CONFIDENTIAL
I
However we have received no report of a meeting on the subject which the Governor chaired in the last fortnight. believe that if HKG were to announce an intention, subject
to certain conditions of transferring a certain sum from the
fiscal reserves each year to a separate fund, to be placed
under the administration of trustees and to be available for
transfers to the general revenue in respect of pensions payments in specified circumstances, this could have a good effect on the civil service generally. Within quite a short
time a reasonable surplus could accumulate. Mr Broadbent
has pointed out that the prospects are of Hong Kong's enjoying healthy reserves over coming years, and a fund on these lines to meet future commitments could help reduce political pressure for new expenditure. Discussion of the idea with the Chinese could put us for once in an advantageous negotiating position: eg to argue for further Chinese actions to provide reassurance to the civil service (and perhaps to open the whole Principal Officials/Chief Executive dossier on a better footing) or even for seeking
to release some funds from the SARG land fund to support
public work projects in Hong Kong before 1997.
5.
According to the Hong Kong telegram the scheme "has very significant drawbacks which will need careful evaluation". However the argument that setting up such a fund would appear as a tacit admission that concern on the issue was justified does not seem to me very convincing ( all pensions legislation could be seen as an admission that governments cannot be trusted unless their hands are tied). There is a serious problem of civil service morale, and pensions are the crucial issue around which all other frustrations can centre. We may well face problems with
local civil servants' resentment of our scheme for HMOCS
officers, modest as that may seem to those who will enjoy
its benefits: there may be an impression that top HKG
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CONFIDENTIAL
I Wander
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