CONFIDENTIAL
3. Mr Major, then Chief Secretary to the Treasury, agreed that HMG should finance the proposed scheme, estimated to
cost between £10 m and £20 m, in total but declined to give
any undertaking about how the cost of the scheme should be
met in the PES terms. However, the matter was not carried
any further forward: Sir Geoffrey Howe decided that the time was not right to put the proposal to the Prime Minister
as there were a number of other financially contentious
issues involving Hong Kong which remained to be resolved.
NATURE OF THE COMPENSATION SCHEME
4. The scheme proposed by Sir Geoffrey Howe was tailored to
the particular circumstances of Hong Kong. A "traditional"
form of General Compensation Scheme would have provided all
HMOCS members still serving in Hong Kong in 1997 with an
actuarially assessed sum (averaging about £92,000 at 1991
values), payable in one or more instalments, and immediate
payment of pension to those who wish to retire in or after
1997. However, the Joint Declaration provides for a
continuing career for these officers. Furthermore,
traditional compensation would tend to encourage officers to leave, since it would permit them to obtain early payment of pension and full compensation, whether or not they remained
in service. This would not take fully into account the 1960 White Paper requirement that schemes should provide an inducement to continue serving. It would also, arguably, not be in keeping with our responsibilities under the Joint
Declaration to work for a smooth transition.
5. Sir Geoffrey Howe therefore proposed a modified scheme which would give incentives to stay on after 1997, and without the full benefits for loss of career given under a "traditional" scheme. It would not provide for early retirement with early payment of pension. It would provide a limited payment in 1997 to compensate for the loss of the
Secretary of State's protection plus 9 further annual
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CONFIDENTIAL
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