TNAG-0254-FCO40-290-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 100

Mr Laird

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The Governor recently wrote to Sir Leslie Monson on the subject of the Hong Kong defence contribution. There is a note attached to the Governor's letter to the effect that Sir Leslie wishes to discuss the matter with you when convenient.

2.

I am not surprised that the Governor has been

unable to arrive at a logical total figure for a Hong

Kong defence contribution on the strength of the figures so far supplied by the Ministry of Defence. There is so much discrepancy (so far as capital works costs are concerned) between the figures which they originally provided and the revised figures which they subsequently sent that their estimating must be regarded with consid- erable suspicion and indeed the Treasury interjected at the time that they would like to have a closer look at the figures before conveying their agreement with them.

3. Moreover, Sir Leslie's letter to the Governor on 9 October, 1969, (the draft of which was very largely 52 Pr the work of the MOD) contained a number of reservations

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which must have made it extremely difficult for the Governor to come to any worthwhile conclusion as regards the likely total cost of the future Hong Kong Garrison over the next five years.

4.

Nevertheless, the Governor has suggested the sum of £8 million per annum as being a figure for the Hong Kong defence contribution over a five-year period, which he might be able to justify to his unofficial advisers. As the Governor points out, this represents an increase of 60% on the existing rate of contribution and on the face of it, should be acceptable to HMG. However, I doubt whether it will be; not, at least, without some bargaining.

5.

On the last occasion that the defence contribution was negotiated, HMG started off by asking Hong Kong to pay £11 million annually: this represented the "local exchange" costs of the whole Garrison. The figure was subsequently reduced to £9.9 million and eventually, after much negotiating in Hong Kong, it was reduced to £4.5 million which represented the local exchange costs of the four major units of the Garrison which represented the element required for internal security purposes. This figure was brought up to £5 million per annum by various adjustments and additions for capital works, and that was the sum eventually agreed upon. The figures now provided by the MOD for the running costs of the post-1971 Garrison show annual local costs at £11.85 m. out of a total annual budgetary cost of £20.03 million. So that it appears that the local costs show little increase over the estimates provided in 1966, despite the fact that the Garrison is to be larger. The full budgetary costs show an increase of some £4 million per

annum.

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