Secret
2.
the present level, including maintenance for which a new contract
has just been let, but that, in the case of capital costs,
although they have adjusted to take into account the reduced
scale of works required, they have not adjusted to take into
account the present level of costs.
We do not know exactly It is far from clear what
adjustments have been made in respect of capital costs.
5.
This
The Governor then deals with escalation of costs and
proposes the average figure of £7.5 million a year.
could mean a series of contributions as follows:-
1971/72
£6.55 m.
1972/73
1973/74
£7.025 m.
£7.5 m.
1974/75
1975/76
£7.975 m.
£8.45 m.
This allows for a total increase of 29 per cent in the contri-
bution over the five year period (i.e. a little under 6 per cent
per annum). If the Governor's original offer of £8 million per
annum were adhered to the series of contributions would look
something like this:-
£6.55 m. £7.275 m. £8 m.
£8.725 m. £9.45 m.
This allows for a total increase of 44 per cent in the contri-
bution over the five year period (i.e. a little under 9 per cent
per annum).
6.
argued
The Ministry of Defence in their letter of 9 November have
K
+
(a) that the size of the contribution should not be governed
by the economic gain to Hong Kong from the presence of
the Garrison. On the contrary it should be based
primarily on the obligation of the Colony to pay the
whole or at any rate a reasonable part of the costs
incurred by HMG in providing for its internal security.
/Comment
Secret