(v) For the purposes of these calculations, current (April 1990) Hong Kong salaries are used. The costings assume that salaries do no more than keep pace with inflation.
How to limit HMG's financial commitment
3.
Whatever option we decide to adopt, there is a risk of
further large increases in Hong Kong civil service salaries
between now and 1997, which could add significantly to the
cost of the scheme. We cannot rule out the possibility that
the Hong Kong Government will continue to increase salaries
for civil servants above the level of inflation in order to
keep them in place. Treasury officials have suggested that one way of avoiding an open ended commitment might be to build in a provision for HMG to review the benefits available under the scheme in the light of prevailing salary
levels in 1997 and thereafter. But any such provision would
create so much uncertainty as to make the scheme almost
worthless in the eyes of HMOCS officers.
4.
Another possibility which we have considered would be to
denominate the scheme in sterling. This would entail
calculating the salaries of individual HMOCS officers at the
current exchange rate when the scheme came into effect and
stipulating that for the purposes of the scheme any future
salary increases could not exceed UK inflation rates. But
such a move would be fraught with difficulties. While it
would probably be unattractive to many HMOCS officers who
hope to continue to receive substantial salary increases in
the run up to 1997, it would almost certainly lead to
renewed pressure from Hong Kong HMOCS pensioners for
sterling safeguards to be applied to their basic pensions,
something we have hitherto strongly resisted.
WEDABI/5
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