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CONFIDENTIAL
-Compensation: We have to make a revised proposal: talks in Hong Kong revealed a huge gulf between our proposal and what can be sold. The advice from Hong Kong on what would be tolerable has proved unreliable. We tried to cut corners, but it is now clear that we must move to a more traditional scheme. Impossible to argue that the Joint Declaration so protects HMOCS officers who stay on that we can treat them differently from other DTS at independence and effectively wash our hands of them. We cannot seem to coerce loyal members of one of HM Services to work for a Communist regime. Hong Kong's economic prospects are still excellent, but it now seems inevitable that there will be substantial interference by Peking in the administration and police
force.
-Our revised compensation proposal still comes broadly within the maximum figure we gave for our previous proposal: some £8m pa for 5-6 years.
CONFIDENTIAL
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