CONFIDENTIAL
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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 payments for each year an HMOCS member remained in service after 1997. Such an arrangement would fall well short of what HMOCS officers in Hong Kong would have hoped to receive, but this was judged to be manageable.
6. In discussions with the Governor we have refined this scheme to front-load it slightly by going 20% of the maximum compensation sum in mid 1997 and by reducing the number of years in which payments would be made from 9 to 8. We also consider that to avoid arousing Chinese suspicions no payments should be made until the officer retires or resigns. Details of the proposed scheme and how to take it forward are attached.
COSTS
It is extremely difficult to calculate accurately how much such the scheme proposed would cost. This would depend
1.
on:
(a) the number of HMOCS members in service in 1997 and on how long they remained in service after 1997;
(b) Hong Kong Civil Service Salary increases between now and 1997; and
(c) the exchange rates at the dates of payment.
Wher
The cost could be as high as £44 million (at current exchange rates) in the unlikely event that all eligible HMOCS officers were to remain until normal retirement age and all contract officers who had the option to transfer to permanent and pensionable terms chose to do so: and "bought back" all their previous service. Equally, if a high proportion of HMOCS officers were to leave in 1997 or shortly thereafter, the cost could be relatively low (84 m to 85 m). A figure midway between these extremes, say £20-30 million, is probably the most likely. (By contrast a traditional compensation scheme would cost between £60 million and £205 million.)
8. One way of avoiding open-ended commitment would be to state that the compensation was based on 1991 Hong Kong
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CONFIDENTIAL
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