CONFIDENTIAL
There is a further point which I should make, and
I hope you will not misunderstand me. There is a large
measure of goodwill for Hong Kong in the United Kingdom.
But, in the context of your defence contribution, the comparison
is inevitably made between your flat rate of tax of 15% and our
much higher rates; and between your contribution to defence
of less than 1% of your GNP and ours of 51%.
Against this background I believe that you would be
endangering this goodwill if Hong Kong were unwilling to
shoulder much the largest part of the cost of the garrison.
The object of the proposal I have made is to adjust the
respective financial burdens arising from the defence of
Hong Kong so as to enable Her Majesty's Government to
reaffirm her commitment to Hong Kong in a way which takes
account of current economic realities.
On
So substantial and rapid an increase in your defence
expenditure cannot be welcome to you. I realise it
presents both budgetary and political difficulties.
the other hand, the British Government is convinced that
if the goodwill and the consent of the British Parliament
and public is to be retained for the British commitment in
Hong Kong, such an ad justment must be made.
/I hope
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