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inducement to continue serving. It would also, arguably, not
e in keeping with our responsibilities under the Joint Jeclaration 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. The actuarial factors used in determing the compensation would be roughly half those used for traditional schemes: thus the payments would be substantially less. The modified scheme would also 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.
6.
In discussions with the Governor we have slightly refined this scheme as follows:
(a) In order to give HMOCS members an incentive to stay beyond 1997, and to help them get over the psychological barrier of 1997, we propose that 20 per cent of the maximum compensation sum should be payable in 1997, after the transfer of sovereignty, and additional sums of 10% of this total would accrue yearly thereafter to those who remained. Thus the maxium compensation would be available to those who stayed for 8 years.
(b) In order to overcome likely Chinese sensitivities about serving SAR officials being in receipt of payment from HMG, we propose that all sums payable under the scheme would be set aside and would be accessible to the officer concerned only when he or she retired, resigned or otherwise left the service of the SARG. The funds might, for example, be placed in an interest-bearing account which would revert to the officer at the appropriate time.
CONSULTING THE CHINESE
7. This is an issue bearing on the implementation of the Joint Declaration on which the Chinese could legitimately claim that they should be properly consulted. They may see the scheme as an attempt by HMG to preserve influence in Hong Kong after 1997. We will therefore need to take great care to try to allay Chinese suspicions and to make clear tht our aim is to ensure that Hong Kong remains stable and prosperous before and after 1997. In the final analysis however, the Chinese could not block the scheme: the obligations of HMG to HMOCS officers are a matter for us and we would in the end have to decide ourselves how those obligations should be met.
CONSULTATIONS WITH STAFF ASSOCIATION
8. There would also have to be consultation with the staff associations in Hong Kong. Such consultation is a requirement laid down in the 1960 White Paper.
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