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6. In these circumstances I accept the strong advice of the Governor of Hong Kong that we should make an immediate
announcement about the compensation scheme and the SPOS adjustment, while continuing to make as rapid progress as we can on sterling safeguards.
7.
On the compensation scheme, our detailed proposals have hardly changed since Ministers agreed the scheme in principle in 1988 (Annex C of the Inter-departmental paper). At the present exchange rate of HK$14: £1 we expect the cost to be between £20 and £30 million spread over 8 years from 1997 (the maximum would be about £39 million; the minimum about £4 million). A period of consultations with the staff
associations must precede finalisation of the scheme. We shall also want to brief the Chinese.
8. SPOS is much less significant in financial terms: about flm per annum at present exchange rates, or £2m if the dollar fell to HK$16 to £1. But the present inequity is a source of strong complaint to the Overseas Service Pensioners' Association and tackling it would help significantly to reduce the immediate heat of the HMOCS issue in the UK.
9. It is proposed to meet the SPOS from the ODA superannuation vote. The PES provision for superannuation is not cash limited, but taking on this new commitment would of course add to out turn expenditure, including 1992-93. This is a matter of long-standing UK pensions legislation and it would not be proper to divert Aid Wing funds for the purpose. (Nor is there any possibility of the Hong Kong Government now starting to contribute special support for expatriate officers). The compensation obligation will also require separate provision in due course: the fulfilment of our
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