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Kong. This is not easy to counter;
defence and security measures have accounted for a steady 13% of Government expenditure in recent years and it is not open to us to argue that it has failed to command a share of rising government revenues. But one might expect, in the aftermath of confrontation, that public opinion would be now better disposed to allocating a higher proportion of resources to such expenditure.
3. It is doubtful whether in the Governor's absence this matter can be taken beyond the stage of listening to preliminary reactions to our letter. We would expect the Governor to raise the matter in discussions here in
November.
BACKGROUND
4. Hong Kong has paid an annual cash contribution to "Imperial" defence since 1863. In 1958 this was fixed at £1 million per annum. In 1964 the Hong Kong Government agreed to contribute, in addition, up to £6 million over the next six years towards the Army and R.A.F. works programme in the Colony. In the context of the United Kingdom Defence Review a further agreement was negotiated in December 1966 (to run from April 1967) under which the Colony agreed to pay
The formula £5 million per annum for the next four years. reached was that Hong Kong agreed to make an annual contribution of £1 million plus a special additional contribution of £31⁄2 million per annum towards the "local costs" of the garrison (which were assessed at £9-10 million in a total cost of about £16 million).
5. The defence contribution has always been a sensitive issue in our relations with Hong Kong since the Colony has been the only one to have made regular and substantial payments.
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/The