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strong current of disillusionment with Government policy.
Our position
10. We had expected these lines of criticism, and I see no need to review the substance of our proposal ahead of next week's consultations. It was always clear that the financial and political constraints would mean that our compensation scheme would fall well short of the expectations of HMOCS officers. We judged it to be the minimum defensible as part of a package with a sterling
safeguard of pensions. However in January the Governor strongly advised that, given the continued difficulty of reaching agreement in Whitehall about the sterling safeguard, we should untie the package and proceed initially to implement the compensation scheme alone. Ministers agreed to do this. But inevitably HMOCS comments have not limited themselves to our specific compensation proposal.
11.
We have recently recommended that the Secretary of State should again minute the Chief Secretary on the subject of sterling safeguards. We hope that this issue can be resolved by mid-June, but it is unrealistic to expect progress on the subject in time for the consultations next
week.
12. Nor can we satisfy HMOCS officers next week on the principle of early retirement with immediate payment of pension. Ministers originally considered this point in 1987/88 and concluded that it was not a viable option, given Hong Kong's special circumstances and the likely Chinese and Hong Kong reaction to a provision which might be seen to undermine the Joint Declaration and the prospects for
continuity and a smooth transition. Moreover, since ExCo and LegCo's Finance Committee would almost certainly reject any proposal that HKG should pay such early pensions to
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