Mr Jackson
SECRET
DEFENCE REVIEW CONSULTATIONS:
1.
RECEI REGIST
24 SL.
1HKK 10/9
HONG KONG
510/9
I think that our brief for the PUS should make the point in para. 6 of the draft telegram on the Defence Review which I passed to you today. I am not sure that the point about waiting for the Americans is so relevant to Hong Kong. Indeed I thought that Ministers had agreed that in the case of Hong Kong, consultations could begin before our lines with the Americans had been completely cleared.
2.
The brief on Hong Kong might therefore say: -
"Any cuts in defence expenditure in liong Kong are unlikely to take effect until the end of the present Defence Agreement in March 1976. The Financial Secretary, Hong Kong, has made the point that, for this reason, it will not be necessary within Hong Kong to debate an increased defence contribution until the budget discussions for the 1976 calendar year. The discussions for 1975, which are just beginning and which will continue until some time in November, will be difficult. Executive Council will have to agree new taxes to maintain the momentum of social expenditure. It is in the interest of IMG as well as of Hong Kong that these discussions should succeed. The Financial Secretary considered it would be very undesirable to mix them with demands for more money for defence in 1976. This suggests that formal consultations with Hong Kong on the Defence Review should not begin until, say, late November. We have asked the Governor to confirm this."
23 September 1974
SECRET
KELS
A C Stuart
Hong Kong & Indian Ocean Dept
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