11
SECRET
B
4.
So far the MOD have resisted this stoutly, in part because
of the difficulties it would create for the Governor in terms of
securing LegCo funding. We consulted Mr Goodlad on the Defence Secretary's minute of 12 October. He (and Private Office)
agreed that it was not necessary for the Secretary of State to
chip in at that time, since the Defence Secretary was making the
right points.
5.
In view of the Chancellor's latest letter, I believe that
the time has now come for the Secretary of State to intervene.
But both the Treasury and the MOD would regard it as a major
breach of faith on our part to discuss the cost savings issue
with the Governor, since the object would be to make savings at
HKG's expense for the British tax-payer. On the other hand, I
judge it essential for our relationship with the Governor to alert him to these developments. He is also best placed to
advise on how difficult the LegCo Finance Committee are likely
to prove.
In the circumstances, I propose that, rather than
copying the Ministerial correspondence to him, the Foreign
Secretary should summarise it in a telegram to the Governor, and
seek his views on what substantive contribution we should make
to this debate. In the meantime, I propose that the Foreign
Secretary should minute to the Chancellor (copied to other
members of OPD (K)) to record the view that the Governor must be
properly consulted before any decision was taken which might
increase the costs to HKG.
6. The substance of this submission was agreed with
Mr Ricketts before he left to take part in the Sixteenth Round
of talks in Peking.
Dhani
J C Morris
garr.PET.JRB
SECRET
/I do not