TNAG-2689-FCO40-3891-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1993 — Page 62

CONFIDENTIAL AND PERSONAL

Foreign & Commonwealth

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HONG KONG:

ARRANGEMENTS FOR MEMBERS OF HER MAJESTY'S OVERSEAS CIVIL SERVICE (HMOCS)

As requested we

Thank you for your letter of 3 November. have set out below the background on this issue, and the Foreign Secretary's proposed course of action. Given the delicate state of discussions with Treasury we have not cleared this letter with them, but we have tried to represent their views as accurately as possible (drawing on the earlier Cabinet Office paper).

HMOCS was established in the 1950s to staff the Dependent Territories. There are some 700 HMOCS officers in Hong Kong and about 1,600 existing Hong Kong pensioners. The FCO, the Treasury and the Governor agree in principle that arrangements need to be settled quickly to compensate the officers for loss of prospects and protection, and to safeguard their pensions, once Hong Kong transfers to China in 1997. It has also been agreed that a balance is needed between offering terms which are accepted as fair by the staff concerned and avoiding unreasonable cost to the UK tax-payer. There is no dispute that a legitimate expectation of help at some level does exist.

The Foreign Secretary considers that to be fair the terms must broadly reflect those applied in the 42 previous cases when the UK has withdrawn from a Dependent Territory. Otherwise the morale and commitment of the staff could be damaged, causing many to leave and making it harder to maintain stability in the run-up to transfer in 1997. is also a danger of the officers seeking judicial review.

Compensation

On compensation arrangements, officials in the FCO and the Treasury have identified a way of splitting the difference between the two Departments' respective proposals, in the context of an overall agreement. This would produce a scheme costing about £39 million. The Governor considers that the

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CONFIDENTIAL AND PERSONAL