China was keen to preserve Hong Kong's prosperity after 1997, which led Deng Xiaoping to coin the phrase 'one country, two systems' - a model that Deng hoped would also work elsewhere.

'He used it to refer to other places. He thought it was a solution for East Germany/West Germany, North Korea and South Korea,' said Lord Howe. 'It hasn't quite worked out in either of those other places, but it has worked out in respect of Hong Kong.'

Given China's limited experience with market economies at that time, Lord Howe believes the Joint Declaration was essential to maintain investor confidence - a concept that in those early days of the mainland's market reforms wasn't well understood.

'It was quite difficult for them to appreciate how much the success of a free enterprise society depended on confidence,' said Lord Howe.

Some of Deng's remarks to Lord Howe suggested he still believed that governments in developed economies could control companies.

'[Deng] said to me: 'We can be confident of the future because the Japanese and American governments have told me their companies will continue to invest in Hong Kong.'

'And I said to him, it isn't like that - you have to create a situation in which the people, the individuals, have confidence in the stability of the future. Then they know that if they put their money in, they can take it out and that gives them the confidence to put it in.'

The deal secured the continuation of Hong Kong's way of life with economic freedom and the rule of law. But British officials were criticised for democratic reform being too late. Lord Howe argues that, during and immediately after the Cultural Revolution, China was 'a most uncertain quantity' and introducing democracy could have had serious consequences.

'If we suddenly announced a Westminster style parliament in Hong Kong, the Chinese might well have taken that as a cause for simply marching in. I don't think they would necessarily contemplate it, but who was to know,' said Lord Howe.

'Now we have got so used to having dealt in a grown-up fashion with each other that it's hard to recapture the sense of insecurity we started off with. Tiananmen Square, which came later, was an illustration of the uncertainty one had to be aware of.'

The Joint Declaration states that the Legislative Council after 1997 is to be 'constituted by elections' - an important clause that Lord Howe thought there was little chance of getting written into the agreement.

'The fact that it [electoral reform] was one of the last items that we negotiated about in a sense indicated the limits of our confidence of being able to get it,' said Lord Howe. 'We wanted to achieve it, but it was more important to achieve continuity of what we had already got - the continuation of the legal system, the continuation of the economic system, continuation of rights and freedoms specifically provided for.'

But no description of how these elections should take place was written into the declaration. So, what sort of elections did Lord Howe envisage when he negotiated the clause? Westminster-style elections? Or the sort that mainland China prefers, where the leadership can ensure a certain result is achieved?

Lord Howe didn't have a precise framework in mind, but he was heartened by the fact that the goal of universal suffrage was enshrined in China's drafting of the Basic Law. 'The existence of the objective must be a great reassurance to the people of Hong Kong,' said Lord Howe.

However, the Basic Law only spelt out procedures as far as the second post-handover Legco elections, which took place in September and where half the legislators were returned by 'one man, one vote'.

But isn't this far short of a 'democratic timetable', as Lord Howe once described the Basic Law's provisions? 'There's a limit to the extent to which you can secure agreement in advance on what happens after you cease to have sovereignty,' he said.

Many of Hong Kong's democrats argue that the Basic Law was broken by the mainland government's interpretation this year that the chief executive in 2007 and Legco the following year could not be elected by 'one man, one vote'. Lord Howe refused to be drawn directly on that viewpoint or the possibility that the spirit of 'one country, two systems' - which lies at the heart of the Joint Declaration - was broken by the decision.

'I think it was a surprise to have an intervention from the mainland without any request for it or expectation of it from Hong Kong,' was the furthest he would go on the issue.

But it was important for China to announce some steps towards the Basic Law's ultimate objective of universal suffrage, according to Lord Howe.

'It's important that the immediate future will, I hope, reaffirm the credibility of the ultimate objective. Stability depends on getting the right degree of evolution of universal suffrage,' he said. And the pace of electoral reform? 'I wouldn't dream of trying to specify a timetable or an end date or anything like that.'

Lord Howe didn't support the democratic reforms introduced by his former British cabinet colleague Chris Patten as the last governor of Hong Kong that, among other things, dramatically increased the number of voters in the functional constituencies. 'For reasons that I've never fully understood, I don't think that Chris Patten's proposals had been discussed with or put to the Chinese before they were announced, which wasn't in line with the way in which we had handled things up until then,' said Lord Howe.

'The changes that Chris Patten did introduce were, in fact, reversed, were they not? And that in itself disturbed confidence because it suggested that continuity might not be maintained.'

However, continuity was restored, according to Lord Howe, when September's Legco elections were conducted in line with the Basic Law.