A.
1
Mr. Campbell Mr. I. Wallace
Mr. E. Melville
I spoke to Mr. Campbell late on Friday afternoon after the receipt of (239) opposite regarding the action now to be taken on the extra Army units for Hong Kong, in the light of what the Governor now says in (239) opposite. He asked me to look at the papers and send them forward with a view to their early submission to the Secretary of State.
2. The position which we have now reached is that the Governor, who is pressing strongly for the early despatch of the additional units to Hong Kong, has agreed as follows:-
(i) To pay the full defence contribution of £1 this to
be related to a garrison strength of six major units (para. 4(b) of (216) opposite)
(ii) To make an additional temporary contribution of £250,000 per annum in respect of each of the additional major units temporarily stationed in Hong Kong (para. 4(a) of (216) opposite)
(iii) To treat the question of the garrison entirely separately
of any question of military lands and compensation therefor (para. 1 of (239) opposite with para. 2 of (237) in particular the proposal earlier put forward (para. 4 (c) of (216) opposite) for linking the question of com- pensation for military lands with the additional
contributions in respect of the extra units has now been dropped.
The only condition which the Governor now attaches to his agreement to settle for the two extra major units on the basis indicated in (i) and (ii) above (which is precisely the basis on which the Service Departments have all along insisted m) is that in the subsequent and separate discussions which will no doubt have to take place on the military lands in Hong Kong and on compensation in respect of them, the Secretary of State will fully and strongly support the Governor's views on the appropriate basis for the calculation of compensation. Briefly, this basis is (see para. 5 of (216) opposite) that compensation in respect of any military lands vacated to which there is no clear Service title by purchase in the open market, should be limited to re-provisioning free of charge, if there is a continuing Service meed for the land vacated, and to the cost of improvement (and not current land values as the Services insist) if there is no such continuing need. The correspondence on this condition has become a little confusing but I think that it is clear that the position is as stated above from para. 5 of (216), para. 4 of (226), para. 1 of (235) and para. 1 of (239). The Governor's views on the basis for compensation seem to be reasonable enough and I imagine that the Secretary of State will see no difficulty in agreeing to support them in the subsequent negotiations on military lands.
3. At present we are operating under a remit from the Defence Committee (see the Conclusions of the Minutes at (205) opposite). A position has now been reached where the questions of the garrison and of military lands are to be treated as the two issues that they are and that Hong Kong has agreed to meet all the U. K.'s financial conditions regarding the two additional units. The Cabinet has already agreed that consideration could be given to the temporary stationing in Hong Kong of two Artillery Regiments provided that Hong Kong made a satisfactory financial contribution (see Conclusion 4 of the Minutes at (96) on Part B), although at a later meeting (see Minutes at (139) opposite) the Committee left over for later consideration the question of the level of Forces to he maintained in Hong Kong. In the position at present
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reached, in which we and also, we hope,
allpthe other 85•