SECRET UK EYES A
!
taxation, but at the same time reaping maximum economic
benefits from the garrison.
11. As regards the size of Hong Kong's contribution the
Governor has persistently taken the line that the colony
cannot be expected initially to do more than double its
present contribution to about £17M a year, although he has
not ruled out the possibility of a graduated contribution
rising to a higher figure in later years. He has mentioned
the possibility of a 50:50 split; but has pointed out that
Hong Kong is less interested in percentages than in the
provision to be made for defence in Estimates 1976/77.
Hong Kong officials are known to have allowed for a defence
contribution of HK $205M in their forward estimates for
1976/77, which represented £17M at 1974 prices. They are
well aware that costs have risen since then and it may be
that this figure (of which the Unofficials are probably
aware) is no more than an opening bid.
12. The Hong Kong representatives are likely to say that,
while they accept that some increase in the colony's
contribution is justified, it is quite unrealistic for HMG,
which was equally a partner to the existing agreement, to
expect Hong Kong to raise its contribution fourfold in a
single step. They will point out that the economy of Hong
Kong is now less buoyant than in the recent past and that a
major increase in defence expenaiture could only be met at
the expense of planned social programmes or by increased
taxes which would discourage the commercial activity on
which the colony's economy depends. They will not fail to
make the point that, with the proposed reduction in the
garrison, they are being asked to pay more for less.
will also argue that HMG, which has a constitutional
SECRET
UK EYES A
2 -4-
They