CODE 18-77
Mr Paul
Hong Kong Dept/FCO
CONFIDENTIAL
Reference...
нив 431/6.
FROM: D S FISH
(GTN 7 7243 3444)
DATE: 5 October 1990
*990
cc Mr J V Kerby (o/r)
Mr S Rew, HM Tsy
HONG KONG: COMPENSATION SCHEME AND STERLING SAFEGUARDS
65
We spoke about your proposed draft telegram, with which I was generally content. I have since seen Simon Rew's disturbing letter of 28 September which takes us backwards rather than forwards.
2.
At our meeting on 22 August we agreed to press on with a compensation scheme along the lines agreed between the Secretary of State and Mr Major, then Financial Secretary. One of the reasons we decided to stick with the original proposal was the need to take things forward, and to avoid the need for a great deal of repetitive discussion. I do not see that there is any doubt about the purpose of the compensation/incentive scheme. We all have doubts about whether it will achieve its objective, especially in view of the events of 1989. But almost any alternative would be considerably more expensive and thus even less attractive to the Treasury. The advice of the Governor is that the scheme as agreed, perhaps with a slight variation along the lines set out in your
draft telegram, stands а reasonable chance of persuading people to stay on.
3. I know that your preference is to keep the compensation and sterling safeguards issue separate. But as I have said all along, this is going to be increasingly difficult, especially with the HK dollar falling in value against sterling. We feel able to depart from a conventional compensation scheme largely (but not solely) because of the guarantees contained in the Joint Declaration. An absolutely crucial element of this is the continuity of payment of pension, and this is only meaningful to current HMOCS staff and existing pensioners if that pension has a reasonable value. I do not believe that the British Government will be able to resist the political and moral pressure to ensure, directly or indirectly, that HMOCS officers and pensioners are protected (to a degree yet to be determined) against the possibility that their pensions could become worthless.
4.
I do not follow Simon Rew's points about previous devaluations; we know of no previous pressure of a comparable nature. As all other colonies moved towards independence we insisted on the conclusion of а Public Officers' Agreement (POA) with the incoming government, a key provision of which was that the pensions of HMOCS officers should be paid at а fixed rate of exchange. Initially, the payment of these pensions was the responsibility of the overseas governments. But subsequently, it was recognised that it was unreasonable to expect local governments to meet the cost of these protected pensions, and we took them over from 1971, as an aid initiative. As a result, all former HMOCS officers are in receipt of basic pensions which are protected against adverse exchange rate movements. I cannot imagine that Ministers would wish to argue that HMOCS officers in Hong Kong are any less deserving,
CONFIDENTIAL
67
No comments yet.
Private notes are available after approval.