TNAG-0254-FCO40-290-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 64

Telephone 01-930 1234, ext. 1106

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Sir Leslie Monson KCMG CB Foreign and Commonwealth Office Downing Street East

London SW1

COPY NO. OF 6

Treasury Chambers,

Great George Street,

London, S.W.I

21 September 1970

4)

RECEIVED IN REGISTRY No. C1

Dear Leslie,

R

HONG KONG DEFENCE CONTRIBUTION

140

HKK 10/9

As suggested by Harold Gwynn, I am writing to let you have our comments on the draft letter to the Governor of Hong Kong enclosed with his letter of 15 September.

2. We think it would reinforce the case for an increased contribution if attention were drawn, perhaps towards the end of paragraph 2 of the draft, to the military salary award as an important factor in the cost increases since the 1969 letter.

If

he agrees, perhaps Gwynn would care to suggest a suitable phrase for this purpose.

3. As regards the case for an increased contribution, we should like to modify paragraphs 4 and 5 of Gwynn's draft along the following lines:-

"4. I am sure you appreciate that, in the context of the public expenditure discussions here, and the particular problems of the cost of Defence, Ministers will want to be satisfied that the amount offered is as much as it is reasonable to expect. In the light of the relative prosperity of Hong Kong, it would be difficult to persuade Ministers, who are under such severe pressure on their own programmes, both civil and military, that the Colony should not make a larger contribution than you have suggested.

5. The objective of any new agreement should be that the Colony will in due course assume a significantly greater part of the UK costs given in Annex A for example the full budgetary cost of the forces provided for internal security. When account is taken of increased costs, your proposal is not more than the share originally provided by the present agreement. Furthermore, the value of a fixed annual contribution for five years would inevitably decrease in real terms over the period. What we should like therefore to suggest to Ministers is that the contribution should be on a rising scale, and increased by pre-determined amounts each year. These annual adjustments should be sufficient not only to cover pay and price increases, but also to enable the Colony to assume a realistic share of the cost of its

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