TNAG-2099-FCO40-2988-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 115

CONFIDENTIAL

downturn and the Hong Kong Government no longer has the huge budget surplus it had two years ago. But we certainly cannot rule out the possibility of further large civil service pay increases. We agreed that the question of how to limit our potential commitment is therefore something we will need to address. possible option is set out in para 8 of the draft OD (K) paper.

(iii) Duration of scheme

One

5.

You say that there does not seem to be any particular reason why the scheme has to run as long as ten years. The fact remains, however, that we have a clear obligation under the Joint Declaration to work for the smooth transfer of government in 1997. When we come to consult the Chinese about this scheme it would be difficult to claim that we were being sincere in observing this commitment if we were to limit the scheme to say 3 years. We will need to be able to demonstrate that the whole purpose of the scheme is to ensure that HMOCS members remain committed to Hong Kong in the long term and continue to serve out their careers there.

(iv) Timing of announcement

6. There are a number of reasons why we cannot afford to delay announcement of the scheme much longer. Pressure among HMCCS and other expatriate officers in Hong Kong for an early decision is growing. As the Hong Kong Chief Secretary, Sir David Ford, emphasised when he came to see me on 31 May, this pressure is particularly strong among the expatriate police officers on contract terms who will have to decide very soon whether to transfer to pensionable terms. The officers concerned claim that they cannot properly exercise the option to transfer to pensionable terms until they know whether there will be a General Compensation Scheme. There is a similar problem related to the new pension scheme promulgated in 1987 which provides for retirement at 60 (instead of the normal age of 55) with a slower pension earning rate but with the possibility of commuting 50% of salary in a lump sum instead of 25%. Those wishing to take advantage of this scheme have to make their minds up by July 1992. This is a real deadline which cannot be extended. If we do not make any announcement about a Scheme before then, those concerned could claim that important information had been withheld from them which could have affected their decision. In such circumstances legal action could not be ruled out.

7.

For presentational reasons in Hong Kong, there would also be advantage in announcing the Scheme soon after the Nationality Bill becomes law and starts to be implemented. It would enable us to point out that something was being done for both expatriate and local staff.

CONFIDENTIAL