TNAG-2100-FCO40-2989-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 62

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because of their wernes

that the Heyday

Dollar

may be devalued

way.

in comp

now.

could cause an exodus of HMOCS members now, with problems for HKG

On the other hand it would not cause problems in 1997 and would cost nothing.

2. The cost of any scheme could increase significantly, however,

if there were further large increases in Hong Kong Civil Service

salaries between now and 1997. 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. 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 or to

postpone announcing a decision until much nearer 1997. But a built-in review provision would create so much uncertainty as to

make the scheme almost worthless in the eyes of HMOCS officers.

Postponing a decision would also be difficult because the 390 contract officers need to know what sort of compensation scheme will

be in place so that they can decide by 31 March 1991 whether to

transfer to pensionable terms. Moreover all officers on pensionable terms have to decide by 1 July 1992 whether to join the new Hong Kong Government pension scheme.

A better solution might be to announce that the level of

↓

compensation would be based on today's salary levels of the relevant

civil service grades, to be increased only in line with inflation in Ic

S

Hong Kong

HMOCS

This however raised the question of sterling safeguards. salaries cannot increase radically without one or more of the following: inflation, depreciation of the HK Dollar, or a slide into uncompetitiveness. Thus any scheme based on current Hong Kong $ salaries but capped at today's levels, would be seen as worthless by HMOCS members They will argue for a sterling safeguard.

GNd oseA members in Hong Kong have long been arguing for a sterling safeguard

1 for their pensions. This is something which we have so far resisted for a variety of reasons, not least because of the possible expense. If we were to set a sterling rate for the purposes of thes compensation scheme, this would provide a very powerful lever for

HMOCS/OSPA to argue for the same rate for pensions. The only

WEDABH/9

CONFIDENTIAL