CO HO FONG
GPG 550
CYPHER CAT &
FM FCO 261240Z
NO L
B
CONFIDENTIAL
TO IMMEDIATE HONG KONG TELNO 984 OF 26 NOVEMBER 75.
YOUR TELNO 1188: DEFENCE COSTS.
1. THE NOTE ON THE ASSESSMENT OF L.0.A. IS AS FOLLOWS:
BEGINS.
(397)
396
NEX!
LEF.
1. LOCAL OVERSEAS ALLOWANCE (LOA) IS PAID TO BRITISH SEVICE PERSONNEL OVERSEAS WHERE THEY INCUR ADDITIONAL EXPENSES IN MAINTAINING THE STANDARD OF LIVING WHICH THEY WOULD ENJOY IN THE UK. LOA IS REVIEWED AT, NORMALLY, THREE YEAR INTERVALS.
2. THE REVIEW PROCEDURE REQUIRES A DETAILED ANALYSIS OF COSTS
IN THE OVERSEAS STATION BUT AS A FIRST STEP IT IS NECESSARY TO
ESTABLISH THE UK STANDARD AS THE BASIS FOR COMPARISON. THIS
STANDARD TAKES THE FORM OF A COMPREHENSIVE BUDGET SHOWING HOW
'AVERAGE MAN' SPENDS HIS INCOME. BECAUSE PATTERNS OF EXPENDITURE
VARY AT DIFFERENT INCOME LEVELS SEPARATE UK BUDGETS ARE CONSTRUCTED
FOR SELECTED SINGLE AND MARRIED SERVICE RANKS AND PROJECTED SO
AB TO COVER ALL RANKS AND FAMILY SIZES. THE INFORMATION USED
IN DRAVING UP EXPENDITURE PATTERNS IN THE UK BUDGETS IS TAKEN
PRIMARILY FROM THE DEPARTMENT OF EMPLOYMENT FAMILY EXPENDITURE
SURVEY. ADDITIONAL INFORMATION IS OBTAINED FROM INTERVIEWS
WITH SERVICE PERSONNEL IN THE UK SO THAT, WHERE NECESSARY, EXPENDITURE PATTERNS CAN BE MODIFIED TO TAKE ACCOUNT OF ESSENTIAL
VARIATIONS IMPOSED BY THE CONDITIONS OF SERVICE LIFE AS OPPOSED
TO CIVILIAN LIFE. THE BUDGETS ARE DRAWN UP AT THE COMMENCEMENT
OF SACH THREE YEAR CYCLE OF REVIEWS AND ARE AMENDED BY REFERENCE
TO MOVEMENTS IN THE RETAIL PRICE INDEX AT THE TIME OF EACH
INDIVIDUAL OVERSEAS REVIEW SO THAT UP TO DATE COSTS ARE REFLECTED.
3. AN LOA REVIEW IS CARRIED OUT BY A SMALL TEAM OF MOD PERSONNEL
ASSISTED BY A REPRESENTATIVE OF THE CIVIL SERVICE DEPARTMENT.
IN A SERIES OF INTERVIEWS WITH SERVICE PERSONNEL COUPLED WITH
PRICING EXERCISES IN SHOPS ETC DIRECT COMPARISONS ARE MADE
BETWEEN LOCAL COSTS AND UK COSTS FOR THE COMPONENT ELEMENTS OF
THE UK BUDGET. IT IS THUS POSSIBLE-TO ESTABLISH THE ADDITIONAL
COST OF MAINTAINING THE UK STANDARD OF LIVING IN AN OVERSEAS
AREA.
4. IN SOME OVERSEAS AREAS LOCAL CONDITIONS, PARTICULARLY CLIMATE,
MAY MAKE IT NECESSARY TO ALLOW FOR ADDITIONAL EXPENDITURE ON
ESSENTIAL ITEMS OR SERVICES WHICH HAVE NO PARALLEL IN THE UK
AND THUS DO NOT APPEAR IN THE UK BUDGET STANDARD. A TYPICAL
EXAMPLE WOULD BE THE COST OF HEAVYWEIGHT CLOTHING TO MEET THE
EXTREME CONDITIONS OF A CANADIAN WINTER, A UK RESIDENT WOULD NOT
NORMALLY POSSESS SUCH ITEMS BUT THEY WOULD BE ESSENTIAL
PURCHASES WHEN ON A TOUR OF DUTY IN CANADA. WHEN ASSESSING
ADDITIONAL COSTS INCURRED DUE TO LOCAL CONDITIONS DUE WEIGHT IS
GIVEN TO ANY COMPENSATING REDUCTIONS IN EXPENDITURE WHICH MIGHT
RESULT WHERE THE APPLICATION OF THE UK STANDARD IS INAPPROPRIATE.
FOR EXAMPLE, IN SAY SINGAPORE ADDITIONAL LIGHTWEIGHT CLOTHING
WOULD BE REQUIRED IN THE TROPICAL CONDITIONS BUT THE NEED FOR
UK STYLE CLOTHING WOULD BE REDUCED.
5. ALTHOUGH IT MAY BE NECESSARY TO MODIFY THE UK STANDARD BECAUSE
OF LOCAL CONDITIONS IT IS NOT THE PURPOSE OF LOA TO EQUATE
THE STANDARD OF LIVING OF SERVICE PERSONNEL WITH THAT OF THE
LOCAL POPULATION, ESSENTIALLY LOA IS CONCERNED WITH THE
MAINTENANCE OF THE UK STANDARD.
ENDS
CALLAGHAN
HNNN