IMMEDIATE
CYPHER/CAT A
PM HONG KONG 260304Z
SECRET .
REGISTRY NO $1
2.
SECRET
NKK 10 g
601
TO IMMEDIATE FCO TELEGRAM NO. 49 OF 26 JANUARY. 1971.
PERSONAL FOR MONSON FROM GOVERNOR
LAST
RFF.
YOUR TELEGRAM NO. 43: DEFENCE CONTRIBUTION.
B. F.
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13
THANK YOU FOR THESE FIGURES. ON THE BASIS OF THEM, I AM PREPARING
TO PROPOSE TO EXECUTIVE COUNCIL A TOTAL DEFENCE CONTRIBUTION
OF POUNDS 8.5 MILLION (R) 8.5 MILLION ANNUALLY FOR 5 YEARS; WHICH
FIGURE 1 FEEL ABLE TO SUPPORT AND WHICH MAY HAVE AT LEAST SOME
HOPE OF A MAJORITY ENDORSEMENT.
2.
THE FIGURE IS BASED ON:-
(A) THE INCLUSION OF AN ELEMENT OF 3% PER ANNUM ON RECURRENT
COSTS EXCLUDING MAINTENANCE IN RESPECT OF POSSIBLE INCREASES
IN COSTS OVER THE PERIOD SEMICOLON
(B) MAINTENANCE CHARGES AS FIXED FOR TWO AND A HALF YEARS BY A
RECENTLY NEGOTIATED CONTRACT SEMICOLON
(C) MAJOR CAPITAL WORKS COSTED AT APRIL 1973 FIGURES. THESE COSTS ARE 35 PER CENT ABOVE 1967 FIGURES, BUT 30 35 PERCENT
BELOW JANUARY 1971 FIGURES,
3.
FURTHER TO (B) ABOVE I INTEND TO PROPOSE FOR EASE OF ACCOUNTING
PROCEDURES THAT WE UNDERTAKE ALL MAINTENANCE WORK AT OUR EXPENSE,
THEREBY REDUCING THE CONTRIBUTION IN CASH BY POUNDS 2.2 MILLIONS.
2 FURTHER TO (C) ABOVE, WE HAVE TRIED TO FIND A FORMULA WHICH
WOULD TAKE INTO ACCOUNT FLUCTUATIONS IN BUILDING COSTS IN SONE
WAY, BUT IS HAS PROVED VERY DIFFICULT TO DEVISE AND, IF DEVISED,
IT WOULD CERTAINLY BE ALMOST IMPOSSIBLE TO ADMINISTER. I FEEL
THEREFORE THE APRIL 1973 FIGURES ARE THE FAIREST GUESS WE CAN MAKE
AT PROBABLE AVERAGE COSTS OVER THE PERIOD: THE PROBABILITY IS THAT
THEY WILL DROP FROM THE PRESENT VERY INFLATED LEVELS, AND VERY FOSSIBLY BELOW THE APRIL 1970 LEVEL LATER IN THE PERIODS, BUT WE WOULD EACH HAVE TO GAMBLE ON WHICH WAY THEY WENT AND ACCEPT
THE CONSEQUENCES.
15. SINCE CAPITAL
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