CONFIDENTIAL
retirement, which would benefit HMOCS staff along with others. But it is judged inconceivable that they would contribute to funding any compensation and safeguard scheme. That would be seen as spending Hong Kong money to provide favourable treatment for expatriates, and risk Chinese complaints of asset stripping.
Compensation
6.
The FCO initially envisaged a scheme designed both to compensate staff for loss of career prospects and removal of the Foreign Secretary's protection and, by limiting the amount of compensation payable at the time of transfer of sovereignty, to give an incentive to continue serving after 1997 in order to help secure an orderly transition. But the HMOCS Association in Hong Kong argued successfully that it was unfair to put pressure on staff to continue serving an alien administration. Consequently it is now the intention that all staff serving up to mid-1996 should qualify for full compensation. The FCO propose that those choosing to stay on thereafter would receive an additional 5 per cent annual supplement. This is likely to be acceptable to the Treasury if it does not add to overall costs.
7.
The FCO propose that compensation payments should be calculated by reference to salary, age and length of service, using the same Government Actuary-calculated multipliers as have been used in previous cases. But the payments would be subject to a cap of £120,000. The principle of a cap is not new, although the Governor considers the proposed level "artificially low", since it would affect some 75 per cent of staff.
8.
The Treasury agree with the methodology and the cap. But they would cut the multipliers (and therefore the payments) by half, approximately reflecting the difference between Hong Kong and UK remuneration. They argue that the staff are better paid than those who worked in other Dependent Territories; and that they are guaranteed the right, under the Joint Declaration, to
continue working after 1997 with no diminution in pay and
conditions save that some 30 of the most senior posts will be reserved for local officers.
9. The difference in cost is some would total £48m, the Treasury £37m 6 years from mid-1996.
10.
-
£11m
the FCO package or some £2m per year over
Informal FCO legal advice is that if, as is probable, the HMOCS Association sought judicial review of a compensation scheme on Treasury lines as failing to meet their legitimate expectations, the court would be likely to base its judgement on
CONFIDENTIAL
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