CONFIDENTIAL
other UK government funding would be made available. In the
absence of a settlement, withdrawal would have to take place
as planned in April 1992 and the first overt steps in that
process would take place within weeks (eg posting changes).
4. The Ministry of Defence view was that although a reduction
from three to two vessels was a possibility, the savings accruing agreed by both sides to be no more than £2m - fell
well short of what was required. Other savings in the cost of
the garrison were already mortgaged in efficiency savings assumptions and budget allocations. One alternative would be for the Hong Kong government to buy out the UK's share in the
capital value of the patrol craft and run and maintain the
vessels themselves. MOD would be willing to provide, on repayment, RN officers and ratings on loan service and believed that it might be possible, provided certain
conditions were met, for the vessels to continue to fly the White Ensign.
5. The Hong Kong government agreed to examine this proposal
and to review all the other options that had been raised in
previous negotiations, with the aim of providing a response within 10-14 days. However all these options were likely to raise difficulties in Hong Kong. The Ministry of Defence in
the meantime would report the outcome to the Defence
Secretary, who would probably wish to report in turn to the Foreign Secretary.
CONFIDENTIAL