SECRET UK EYES A
During the talks the annual cost of the garrison at current price levels has been refined from the rough estimate of £40M pa quoted in my minute to £42.5 M. The Governor's assessment is that it might just be possible to get agreement on this package subject to subsequent detailed negotiations to agree to a time-table to the release of further defence lands. In his view the only alternative would be for officials to examine once again the size of the garrison.
3.
The Minister of State has pressed very hard for Hong Kong to pay 75% (£31.9M) from the outset or failing that for at least some advance on 50% (£21.3M) in the first year. He considers, however, that 50% has now acquired a symbolic significance not only for the Governor but also for the unofficials; and firmly believes that they will not be budged. A further consideration is that the Chiefs of Staff consider the reduced garrison is the minimum acceptable. Moreover the Governor's proposal as compared with the authorised fallback position would represent a reduction of only about £5.5M of a total contribution over a five year period of about £145M.
4. It seems clear both from the advice of the Governor and of the Minister of State for Defence that the alternative to agreeing that the Governor should press for a contribution on the lines outlined above would be a breakdown in negotiations. In view of the considerations outlined in paragraph 3 above I judge that we should instruct the Minister of State to proceed as he recommends subject to the approval of the Foreign and Commonwealth Secretary and the Chancellor of the Exchequer.
5.
The Minister of State can go no further pending our decision. An answer is needed quickly; and I should be grateful to know by noon tomorrow whether you agree that we should proceed as I have proposed.
6.
I am sending copies of this minute to our OPD colleagues and to Sir John Hunt.
29th October 1975
SECRET
SECRET UK EYES A
Rim