CONFIDENTIAL
13.
Departments agree that this option, if feasible, would meet our objectives with HMOCS members. Departments differ on the political feasibility of the proposal. FCO Diplomatic Wing accept the Governor's judgement that LegCo would refuse to vote the funds, and consider that for
Ministers to direct the Governor to overrule LegCo on a financial issue of this kind would precipitate a political
crisis which could make Hong Kong ungovernable.
Commercial Loan
14.
HKG have commissioned a consultancy report on a scheme
to enable all Civil Servants to take out loans against a part of their pension entitlements. The attractiveness of such a scheme to HMOCS members would depend upon whether it could be extended to cover their full pension entitlements and how much HMG were prepared to subsidise the costs. From HMG's viewpoint this scheme would enable us to discharge at a quantifiable price before 1997 our obligation to safeguard the sterling value of HMOCS pensions, rather than have to face an uncertain but possibly much greater liability thereafter (this assumes that financial institutions will be willing to operate it without HMG giving a sovereign guarantee ie a continuing contingent liability). No assessment has yet been made of the level of financial support which would be necessary from HMG to make a scheme viable. A potential attraction is that such a scheme could be applicable to all Hong Kong Civil Servants, even if HMG topped up the loans to HMOCS officers. It could, however, prove divisive if a scheme for local officers was ruled out by HKG or if local officers were given a much less generous scheme. We would not expect insuperable difficulties with the Chinese. Experts need to consider further whether this option could be turned into a viable scheme, and if so at what cost. HKG would need to consider whether a variant tailored to HMOCS would cause
resentment among local Civil Servants, and if so, what they could do about it. FCO/ODA agree that if a scheme could be
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CONFIDENTIAL
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