PRIME MINISTER
SECRET
UK EYES 'A'
HONG KONG DEFENCE AGREEMENT
CHIEF SECRETARY TO THE
TREASURY
827/11
Ps
36
Sutr tome quickly please
وحمل
PS / hand forming, sabate мі пале resein vol.
Mr
351
The Defence Secretary's minute of 3 November briefly reported the
outcome of the recent negotiations with Hong Kong. I am writing
now to convey my agreement to the proposed package, subject to
certain conditions.
2.
First, in order not to prejudice the financial terms which the
Minister of State for Defence has secured, it is essential that we
should confirm the feasibility of the proposed land releases, which
are the key to the whole agreement, by the end of the month. There-
after we must make every effort to ensure that the releases are
achieved by the due dates or we shall put at risk the substantial increases in the Hong Kong contribution rates which depend upon
them.
3.
Second, our reprovisioning requirements must be kept within
the limits of what Hong Kong would accept as being both essential and reasonable, otherwise we might prejudice Hong Kong's acceptance
of the full reprovisioning costs.
4. Third, whereas we are of course ready to discuss the Hong Kong
request for a further examination of the possibility of limiting the cost of differential inflation, I do not regard this as a
serious problem and it must not be allowed to interfere with the
operation of the inflator mechanism already agreed ad referendum
with Hong Kong officials.
1