TNAG-2431-FCO40-3533-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 258

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CHANCELLOR OF THE EXCHEQUER

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PS/ Mr Patter Sir I Wies

HONG KONG: ARRANGEMENTS FOR HM OVERSEAS CIVIL SERVICE

J

Miss Brock Acis, Légal Mi WRI

1. I minuted to Michael Portillo on this subject on 1 May.

Since then, it has become even clearer that we must settle

on a package of arrangements for members of Her Majesty's

Overseas Civil Service (HMOCS) before Chris Patten arrives in Hong Kong at the beginning of next month. This matter has dragged on for years in discussions at official

level, and now needs to be brought to a head.

2.

I should therefore like to propose a meeting next week

with you, Michael Portillo, Alastair Goodlad and

Chris Patten in order to try to agree on the two essential

elements of the package I believe we must put forward if we are to avoid a damaging impact on morale in the remaining years before 1997:

(a) Sterling safeguard for pensions: This was the subject of my minute of 1 May. We agree that we already have a

contingent liability to step in if after 1 July 1997 the Government of the Hong Kong Special Administrative Region

(SAR) should default on HMOCS pensions. We estimate that in the peak year of 2011 HMOCS pensions could total HK $265m, ie this existing contingent liability could be worth nearly £19m pa at present exchange rates. The question is whether we should also accept a contingent liability to protect HMOCS pensioners against a fall in the value of the Hong Kong dollar against sterling, ie to pay supplements to

make up the difference. In all 42 other cases since 1954, HMOCS pensioners enjoyed a continuing sterling safeguard

S.of.S

LETTER

12 JUNE

19:12

CONFIDENTIAL