CONFIDENTIAL
7.
(f) Hong Kong pensioners are currently suffering because the Hong Kong dollar has weakened considerably against the pound. A sterling safeguard should be introduced now
to protect current pensioners. [Comment: very little evidence that there is any genuine hardship.]
The arguments which have been advanced against
introducing a sterling safeguard are:
(i) the Joint Declaration provides explicitly for
terms and conditions of service after 1997 to be no less
favourable than before. This safeguard is enough.
[Comment: HMG's strongets "legal" point.]
(ii) it has not been for HMG to fund such a safeguard
even if HMG has "done the right thing" in case of
default. [Comment:
-
(iii) it could show a lack of confidence on the part of HMG to Hong Kong's future. This could be very damaging to Hong Kong depending on how it was introduced, it could
lead to strong demands on HKG to do the same for local
civil servants with dire consequences. [Comment: very valid but might be overcome if carefully handled.]
(iv) it could be expensive. In 1985 it was calculated that the cost at maximum would be £10.5 million per annum (at 1983/84 salary levels and exchange rates) if the HK
dollar became worthless. [Comment: refusal to act on
financial grounds would be difficult to sustain.]
(v) there is no need to introduce a safeguard at this time and indeed such safeguards in the past were only introduced at the change of sovereignty. The HK$/US$ link is currently firm and exchange rate fluctuations are
RODACP/5
CONFIDENTIAL
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