TNAG-0255-FCO40-291-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 145

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EX.9/10

Thank you for your note about the Hong Kong defence contribution. Mr. Haddon-Cave duly called this morning and made it pretty clear that he and the Secretariat were unhappy with the Governor's offer of £8 million. He said jokingly that this had been a slip of the tongue and should read £7 million.

2. At the same time, there was some merit in the Governor's approach to the problem insofar as it aimed at creating a simple situation in which there need not be complicated haggling from year to year about the ratio of expenditure as between internal security and external defence or about items of expenditure which appeared to relate to the staging of forces through Hong Kong. I gathered that there were still difficult discussions arising from these problems in relation 1967 and subsequent years. Apart from anything else, these complications take an unnecessary amount of the time of the rather slender resources of the Hong Kong financial experts.

3. Mr. Haddon-Cave was also somewhat critical of what appeared to be inflationary tendencies in the size of the Hong Kong military headquarters staff, which he feared might be intensified when CINCFE headquarters no longer existed and Hong Kong became an independent command. I tried to reassure him on this by pointing out that the Ministry of Defence were under great pressure to find economies in their expenditure and that some inflation of "tail" was probably inevitable during the period of run down East of Suez.

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Mr. Haddon-Cave was, however, apparently resigned to the Governor's offer although I would judge that he would strongly resist any pressure to increase it above £8 million.

Jounkellich

(J.E. Killick) 8 October, 1970

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