CONFIDENTIAL
5. Mr Burns said that Ministers had already agreed the arrangements for a compensation/incentive scheme. In 1985 we had hoped HKG would pay, but in his minute of 24 November 1988 to the Chancellor, Sir Geoffrey Howe had explained why it would not be right or feasible for HKG to bear the costs. Nor was it possible for HKG to provide a sterling safeguard for pensions: the White Paper obligations were for HMG.
6.
In subsequent discussion Ms Brown, Mr Rew and Mr Rayson argued that Ministers had not agreed on a specific compensation/incentive scheme. In 1985 the assumption had been that HKG would pay. The Chief Secretary's letter of 19 December 1988 had referred to difficult matters of judgement. Ministers had thought that some scheme should be put in place but details had not been decided. Nor was it self-evident that HMG should fund any pension protection arrangements. There might be a moral obligation, but there was no legal
The Carr-Robertson assurance would apply only in case of hardship.
one.
7.
Mr Burns argued that Ministers had recognised over the years that the case of Hong Kong was comparable to that of other colonies approaching independence. We needed to look at what sort of scheme would meet the Treasury's objective of a "least cost" solution and yet respond to the expectations of the civil servants involved. The Joint Declaration laid down certain important assurances which could act as one buttress to HMOCS after 1997. We needed the proposed arrangements as a second buttress.
8.
Mr Rayson said that the Treasury had made a proposal in October 1990, ie that before 1997 the Hong Kong Government should pay individual officers or HMG the capitalised value of HMOCS pensions. He did not believe this proposal had been fully considered by HKG - it had been quickly brushed aside. In the Treasury's view it was a feasible and practicable solution, as Hong Kong had sufficient reserves. Capitalisation of a lump sum would entail no cost for HKG. It was perfectly reasonable for HKG to relieve Hong Kong now of a liability that already existed. This solution was available now, and we could thus avoid discussing uncertainties about the future.
The
9. Mr Burns and Mr Cox said we had not brushed the Treasury proposal aside. Hong Kong had advised that it would not be possible to remove a lump sum from Hong Kong's reserves. Legislative Council, particularly in view of its altered composition since September's direct elections, would not vote for such funds. HKG could not discriminate between local and HMOCS officers. HKG could not put forward a proposal which would show a lack of confidence in the future SAR's ability to pay.
10. Mr Rayson said that we were faced with a balance of discomforts: there would be greater discomfort for HMG if we were to take on this liability. The Public Accounts Committee would not like it. It could have embarrassing
WADAAM
CONFIDENTIAL
Page 30Page 31
No comments yet.
Private notes are available after approval.