CONFIDENTIAL
should amend the inequitable operation of the present regulations for UK pensions supplements (SPOS) for existing Hong Kong pensioners affected by exchange rate fluctuations. As David Mellor and I were unable to agree on this package, we decided to split it up, first implementing the
compensation proposals, originally agreed between John Major and Geoffrey Howe in 1988, and leaving the pensions issues
for further consideration.
3.
We have duly opened consultations in Hong Kong on the compensation proposals. Initial HMOCS reactions are very critical of the limited nature of the proposals, and we can
expect some difficult discussions and public controversy.
In the light of these consultations we shall need to look carefully at our proposals before promulgating a scheme. Apart from the political and financial aspects, we shall need to consider carefully how a scheme would be likely to fare in the event of an application for judicial review.
4.
Meanwhile we now need to reach decisions on pensions.
David Mellor wrote to me on this point on 19 March. In view of his paragraph 5 I should make clear that we do not assert that HMG are necessarily under a legal obligation to safeguard the sterling value of HMOCS pensions, but we are in no doubt that the White Papers and subsequent practice constitute a strong moral and political commitment by successive British governments (decisions in respect of which could well be the object of an application for
|| judicial review) to ensure that such a safeguard is provided
and, if the government of the territory concerned is unable or refuses to provide it, to step in and provide it
ourselves. I enclose a note setting out the precedents, of
which Hong Kong HMOCS officers are well aware.
ARRAFI/2
CONFIDENTIAL
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