SECRET
SECRET
UK EYES A
UK EYES A
(e) The idea of a graduated contribution over a period of years had
presentational attraction. It could not be denied that the present
contribution rate was too low. On the other hand, the jump from the
Graduation would help
present to the new rate could not be too abrupt.
here. There would also be advantage in having a longer period for the
agreement than five years. A ten year period would be helpful for
stability and confidence as it would ensure the continuation of a
British military presence for at least this period. If the agreement
were for 10 years it might be possible to increase the rate of contri-
bution to something like two-thirds of the cost of the garrison by
about the seventh year.
(f) The foreign exchange cost of the garrison to the UK, and therefore
the benefit to the Hong Kong economy, was about two-thirds of the total
cost. This might be of presentational value to the UK in justifying a
contribution of about this size.
(g) Whereas Hong Kong would prefer to denominate and pay the contribu-
tion in sterling, there were no overriding difficulties to payment in
two currencies
sterling for costs incurred in the UK and Hong Kong
dollars for local costs. This would follow the pattern of the proposed
inflator formula.
(h) The £17M contribution which had been offered by the Governor took
account of the fact that the British forces paid income tax to HMG.
The Governor's views
17.
At a final meeting with the representatives of the UK and Hong Kong
teams, and attended by the Colonial Secretary and CBF, the Governor, while
making clear that he was not negotiating, gave his assessment of the options
left open as a result of the discussions in formal session,
11
SECRET
UK EYES A SECRET
UK EYES A