SECRET
CI
7
5
XCS(75)6
the release of land was to form part of the agreement, and to deal with the possibility of graduated payments and certain other small matters.
(e) At the time of circulation of this paper, agreement
had not been reached with MOD on this item. If further progress is made a further note will be cir- culated separately. A copy of the Memorandum of Understanding is attached at Annex E. It cannot be completed until agreement is reached on:
(i)
(ii)
(iii)
the division of costs,
the period of the agreement,
a formula for reducing differential inflation, and
(iv) the point made in paragraph (d).
(f) Preparation of a Statement of Works Procedures
and a Statement of Financial Procedures. It is not absolutely essential that work on these statements should be completed before agreement is concluded.
The current Defence Costs Agreement comes to an end on 31st March 1976. The present negotiations and exchanges have been going on for more than 12 months and it is essential that, provided a settlement which is satisfactory to Hong Kong can be secured, the successor agreement should be concluded as soon as possible. If the evacuation of Victoria Barracks and Kai Tak is to proceed according to the timetable, a decision to reprovision them in HMS Tamar, Sek Kong and elsewhere is required before 1st January 1976. To meet this date, it is necessary to take advantage of the Governor's presence in London in early December to try to reach agreement with the British Government. It is intended that the Governor should be supported by a team of officials from Hong Kong during these discussions.
Points requiring Advice
8
The advice of Honourable Members is accordingly sought on:
(a) Vacation of Victoria Barracks. It is recommended
that the conclusions of the Working Party be endorsed.
(b) Vacation of RAF Kai Tak. It is recommended that the
conclusions of the Working Party be endorsed. If the Ministry of Defence seeks to resist the complete evacuation of RAF Kai Tak it is recommended that the Hong Kong Government should insist that, it is essential
SECRET