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Air Lozan
Mr Logan
HONG KONG DEFENCE CONTRIBUTION
Since submitting my minute of 21 June (a copy is attached) I have been thinking about our tactics with other Departments.
1.
2. I am pretty confident that we have knocked the Treasury and the MOD off their stand on £8.5 million. They may however argue and recommend to their Ministers - - that, in view of the Chinese inclination to haggle, it would be better, at any rate at this stage, to go down only to a point somewhere between £8.5 million and £7.5 million - say, £8.0 million. The only satisfactory answer to this that I can think of is to argue that it is the considered view of the Governor that an annual average of £7.5 million is the maximum figure likely to be acceptable to the Unofficial Members of the Executive Council and that we would have to use the reserved powers to obtain the £8.0 million.
3. It could then be argued however that we are more likely to get £7.5 million if we drop to £8.0 million in the first place, recognising that we shall probably have to go to £7.5 million later.
4. This line of thought tends to strengthen the case for taking a decision now that the reserved powers should, if necessary, be used to secure a contribution of £7.5 million.
5.
The trouble is that the Treasury and the MOD can fairly argue that they agreed against their better judgment to follow the Governor's advice to seek a contribution of £8.5 million. That approach has failed. If they agree a second time to follow the Governor's advice - to seek a contribution of £7.5 million what guarantee is there that this second approach also may not fail?
6.
I hope we shall be able to clear this point in discussion with the Governor tomorrow. I suggest also that it would be
helpful if the Governor could be pressed on the likely reaction locally to the imposition of a contribution by use of the reserved powers.
28 June 1971
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Sir L Monson
Mr Wilford
Eɣaria.
E O Laird
Hong Kong Department
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