TNAG-2686-FCO40-3888-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1993 — Page 50

11-MAY-'93 TUE 17:32 ID:

public

expenditure,

and

FAX NO:

CONFIDENTIAL

would

be

#237 PII

inconsistent with

the

Government's current policy of pay restraint.

-

26. The sum at issue between Treasury and FCO on compensation £15m in total spread over 6 years is relatively small. That at issue on pensions safeguard is more significant at some £150m in total. But it would be payable only in the event of collapse of the Hong Kong dollar or if the Chinese Government reneged on its commitment to pay pensions, and would be spread over a period of 50 years or more.

27. The available legal advice is that, if the Treasury approach were adopted, the Government could be at greater risk of successful challenge

the compensation element than on safeguarding, but would stand a good chance of winning on both.

on

28. Against this background, Ministers will wish to consider

whether:

or

the additional costs of the FCO package are necessary;

I

the Treasury proposal would be defensible; or

some intermediate arrangement would be acceptable.

Cabinet office

11 May 1993

CONFIDENTIAL