TNAG-0055-FCO40-91-Defence-review-1977 — Page 111

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These figures take no account of the several thousand local inhabitants who are in private employment or of consequential effects on people whose present livelihood (e.g. small shopkeepers) depends on the Services.

It should also be remembered that current levels of employment are

somewhat higher than they were before the start of the Confrontation with Indonesia.7 There are also some 47,000 Service dependants in Singapore

and Malaysia.

Financial Consequences

8. Our present level of local expenditure is about £56.5 million a year in Singapore and £17.5 million in Malaysia. The 1966 Defence Review plans entailed reducing these expenditures by 1970 to about £53 million and £13.5 million respectively. A rundown on the lines of paragraph 7 would imply a reduction to about £45 million a year in Singapore and to very little in Malaysia by 1970-71 (the cost of one or two Gurkha units at most) and of course to nil for both countries by 1975-76.

The counter-

part of the local expenditure savings in budgetary terms on the defence budget as a whole, is the rough assessment of £150-200 million in 1970-71

and £300 million in 1975-76 already quoted by the Defence Secretary (OPD (67) 14th Meeting). These are budgetary savings against the level

of Defence expenditure for 1970-71 assumed in the Public Expenditure

Studies. No allowance is made for offsetting expenditure outside the Defence Budget (see paragraph 61).

Consequences for our Commitments and Force Declarations

9. By 1970-71

The major consequences will be as follows:

(a) SEATO. Force declarations to SEATO plans, and certainly SEATO

Plan 4 (defence of the SEATO area against attack by China and North Vietnam) will have to be progressively reduced starting

in 1967-68.

(b) Commonwealth Brigade and Strategic Reserve. The present British

contribution and support to the Commonwealth Brigade will start to be withdraw by 1967-68 and will be completely withdrawn by

1969. At present our contribution provides teeth arm and logistic support to the Australian and New Zealand elements of the Brigade. Unless Australia and New Zealand are prepared to make alternative arrangements (and this is almost certainly

unlikely), they will not be able to keep their own land forces

in Malaysia nor to maintain their present force declarations

to SEATO.

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