SECRET
even
be £25.
UK EYÉS A
ane
Because of the worsening of the economic situation
is now certain that he could not chain agreement to a contribution of the within the last few weeks, the Governor/is new less confident
of persuading UMELCO to confirm the contribution of £17M which
he had earlier thought feasible. He is nevertheless willing to
make the attempt but sees no possibility whatosever of increasing
this figure (at september 1974 prices). The implication of this
is that tx garrison costing around £35M can be financed only
if HMG is prepared to accept a 50/50 split of costs. The
Governor's personal view is that such an arrangement is
desirable, since it will maintain a position in which Hong Kong
cannot claim a dominant voice in garrison affairs, This is a
consideration to which he gives great weight. If, on the other
hand, IIMG consider it important in principle that liong Kong
should bear more than half the costs of the garrison, despite
the very substantial disadvantages which he sees in an arrange-
ment of that kind, the only possible meti.od of achieving such
a position is in the Governor's view through graduation, in
which the Hong Kong contribution starts at, say, 40% of the
total cost and reaches 60% after, say, 8 years. Such an arrange.
ment would also, of course, be governed by provision for
inflation.
14
19. As regards the timing of cons.ltation within Hong Kong,
the Governor's judgment is that UMELCO could not be asked to
concentrate on the issue either before or during the Budget
season (the Budget we due to be presented on 26 February)
without reducing substantially the chances of a successful
outcome. His preference would be to open discussions in May.
But he considers that an early examination, involving CBF,
will be needed of the options available within a 35M force
and agreement reached in good time on a proposal to be put to
UMELCO. The Governor hoped that approval to undertake such
Governor
SECO
PVPG