CONFIDENTIAL
stated that the matter is one for HMG.
And in any event such a there would be strong
safeguard could last only until 1997; pressure for HMG to pick up the commitment thereafter.
15. The only way to ensure that HK Government took on the liability would be for HK Government to capitalise all outstanding HMOCS pension liabilities and make over this sum to HMG before 1997. We have put this to HK Government, which has rejected it: they could not do something for HMOCS members alone, the same treatment would have to be applied across the board; the Finance Committee of Hong Kong Legislative Council would not approve the funds; such a move would be a clear vote of no confidence in the future SAR's ability to pay; and it would
provoke a huge row with the Chinese, who would see this as yet
another case of British "asset stripping".
16. With regard to SPOS, Hong Kong pensioners are in a uniquely exposed position, compared to their counterparts from other
territories. Because their pensions are not linked to sterling, their base value in sterling terms can fluctuate wildly. In
recent years this fluctuation has been all downwards. It is
becoming impossible to justify the current position and steps need to be taken to put the regulations on a more equitable footing.
The financing of SPOS has always been our responsibility and we propose that the new arrangements should
commence on 1 April 1992.
17. I hope that you will be able to let me have your early
agreement that we should now tackle this problem in the way I
have outlined. As with the compensation scheme, we propose that the sterling safeguard and the change to the SPOS arrangements should be handled by ODA with the costs being borne on the Superannuation Vote. Mr Major accepted in 1988 that we could not justify the diversion of Aid Vote funds to a territory not qualifying for aid but left it to a future government to decide
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