TNAG-2417-FCO40-3519-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 182

CONFIDENTIAL

confidence that these claims of the Joint Declaration will

be honoured (or that HMG could or would enforce them).

Elements of a Package

(A) Compensation

6.

HMG.

Since 1988 we have, with the Hong Kong Government, developed proposals for a low-cost compensation scheme designed to include an incentive for HMOCS officers to stay in Hong Kong after 1997. In 1988 Sir Geoffrey Howe sought agreement of the Treasury to a compensation scheme funded by

Mr Major, then Chief Secretary, accepted the need for a compensation scheme funded by HMG. Despite this Ministerial agreement on principles, detailed proposals

could not be taken forward immediately. We have since

refined earlier proposals, and details are at Annex B.

While this scheme is much more modest than a traditional

compensation scheme and will therefore fall well short of HMOCS members' expectations, it goes some way to meeting the

White Paper obligation to provide compensation. The cost of the scheme is difficult to predict. The most likely figure

is between £20-30 million, with a maximum of £44 million.

The scheme at Annex B was designed to form part of a

package, with a sterling safeguard (see next section). But if no such safeguard scheme can be agreed, one option would be to introduce a compensation scheme only. Views differ on the impact this would have. HKG think that it might buy some time with HMOCS officers. We consider however that

HMOCS officers would see it as so inadequate that it would only fuel pressures for a full safeguard scheme as well. There is also a risk of salami tactics by HMOCS officers

first pressure for a full traditional compensation package, then pressure for sterling safeguards.

(B) Sterling Safeguards

7. Despite the present strength of the Hong Kong economy,

NFJABA/3

CONFIDENTIAL