TNAG-0309-FCO40-345-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 116

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Note for the Record

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HONG KONG DEFENCE CONTRIBUTION

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1. As agreed at last week's meeting in Sir L Monson's room, Mr Gaminara and I went over the ground this morning with representatives of the Treasury, the MOD and the Department of the Environment.

2. At the outset I explained that we had had a preliminary meeting with Sir D Trench, that he had advised strongly that we should not impose a contribution on Hong Kong but that if Ministers should decide that a contribution should be imposed it would be better to proceed by way of article IX of the Hong Kong Letters Patent rather than by use of the Governor's original and casting vote in the Legislative Council. I also said that Sir D Trench had asked to see Ministers before any decision was taken. Finally I went through the details of the Governor's latest proposals (providing for a contribution of £7.5 million a year for a period of 7 years), mentioning in particular his idea that the gap between the two sides might be made up by the loan by Hong Kong to HMG of a suitable capital sum interest free.

The MOD representative (who made it clear that he had been up to Deputy Secretary level in the MOD seeking viers) repeated the line he had already taken in his letter to

Mr Gaminara. He did not think there was much to be gained in pursuing any idea of a reduction in the size of the garrison. It was clear that the MOD have been told by the Treasury that if there is any shortfall in the contribution from Hong Kong the MOD will have to make it up by adjustments elsewhere. It also came out clearly during the discussion that the Treasury, while prepared to look with sympathy on the MCD proposal for a large married quarters programme in Hong Kong, are waiting for the outcome of the negotiations with Hong Kong before committing themselves on the married quarters.

3. Against that background the Treasury seemed quite relaxed. Their representative raised the following points:

(a)

What were the likely consequences of the imposition of a contribution by HMG? We replied on the lines of the reply given by Sir D Trench to the similar question asked by Sir L Monson at last Thursday's meeting.

(b) Was there any room for haggling?

If so, would it be wise to jump from £8.5 million (over 5 years) to £7.5 million (over 7 years)? It was thought generally that the Chinese probably did expect HING to bargain over the contribution.

(c) Were there any "carrots" we could offer Hong Kong in another field? We could think of nothing short of another grant or loan.

SECRET

/(a)