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CONFIDENTIAL
2.
The main sticking point is likely to remain a sterling
safeguard for HMOCS members pensions. The Treasury are dismayed by the size of the worst case contingent liability if the Hong Kong dollar became worthless or dropped significantly in value. But given Hong Kong's geographical position, at the heart of the world's fastest-growing region, this risk must be very low. It is more likely that the sterling safeguard would not be invoked and would cost us nothing. It is clear from the reactions of HMOCS officers that a sterling safeguard will be essential if they are to accept a package of measures. HMG have made arrangements to protect the sterling value of pensions in all 42 previous decolonisation cases: we have an obligation
to do so in the case of Hong Kong also. Failure to do so could open us to judicial review.
3. The consultations with HMOCS officers in Hong Kong
showed that we must also improve our proposal for
compensation. The total expenditure commitment now envisaged is £41-£47 million (spread over 5 or 6 years from 1997) at 1992 prices or £37-£43 million at 1991 prices. In his letter of 11 February to the Chief Secretary, the Secretary of State stated that the maximum cost would be £39 million, and the likely cost between £20 and £30 million.
The improved offer would not, therefore, cost more than
about £2 million a year extra.
chech
PF Ricketts
PJZAYO/2
CONFIDENTIAL
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