3
8.
These two points are connected in that we could more easily afford to meet the cost of improving safety if we could maximise the commercial use of the airport; and they could perhaps lead to a different proposition. H.M.G. argue that the Chicago Convention imposes an obligation on it to control our air traffic rights (a point we have never really been able to accept, at least in the sense of an obligation to control restrictively). That being so, one is led to the conclusion that the proper course of action by H.M.G. would be the payment of compensation by Britain to Hong Kong for the loss arising from commercial under-usage of the airport, imposed in the interests of United Kingdom civil aviation. A preliminary rough estimate suggests that this at present approaches £200,000 a year. Compensation could take the form of a lump sum commuta- tion in respect of some fixed term of years or of an annual subsidy of the interest rate payable on a commercial loan. This solution might ease the problem of finding the money from a U.K. vote; although we have, I must confess, never understood why the absence of funds in a vote in any particular year made it difficult or impossible to provide funds which would be required, not immediately, but over the course of future years. There is also still the possibility of waiving further payments on the previous Airport Loan, of which £1,400,000 is outstanding at present.
9.
This solution would not, of course, solve the problem of the cash outlay which we are anxious to avoid in terms of priorities. But there is still the possibi- lity, as I understand it, of access to the London market for a guaranteed loan. Additionally, I have been approached again by the First National City Bank with an offer of finance for airport development. They have not stated terms and the loan would, of course, be in U.S. dollars. I think their offer arises both from a guilty conscience about a certain wavering on their part in 1967 and from complete confidence in our stability now.
10.
We should be very grateful if you would let us have your reactions both to the idea that we abandon our efforts to secure a financial contribution from H.M.G. and make up our own minds in the light of our own interests; and to the alternative approach I have outlined above. We shall not take the former question to Executive Council pending your advice.