TOP SECRET
E.
FINANCIAL IMPLICATIONS
60.
It is not possible, on the information now available to us, to prepare a detailed financial and economic analysis of the projected new defence policy in the Far East. But in terms of the United Kingdom budget and external account the balance of advantage is clearly in favour of the new policy, even though there will need to be substantial mitigating assistance to Singapore and Malaysia.
61.
The scale of this assistance cannot be determined with any precision at this stage. Although the capacity of the local economies to absorb enlarged development aid is limited, this is not the case with budgetary or defence aid. Moreover, to the extent that development expenditure is limited by the constraints discussed elsewhere the need for budgetary aid will be correspondingly increased. Our present very provisional estimate is that the United Kingdom may feel it necessary to contemplate providing mitigating assistance (in varying forms) to Singapore and Malaysia averaging something of the order of £30 million a year over the period 1970-75; assistance, perhaps at a somewhat lower annual level, will be needed after 1975. The total of increased aid payments over the ten years from 1970-71 to 1979-80 might be some £300 million.
further
62. These are large suns But to set against them is the Defence Secretary's estinate that he hopes to be able to secure total savings in the Defence Budget of
About £150-200 million a year by 1970-71 and £300 million by 1975-76. three-quarters of these savings flow, directly or indirectly, from the new policy in the Far East. Thus the savings over ten years from 1970-71 comparable with the new aid expenditure for that period would be some £2,000 million (three-quarters of £2,600 million).
63. Our present level of local defence expenditure is about £74 million
On the (£56.5 million a year in Singapore and £17.5 million in Malaysia). assumption that our forces would be reduced by about half in 1970-71, local expenditure would be reduced to £45 million in Singapore and virtually to There would be no local nil in Malaysia, a saving of about £30 million.
expenditure in either country by 1975-76 but there would be new expenditure across the exchanges for the Air and Naval Forces redeployed to Australia of the order of €10 million. Local defence expenditure after the rundown will therefore show savings of some £60-55 million (the current rate of £74 million less the expenditure in Australia). But offset against these savings will be the increased aid expenditure estimated at some £30 million a year. The net saving would therefore be some £30-35 million a year.
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TOP SECRET
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