Secret
(c)
4.
play in attempting to put over an increase of the order
contemplated.
that the reduction does not tie in with the Governor's
previous suggestion that the £8 million offer "should be
considered to be a basically stable one running for five
years and subject to review only if the Garrison is
increased or decreased by the equivalent of two (or more)
major Army units"
Comment
(a)
The Governor's suggestion of a stable arrangement was
clearly dependent on agreement being reached on a
mutually acceptable basis in the first place.
that the Governor's proposals would not cover price
(per year) inflation of roughly 10 per cent over the five year
cent
period.
Comment
There is substance in this argument as will be seen from
the figures in paragraph 5 above. However, these
figures (based on an average of £7.5 million per annum)
do allow for an overall increase of nearly a third over
the five year period and this does not seem unreasonable.
The following arguments might also be deployed in support
of the Governor's revised offer:
7.
(a)
Under the existing agreement Hong Kong contributes £5
million per annum towards total annual budgetary costs
estimated in 1966 at £16 million, i.e. 31 per cent of the
total budgetary cost. The figure of.5 million per annum
represents 35 per cent of the total estimated post-1971
annual budgetary cost of £22 million.
Secret
/(b)
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