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level of surplus revenue. It is very difficult to estimate at this stage whether the increase in demand will be sufficient to reach this level. There are about 3.25 million residents of Hong Kong who will be eligible for the BN (0) passports between 1987 and 1997 and most of these are expected to apply. On current information, about two thirds of them would need to do so for Hong Kong to maintain its existing level of surplus revenue, but this would depend largely on what happens to local costs in Hong Kong over the ten year period.
4.
There are a number of other services performed by the Hong Kong Government on behalf of HMG. On one of these, the issue of entry clearances, the Hong Kong Government estimates that it has been in deficit for many years. Over half of the entry clearances issued are in the form of entry certificates for Commonwealth Citizens. Until we introduced an entry certificate fee this year, the Hong Kong Government received no revenue at all for this service. Other services undertaken on our behalf include those in support of British shipping calling at Hong Kong and the provision of unofficial trade representatives in 18 cities overseas to cover functions some of which we should otherwise have to take on. return our own missions overseas perform consular work on behalf of Hong Kong. The Hong Kong Government could therefore quite reasonably argue that the surplus revenue which it receives for passport issues should continue to be regarded as part of the long established overall reciprocal arrangements and that they help to finance the deficit incurred on entry clearance work.
In
5.
A further point is that the UK passport fee charged under the Consular Fees Order is set at a level intended to cover the cost of the passport issuing operation in the UK and at our overseas posts as well as the cost of maintaining non-fee-bearing consular services overseas. The theory behind this is that it is passport holders overseas, whether resident or visiting, who call on these consular services. So far as residents of Hong Kong are concerned, the holding of a passport is an essential to the acquisition of the new BN (O) status. It is expected therefore that many of the passport applications will be from Hong Kong residents who have no intention of travelling abroad but who wish to preserve a right to a form of British nationality. The majority are therefore unlikely to call upon UK consular assistance abroad. In view of this it does not seem logical to include the administrative costs of issuing their passports and the revenue from fees paid by them in the calculations for setting the level of the UK passport fee. In securing their entitlement to a form of British nationality, BN (O)'s in Hong Kong could well finish up subsidising UK passport applicants. Or the reverse might happen if administrative costs in Hong Kong should rise more steeply than in the UK and at our overseas posts between now and
1997.
6. Finally there is a political argument which we should not overlook, Nationality and passport questions are a particularly sensitive issue in Hong Kong and making the new BN (0) status acceptable there is not easy. If we were to change the existing
/arrangements
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arrangements in a way which made it look as though our prime concern was to make money our good faith in the whole difficult process of transition would be called into question.
7. For the above reasons, we hope you can agree that it is right that the Hong Kong government should be allowed to retain the whole of the revenue raised from the issue of BN (0) passports.
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Merchand
CC:
R E Escritt
Finance Department
Mr Marcelin NTD Mr Hill HKD
Miss Kaye Consular Department Mr McDougall
MVD