1.
SECRETEK EVE
EYES
HONG KONG DEFENCE COSTS NEGOTIATIONS OCTOBER 1975
OPENING STATEMENT BY MINISTER OF STATE
BRIEF B
The purpose of my visit to Hong Kong is, as you know, to put HMG's position on
the terms of a new defence costs agreement to succeed the present arrangements
March 1976. /
which expires at the end of The Government of Hong Kong has made a financial
contribution to the cost of the Hong Kong garrison for many years in a succession
of agreements and you will rightly have concluded that, the practice being so
well established, HMG would not have sent a Minister of State to discuss these
matters with you now were it not necessary to ask the Hong Kong Government to
make a substantially increased contribution; and that HMG viewed this matter so
seriously as to warrant our position being put at the highest political level.
2.
Before explaining in detail our position on the future cost sharing arrangements I
believe I must first make it clear to you why we have decided that we must reduce
the garrison in Hong Kong and must ask you to take on the greater part of its costs,
and why a satisfactory agreement with you on these matters is now of the greatest
importance to us. The simple fact is that the British economy and the British
Government is facing a crisis more serious than at any time since the war. Last
year our balance of payments on current account was showing a deficit at an
annual rate of £3,750m or nearly 5% of GNP, inflation was running at a high level
and unemployment was beginning to rise. We are attacking inflation through a
severe limit on vage increases one which will mean a fall in real living standards
for many workers and families during the next twelve months.
Our balance of payments
has improved, it is true, but our deficit so far this year is running at an annual
rate of £1,500m
(and that is before the most recent increase in oil.
prices). Even though there has been this improvement, the solution to our balance
of payments and resource problems is far from complete. By itself the elimination
of our remaining current account deficit will require a substantial shift of
resources from private and public consumption and will be made more difficult
while the world economy remains in recession. Moreover, in order to allow time
for our economy and particularly the balance of payments to adjust to the new
SEORET.UK EYES A