Secret
102
but does not thin include the inflated building forgram
Rents, Leee, are
now falling!
Mr. Wilford
Hong Kong Defence Contribution
We have just had about two and a half hours with representatives of the MOD, the Treasury and the Department of the Environment (Defence Secretariat).
2. First of all, I tried to get agreement on the principles to be followed in determining the amount of the Hong Kong con- tribution. Unfortunately we did not get very far on this, although it was agreed generally that internal security could not be divorced from external defence. The discussion quickly concentrated on what Hong Kong should pay. In the process we managed to extract from a rather reluctant Treasury represen- tative the Treasury view that what was not paid by Hong Kong should come out of MOD Votes. This meant that so far as the Treasury were concerned there could be no question of any pay- ment from the FCO Vote.
3.
In
To the obvious annoyance of the Treasury representative, the MOD representatives talked about £8-9 million a year. reply to the direct question what in the view of the Treasury Hong Kong should pay, the answer was at least 50 per cent of total costs, i.e. £12-13 million a year. When I suggested that we might be able to obtain an agreed FCO/MOD paper for Ministers basing ourselves on the Governor's offer of £7.5 million a year plus his suggestion that any increase in building costs over the period of the agreement should be shared between HMG and the Hong Kong Government, the Treasury representative immediately said that they would have to advise the Chancellor to put a separate paper to the Defence and Oversea Policy Committee.
4.
and an
We discussed the large increase in capital costs (from some £19 million over the period of the agreement to rather more than £27 million). This increase represents a new pro- gramme for providing married accommodation, a revised estimate of the cost of maintenance of all Services' property allowance for an increase in building costs over the period of the agreement. Although the programme providing more married accommodation has not yet been approved by the Treasury it seems likely that these proposals will at any rate be accepted in principle.
5.
Throughout the discussion Mr. Gaminara and I kept emphasi- sing the dangers in seeking to obtain from Hong Kong a contri- bution unacceptable to the Unofficial Members of the Councils. I think we made some impact because the Treasury representative at one point admitted that he was not sure whether the Chancellor would accept the advice of his officials to the effect that Hong Kong should be asked to pay at least 50 per cent of total costs. Nevertheless he obviously had no authority to agree even to the kind of figure suggested by the MOD.
Secret
/6.