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unconvincing public line that "we do not believe that, overall, the present system works to the disadvantage of
the Hong Kong pensioner". The problem would be left unremedied (as it has been for many years) and would
probably worsen because of continuing exchange rate
fluctuations. Pressure on the FCO and ODA from existing pensioners, and indeed from Parliament, would
undoubtedly increase.
ii) We could try urgently to reform the SPOS system, so
as to take some account of falling sterling values of the basic pension. The ODA have proposed that SPOS
might henceforth be used to top up the basic pension in
the event of further exchange rate fluctuation. They estimate that this could cost £2-3 million per annum
(depending of course on the level at which the "safety
net" was set and the extent the Hong Kong dollar
depreciated). The Treasury are opposed to this on the
grounds of cost, because of the link with the wider issue of sterling safeguards and because they believe
that this is the responsibility not of HMG, but of the Hong Kong Government.
iii) We could increase pressure on the Hong Kong Government to help. But they are very likely to maintain that this issue is our responsibility, not
theirs.
11. As Lord Caithness is aware, discussion with the Treasury on the wider issue of sterling safeguards for serving HMOCS officers (and future compensation arrangements) are deadlocked. We await new proposals from the Hong Kong Government. In present circumstances, it is likely to be a long time before this complex set of problems is settled. In the meantime, the prospects of a solution to the particular injustice of SPOS are not good.
PJ ZAVL/4
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