TNAG-0255-FCO40-291-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 103

7.

(4)

Secret

if the Governor now uses the same argue-

ment in reverse.

This argument is an extraordinary one.

The Governor's suggestion of a stable

arrangement was clearly dependent on

agreement being reached on a mutually

acceptable basis in the first place.

Otherwise it has no meaning.

The Governor further maintains that his

revised offer of £7m. per annum would, when

taken over a period of five years, offer a

reasonable compromise to meet the request of the

Ministry of Defence and Treasury for:

(a) An annual increase in the contribution

to cover pay and price rises during the

period of the agreement; and

(b) A higher starting figure than the

Governor's original offer of £8 m. per

annum, and would He states that his offere.

8.

cover price inflation peranmen"

of roughly 10 per cent over the period.

a

Taking contribution of £6.55 m. in

1971/72 and assuming equal annual increases

over a period of five years, the offer of

£7 m per annum would equate with the following

scale:

1970/72

1972/73

1973/74

1974/75

1975/76

£6.55 m. £7.025 m. £7.5 m.

£7.975 m. £8.45 m.

This allows for a total increase of 29 per cent

in the contributions over the five year period

(i.e.à little under 6 per cent perannum).

9.

If the Governor's original offer of

£8 m. per annum were adhered to, the correspon-

ding position would be:-

£6.55 m. £7.275 m. £8 m.

£8.725 m. £9.45 m.

This would allow for a total increase of 44 per

cent in the EX contribúton over the five

Secret

/year

Flag A

NOTHING TO BE WRITTEN IN THIS MARGIN