SECRET UK EYES 'A'
Defence programme.
I do not want to go into the details of the Defence Review. It is sufficient to say that
Continue as in the fourth sentence of the present paragraph 37."
...
Delete fourth sentence of paragraph 6 and substitute the following:
We
"But, as I have already said, we are facing a serious economic
crisis, and it can no longer be right that the UK should continue to bear so much of the burden of providing for your security. are therefore proposing two steps. The first is to limit the size of the garrison to no more than is absolutely necessary. We have therefore undertaken careful
Continue as in the rest of the paragraph7."
...
Paragraph 7 delete the second sentence: this is a hostage to fortune. Comment
Paragraph 8, while on the right lines, needs expansion to give more and
better information on the comparative performance of the UK and Hong Kong economies. Moreover, comparison of standard rates of income tax gives a misleading impression of relative tax burdens because of different exemptions etc. We also think that it is undesirable to refer to the idea that Hong Kong's own economic problems may limit her ability to pay increased contributions.
Amendment suggested
Delete paragraph 8 and substitute the following:
"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 cuts 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 increased contribution; and with the
3
SECRET
UK EYES 'A'