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the same time as final decisions on sterling
safeguards; and that Lord Caithness should say that both these questions were still under consideration and that we expected to be able to take decisions within
three months.
(d)
The Chief Secretary's letter of 4 March again rejected
HMG funding of sterling safeguards; proposed an
alternative draft statement by Lord Caithness placing
the onus for any sterling safeguard on the Hong Kong
Government but saying that we continue to study SPOS; but suggested that if this formula did not commend
itself to us it might be better to say nothing at all on the subject of pensions at this stage.
4.
The Treasury draft statement is not completely accurate
and would cause us serious difficulties in Hong Kong.
However we can live with their fall-back position of making
a short statement about the compensation/incentive scheme,
and forthcoming consultation on this, but saying nothing at all on pensions, ie sterling safeguards and SPOS.
This was
our immediate objective, the two-pronged approach advocated
by the Governor during his calls on Ministers in January, when he argued that news on compensation/incentives should
take the immediate heat out of the issue in Hong Kong and
buy us some time while we continue to pursue the sterling safeguards debate.
5. We told Treasury officials last week that we expected
Lord Caithness to make a short, low-key statement on these
lines. They were content. However, on the strong advice of Mr Galsworthy and the Governor, Lord Caithness decided that it was better not to make any statement which might become public before we had briefed the Chinese.
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