CONFIDENTIAL
if so whether they are prepared to accept this contingent
liability. If the banks are worried and HMG in the UK will
not give a guarantee, the cost of the scheme will obviously be even higher as the banks seek to insure against the risk
they perceive.
Compensation/Incentive Scheme
8.
-
Whatever the outcome on the sterling safeguard problem, we should seek to tie the Treasury down on the compensation/incentive scheme. They accept that Ministers
have agreed that there should be such a scheme but at our
last meeting suggested that the details of the scheme were still for debate: they favoured a more targetted approach. However we understand that this was hardly discussed in Hong Kong: HKG explained why targetting was a non-starter all HMOCS members had an expectation of compensation, and the political requirement was for continuity, ie to maintain the maximum HMOCS element, irrespective of individual quality. The Treasury made no comment and did not raise the issue
again. They no doubt feel that the claim for sterling safeguards should be settled first, one way or the other. But I recommend that we argue that they have had their chance to explore alternative compensation schemes. We spent £7000 on their trip and cannot now justify further expense or time on this aspect.
The package approach?
9. We need to keep pressure on the Treasury for early
has been decisions. Our preference is for a package deal on HMOCS covering compensation, sterling safeguards and SPOS (because we believe the compensation proposed will fall far below HMOCS expectations and will only be acceptable if propped up with the other elements). But the Treasury have an even stronger bureaucratic interest in a package solution (to resist what they would see as FCO salami tactics). On tactical grounds I therefore recommend that we say that, if
NC2AAU/4
CONFIDENTIAL
No comments yet.
Private notes are available after approval.