SECRET
necessary before the agreement is concluded.
You
will of course be kept closely in touch with HQBF's
informed continuing internal search for economies and
if garriten costs are brought below HK$450 million you will be informed immediately.
2.
Your para. 2B. MOD t
A
agree that such an
Indeed
exercise would be of value to both parties. The new MOU makes provision for this.
should
For presentational
reasons, however, a review ought to achieve worthwhile results and MOD do not believe this would be possible in the timescale you suggest. Reducing costs to HK$450 million is likely to leave little scope for significant further saving, although MOD will of course look carefully at the relocation plans. Savings already identified take account of the reduced force level. But recognising your presentational need, MOD propose the following formula for public use: Kinet,(the costs have been rigorously studied by both sides and useful savings made; Second, both sides
Sul
have agreed on the importance of achieving the maximum economies in running the garrison and have made provision whereby during the period of the new agreement the Hong Kong Government may call for reports and share in any resulting savings, Third, that HBF will keep dosely in touch with the Hong Kong Government to ensure that all opportunities for economy are taken.
and (iii)
rest
3. Your para. 2C-F. MOD believe it is agreed that, apart from UK Pay and Allowances, Equipment ex UK and Air Trooping, the remaining cost of the garrison (some 50%) is based on Hong Kong prices. Of the remainder, air charter costs (5%) are determined primarily by worldwide rates, and equipment ex UK (13%) is subject to UK inflation. This leaves pay and allowances of UK personnel (some 33%) of the total). A note on the basic method of assessment of Local Overseas Allowance follows
demonstrates by bag: You will see from this that prices in Hong Kong rather than UK determine the overall size of the pay and allowances Bill, and MOD consider there is nothing between us on this. Your officials' concern was with the mechanism for adjusting LOA downwards, if basic pay rose much more quickly than costs in Hong Kong. As the last review was conducted after the April 1975 increase in basic pay, no problems of differential inflation are
/likely
SECRET
NOTHING TO BE WRITTEN IN THIS MARGIN