CONFIDENTIAL
to reconcile with our commitments under the Joint
Declaration to work for Hong Kong's prosperity and stability
and for a smooth transition in 1997. Local officers, who
have shown the same loyalty to the Crown, would react angrily to a scheme which led to an expatriate exodus in 1997, leaving them alone to face the change of sovereignty. It could be difficult to explain to Parliament why we were prepared to commit up to £150 million on a group of civil servants who are already well paid by UK standards and given the assurances about security of pensions in the Joint Declaration. Departments are agreed that this option should be ruled out as being too expensive, and undermining the
assurances in the Joint Declaration and our objective of
encouraging HMOCS officers to stay.
FCO/ODA Scheme
10. This would fall well short of what HMOCS members are
expecting. They would in particular be strongly opposed to
a safeguard rate of, say, $16 to £1. But it would give them a degree of certainty that their pensions would not become
worthless even if the Hong Kong dollar collapsed. The costs
of the scheme cannot be predicted they could be zero if
the Hong Kong dollar stayed stronger than $16 to £1, or they
could amount to several hundred million pounds if it became
worthless. While the scheme would be divisive to a certain
extent in the Civil Service, the Governor is satisfied that
it should be possible to contain this by pointing out that HMG were paying, pursuant to their past undertakings to HMOCS members. Departments differ on whether HMG should be prepared to take on a contingent liability of this kind. The Treasury argue that HMG should not do so unless they simultaneously received assets from Hong Kong to pay for it. FCO/ODA strongly believe that this scheme is the minimum which should be offered, given HMG's commitment to HMOCS officers, and that it would be defensible in Parliament as striking a fair balance between the interests of HMOCs officers, the interests of the taxpayer and wider British
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