ATANTE
TTT-
SEOR
TUTIO A
UK EYES A
about £40M at Sept 74 prices, $480,000,000 HK dollars. In further discussions
with the Governor and his security advisers the whole problem of the security
threat and the forces, both civil and military required to meet it was given the
most rigorous study both in Hong Kong and in London. The conclusion is that
some further reduction can be made while still maintaining a garrison which is
militarily adequate, in present circumstances. These reductions would involve
the removal of an infantry battalion, the remaining artillery battery, and one
or other components of the Naval element. Such a garrison, comprising 4 infantry
battalions (one of them, for military and political reasons, a UK battalion),
engineers, a frigate, (should that be selected) and a helicopter squadron would
cost about £334 million, 400,000,000 dollars at September 74 prices
or about
£40 million about 450,000,000 dollars at September 1975 prices. HMG are satisfied
that this level of forces is sufficient in Hong Kong in present circumstances.
9.
We therefore approach the cost sharing discussions on the basis of a garrison reduced
as I have described. I should make it clear that these reductions entail cutting
the garrison more than is normally desirable. However it could be reinforced in
an emergency.
All possible economies had to be sought both from the viewpoint of
HMG and in our effort to ease the difficulty for Hong Kong in meeting our associated
financial requirements, to which I now turn.
10.
I have already said enough, I hope, to impress on you the gravity of the problems
we faced at the time we took decisions on the Defence Review. You may know that
as a result of a further deterioration in our economic prospects, it was necessary
to make further economies in defence as part of the curs in public expenditure
announced in the Spring Budget of 1975. Even with the reductions in the garrison
which I have described, if the Hong Kong Government contribution were to remain
at its present level, the UK would still have to find £25M a year towards the
cost of meeting your security. This we can no longer afford to do. We decided
as part of the Defence Review itself that we must ask you for a substantially
SEORET UK. EVES A