A.
CONFIDENTIAL
Interim arrangements
21.
MOD explained that interim arrangements would be required if a new DCA was not to take effect until 1 April 1981 in view of the gap that had been demonstrated between the assessed costs under the present DCA and the actual costs. If a new DCA could take effect much earlier, interim arrangements would not be necessary. MOD proposed that interim arrangements should take the following form:
the 'rough justice' exclusions from the present DCA could continue to be left out until swept up in a new DCA.
a.
b. the arrangements should cover pay/allowances, equipment/ stores/supplies, and air trooping.
C1
pay and allowances would be calculated using 1980/81 capitation rates but would not include non-effective benefits.
d. for equipment/stores/supplies the 1975 base figure would be updated to 1980/81 using a UK inflation factor as the best means available of reflecting actual costs in the interim..
e. For air trooping in support of the DCA garrison HKG would be billed for the full costs, as agreed, of the VC 10 and Hercules flights and the charter costs.
HKG maintained that the figure for equipment/stores/supplies should be calculated by taking the 1979/80 DCA cost as the base and applying the UK inflation factor from then only. To do otherwise would entail some retrospective recovery which HKG could not accept. MOD said that it was necessary to use the 1975 base in order to avoid the 1980/81 figure being abated by the under-assessment of the preceding years. It did not involve retrospective recovery for those years but merely ensured that the 1980/81 figure was as accurate as possible.. MOD accepted that retrospective recovery would be inappropriate. It was agreed that MOD would provide HKG with an analysis of the financial effect of their proposals which would show two figures for equipment/stores/supplies, one reflecting the MOD position and the other the HKG position. It was also agreed that the interim arrangements should cover the whole of 1980/81 with a new DCA taking effect on 1 April 1981. The arrangements would be formalised in an exchange of letters.
Transitional arrangements for garrison build-up
22. MOD explained that HKG payments would be necessary if the garri- son build-up was to be sustained even though HKG had already agreed to underwrite the costs of building up the fifth battalion (in full if enlargement was not eventually agreed and on the basis of the new DCA if it was agreed). HKG agreed to make such payments,
CONFIDENTIAL