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Summary of situation and need for new guidance
24. On the basis of work already done, a tentative assessment of the savings that are likely to derive from the studies as a whole (up to a point at which fundamental changes in our external policies would become necessary) would be in the region of £100-125 million in gross terms. This estimate of savings has to be set against the indication that although no target figure was stipulated, Ministers were, subject to an examination of the consequences, looking for a gross saving of £200-300 million. It is therefore clear that a choice has to be made between accepting that the further Defence Review studies will not produce a gross saving of £200-300 million and altering the main assumption that we do not decide upon and announce this year fundamental changes in our external policies. Further guidance is therefore necessary from Ministers and, for the reasons given later in this report, this guidance is required urgently.
25. We must also bear in mind the difference between the gross savings referred to in the previous paragraph and the net savings after taking account of the extent to which, particularly in the shorter-term, savings in planned defence expenditure would be offset by increased aid to mitigate the local economic consequences of our withdrawal. Unless the additional economic aid was to be found at the expense of the aid available for other countries under the aid ceiling, the net saving would of course be sub- stantially less than the savings on defence. The aid might in certain circumstances be greater than it otherwise would be in proportion to the speed of our withdrawal. There would be large demands for military aid to Malaysia and Singapore since the pattern of their forces has been developed on the basis of our capacity to defend them in accordance with the Defence Agreement. In addition, substantial extra expenditure would be necessary in the United Kingdom, for example on works services for the accommodation
of forces that were still maintained in being.
Room for Manoeuvre
26.
If it is decided that the overriding objective must be a gross saving substantially greater than £100-125 million and that our external policies must be reshaped accordingly, we do not have a wide range of choice in seeking this objective. Apart from Germany, where our national security severely limits our freedom of action, the Far East is the one major overseas theatre. If therefore we must look for further savings, we must look largely to the Far East. In considering their extent, it is relevant
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