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sides giving some ground.
It was agreed that a meeting would be required between them to reach a settlement. This meeting was
originally scheduled for 29 July but had to be postponed.
4.
The present position on HMOCS is that we have agreed with
Treasury officials the broad outline of a compensation scheme
(which would cost about £39 million). However, we have not been
able to persuade them to recommend to the Chief Secretary a rate
of HK$16:£1 for the sterling pension safeguard and they are
resisting any attempt to change the mechanism for calculating
Supplementary Pension for Overseas Service (SPOS). The best
indication we have of their position is that they might be prepared to recommend a safeguard rate of HK$21: £1 without any
amendment to SPOS, or HK$24:£1 with the SPOS amendment, but only
on the condition that this would be acceptable to the Governor and that he would not oppose the package.
5. In a meeting with FCO officials on 29 July, the Governor
said he could accept a compensation scheme along the lines
proposed; and that he would also be prepared to agree to the
Treasury's proposed mechanism for the sterling pension safeguard
if the rate was set at no less than HK$16:£1. However, he was
not prepared to contemplate a safeguard rate of worse than
HK$16: £1 and considered that there was no point having further discussions with Treasury officials if they were not prepared to
recommend this rate to the Chief Secretary. In the absence of
any further movement on our part, it is likely that the Chief
Secretary will not improve his existing offer of a safeguard set
at HK$26: £1. The Governor envisages that the next step should
be a bilateral between the Foreign Secretary and the Chief
Secretary and that if no agreement is reached, the matter
should then be put to OPD (K) for decision. He warned that if
the Treasury position was imposed on him he would oppose it
publicly.
hk.arrg.ADM
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CONFIDENTIAL
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