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CONFIDENTIAL
11. Our proposal to minimise the deficiencies in the
the SPOS
arrangements is described at Appendix 1. We estimate that the cost would be £1 million per annum at current exchange rates and
£2 million per annum at HK$16: £1 sterling. In what were very exploratory discussions with your Superannuation Division, it was accepted that the present arrangements were difficult to defend but your colleagues were not wholly convinced that Hong Kong should not meet the cost of a change in the way we operate the
regulations.
FINANCIAL ARRANGEMENTS
12. We have considered very carefully whether it would be right
or feasible to ask the Hong Kong Government, or the Chinese on
behalf of the future SARG, to bear the cost of a sterling
safeguard or of contribution to the UK Pension Increase
equation. We have concluded that it would not.
13. We judge that there is no prospect of the Chinese agreeing
to commit the SARG to sterling safeguards for the pensions of British expatriates. The matter is not one for the Hong Kong
Government alone since it will cease to exist when the
arrangements would be in force and the Chinese have made it plain
they do not feel bound to recognise any post 1997
arrangements entered into by HK Government without direct
agreement.
that
14. It is impossible for the HK Government now to introduce
sterling safeguards for all civil servants. This would show a
complete lack of confidence in the present link between the Hong Kong and US dollars. To do so only for expatriates would be highly divisive between local and overseas officers in Hong Kong's unified civil service. There would also
also be strong opposition in the community as a whole. The Hong Kong
Legislative Council would not vote the funds: ExCo have already
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