DRAFT TELEGRAM TO GOVERNOR HONG KONG
Your telegram No. 467. Sterling guarantee and
accidental breach provision. In the light of your
remarks and the discussion in the Executive Council,
we have considered again carefully whether any deviation
could be made from the terms of the declaration, as far
as the accidental breach provision is concerned, so as
to accommodate the wishes of Hong Kong. As you know,
the declaration was drawn up after participants had had
the opportunity to comment, and it was an attempt to
strike a fair balance between the interests of the UK
on the one hand and those of participants on the other.
In order to satisfy public expenditure control provisions
here, we have to lay down as precisely as possible the
requirements which participants need to satisfy if they
are to qualify for the guarantee. As far as the
accidental breach provision is concerned, this has not
caused difficulties with other holders nor has there
been doubts about the interpretation. We are sorry but
we cannot agree to modify the terms of the declaration
in order to meet the particular needs of one holder,
however important.
2. It may be of course that in practice, the margin
of £2 million or £3 million which you propose to build
in, would be enough to ensure that no breach occured.
However it is an important part of the declaration that
the responsibility for adhering to the terms of the
declaration should rest with the Government concerned.
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