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after British rule ended.
The maximum liability could
amount to some £5.5m pa in the peak year of 2011, if we had
set the trigger rate at HK$16: £1 and the dollar were to
drop to HK$24:£1 (at present it is about HK$14:£1).
(b) Compensation: In 1988 John Major, as Chief Secretary,
accepted Geoffrey Howe's proposal for a UK-funded compensation/incentive scheme. On the Governor's advice, and with David Mellor's concurrence, we decided earlier
this year to begin consultations with the HMOCS Association
about this scheme without waiting for decisions on the
sterling safeguard. I have now reviewed the consultations
which my officials held with the Association in Hong Kong
from 7-11 May. I have concluded that the present proposal
is inadequate: it falls far short of the reasonable expectations of the officers concerned; despite the good
assurances in the Joint Declaration there are now real
concerns about future developments in the administration and police force; it is not politically defensible to give officers only 10% of the compensation traditionally payable
unless they agree to go on working under Chinese
sovereignty after 1997; moreover in terms of incentives,
our priority is now to induce officers to serve at least until 1997, rather than for any long period thereafter, and the danger now is that many will otherwise leave before then. I therefore now propose the revised scheme set out in the Annex to this letter, which is closer to traditional
schemes. The cost would probably be about £8m pa (in 1992
prices) over 5-6 years from June 1997.
3. We are not in a position at present to give
satisfaction to the HMOCS officers on the third main
element outstanding from the traditional package of arrangements made at the time of constitutional change: right of early retirement with immediate payment of earned
pension. This is a matter for the Hong Kong Government,
a
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