CONFIDENTIAL
private sector arrangement would seem far more likely to arouse suspicions and perhaps ultimately lead
a default by the
Chinese; and in that event there is no doubt that HMG would have
to meet the full cost of HMOCS pensions.
19. I do not believe that the private sector option will work, but given that it would be desirable for HMG to receive at least some funds to reduce the contingent liability, this option must be explored with an open mind. Having said that, this option
should not be allowed significantly to delay political consideration of the issues. Treasury officials will continue
to press for capitalisation as a matter of principle; they are likely to try further to reduce the value of any safeguard offered (although the Actuary thought that HK$16: £1 was reasonable and certainly not over generous); and they may well suggest that if Hong Kong Government will not pay, there should
be no safeguard at all. If that is the case the sooner the issue falls to be decided at the political level the better.
20. Peter Ricketts, the Head of Hong Kong Department in the FCO joined us for a policy meeting on 11 December and afterwards told me that he planned to put up a submission to the Secretary of State during the week beginning 16 December. Before taking that step I suggest that Mr Burns, AUSS, FCO should call a meeting with the visiting team in a final attempt to see if the gap between the FCO and the Treasury can be bridged to some degree.
D S FISH
Overseas Pensions Department
18 December 1991
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