CONFIDENTIAL
interests.
Capitalisation
11. This scheme would cost HMG nothing, and would give
HMOCS members the protection they seek. However, it presents grave problems in the Hong Kong context. Capitalisation of pensions is precisely what local Hong Kong civil servants are after. For the Hong Kong Government to provide this for a small group of expatriates without providing the same for the great majority of civil servants would be highly divisive. HKG cannot afford to fund the
HK$120 billion needed for capitalising the whole Civil
Service Pension Scheme. The Governor's considered judgement is that the Legislative Council would not be willing to vote the money for a capitalisation of HMOCS pensions alone.
12. Chinese views have not been tested. Views differ
between Departments on how strongly they would object, and on the dangers of raising this with them. But the advice from Peking, Hong Kong and our Delegation to the JLG in Hong Kong is that the Chinese would be deeply suspicious of such proposals for Hong Kong to pay for disproportionately
At the generous arrangements for expatriate civil servants. least they would engage us in lengthy dialogue: at the worst they could accuse us of trying to renege on the Joint Declaration and could withdraw co-operation in other areas, despite the damage this would to the prospects of a smooth transition in 1997 and to the authority of the Hong Kong Government. If we sought to take unilateral action, the Chinese could frustrate it by announcing that this was a major change in the arrangements existing in 1984, and that the SAR Government after 1997 would be free to over-turn it.
The FCO consider that the Chinese should only be approached if Ministers concluded that they wished to pursue this option and were prepared to accept/risk the consequences in
Hong Kong.
NFJABA/6
CONFIDENTIAL
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