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2.
major units instead of 7 2/3 (see the final paragraph of my letter of 7th July), local expenditure is once more correspondingly less, and the economic gain to Hong Kong less.
2 to 6 3/23
4. On the basis of your letter, therefore, my justifications locally for putting forward a figure of £8 m. per annum are seriously impaired: and the corresponding figure now becomes £6.55 m. This reduction is accounted for approximately as to £l m. in respect of the reduction and £.45 m. in respect of the new estimate of local expenditure.
5. I should explain here that the above takes into account recurrent costs at the present level; including maintenance for which a new contract has just been let: but in the case of capital costs, although we have adjusted to take into account the reduced scale of the works required, we have not adjusted to take into account the present level of costs.
6 To turn now to the question of
escalation of costs. I would like to say, in passing, that one hopes that costs will not inevitably continue to escalate as in the past; and that external inflationary tendencies will come under some kind of control but I agree one must recognize that a degree of escalation of cost is likely to be more or less inescapable. The problem from my point of view is that I want if at all possible to avoid an annual crisis while public excitement has to be dealt with on learning that the contribution is each year higher than the year before.
7. For this reason, then, I would (on first thoughts) prefer a figure which was, so to speak, recognized as averaging the estimated escalation by being a mid-point figure.
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