4.
Actuals
UNFIDENTIAI
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The Hong Kong side stated that the higher the proportion of the Hong Kong contribution, the greater became the need to consider the payment of the Hong Kong contribution being related to actual expenditure incurred.
5. Maintenance and Minor Works
6.
7.
The U.K. side were advised that they might pursue with PSA and PWD a more detailed costing of this item. The U.K. side noted that the amount that PWD might consider desirable did not necessarily represent the financial provision that would be made. It would be necessary to economise as much as possible.
Cost Reductions
(a) Substitution for U.K. personnel. It was agreed
that the EME and medical manpower strength would be examined by the U.K. side to determine whether it would be possible to replace U.K. personnel by LEPS and LECs.
(b) Costs. The U.K. side undertook to re-examine the
cost of education units taking into account fees paid by non-entitled personnel. The strength of the signals units and the need for radio relay equipment would also be examined. It was also thought that some economy might be made by deleting from the cost of Gurkha training the cost in respect of units based outside Hong Kong.
Inflation
It was provisionally determined that the sterling component of cost in respect of pay and allowances and LOA for U.K. personnel amounted to about 40% of the .total cost of these items, on the assumption that 50%
of pay and allowances was retained in thé U.K.
As pay and allowances and LOA constituted approximately 30% of the total cost of the garrison, the proportion of this total cost attributable to the sterling component of cost for these items amounted to about 12% i.e. 40% of 30%. Thus the percentage of the cost of the garrison that was subject to differential inflation in the U.K. amounted to about 30%, made up of 12% in respect of pay and allowances and LOA and 18% in respect of equipment from the U.K. However, this figure assumed more frequent adjustments in LOA to compensate for inflation related wage settlements in the U.K. The U.K. side pointed out that the end-March 1976 cost of pay and allowances and LOA for U.K. personnel would not show an increase over the 1975 costs as pay would be held at its present level.
CONFIDENTIAL
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