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whereby the MOD pay 35% of the cost, to be £15 million over the five years between 1992 and 1997) are not all that large. As I explained, the Governor is prepared to be as flexible as possible over the financing arrangements, within the overall parameters of the DCA. But he is understandably most reluctant to have to re-open the DCA, which as you know, generated much bitterness locally, most of it directed at the British Government. I hope that our conversation did not leave you with the impression that Hong Kong might now be able to make an additional contribution of the order of magnitude that your negotiators have indicated. A bruising public row in Hong Kong now would be all the more damaging when the Finance Committee of the Legislative Council has just approved a contribution of £15 million towards HMG's costs arising from the Gulf War. I think it would be not unreasonable to find some way to give Hong Kong some credit for this important political gesture.
In sum, I strongly believe that the military and political risks I have outlined above are too great to be subordinated to a dispute about relatively small sums of money. I do not propose to enter into any detailed discussion of figures: that is for the negotiators of the two sides. I very much hope that, with flexibility and goodwill on both sides, a reasonable solution can be found. However, as you know time is short. If the present deadlock persists, Ministerial discussion of the wider issues will be needed before decisions are taken which will have a profound impact on Hong Kong and on British interests there.
1/ You free
Maled
THE EARL OF CAITHNESS
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