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HONG KONG
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Previous Reference: OPD(74) 14th Meeting, Item 3
THE DEFENCE SECRETARY said that a reassessment of the size of the garrison
required for Hong Kong had made it possible to reduce its annual cost from £39 million to £331⁄2 million. Of this the Governor had said that the maximum
Hong Kong could pay now was £17 million with a possibility of increases over
the next 7 years to an eventual 75 per cent of the total cost. However, the
Defence Budget was under great pressure on the non-NATO commitments and it
was the next few years which presented crucial financial problems. He would
therefore very much like to see Hong Kong pay 75 per cent of the cost
immediately: if this proved impossible of achievement, then at least the
75 per cent payment rate should be reached in 5 years instead of 7.
THE CHANCELLOR OF THE EXCHEQUER said that Hong Kong was a very wealthy Colony.
Although its economy had stagnated over the last 12 months its forecast
growth rate for the next 3 years was 5 per cent, 7 per cent and 7 per cent.
It had never had to resort to deficit financing and had a tax rate as low as
15 per cent. Even if it provided 75 per cent of the cost of the garrison,
this would amount to only one per cent of its Gross Domestic Product. He believed therefore that we should press very hard for a 75 per cent payment
immediately. Failing a satisfactory response from the Hong Kong Government
we might have to reconsider the size of the garrison, although he did not
totally exclude, as a fall back position, the idea of a progression in rate
of payment to 75 per cent over 5 years.
THE PRIME MINISTER, summing up a brief discussion, said that there was
general agreement that, by any objective standard, Hong Kong could afford a
75 per cent contribution to the cost of the garrison. The Governor was in
a very difficult position on this matter, and it would emphasise the
seriousness with which we viewed the matter if a Minister was sent to
negotiate with the Hong Kong Government.
The Minister of State for Defence
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Mr. Womack Defenu Bept.
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