TNAG-2422-FCO40-3524-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 245

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CONFIDENTIAL

5. 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 (or to open the

consultations with HMOCS officers which are the next step)

until we had briefed the Chinese. This will take a little

time, so, in order to pin down the progress we have made

with the Treasury and to minimise the risk of future

Treasury back-sliding (eg after an election is called or in

the light of Hong Kong's announcement last week of its

healthy fiscal reserves), he has made the statement in a confidential letter to Sir David Ford (Chief Secretary of

Hong Kong and the most senior HMOCS officer in the

territory).

6. We need now to wrap up the present correspondence,

confirming where matters stand. We can agree to a request by Treasury officials' that we should clear with them the

briefing line for use with the Chinese (this will be

difficult and time-consuming, but we can hardly refuse the

request). On the details of our compensation scheme we had

feared that the Treasury officials would seek to block

unworkable progress by pressing on us factitious proposals for changes

and requiring that we agree these details before opening consultations in Hong Kong. In fact they have not done so,

but there is advantage in our showing that we are

considering the ideas they have put forward and will keep in

close touch at official level as we prepare for the

consultations. The draft minute from the Secretary of State

therefore also covers this point and, to protect our

position in future discussion, rebuts the Chief Secretary's ill-informed assertions on sterling safeguards. To avoid provoking a rejoinder from Mr Mellor it is less acerbic than

our first draft.

Moso

N J COX

This minute is intended not to require anm response from the Chief Secretary; and

NJCAAP/4 to establish that officials should proceed wolf consulting the Moors in Mary liong over the coming weeks. CONFIDENTIALITER Governor's main requirement.

This meets

Boschetts 10/0