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TOP SECRET & STRICTLY PERSONAL

Foreign and Commonwealth Office

London SW1A 2AH

29 August 1975

His Excellency

Sir Murray MacLehose KCMG KCVO MBE

HONG KONG

Dear Murray

18 August.

I have just received your three letters of

I fully understand and indeed share the anxieties which lie behind them; but I would also like you to be assured that there is no question of HKIOD or anyone else in the office concerned with your affairs missing tricks or going soft.

2. I was myself present at the meeting with the Secretary of State on 21 July, together with O'Keeffe and Bill Bentley; and with Goronwy, Ted Rowlands and Tom McNally on the political side. The official submission on which discussion took place maintained the firm orthodox line on constitutional/electoral development; but suggested (subject to the requisite consultation with yourself) a few possible "minimum-maximum" concessions to the NEC representations, by way of (i) an annual review of ILO Convention applications by a Minister (ii) a "low-profile" study in the labour relations field and (iii) some simplification of your trade union law particularly to remove restrictions which are not applied in practice.

3. As things turned out, it was hardly a matter of letting loose balls go by, but rather of dealing with a couple of fast yorkers from the Secretary of State himself. The first (i.e. the Secretary of State's insistence that he could see no reason why three members could not be found preferably from the MACs for appointment to LegCo next year) we felt we could only glide to leg to you. The gulf between the rural district council and the legislature does not seem all that wide to successful Ministers who have stepped across it themselves. The much more dangerous ball (arising from the thought which came off the top of the Secretary of State's head for some sort of social-economic consultative council in Hong Kong including trade union representation) was the suggestion of straight talking in Feking about future arrangements in Hong Kong. We played a very straight bat to this, and I reminded the Secretary of State of the potential problem of all the British passport holders of Chinese origin in Hong Kong, if relations with China went awry.

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At that moment, however, he obviously liked the feel of the ball he had delivered, and we had to leave with the thought that after all this was carefree bowling in the nets, and there was time for serious coaching before he walked out onto the Feking wicket next May.

4. We talked with Goronwy and Tom McNally immediately after the meeting, and both of them are well seized of the dangers in this line. We have already set the "coaching" process in hand, with the preparation of a draft outline paper on the long-term future of Hong Kong, intended to provide a considered basis for the Secretary of State's approach to the Chinese next year. Laurence O'Keeffe has spent a lot of midnight oil on this, and it is now with Goronwy to mull over during the recess. We believe it reflects his own thinking. In sending it forward to him, I underlined its main conclusion, that any frank discussion of the future with the Chinese during the Secretary of State's visit next year would be premature, and that it will be crucial not to give any impression of impending change of policy by talking about Hong Kong's internal affairs or suggesting their cooperation in its administration. We plan to go over the paper with you here when you come home in the autumn. Teddy Youde has had a chance to look at it and comment during his present leave.

5. Meantime, we had of course to put to you the upshot of the meeting with the Secretary of State; and the draft of my letter to you of 8th August represented a bit of fine marquetery work by Laurence, which was approved by Goronwy and the Secretary of State himself as the record of the meeting. It was not intended simply to dump everything on your plate, and I am sorry if it did not offer enough implicit guidance. I hope in the light of this letter you will be able to let us have a reply to it which will help us, and you, in handling the problem we face. It will certainly help if you could be forthcoming on the suggestions of an industrial relations study, and limited revision of the trade union law. On the question of membership of Legco, you will doubtless balance carefully any domestic difficulties you may see in the proposal put to you against the strong feeling with which the Secretary of State looks at it from the political angles at this end. But on the thought of possible discussions with the Chinese on trade union involvement in the processes of Government in Hong Kong, we shall expect from you firm and considered argumentation to back up what we ourselves are trying to do. Meantime, the interim reply to the NEC has not exposed any vital ground.

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I shall let Goronwy see your confidential letter of 18th August, about the dangerous concatenation of events this autumn (I should like to show him your secret letter also, but feel I can hardly do so without evoking the question of what reply I have sent!). We have not forgotten all this, and do indeed realise how heavily 'it all bears on you. On the defence costs front, we can only continue to strive to do our best for you. Rodgers is at the moment battling for flexibility in his negotiating brief (as forecast in Laurence's letter of 1st August to you), but whether he will get this from the Chancellor, or be required to report back after an impasse over an initial demand for a flat 75% contrąbution, is still undertain. We will keep in the closest touch with you about the tactical handling of this. You will realise that on this front the Secretary of State has not been disposed to take up the cudgels which our briefs have presented to him.

7. I hope this may have assuaged your anxiety about serious slippage at this end. Hong Kong Department has had to adjust to changes, but has certainly not lost its grip. O'Keeffe's visit this autumn will I trust offer you further reassurance as well as opportunity to shew him all the ropes.

8. This letter is graded top secret because for obvious reasons the existence of a draft outline paper (para 4) is so classified. It would otherwise have been secret.

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