HC Deb 23 November 1995 vol 267 cc849-65

Order for Second Reading read.

6.43 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Jeremy Hanley)

I beg to move, That the Bill be now read a Second time.

The Hong Kong (Overseas Public Servants) Bill is an enabling measure, which will allow the British Government to provide a package of benefits to certain overseas public servants in Hong Kong. My purpose today is to explain the background to the proposal, and to set out the package of benefits which we propose to implement by Order in Council after enactment of the legislation.

In 1954, the Government of the day published a White Paper on the future of the colonial civil service. That White Paper anticipated the process of decolonisation and considered how civil servants recruited from this country to work on pensionable terms in the colonies and other dependent territories would be treated when a colony moved to independence.

The White Paper recognised that overseas territories owed a significant debt to the efficient work of the men and women of the colonial service, and that the British Government had a special obligation towards them as a result of their having been recruited to their posts by the Secretary of State for the Colonies or through the Crown Agents. To give officers confidence about their future, the White Paper set out the conditions that they could expect to be observed upon independence. Those conditions included maintenance of their terms and conditions of service, safeguarding of their pensions, the ability to retire prematurely, and the payment to them of compensation. The White Paper also renamed the colonial service as Her Majesty's Overseas Civil Service, or the HMOCS. Judicial officers form a separate HMOJ, but I shall refer to the whole as the HMOCS.

A further White Paper in 1960 refined the arrangements. In particular, it provided that the British Government should provide financial assistance to the territories concerned to help them keep the services of expatriate officers after independence. The White Paper also provided guidance on how the compensation arrangements should operate, and established a resettlement bureau to help the HMOCS members who retired prematurely to find new employment.

Since 1960, 42 former British dependent territories have become independent. The British Government implemented the arrangements by making Orders in Council for the payment of compensation by the successor Government to members of the HMOCS for the loss of their career prospects and of the Secretary of State's protection. The Government also negotiated public officers agreements which required the successor Government to pay pensions at a fixed sterling exchange rate. In most cases, the British Government reimbursed the cost of compensation in the form of aid, and in due course took over the pensions as an aid measure.

There are some 700 members of the HMOCS in Hong Kong who were recruited on pensionable terms before the Sino-British joint declaration was signed in 1984. Those officers are the last members of the HMOCS. They have contributed enormously to the success of Hong Kong, and many of them wish to continue in the service of the Hong Kong Special Administrative Region Government after 30 June 1997. Like their predecessors in other territories, the officers are concerned about their future and need to know how they will be treated.

The Government considered the question of arrangements for the Hong Kong HMOCS at the time of negotiation of the joint declaration. To give overseas officers a guarantee that their services would be welcomed by the future Hong Kong Special Administrative Region Government, China and Britain agreed, and the joint declaration makes it clear, that, after 30 June 1997, foreign nationals could continue in the service of the SAR Government on terms and conditions of service no worse than before. The joint declaration also provides that the pensions of all Hong Kong civil servants, which includes members of the HMOCS and their dependants, would continue to be paid by the SAR Government. Those pensions are, and will continue to be, paid in Hong Kong dollars.

Those important and far-sighted treaty provisions give members of the HMOCS in Hong Kong confidence that they can continue to work in the service of Hong Kong up to their normal date of retirement, and that their pensions will be paid. The joint declaration also provides that, after 30 June 1997, the top 20 to 30 posts in the Hong Kong public service should be held by Chinese nationals. Those members of the HMOCS who choose to stay on will not be able to aspire to the senior positions. Indeed, the process of localisation is already in full swing and will extend beyond those posts as a result of the need to build up a pool of local officers with enough experience to occupy the highest levels of government. The process of constitutional change will therefore inevitably limit the career prospects of members of the HMOCS in Hong Kong.

By 1989, the Hong Kong HMOCS was pressing the British Government to give its members the same package of benefits provided to their predecessors in other former dependent territories. Their representative body, the Hong Kong HMOCS Association, argued forcibly that its members were in the same position as their predecessors and that the British Government were honour-bound to treat them in the same way. It was supported by the Overseas Service Pensioners' Association—known as OSPA—which represents the interests of former members of the HMOCS from Hong Kong and elsewhere.

The Hong Kong Government judged that they could not provide a general compensation scheme. Hong Kong has a unified public service and the Hong Kong Legislative Council would not be expected to vote funds for special benefits for an exclusive group of expatriates. The only compensation that Hong Kong is prepared to pay is in respect of those officers who are required to retire for constitutional reasons or who are superseded under the localisation programme. Members of the HMOCS look to the British Government, rather than the Hong Kong Government, to provide them with compensation and pension protection which had been accorded in other territories.

After careful consideration, the British Government accepted publicly the associations' request for an HMOCS package of benefits. In formulating detailed proposals, we considered the arrangements made in the 42 previous cases as well as the particular circumstances of Hong Kong. The package that I shall outline in a moment reflects those considerations, as well as the outcome of discussions with the two associations, and of course the Government's responsibility to balance the interests of the Hong Kong HMOCS and those of British taxpayers.

Dr. Jeremy Bray (Motherwell, South)

In the interests of the Chinese civil servants and the overseas civil servants, is the Minister aware that a suggestion has been made recently in Hong Kong by Sir S. Y. Chung that a shadow Government should be appointed by China six months before the hand-over date to make shadow laws and to prepare a shadow budget? Does the Minister agree that that would cause great confusion in the civil service and for all those who seek to achieve a smooth hand-over in 1997? Can he confirm that the Government have no reasons to believe that that represents the views of the Chinese Government?

Mr. Hanley

I accept the hon. Gentleman's question. Although Sir S. Y. Chung's proposals appear to have been made in a personal capacity, they are damaging to confidence in Hong Kong. The Governor and the Hong Kong Government are committed to co-operation with the Preparatory Committee and future chief executive to ensure a smooth transition in Hong Kong. There is nothing in the joint declaration or basic law about a provisional Government. I believe that the establishment of such a body would only confuse and unsettle the community and the civil service. That is in the interest of neither Hong Kong nor China.

The Government remain committed to effective administration of Hong Kong until 1 July 1997, and we shall do nothing to undermine the authority of the Legislative Council elected in September. I continue to believe that it should be allowed to serve its full four-year term. I hope that the hon. Gentleman accepts that as a full answer. We should now stick more closely to the terms of the Bill.

Subject to Parliament's agreement, it is proposed that Hong Kong HMOCS members and pensioners should be offered the following package of benefits. First, on premature retirement, the HMOCS members would be allowed to retire before the resumption of sovereignty by China, with immediate payment of pension. To enable the Governor to phase departures, officers would be allowed to retire prematurely between 1 July 1996 and 30 June 1997.

The second part of the package is compensation. The HMOCS members would be paid compensation for loss of the Secretary of State's protection and career prospects, based on their seniority and length of service. The proposed compensation arrangements would be broadly similar to previous HMOCS compensation schemes, except that the actuarial factors used to calculate compensation are somewhat less generous. That is because the provisions in the Sino-British joint declaration offer the Hong Kong HMOCS officers a better chance of a continuing career than their predecessors could have expected.

There will be a cap on compensation of £120,000 at 1992 prices. That year was chosen because that was when we first put forward proposals on an HMOCS package for consultation with the interested associations. The cap was set with reference to caps in previous HMOCS compensation schemes, uprated in line with United Kingdom inflation. As the HMOCS members in other former British dependent territories were not required to pay tax in Britain on their compensation, the HMOCS members would be paid their compensation gross. The cost of any United Kingdom tax liability would be met directly by the British Government.

The compensation arrangements would be set out in two schemes: compensation scheme A and compensation scheme B. The only significant difference is that compensation scheme B would apply to officials who decided to retire prematurely and compensation scheme A would be for those who continue. The compensation arrangements would cost about £47 million at current prices.

The third part of the compensation scheme is a sterling pension safeguard scheme. The HMOCS pensions will continue to be paid in Hong Kong dollars by the Hong Kong Special Administrative Region Government after 30 June 1997. In line with the policy in the 1954 and 1960 White Papers, and subsequent practice, the British Government intend to provide the Hong Kong HMOCS members with pension protection. Unlike previous cases, the Government have decided not to protect the full sterling value of the Hong Kong HMOCS pensions at the date of change in sovereignty. As the Hong Kong HMOCS members receive salaries which have a greater purchasing power than those of their predecessors and of their British counterparts, the Government propose that their pensions be protected at a level broadly equivalent to the pensions received by officers in similar grades in the British public service. This principle of broad comparability underlies the proposed sterling pension safeguard scheme.

Sir Anthony Durant (Reading, West)

I am speaking for the Overseas Service Pensioners Association, which is concerned about the formula with which my hon. Friend is now dealing. It feels that the divider of HK $21 is rather unjustified. It would rather stick to the value of a HK $14.6 exchange rate as at 1 January 1992, which it feels is a more satisfactory approach. I wonder whether my hon. Friend will comment on that.

Mr. James Couchman (Gillingham)


Mr. Hanley

It might be for the convenience of the House if I accept another intervention.

Mr. Couchman

I was about to make much the same point as my hon. Friend the Member for Reading, West (Sir A. Durant). I believe that OSPA suggests that the Hong Kong dollar has never been at an exchange rate worse than HK $16 to the pound. Therefore, it sees the divider of HK $21 as totally illogical and unfair. If the safeguard scheme comes into operation, it will reduce pensioners' income to about 70 per cent. of what it should be under the present terms.

Mr. Tim Renton (Mid-Sussex)


Mr. Hanley

Would my right hon. Friend care to intervene before I deal with those interventions?

Mr. Renton

I want to intervene on the same point. I take a contrary view. The Hong Kong Government and the British Government have worked out a satisfactory compromise. The Hong Kong dollar has been extremely strong, in fact a good deal stronger than sterling, for many years now. Probably quite a few of us would rather take our pensions in Hong Kong dollars than in sterling, particularly with the prospect of a Labour Government. It is right that the British taxpayer should not be asked to take all the burden. I realise the difficulty of reaching a compromise on this issue, and I think that what is suggested in the Bill provides such a compromise.

Mr. Hanley

I am grateful to my right hon. and hon. Friends for their questions.

When we started considering the proposed scheme in 1991, the Hong Kong dollar exchange rate was HK $13.76 to the pound. To bring average Hong Kong and United Kingdom public servants' pensions into line, we calculated that the exchange rate would have to fall from that level to about HK $21 to the pound. That is why the divider of 21:1 appears in the scheme.

We can calculate a pensioner's protected pension by taking the Hong Kong dollar salary in 1991 for the grade at which he retired and dividing that figure by 21 to give the protected pension in sterling as at 1991. That amount is then uprated in line with UK inflation since 1991 to give the current value of his protected pension. In the scheme, his protected pension is described as his notional pension. If, at any point, the sterling value of his actual pension fell below the value of his notional pension, the Government would make up the shortfall.

So the Hong Kong pensioners will continue to be paid their pension. We are talking about a possibility that the Hong Kong dollar might fall. I should like to think that the Hong Kong dollar will not fall but will continue to be strong. It is the objective not only of Her Majesty's Government but of all people of good will that Hong Kong should continue to flourish and have a strong currency.

If the Hong Kong dollar fell, we would protect those pensioners as soon as it fell below HK $21 to the pound. That would mean that the pensions of those people who at present receive pensions higher than those of equivalent civil servants in the United Kingdom would be on broad parity. That seems to the Government to be a fair balance between the needs of protection for Hong Kong pensioners and for the British taxpayer.

Dr. John Marek (Wrexham)

The Hong Kong civil servants were recruited by the British Government. They have an expectation of a certain pension at a certain rate. The Government seem to be saying arbitrarily that in certain circumstances they will reduce the civil servants' pensions by up to 40 per cent. Those of us who may be selected to serve on the Committee that will consider the Bill will wish to go into the matter in some detail. Is there any chance of the Minister publishing a draft Order in Council so that we have some meat on which to chew and we can consider the matter carefully? The Bill is an enabling measure. It is difficult to take exception to any of it. We need to be able to see, certainly in Committee, precisely what the Minister is getting at. If he could help the House in that way, it would go a long way towards what I suspect will be a more or less bipartisan approach to the Bill.

Mr. Hanley

I am grateful to the hon. Gentleman for his careful and thoughtful intervention. I imagine that the Committee proceedings will be held within the next two weeks, although that is still open to negotiation through the usual channels. I hope to produce for members of the Committee as much information as possible to enable them to reach an informed opinion. I hope that that is helpful to the hon. Gentleman.

I assure the House that the British Government would not incur any significant liability under the sterling pension safeguard scheme unless the Hong Kong dollar fell substantially in value. That is just not likely to happen. Certainly in the foreseeable future, Hong Kong's economic stability and the publicly stated commitment by both the Hong Kong authorities and the Chinese Government to maintaining the linked exchange rate between the Hong Kong dollar and the US dollar will bring greater stability to the Hong Kong dollar. The maximum contingent liability under the scheme, based on the wholly unrealistic proposition that the Hong Kong dollar will be worthless on 1 July 1997, would be £130 million spread over 50 years. That liability would diminish rapidly with the passage of time and could be expected to halve within only eight years. We are talking about a contingency.

The fourth part of the package is resettlement help. The HMOCS officers who retire prematurely would be given financial help in finding re-employment or retraining. This help, some of which would be provided by a consultant or in other ways, would be limited to £2,500 per officer, and subject to an overall cost ceiling of £750,000. The Chinese Government have been informed of the proposal to provide benefits to members of the HMOCS in Hong Kong. They have accepted that this is a matter for the British Government.

An additional element of the package does not depend on the Hong Kong (Overseas Public Servants) Bill for its implementation. It is a proposed amendment to the Regulations on Supplementary Pension for Overseas Service, known as the SPOS. The regulations ensure that increases in all HMOCS pensions, not just those of Hong Kong, keep pace with inflation in Britain. The regulations as applied to Hong Kong are complex and technical, but in essence what we propose is an amendment which would allow the payments under the SPOS to take into account small reductions in the value of the Hong Kong dollar relative to sterling. That would provide some benefit to Hong Kong pensioners, particularly over the long term.

The proposed package has been discussed extensively with the HMOCS Association and OSPA. The HMOCS Association has given its full support to the early passage of the Bill. Despite the misgivings of some former Hong Kong HMOCS members about some elements of the package, the Government believe that it strikes a fair balance between the interests of the HMOCS pensioners and the British taxpayers who will have to fund it.

In conclusion, I urge right hon. and hon. Members, in considering the Hong Kong (Overseas Public Servants) Bill, to bear in mind the contribution that the HMOCS officers have made to Hong Kong, the uncertainty that they face over their future careers, and the honourable record that the British Government have established in providing a reasonable package of benefits to the HMOCS upon the ending of British sovereignty over our dependent territories. It is only right that the HMOCS officers in Hong Kong should receive benefits similar to those provided to their predecessors. I hope that the arguments that I have made will be supported by the House.

I thank the hon. Member for Wrexham (Dr. Marek) for his question. I have just heard that the information that he requested—schemes for Orders in Council—are at this moment being placed in the Libraries of both Houses.

7.6 pm

Mr. Derek Fatchett (Leeds, Central)

In the spirit of these post-Nolan times, may I thank the Hong Kong Government for the hospitality that they have shown to me in recent days, during which I was a guest of the Government. I thank them for the timetable that they organised for me. It was my first visit to Hong Kong and it was a most impressive experience. It is difficult for anyone to come away from Hong Kong without having been struck by the nature of its society. It is an interesting society and one which is, for fairly obvious reasons, increasingly politicised. Everyone has a view on the events that are taking place and are likely to take place on the island. It was fascinating to hear the full spectrum of views that came in my direction. I am sure that the Minister has been through a similar experience. One or two people mentioned kindly to me the meetings they had recently had with him.

Two things struck me visually about Hong Kong. The first was the intimate relationship between the economy of Hong Kong and southern China. One can understand that only by seeing the extent to which Hong Kong's manufacture, if I may use that expression, now takes place in southern China. The second was the success of the Hong Kong people and Government in undertaking such a massive infrastructure project as the development of the new airport. The airport, the road scheme and the railway projects are all running virtually on time and in budget. That is a tremendous achievement and one which the Government and those directly involved in the projects can be proud of.

I thoroughly enjoyed my experience of Hong Kong. It taught me a lot about the place and I look forward to further contacts with the people of Hong Kong.

As for the specifics, we welcome the Bill. In particular we welcome the Minister's final comments about providing additional information for the Committee. My hon. Friend the Member for Wrexham (Dr. Marek) has never made such a potent intervention. Within a matter of moments his wish was delivered. One hopes that he will intervene similarly in other debates in future. It may also be helpful to deal with one or two of the points raised by Conservative Members. Of course they may also queue up to serve on the Committee, armed with all the additional information, and be able to make speeches at that stage.

It is right—the Minister made the point—to treat Hong Kong in line with all the other 42 similar experiences. It may be worth while putting on record the fact that last week I had a meeting with Ian Strachan and his colleagues of the Association of Overseas Civil Servants and they were broadly sympathetic to the Bill. They want it to have a quick passage through both Houses. They have some reservations about the sterling guarantee, as the Minister acknowledged in his speech. They said, however—it is very important for all to recognise—that the Bill represents the best available deal on the table. They accept it and want to make progress with it. I say to the civil servants that Labour Members will certainly do nothing to hinder that progress. Indeed, we will do all we can to ensure its speedy passage.

One thing struck me very much last week: the extent to which the civil service in Hong Kong is seen as an important element in civil society. The characteristics of the Hong Kong civil service are ones of which those who have worked in it, either as overseas civil servants or as Hong Kong civil servants, can be justly proud. It is seen as clean, corruption-free and supporting the rule of law.

When we in this House, for obvious reasons on occasions, criticise civil servants, we should look at the Hong Kong experience and the relationship between a clean, corrupt-free civil service and the rule of law and economic development. I hope that those operating in business in Hong Kong take on board the lesson that much of their success and the framework in which their businesses have operated have depended on the type of civil service operating on the island. All of us would wish to express our thanks to those who have worked in the service over the years.

The Minister referred to the fact that about 530 civil servants will benefit from the legislation. Of course the vast majority of civil servants in Hong Kong will not benefit and they will continue to serve the Government both in the pre-1997 arrangements and the post-1997 arrangements. They have also made a very important and successful contribution over the year.

There were anxieties, as the Minister will no doubt acknowledge, over the localisation programme. That is partly dealt with by the Bill. It has to be handled sensitively. There has been some success and it is obviously important that we continue to move forward.

One of the issues that clearly came to light, to which the Minister did not refer but which is important, was the need to maintain the character of the civil service in Hong Kong post-1997. That is important for the economic success of the island and for Chinese sovereignty. The decision on the appointment of the chief executive, which has to be taken by the Chinese Government during 1996, will have a significant impact on civil service morale. I am sure that all hon. Members participating in this debate acknowledge the importance of appointing someone who is seen as upholding the traditions of the civil service and the rule of law and who will give the service a sense of confidence. We will all be watching that appointment—it will be crucial to the post-1997 development of Hong Kong.

The Bill deals with the fears of overseas civil servants. It is right that we should deal with those fears and that we should come up with this legislation and deal with it in the way that we are. The Bill also reminds us—if I may broaden out to some of the Minister's finer points—that we are fewer than 600 days away from the change of sovereignty. The Bill is important because it is but one detailed issue on the path towards the transfer of sovereignty and the way in which we handle it will be significant in future.

When we looked at the work of the joint liaison group, I was delighted to see that progress had been made in a number of areas. We have already talked about the airport and possible developments in relation to container terminal 9. Such advances are significant and help to improve the atmosphere, and resulted partly from the meeting between the Foreign Secretary and his Chinese counterpart. There are difficult issues to be resolved and I think that the Minister will agree that we should place on record in this debate our thanks to all those on the British side who have played such a significant role in the joint liaison group and have made such a contribution, again as civil servants—not as overseas civil servants in that case, but as Foreign Office staff. They have performed a very important function on behalf of people here.

Although we have dealt with one fear through this Bill, there are other fears beyond its remit which arose time and again during my discussions with business people and politicians in Hong Kong. I should like to mention to the Minister—I do not expect an answer today—a matter which is not totally relevant to the Bill but is part of the changeover—

Mr. Deputy Speaker (Mr. Michael Morris)

Order. Interesting as the hon. Gentleman's trip to Hong Kong is, I am afraid that the rules of the House are very clear: we must debate only the Second Reading of the Bill. Allusions to other dimensions are acceptable, but there must certainly be nothing beyond that.

Mr. Fatchett

I was foolish enough to pre-empt you, Mr. Deputy Speaker, which was a mistake on my part. I was saying—I am sure that you will acknowledge the point's validity—that while the Bill deals with one set of fears, others exist in Hong Kong. The individuals whom I was going to mention, and who are relevant because their fears still exist, are the war widows and the ethnic minority groups. I hope that the Minister will acknowledge that the Government still have fears with which they must deal. The right measures have been introduced in the Bill, but I assure him that all the political groups in Hong Kong and the business interests recognise that other fears must also be resolved.

We are dealing only with a specific issue in this debate, but we must deal also with the anxieties and concern in Hong Kong. What impressed me was that against such a background, there is a great deal of robust optimism about the future. The society has very clearly stated values. It believes in the rule of law and has political accountability and an element of democracy. The through train post-1997 is crucial to the long-term economic success of Hong Kong.

My hon. Friend the Member for Livingston (Mr. Cook) summed up the matter in the debate on the Gracious Speech when he said that Britain's involvement in Hong Kong and the role played by the British civil service will be judged not only in terms of what we have done over the past few years but by how we have entrenched and embedded a system for the years post-1997. That is the real criterion on which all our records will be judged.

What is clear is that, as part of the British record in Hong Kong, we have left a civil service that has maintained the rule of law and given to that island something of which we can be justifiably proud. That is why we support the Bill and, through it, we thank those overseas civil servants who have played their part in making Hong Kong the success that it is.

7.18 pm
Mr. Tim Renton (Mid-Sussex)

May I say what a pleasure it is to be taking part in this short debate and what a pleasure it was to listen to the speech of my right hon. Friend the Minister, and that of the hon. Member for Leeds, Central (Mr. Fatchett) who is also fairly new to his position in the shadow Foreign Office team.

Speaking as a past Foreign Office Minister and one who had responsibilities for Hong Kong between 1985 and 1987, and who since 1992 has been chairman of the active all-party committee on Hong Kong, I find it a great pleasure to be so much in agreement with both speeches.

Before dealing directly with the Bill, may I be provocative for just one moment? I fully agreed with the comments of the hon. Member for Leeds, Central about the legacy that we will pass on in Hong Kong on 30 June 1997. I think that we can be very proud of that legacy. I would only suggest to the hon. Gentleman that he should act to convince the hon. Member for Rotherham (Mr. MacShane), who is sitting behind him, of that.

In a debate on this subject at the Oxford Union some two weeks ago, in which we both took part, the hon. Member for Rotherham advanced some very extreme ideas. More to the point, he advanced the idea that Britain should be thoroughly ashamed of its position in Hong Kong. That is wrong, and I hope that the hon. Member for Rotherham will come to regret those remarks. I am moving on to the subject, Mr. Deputy Speaker.

Mr. Deputy Speaker

I am grateful to hear that the hon. Gentleman is moving on to the subject because this debate is very specific.

Mr. Renton

I think that the Bill, quite simply, is a good housekeeping measure. The legislation is necessary, and the Government are to be congratulated on the speed with which it has been brought before the House.

My right hon. Friend the Minister of State took us through the basic points of the Bill very thoroughly. All hon. Members will be interested in the Bill's resettlement element and in the help that it provides to the members of the overseas civil service and the overseas judiciary who may decide to retire early. If they decide to retire early, it is important for them to know that they will receive assistance in resettlement. That provision may be a further encouragement to some people to retire early.

The main bone of contention in the Bill—perhaps the only one—is that to which my right hon. Friend referred: the peg at which the safeguard to pensions comes into play. That must be a balancing act, but, given the generosity of the pension arrangements in Hong Kong in recent years, which have been based on a substantially higher rate of inflation than that of the United Kingdom, the principle of comparability must apply. Therefore, the decision to make the peg—the point at which the Government would step in to help—the rate of 21 Hong Kong dollars to the pound is, frankly, not unreasonable.

I am sure that the Bill will not have a long Committee stage. It is an advantage that we have discussed that important issue this afternoon and, as the hon. Member for Leeds, Central said, perhaps, having got that out of the way, there will be time at some stage in the future for us to debate some of the other matters to which he referred: a Bill of Rights; the new Special Administrative Region passport and whether it should be visa free, as I hope it will be; and the point that the hon. Member for Motherwell, South (Dr. Bray) raised about the considerable confusion that any interim legislative assembly or interim governmental body in Hong Kong which came into effect before 30 June 1997 would cause. I am very pleased that the Governor of Hong Kong has already gone on record as saying that he could not possibly support that idea. In such a debate I hope that we might also be able to consider the position of the new fully elected Legislative Council in Hong Kong. I appreciate, however, that those points are not in order this evening.

I certainly support the Bill and hope that it will reach the statute book very quickly.

7.23 pm
Sir Russell Johnston (Inverness, Nairn and Lochaber)

Pretty well every hon. Member who has spoken thus far has subscribed to the general view that the Bill is non-controversial. Indeed, the Library research paper describes it as a relatively straightforward piece of legislation aimed at creating similar conditions for Members of HMOCS in Hong Kong as have applied in the past when colonies have passed out of British sovereignty. Nevertheless, it is a fact, of which I am sure the Minister is aware, that there are some in the Overseas Service Pensioners Association who do not take quite that line and feel that they have not been as fairly treated as has been claimed. It is only appropriate and right that their opinion should be ventilated. We are, after all, talking about a very limited number of people. The essential argument that some of them use is that the proposals laid before the House do not provide safeguards equivalent to those afforded to expatriate pensioners in other former colonies who enjoy 100 per cent. protection of the original purchasing power of the pension awarded to them on retirement.

One such pensioner, Mr. A. Thorne, wrote to my hon. Friend the Member for Cheltenham (Mr. Jones). I should like to read out a couple of paragraphs from his letter to which the Minister might be able to respond in his winding-up speech. I shall not read out the first page as it deals mainly with the divisor, a matter already raised by two Conservative Back Benchers. Mr. Thorne wrote: HMG claims that the proposed safeguard scheme will protect Hong Kong pensions at a sterling value broadly equivalent to those paid to comparable former UK public servants despite any evidence that they can be fairly equated. Well, that is an argument, I suppose. Mr. Thorne develops it in the next paragraph when he states: Apart from the obvious defects in arriving at the divisor, no account has been taken in these comparisons of the differences that result from the fact that, in the absence of a ministerial system, Hong Kong civil servants, at every level, carry a degree of responsibility and public accountability which home based civil servants are shielded from. Accordingly, a simple comparison of Hong Kong salaries with those of officers in equivalent ranks and grades of the home civil service makes no allowance for such extra burdens. It follows that the comparisons which have been made in formulating this pensions safeguard scheme are not on a like with like basis. I do not necessarily espouse that argument, but it deserves a response. I hope that in due course the Minister will provide one.

I shall read one more sentence on the question of the divisor. The correspondent alleges: Despite many requests from individual pensioners and OSPA, the officials charged with drawing up the scheme have refused to provide calculations showing how the divisor of 21 has been arrived at. That could also be dealt with in Committee.

We are approaching the end of the time in which we are responsible for Hong Kong, but it is important for people at every level to remember that many questions still need to be answered and criticisms are still being made. I was delighted when the hon. Member for Leeds, Central (Mr. Fatchett), during his recent visit to Hong Kong, made a commitment with regard to the 6,000 or 7,000 ethnic minority group. I wish that the Government would follow his good example.

I should not like to think that the Government have devised a scheme that treats pensioners and the widows of pensioners from Hong Kong any less favourably than pensioners from the other 42 or so colonies. The trouble with many actuarial measures is that they are often too complicated for simple people like me to understand. It is very important that pensioners clearly understand these measures and regard them as fair.

7.29 pm
Mr. Denis MacShane (Rotherham)

Like other hon. Members who have spoken in the debate, I whole-heartedly support the Hong Kong (Overseas Public Servants) Bill, which is one of the building blocks that we are now putting in place in the lead-up to 30 June 1997.

Two weeks ago, I had the great pleasure to debate the issue of Hong Kong with the right hon. Member for Mid-Sussex (Mr. Renton) in a rather more crowded house at the Oxford Union. We debated the question of whether the British Government have betrayed the people of Hong Kong. I spoke on behalf of the people of Hong Kong because Martin Lee could not attend the debate, and the right hon. Gentleman spoke for the Government. My side won by a margin of 244 to 36, which showed not the power of my persuasion but the idealism of young people on key democracy and human rights issues.

Mr. Renton

I thank the hon. Gentleman for giving way. I take this opportunity in the post-Nolan era to declare my interest in the subject. I should have said at the beginning of my speech that I recently visited Hong Kong as a guest of the Hong Kong Government. I much appreciated their generosity and I have already declared my trip on the Register of Members' Interests.

The hon. Gentleman took a rather extreme view in the Oxford Union debate. He said that he believed that British passports, or right of abode in this country, should be granted to the 3.5 million Hong Kong people who currently hold British national overseas passports. His view was received sympathetically by the audience at the Oxford Union, so perhaps he would like to confirm tonight whether that is also the policy of the Labour party.

Mr. MacShane

I do not think that we should have a re-run of the Oxford Union debate in this place, although I would be happy to participate. I was most affected by the arguments of young men and women—our future leaders and intellectual elite—who drew attention to the fact that some 250 million people from European Union countries have the right to settle and to work in the United Kingdom. They pointed to the unfairness of denying the same rights to 52 war widows and 7,000 stateless Asians who are neither Chinese nor of British origin.

We are slowly putting the building blocks in place, and I appreciate the measured contributions that we have heard tonight. In introducing the Bill, the Minister stressed its importance as a small, but important, confidence-building measure. I hope that the right hon. Gentleman, in his wider role as the Minister responsible for Hong Kong, will convey to the Chinese Government the deep concern of hon. Members which is reflected in early-day motion 82—which appears on the Order Paper for the first time today, standing in my name and those of other hon. Members—about the plight of Wei Jingsheng, a Chinese human rights activist who is now on trial for his life. There is some contradiction between the confidence-building measure that we are seeking to establish in law tonight and the decision of Beijing in that case which is likely to undermine confidence in a stable future for Hong Kong.

Labour Members have very few objections to the substance of the Bill. Hon. Members have referred to the plight of the war widows, the stateless ethnic and Asian people, and the status of the current British dependent territories passport holders who will receive national overseas passports after 1 July 1997. Other Hong Kong inhabitants will receive Special Administrative Region passports, and I agree with the right hon. Member for Mid-Sussex that they should be granted visa-free entry into the United Kingdom. I emphasise that point to my hon. Friend the Member for Leeds, Central (Mr. Fatchett).

Representatives of Her Majesty's overseas civil service have approached the Government in an effort to secure the best possible packages. They have considered the early retirement option and they wish to secure the value of their pensions after 1997. I hope that the Hong Kong dollar will remain stable. I hope also that sterling will be a much more stable and durable currency in the future through closer links with the process of European integration—but that is a subject for another debate.

I am concerned that civil servants and other groups in Hong Kong who are covered by the legislation will fall foul of article 23 of the basic law, which prohibits political organisations or bodies of the region from establishing ties with foreign political organisations or bodies. Some civil servants—for example, judges who have served in British colonies and dependent territories—will find that, if they continue to live in Hong Kong after 1 July 1997 and seek to form quite normal associations so that their interests may be represented, under that article they will be unable to make representations and establish ties with their colleagues in other parts of the world. That is a fundamental concern about the post-30 June 1997 situation in Hong Kong and it has been raised with me during my many visits to Hong Kong in recent years.

As we introduce other legislation to address specific issues between now and 30 June 1997, we must have some regard to articles in the basic law that may nullify the objectives of those who make representations to hon. Members.

7.37 pm
Mr. Mike Gapes (Ilford, South)

I shall not detain the House for long. It is important that we pass the Hong Kong (Overseas Public Servants) Bill, although it is a relatively insignificant tidying-up measure. We must reassure and restore the confidence of the few hundred people in Hong Kong who will benefit from it.

My hon. Friend the Member for Leeds, Central (Mr. Fatchett) referred to the fact that the legislation will not benefit other civil servants in Hong Kong and, as my hon. Friend the Member for Rotherham (Mr. MacShane) said, all Hong Kong civil servants must wonder about their positions post-1997. The present chief executive of the Hong Kong civil service will be replaced by a new appointee after 1997. The Chinese and Hong Kong press have reported the remarks of a potential candidate for that post, the present Hong Kong Chief Justice, who has said that the Bill of Rights and other very modest measures go too far. It is worrying that already senior figures in the administration, the legal system, the civil service and elsewhere in Hong Kong are beginning to adopt a different way of thinking about matters that the civil service in Hong Kong administered in the past and will continue to deal with in the coming year.

Two years ago, the Foreign Affairs Select Committee dealt with Britain's relations with Hong Kong and China, and its report drew attention to a number of matters that I shall not discuss now as they are outside the scope of the Bill. It made clear its concerns about the need for a human rights commission, which the Government unfortunately rejected.

Mr. Deputy Speaker)

Order. The hon. Gentleman has been quite ingenious in continually mentioning the word civil servant and then proceeding to argue about some other aspect. I am quite sure that the usual channels will read the debate and recognise that both sides of the House would like a debate on Hong Kong, but that cannot take place this evening.

Mr. Gapes

I take your advice, Mr. Deputy Speaker, and I shall not pursue that line of argument any further.

It is important that the Government do not consider such tidying-up matters to be the end of the process. Issues involving war widows and people who are effectively stateless, and other matters referred to by the Foreign Affairs Select Committee should be dealt with expeditiously in the next year, so that they can be resolved before 1 July 1997.

7.44 pm
Mr. Hanley

With the leave of the House, I shall reply to this excellent Second Reading debate.

I am pleased that the Hong Kong (Overseas Public Servants) Bill received a warm welcome from the House. It is essentially non-political and technical and, as my right hon. Friend the Member for Mid-Sussex (Mr. Renton) said, it is a good housekeeping measure that recognises the British Government's responsibilities to the last serving members of HMOCS.

I am particularly grateful to the hon. Member for Leeds, Central (Mr. Fatchett) for giving the proposals his full support and for the tone of his comments. I am extremely pleased that he is now more familiar with Hong Kong. Hong Kong is rather like a Chinese meal: soon after people leave it, they want to go back for more. I am sure that the hon. Gentleman wants to return to Hong Kong. It is a remarkable place.

Mr. David Faber (Westbury)

This evening.

Mr. Hanley

I am sure that this evening Leeds is more pressing.

I am sure that Hong Kong HMOCS officers and pensioners will appreciate the warm tributes that hon. Members on both sides of the House have paid to their commitment and contribution to Hong Kong over many years.

I was not surprised that the House focused on the detail of the package of benefits rather than the principle of providing Hong Kong HMOCS with a package in the first place. After all, we are not doing anything for Hong Kong HMOCS officers that was not done for their predecessors in many other former territories. I note that no hon. Member questioned whether such benefits should be provided and thus doubted the need for this enabling legislation.

All hon. Members recognise that the Bill is necessary and must be implemented without delay. I am glad, too, that the elements in the package that I outlined earlier, and that hon. Members will have an opportunity to consider in detail later, command more support. Any proposal that offers benefits and involves actual expenditure and contingent liability is bound to attract comment, particularly about the costs involved.

Of course, I recognise that other issues need to be resolved, some through the efforts of the joint liaison group, by negotiations between British and Chinese representatives, and others between the Hong Kong Government and the British Government. Although certain issues need to be resolved over the coming 18 months, it is most important to sustain confidence in Hong Kong—confidence in which I firmly believe—so that Hong Kong can continue, with the greatest degree of autonomy and continuity, its current system that has made it such a success.

May I almost intervene on myself and reply to the hon. Member for Rotherham (Mr. MacShane), who mentioned Wei Jingsheng? My right hon. and learned Friend the Foreign Secretary raised that issue on 3 October with the Vice-Premier and Foreign Minister of China, Qian Qichen. We raise issues of human rights and specific cases of concern whenever we meet.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) made one small comment with which I disagree. He said that we refused to provide full calculations of the figures. I can assure him that I provided the chairman of the Overseas Service Pensioners Association with a full description of the methods used to calculate the 21:1 divisor, and my officials have provided numerous lists and tables detailing the Hong Kong and United Kingdom salary and pension comparisons. There are more than 50 pages of detailed calculations, and I am sure that I could provide them to the hon. Gentleman if he would like to work through them before the Standing Committee meets.

I conclude by saying a little more about the sterling pension safeguard scheme. I do not want hon. Members to leave tonight without understanding that it is not a bad deal for those for whom we have great admiration and wish to provide.

The proposed pension safeguard scheme differs from previous schemes and does not offer Hong Kong HMOCS officers full protection of the sterling value of their pensions at 1997 rates. Hong Kong pensions are currently paid in Hong Kong dollars with no guaranteed conversion rate to sterling, so the British Government will assume a new contingent liability for those pensions.

Let me explain why. There is a solid guarantee in the Sino-British joint declaration that the autonomous authorities of Hong Kong will continue to pay pensions after 30 June 1997. The British Government have full confidence that that provision will be honoured. I should tell the hon. Member for Rotherham that, although article 23 of the basic law sets limits to political organisations in Hong Kong having links with such organisations abroad, I am not clear whether that is relevant to HMOCS as article 27 of the basic law guarantees free speech and freedom of association, including labour organisations.

The Bill, therefore, addresses the assistance that should be provided to HMOCS pensioners over and above the existing arrangements whereby they receive their pensions in Hong Kong dollars with no protection against currency movements and having regard to guarantees in the joint declaration. Some have argued that the British Government should protect the full sterling value of Hong Kong HMOCS pensions, but it would be unfair to expect British taxpayers to provide such support as the salaries, and hence the pensions, of the Hong Kong HMOCS have a greater purchasing power than those received by their predecessors and their counterparts in the British public service. In addition, many former Hong Kong HMOCS officers have enjoyed big pension increases over the years, awarded by the Hong Kong Government. Indeed, they have deserved them, but those increases were based on the relatively high rate of inflation in Hong Kong, which has no relevance to the cost of living for pensioners who have retired to the United Kingdom, for example, thus the purchasing power of Hong Kong pensions has in many cases greatly increased since the officers retired, and the British taxpayer should not be asked to protect those windfall increases.

Claims that in some cases our proposed scheme would protect only about 60 per cent. of the sterling value of those Hong Kong pensions do not represent the full picture. The real test of the scheme is what percentage of the original sterling purchasing power of those pensions would be protected by the scheme. The answer is that, on average, the scheme would protect 80 per cent. of officers' Hong Kong pensions and 100 per cent. of almost all widows' pensions, so we have decided that the scheme should be based on the principle of comparability with the British public service. As I explained, we cannot offer Hong Kong HMOCS officers full pension protection. Equally, it would be wrong to leave them with no protection at all, however unlikely an exchange rate collapse might be. That is why we proposed the safety net.

The principle of comparability with the British public service strikes a just balance between the interests—for which the Government are equally responsible—of HMOCS and the British taxpayer. Two points should be borne in mind. First, the proposed scheme would provide a safety net that does not exist at the moment and, secondly, the chances of any significant liability ever being incurred under the proposed scheme are remote. In practice, the contingent liability is expected to halve after eight years and disappear altogether after 18.

I am grateful for the tone of the thoughtful comments by hon. Members on both sides of the House, showing good will both to the people of Hong Kong and its continued future and to the dedicated civil servants who have helped to make Hong Kong the success that it is and will continue to be.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).