SECRET UK EYES A
FIV NCE AND THE DEFENCE COSTS AGREEMENT
11.
The gross LTC costs of the Hong Kong Garrison in the current financial year amount to about £124M. Receipts from the Hong Kong Government based on their meeting 65% of the full costs of the Garrison in 1992/3 are estimated to be £135M. Withdrawal of one battalion in 1994 would not produce any significant savings either to the gross defence budget or to the costs of the Hong Kong Government before 1994/5. This sits uncomfortably with the Hong Kong Government's insistence that they will only be able to obtain approval for their 1993/4 defence costs estimates from the Finance Committee of LEGCO if they show a significant decline from 1992/3 - a problem that is made worse by their continuing refusal to pay the final quarterly bill for 1992/3 during this financial year. (It is clear that the Hong Kong Government is having significant political difficulty with the Finance Committee of LEGCO which is increasingly less sympathetic to spending large sums on defence and over which the Governor has no reserve powers). It will be important that, in seeking the Governor's agreement to our plans for Garrison reductions, he is made aware of the financial consequences and the need for the Hong Kong Government to meet its obligations under the DCA including their share of the costs associated with the run-down.
PUBLIC HANDLING
12. Our current public line on the withdrawal plan is that it has been drawn up with our responsibilities for security in Hong Kong until 1997 fully in mind; that it is flexible and can be adjusted to meet changing circumstances; and that individual decisions on significant changes to the size of the Garrison will be announced once they are made. There is a case for being a little more forthcoming and publishing some of the key features of our current plans. It would help assuage public concern in Hong Kong in that it would show a definite downward trend in the Garrison's size and might thus defuse some of the criticism about the its size and cost which in turn leads to the sort of difficulties we are having over the DCA. It might also be reassuring both to Hong Kong, in that it would show that we intended to retain a Garrison till the point of handover, and to China, who would prefer to see a significant British presence right to the end. It might also reduce speculative, inaccurate and unhelpful local media reporting. the other hand, it could undesirably reduce our room for manoeuvre, particularly on the timing of the withdrawal of battalions. were to specify a date for withdrawal in advance of a final decision being taken, no amount of caveating would prevent difficult and pointed questions being posed if we decided to change our minds.
13.
On
If we
It ought, however, to be possible to steer a middle course which would satisfy both criteria, by being reasonably specific about things which are not going to have a high operational profile, such as the ending of accompanied service, the movement of HQ Brigade of Gurkhas to the UK, the fact that the last battalion to be withdrawn will be British etc, and by giving a time bracket for more sensitive events, such as the withdrawal of Gurkha battalions. I therefore attach at Annex B a draft withdrawal
COSSEC/S/2.004
5
UK EYES A
SECRET