TNAG-0308-FCO40-344-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 227

PRIORITY

CYPHER/CAT A

SECRET

(HKK 10/9)

3

FM FOREIGN AND COMMONWEALTH OFFICE 011709Z

SECRET.

TO PRIORITY GOVERNOR HONG KONG TELEGRAM NO. 5 OF 1 JANUARY,

DEFENCE CONTRIBUTION,

LAST

REF.

WE HAVE BEEN UNABLE TO REACH AGREEMENT AT OFFICIAL LEVEL ON THE BASIS OF YOUR OFFER TO TRY AND NEGOTIATE WITH YOUR UNOFFICIAL ADVISERS AN ANNUAL HONG KONG CONTRIBUTION OF C7 AND A HALF MILLION. THE CASE IS BEING PRESSED STRONGLY THAT THERE IS EVERY JUSTIFICATION FOR INCREASING THIS FIGURE.

2. ONE NEW DEVELOPMENT SINCE YOUR RETURN TO HONG KONG IS THAT WE HAVE BEEN INFORMED BY MINISTRY OF DEFENCE THAT A SUBSTANTIAL RISE IN WORKS COSTS OF GARRISON OVER 5 YEAR PERIOD BEGINNING 1971/72 IS NOW ENVISAGED PARTLY ON ACCOUNT OF A PLANNED INCREASE IN CAPITAL PROGRAMMES AND PARTLY AS A RESULT OF PRICE INCREASES. THIS WILL INVOLVE AN INCREASE IN WORKS EXPENDITURE TO A TOTAL OF £27 MILLION OVER THE PERIOD AS COMPARED WITH THE FIGURE OF $19 MILLION GIVEN IN REVISED ANNEX B ENCLOSED WITH OUR SAVING DESPATCH NO. 126 OF 13 APRIL 1973. CAVEAT IN PARAGRAPH 6 OF THAT DESPATCH APPLIES TO THIS LARGER PROGRAMME ALSO. ENVISAGED ANNUAL RATES OF EXPENDITURE OUT OF THIS TOTAL VARY FROM C4 AND A HALF MILLION (THE LOWEST) IN. 1971/72 TO £6.7 MILLION (THE HIGHEST) IN 1974/75.

3. THE CAPITAL ELEMENT IN THE TOTAL IS INCREASED FROM £12 MILLION TO £16 AND A HALF MILLION. THE COST OF ERSKINE BARRACKS HAS OF COURSE BEEN EXCLUDED BUT A FIGURE OF C7 MILLION HAS BEEN INCLUDED FOR PROPOSED NEW ITEM OF MARRIED QUARTERS (FORESHADOWED IN PARAGRAPH 3(1) OF SAVING DESPATCH REFERRED TO ABOVE) PLUS ANCILLARIES INCLUDING SCHOOLS. REMAINING CHANGES ARE RELATIVELY MINOR AND ARE DUE MAINLY TO REPHASING OF SERVICES ALREADY KNOWN TO YOU. BALANCE OF INCREASE IS REQUIRED TO BRING PROGRAMME BROADLY TO PRESENT PRICE LEVELS.

4. THE MINOR WORKS AND MAINTENANCE ELEMENT IS INCREASED FROM £7 MILLION TO £19 MILLION ON THE BASIS OF OUR 1971/72 ESTIMATES AT AUTUMN 1970 HONG KONG PRICES.

5. THE BULK OF THIS PROGRAMME WILL INVOLVE LOCAL EXPENDITURE ON CAPITAL WORKS WHICH WILL REMAIN AS PERMANENT ASSETS FOR THE BENEFIT OF HONG KONG. WE ACCORDINGLY HOPE THAT YOU WILL REGARD

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