TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 177

CODE 18-77

CONFIDENTIAL

HALB 101|1=

CONSTITUTIONAL

Reference

Miss Brooks

Legal Advisers

DIRECTIONS TO THE GOVERNOR BY THE SECRETARY OF STATE ON FINANCIAL MATTERS

1. I should be grateful for your advice on whether it is theoretically possible for HMG to direct the Governor to hand over Hong Kong Government public funds without him having to obtain the Legislative Council's agreement.

2. In the context of safeguarding pensions for HMOCS officers, one of the options we are looking at is for HKG to make over a lump sum to HMG to cover earned pension entitlements by HMOCS officers. HKG are unwilling to do this, primarily because local officers would also wish their pension entitlements to be capitalised and that financial commitment would be completely beyond HKG. The Treasury think this is an excellent option and one that in fact could be to HKG's advantage in pure technical terms. They are bound to ask sooner or later why we cannot simply direct the Governor to hand over the money.

3. In the normal way, it is true that the Legislative Council would have to approve this disbursement of funds. (It is not exactly clear to me where the requirement for LegCo to vote any and all funds comes from in the Letters Patent. Is it because no government funds can be expended except through legislation and therefore LPVII comes into play?) But is there power under the Letters Patent or Royal Instructions for us to direct the Governor to hand over the money? Presumably we could do so under LPIX - but this would be a rather high-profile way of proceeding presumably by Act of Parliament. Could we utilise LPXX to amend the Letters Patent to make specific provision for Hong Kong to hand over the money? Can you identify any lower-profile way of proceeding?

4.

I need hardly add that we would expect this option to fail on policy grounds, provoking a constitutional crisis in· Hong Kong and a diplomatic crisis with Peking. But it would' be helpful to know the legal position.

5.

As this may well come up during the Governor's visit here 21-24 January. I should be very grateful for your advice by 20 January if possible.

محمد

for.

M V Stone

Hong Kong Department

WH 304

270 2651

13 January 1992

CHAAGB

CONFIDENTIAL