DECIRE
Foreign and Commonwealth Office London SW1
H FT Smith Esq CMG Cabinet Office Whitehall
Telephone 01-
Your reference
Our reference
Date
10 October 1974
131
DEFENCE REVIEW: HONG KONG
1.
We agreed at the Sub-Committee meeting on 2 October that there was no absolute need to have formal consultations with Hong Kong's Executive Council until May 1975. This postponement will enable the Governor to get the 1975-76 Hong Kong Budget out of the way, including higher taxation to pay for the social programme which is strongly supported by UK Ministers. We also agreed that neither an early Parliamentary statement nor the subsequent White Paper need give any figures for Hong Kong.
2.
It is equally important that any statement should in no way imply that a decision on Hong Kong has already been taken, in advance of consultations. Any such implication would be almost as damaging in Hong Kong as publication of the details of that decision.
3.
I have been wondering how the passage on Hong Kong in the Defence White Paper might be phrased so as to meet the needs of both the British and Hong Kong Governments; and I am writing now to say that I propose to ask, at tomorrow's meeting, whether the Sub-Committee could agree to something on the following lines:
"The current defence agreement with Hong Kong runs until March 1976. Before that date there will have to be consultations with the Hong Kong Government about a successor agreement. Our commitment to defend Hong Kong will remain. The purpose of the consultations will be to agree on how the cost of the necessary forces should be divided. Under the present agreement Hong Kong contribute about £81 m. a year. But in our current financial
circumstances we shall aim to agree that Hong Kong should bear a higher proportion of the cost than they do now.
In answer to questions about the right size or proportion of the contribution, we would say that this is what the consultations will be
about.
4.
I am sending copies of this letter to Hudson and to Hall. I thought it would be helpful for all to be aware of the proposal before tomorrow's meeting, and I hope it will not cause difficulty.
J A Thomson
SECRET
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