XCS(71)3
(a)
SECRET
5
18
(b)
(c)
it would not be fair to Hong Kong to apply this factor to the total local costs of the entire garrison; specifically both the RAF and Navy expenditure seem to contain elements that are not solely for the benefit of Hong Kong, e. g. RAF transit facilities and naval facilities not solely applicable to Hong Kong needs;
during a period of five years there will probably be a rise in recurrent costs. Some costs, of course, may be reduced at any rate towards the end of the period, eig. the expenditure on hirings if an extensive capital programme for quarters is carried out as the above figures indicate. The best estimate that in the circumstances might be made of the extent to which rising costs might be allowed to influence calculations is considered to be 3% per annum;
capital expenditure is partly on rebuilding or improving barracks, partly on redevelopment of storage facilities, depots and other facilities, partly on a substantial quarters building programme designed in part to reduce dependence upon leased accommodation (so incidentally increasing the stock of domestic accommodation for general community use) and partly to increase the percentage of the married services personnel that may be accommodated in the garrison with standards recently approved by HMG for general application overseas. With one exception these capital figures have been estimated on the basis of April 1970 prices, which are about 35% above 1967 prices. It is difficult to say how valid this figure will remain during a 5 year period. Prices have increased since April 1970 by perhaps 30 - 35%. On the other hand, present levels are unlikely to be maintained throughout the period, and for present purposes it may be acceptable to use the April 1970 figures. Even if it were possible to determine a formula which would reflect fluctuating prices through the period, the resultant frequent changes in calculations would give rise to constant By controversy and difficulties in adminstration;
(d) figures for maintenance works are based on the
recently tendered Public Works Department contract price.
Taking account of all these factors as far as possible it is suggested that a possible basis for an offer might be as follows:
SECRET