CURRY DE
ERTIAL-
AL
combination of cost inflation and the falling £. Once the building cost index had
triggered the 50% inflation clause in the Agreement, strenuous negotiations resulted
in the Hong Kong Government agreeing in May 1974 to make an additional contribution
of HKS (specified in dollars).
6.
Although about half of this additional sum should be spent by March 76, it has
not been taken up in full because certain projects have been held over pending
resolution of the position of the Hong Kong garrison and consequent works programme
post Defence Review. It might be possible to take credit in the forthcoming
negotiation, for this underspent balance of £1.5M or so (unspent only because we
did not want to waste Hong Kong Government money).
7. As regards maintenance we understand (although the accounts of the Hong Kong
Public Works Department are not available to us) that their expenditure did not
reach the nominal £2.2M per annum until 1974/75. It would have soared to well
over £3M in 75/76 however, had the Hong Kong authorities not asked us to accept
a reduced standard (by a strange coincidence costed at almost exactly £2.2M) in
conformity with their public expenditure economy campaign. We might be able to
take some credit for this also in negotiation.
Works Element of Proposed New Agreement
8. Had the capital works programme stimulated by the present agreement been allowed
to proceed unchecked, it would have spent some £28M over the next quinquennium.
However, once the limits of the finance likely to be available during the next
agreement period, either from Hong Kong or UK sources had become apparent, CBF
decreed that this programme should be reduced to £20M over a 5-year period and this
figure has been reduced further to £154 (nominally 3M per annum) pari passu with
the reducing force level.
2- CONFIDENTIAL"