27-OCT-1993 11:43
OED CROYDON
CODE 18-77
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081 686 4951
P.03
Reference
listed in (a) and (b) of Mr Gunesekara's letter under reference, before the proposed meeting with Treasury (Mr Marr) which you or Mr Wootton are arranging, as agreed at the 28 September meeting.
4. However any agreed figure, of which the minimum will be £640,000, will leave very little for a decent "rent" return which is likely to be acceptable to Treasury and they could insist on an annual economic rent. The minimum is likely to be based on the TDR criteria of 6% of the Sterling capital cost which would need to be indexed to UK inflation so as to hold its real value and thus be a constant price return on our expenditure: for 6,142m2 (the total BC gross area) this would amount to £615,240 pa and £425150 for 4245m2 (gross area for teaching/student facilities only). which ever, if any, of these rent figures are agreed with Treasury will put the running/maintenance costs etc and rent above the BC ceiling. In these circumstances the British Council may insist on short term commitments, as hinted in their letter under reference, which would not make economic sense.
In
5. In view of paras 3 and 4 above I suggest that we should restate our original case to Treasury which has not yet, in my view, been formally rejected we have only been asked to review. In further discussions with Treasury we should re- emphasise our understanding that acceptance of the PES bid would ensure that the capital cost of creating the BC space would be funded from capital to be dedicated to the Council's specific purposes in Hong Kong after 1997. these circumstances there would be no capital expenditure to FCO and no rent should arise to the British Council although the Council would be expected to meet their full share of running and long term maintenance/refurbishment costs, ground rent and rates (if applicable). We could also add that the British Council will still meet these costs: the difference/saving (of say £160,000) between these and their present costs of £800,000 could be returned to Treasury.
PCAS4.207
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