TNAG-0254-FCO40-290-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 101

This paper has

nows been deferred until after hard Carvinglati's retion from LE FE

ANG

21.7.20

6. If MMG's attitude in 1966 can be taken as any guide for this exercise, the Treasury and the MOD may start off by proposing that Hong Kong should provide the £11.85 m. required to meet local running costs of the entire Garrison. If they continue to follow the 1966 example they may then reduce their claim to £7.11 million, being the estimated local costs relating to that part of the Garrison required for internal security purposes. Sub- tracting this from the Governor's offer of £8 million would leave only £900,000 per annum for capital works costs.

7. As it is, the Governor is suggesting that out of his offer of £8 million, £2 million might be regarded as ear- marked for capital works towards the MOD's proposed capital works programme totalling £19.15 million over five years. This figure compares with £600,000 notionally allocated for capital works out of the existing contribution of £5 million per annum.

8. On the face of these figures the Governor's offer of £8 million does not appear unreasonable. However, I think it would be premature to put this figure to the MOD and the Treasury at this stage. Now that the Governor's term of office has been extended for a year, there is not quite the same urgency in settling this matter and I suggest that we should try and get a firmer figure from the MOD. At least we should find out whether the MOD's estimates are acceptable to the Treasury.

9. Moreover, I understand that there is an expenditure review in progress in which defence expenditure is a central item. This review is not likely to be completed until the end of September. Again, the DOPC is taking

this a paper this week on the future of the Gurkhas: could have a bearing on the future "mix" of the Hong Kong Garrison.

10. Taking everything into account, I think it would be advisable to ensure that the figures given to us by MOD, four months ago or longer, provide the correct background (acceptable to the Treasury) against which to assess the contribution to come from Hong Kong.

11. Accordingly I attach a draft letter to MOD (and copied to the Treasury) for consideration. The draft has been designed for signature by Sir Leslie Monson and is addressed to Mr Gwynn, since the latter was the last person in MOD to write to us on this subject.

(A.

Gaminara)

21 July, 1970