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there was a reasonable chance of Mr Rodgers being able to reach an agreement. Mr Dales accordingly wrote to the Private Secretary at No. 10 yesterday morning.
4.
I understand from the MOD that contrary to what had been hoped see the final paragraph of my submission of 22 October there was virtually no discussion in the margins of Cabinet yesterday morning about the Defence Secretary's minute. During the course of the day, however, the Chancellor agreed to the Defence Secretary's recommendation subject to three provisos: that there was a reasonable expectation that a settlement on this basis could be reached; that satisfactory inflator arrangements would apply; and that further study should be made of means of reducing the costs of the garrison (although they do not envisage a review of the basic size or shape of the garrison). The Prime Minister gave his consent by the end of the day.
5. While the concurrence of OPD Ministers was being sought to what Mr Rodgers had recommended, three reports came in from the Governor. In the first (Hong Kong telegram no. 1086) he seemed to confirm what Mr Rodgers had reported the previous evening about the proposal to be put to Unofficials. It should be noted, however, that in paragraph 8(A) of his telegram the Governor said that he was recommending Unofficials to accept the progressive contribution to 75% over three years on the basis of an agreement to be "as long as possible, preferably ten years, but at least seven". He also
said that his recommendation to Unofficials would include an
exploration of other details such as some means of limiting the cost to Hong Kong of any differential in the rates of inflation that
might develop between Hong Kong and the UK.
6.
Later in the day, the Governor reported on the outcome of his meeting with Unofficials (Hong Kong telegrams nos. 1089 and 1090). The gist of the outcome was that Unofficials accepted the Governor's recommendation subject to stricter understandings on the release of MOD lands, particularly in the first two years of a new agreement. It was agreed that the question of the release of lands would have to be examined by a working party.
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