UNCLASSIFIED
Reference..
($6)
Hong Kong Department (Mr. Gaminara)
1271-
[.... Expandiruma
32
Vorak which'. Depaap in the
Estimates].
K.I.V. extract for
fice from
record of
this
discussions with the
28. 11.65.
Garang. ANG Imbe Gavenpor
Defence Costs
You asked if I could provide you with definitions of the terms: "Budgetary Cost", "Foreign Exchange Cost" and "Overseas Exepnditure Cost" as used the Ministry of Defence.
2.
This has proved more difficult than I expected. The best explanation of these terms that I have been given is:
(a) Budgetary Cost
The expenditure on projects from monies provided by Parliament. When the term
^ is used in Chiefs of Staff papers it is not necessarily the full cost of a project. It depends on the type of question that Chiefs are considering.
For example: the cost of maintaining a certain military unit in the U.K. may be 100: in Hong Kong 110. The budgetary cost of maintaining that unit in Hong Kong may variously be shown in a Chief of Staff paper as 110 or 10 (the extra cost above the U.K. cost). The latter figure is used when the unit being considered must be maintained in being whether it is stationed in Hong Kong or not. (This
is what has happened in the draft Chief of Staff papaer on "Additional Helicopters in Hong Kong". The budgetary cost quoted in this paper is not the full cost but the extra cost).
(b) Foreign Exchange Cost
Overseas Expenditure Cost)
These two terms are synonymous.
They do
not however refer to the foreign exchange element in budgetary costs as we have previously been told. They constitute
in a
an estimate of the net effect on the balance of payments of defence expenditure overseas. This is a father artifical figure calculated in accordance with certain complicated Whitehall conventions. (e.g. Foreign exchange expenditure by Mnising
overseas may be 100 but this may not be directly reflected across the exchanges since a portion of the 100 (say 25) will probably return to the U.K. in the form of purchases of U.K. goods and services. If so the net
/effect