SECRET
4. There was come discussion about the Governor's proposal that the gap between our figures and those of Hong Kong should be ade up by the Hong Kong Government placing at our disposal * Lap Sum interest free. Subject of course to the views of the Treasury it was thought that we might be able to nake Comobiling of this. I should however warn you that the Governoı is not particularly keen on the 1deu; moreover, there is the
Motion of bringing the payment to account at this end (could this be done in such a way that there would be no danger of the ulrangement becoming known in Hong Kong?).
5. It was accepted generally at the meeting that if et ell poreible we must avoid use of the reserved powers to impose intrication on Hong Kong. Moreover, the Governor maintaine
at this too was accented generally - thut it would be one thẳng to use the powers available under article IX of the lleng Kong
Liers Patent (imposing a contribution by rder in Courcil) www.r the Unorficial Fombers of Executive Council - or at leest enjority of them - hsd ccepted something like the dovernor's proposals and quite another to use those reservo juniors to push through & contribution against the wishes not only of the Daorvielal Members of the Legislative Council out also against L'e onvice of the Unofficial Meneers of the Executive Council.
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In view of what the Governor said we were anked by the Mindstor to reconsider with other Departments thether it would not be possible to proceed on the lines proposed by the Governor convined possibly with an arrangement whereby in certain ovontuniities there would be consultations between 0 and the Hong Kong Government after 5 years. The Governor explained that 4 per cent inflation (this is his estimate of the likely sumed inlation in Hong Kong over the period of the agreement) was built into his proposels. If costs in Hong Kong were to go up at a rate groster than 4 per cent there would be jarication for a revisz of the arrangenents, Lowever, -
lle maintained,
e has done in the past - that we lever inflation Lec iyht be in the UK was no concern of Hong Kong's. Se do not accept that view - in particular if the salaries and allorance of HM Forces serving in Hong kong vere to go up over the years of the agreement it would seca reasonable that then I et should be taken into cocount in ascesuing the amount of on Kong's contribution, The Minister then suggested that 1o :e went for a 7 year agreement on the lines proposed by the Governor there should be tro conditions providing for consultation between 10 and the Hong Kong Government after 15 YEARS: (1) ir irlation in Hong Kong were to be shown to
ve increased by more than 4 per cent year by year and (11) 11 nd here tho idea was that there should be some condition safeguarding the UK's interestE. The kind of thing the
inister hug in mind was that inflation here might be more than in llong Rong).
2.
BLOR ST
17.