From:
RP HATFIELD
CONFIDENTIAL LOCSEN
Head of Secretariat (Overseas) (Commitments)
7 MON
MINISTRY OF DEFENCE
Main Building, Whitehall, London SWIA 2HB
Telephone (Direct Dialling) 01-218 6188
(Switchboard) 01-218 9000
Ian Strachan Esq
Deputy Secretary for Security Government Secretariat
Hong Kong Government
Lower Albert Road
Hong Kong
48
D/Sec(0) (C)/6/7
19 July 1990
Dear Mr Strachan
Thank you for your letter of 20 June.
Perhaps I could begin by emphasising the extent of the financial pressures on the MOD in the coming years. No doubt Ian Wotherspoon will be able to tell you on his return that speculation on the 'peace dividend' and cuts in the MOD budget are a major theme in the British media every day but I can certainly confirm that the pressures have increased very considerably since my meeting with him in Hong Kong. Against that background it is imperative that, if we are to run on the Patrol Craft, the cost to the defence budget is kept to the absolute minimum.
That said, I had hoped that the discussion in May had identified a way forward which was broadly acceptable both to the HKG and the MOD. I therefore found your letter disappointing as it seemed to put this in some doubt. I therefore took the opportunity to speak on the telephone to Ian while he was in this country to clarify a couple of points. In the light of that conversation I hope that it will still be possible to reach a mutually satisfactory arrangement.
Ian made it clear in May that you did not wish to pursue our idea based on the disposal value of the vessels. I do not believe that this would involve a break with the 65:35 apportionment and so far as I am concerned it remains on the table. Nevertheless I have regard also for your judgement in relation to the political factors in Hong Kong.