SECRET
UK balance of payments position.
The possibilities are that the contribution should
be based on the cost of the forces notionally required
to maintain internal security (as distinct from external
defence); or on the "local costs" of the forces; or
conceivably a combination of both.
The idea that forces performing an internal security
role can be separated from those required for external
defence has been advanced on a number of occasions by the
It has never found favour with Hong Kong (or
ourselves) on the grounds that it is quite unrealistic
MOD.
to attempt to draw this distinction when the threat
within is the same as, and part and parcel of, the threat
without. The Defence Secretary's implied suggestion
in Cabinet that Hong Kong should pay the full budgetary
cost "of that part of the garrison not directly
attributable to our external defence responsibilities" (see paragraph 6 of Background) would be quite unacceptable
to the Governor. And, I suggest, it should be regarded
as politically unacceptable to us. We would never get
a sum of that order (£14 million) voted in Hong Kong
except by way of a direction to the Governor and the use
of the official majority; and if we did that we would
have a first-class constitutional crisis on our hands,
with a quite disastrous loss of confidence in the Colony.
Reimbursement of "local costs" is a plausible basis
in these days of balance of payments difficulties, has
been used in the past and is possibly the best line for
the future. But for the entire garrison at post-1971
/ strength