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HONG KONG HMOCS ARRANGEMENTS
STERLING SAFEGUARD OF PENSIONS
Previous practice
Pensions paid at rate of exchange at independence (usually an exchange rate fixed for some years before).
HMOCS claim
HMG to safeguard exchange rate of pensions at "neutral" rate, eg average HK dollar to sterling rate 1972-1997 or 1984-1997: ie HMG to pay supplements if HK dollar falls below this value. (Comment: pre-1992 average
sterling value against HK dollar well below present figure of £1 = HK $13.8)
HMG's proposal
None: "matter still under discussion; no decisions have yet been taken; we cannot predict when they will be taken or in what sense"
State of play
The Secretary of State minuted to Mr Portillo on 1 May arguing for agreement to the principle of a sterling safeguard by HMG, with officials to discuss details (previous proposal at official-level was for the trigger point for the sterling safeguard to be £1 = HK $16).Mr Portillo has not yet replied. (We know Mrs Brown remains deeply hostile to HMG's taking on this contingent liability: which might cost up to £15m in the worst year, if the HK $ became worthless.)
Way forward
-Aim for solution before Mr Patten leaves. -Ministers to telephone Mr Portillo ?
-Meeting of OPDK (due to discuss Gibraltar on 2 July) ?
CONFIDENTIAL
No comments yet.
Private notes are available after approval.