNTARY SCHEME WOULD

SINCE IT WOULD BE UP TO THE INDIVIDUAL TO CALCULATE THE ODDS. THE RISK OF AWKWARD QUESTIONS COULD BE REDUCED BY REMOVING ANY RETIREMENT BENEFIT FROM

THE SCHEME THOUGH WE WOULD BE SORRY TO DO THIS.

CARRY SOME OF THE SAME RISK BUT LESS SO,

5. THE SECOND RISK IS THAT PEKING WOULD THINK THAT WE WERE PUBLICLY

TAKING TOO MUCH FOR GRANTED ABOUT THE FUTURE AND REACT ACCORDINGLY EITHER BY DIRECT COMMENT, WHICH WOULD BE VERY DAMAGING TO CONFIDENCE, CR BY ENCOURAGING LOCAL OPPOSITION, WHICH WOULD BE

LESS DANGEROUS BUT STILL AWKWARD. AGAIN, THIS RISK COULD PROBABLY BE REDUCED IF THE SCHEME DID NOT INCLUDE RETIREMENT

BENEFITS. IN THAT CASE I SUSPECT THAT THE DEGREE OF PRE-JUDGEMENT INVOLVED WOULD BE TOO SMALL TO WARRANT DEPARTURE FROM THE CURRENT

SELF INTERESTED POLICY OF NOT ROCKING THE BOAT.

7. THE THIRD RISK APPLIES ONLY TO A COMPULSORY SCHEME. IT IS THAT THE LOCAL COMMUNIST HIERARCHY WOULD OPPOSE THE SCHEME FOR LESS FUNDAMENTAL REASONS, E.G BECAUSE THEY FELT IT TO BE AGAINST THE FINANCIAL INTERESTS OF COMMUNIST ENTERPRISES: BECAUSE THEY CBJECTED TO PAYING INTO A FUND ADMINISTERED BY THE HONG KONG GOVERNMENT OR FOR EMPLOYEES SOME OF WHOM WOULD RETURN TO CHINA AND NOT BENEFIT: BECAUSE IT UNDERMINED THEIR OWN SCHEMES FOR EMPLOYEES:

zi CONFIDENTIAL

/OR BECAUSE