9.
In
Matters are likely to be brought to a head when we announce the compensation/incentive scheme for HMOCS members, which is the subject of a separate submission.
this scheme we are proposing to make payments in 1997 and
thereafter to serving members of HMOCS in an effort to
induce them to stay unp to and well beyond 1997. One
question that is bound to be asked is how the payments can
be guaranteed to be worth something unless they are backed
by a (sterling) guarantee. This will be closely followed by
the same question regarding pensions for HMOCS members which
fall due after 1997.
10. The question of sterling safeguards raises a number of
conflicting interests. These may be summarised as follows:
HMG
11.
Our
HMG's policy on sterling safeguards has been that this is a matter for HKG, for the reasons set out in paragraph 5 above. We have however recognised privately that the epressure on HMG to introduce a sterling safeguard could
become intense and would be very difficult to resist.
prime aim must be to ensure a stable administration in Hong
Kong up to and, if possible, beyond 1997. Introducing
sterling safeguards for HMOCS members could help to ensure
this. We are constrained in our choices by the wealth of
precidents there have been in previous colonies for HMG to
negotiate and then to provide a sterling safeguard for pensions, such a safeguard was not negotiated nor included in
the Joint Declaration.
12. A major concern is the potential cost. The estimated
pension liability for HMOCS members in 1997 is estimated at
current salaries and an exchange rate of 1 to 14.5 to be £.. million per annum with a continuing, fluctuating liability up to the year 2040.
ROZAUD/5
If the HK dollar were to
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