CONFIDENTIAL
and economic confidence within the Colony necessitates some UK
contribution to the costs and the composition of the forces
required for security.
But by far the greatest benefit from
Kong Kong's continued prosperity and security accrues
to the citizens of Hong Kong.
believes that Hong Kong should,
Her Majesty's Government
therefore, now assume the major
responsibility for and make the major contribution towards the
costs of its defence and that the UK's share should be the
minimum compatible with its political objectives. We put this
at 25% and Hong Kong's contribution at 75%.
We are satisfied that this step is right" on merit.
And I must make it plain that the UK's economic situation is such
that a rapid and substantial step is needed. The simple fact
is that the British economy is facing a crisis more serious than
at any time since 1945. This means that all our domestic
public expenditure programmes, for example education, housing.
and health, continue to be under the greatest pressure. Overseas
expenditure, such as the Hong Kong garrison, presents special
problems because of our acute balance of payments deficit.
This is the background against which we conducted our
Defence Review and are continuing to scrutinise our Defence
expenditure. The review proceeded from a careful appraisal
of the strategic priorities and their implications
political, economic, industrial
military,
and led to conclusions for
the future allocation of defence resources.
In strategic
terms the conclusion could only be that the North Atlantic
/Treaty
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