TNAG-0308-FCO40-344-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 176

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The Hong Kong Proposal

5.

The Governor, on the basis of the forecast figures and taking into account the size of the garrison to be retained in the Colony, has now offered to try to obtain an increase in the present rate of contribution from £5 million to £8.5 million per annum for a period of five years beginning in 1971/72. This annual figure is an average in which he allows for a small element of local price increases on the non-works elements of the garrison's costs. He would like to table this proposal in the Executive Council next Tuesday, 9 February.

His offer incorporates the following conditions:

6.

(a)

(b)

(c)

7.

The Hong Kong Government, within its contribution of £81⁄2 million, would pay for the cost of minor works and of maintaining all Service buildings and installations in the Colony; this cost (£2.2 million per annum) will be absorbed in Hong Kong public works votes, thus reducing the size of the annual cash contrib- ution (for presentational purposes in Hong Kong) to £6.3 million. Out of the £6.3 million up to £3 million in any one year would be treated as a contribution to the Services' capital works programme on the understanding that those works paid for by Hong Kong (if no longer required by Her Majesty's Government) would become the property of the Hong Kong Government.

The agreement would be subject to review only:

(i) if the strength of the present garrison were increased or decreased by more than one major Army unit or the equivalent (ignoring temporary absences and the transitory effects of roulement etc).

(ii) if, during the period of the agreement, there was a substan- tial increase or decrease of 50% or more on April 1970 prices in the capital works costs.

The Governor attaches particular importance to the capital works element (paragraph 6(b) above) as this will be an important selling point for him in persuading his unofficial advisers that they will be getting value for money.

8. In cash terms the offer represents a 70% increase on the current contribution. It amounts to 32% of the costs that are estimated to be incurred in Hong Kong in the first year of the new agreement - as

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