TNAG-0309-FCO40-345-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 128

STORET

From:

Mr. G. J. Gammon, A/Head of F1(Air)

Our reference: A/16/ABD/6305 Your reference:

MINISTRY OF DEFENCE Main Building, Whitehall, LONDON S.W.1 Telephone: WHItehall 7022, ext.7491

957

A. W. Gaminara, Esq

Hong Kong Department

Foreign and Commonwealth Office

Dear Gaminara

HONG KONG DEFENCE CONTRIBUTION

(93) and 368 of 2 June.

2.

RECEIVED IN

REGISTRY No.51

30 JUN 1971

HKKIO/G

4 June 1971

92

You asked for comments on the Governor's Telegrams Nos. 367

From our point of view, the minimum contribution from the Hong Kong Government which we regard as acceptable is £42.5M spread over five years. This was the figure agreed by Ministers in February, and we see no grounds for recommending them to accept the considerably lower figure of £49M spread over seven years.

3. I realise that this means, in effect, that our proposal will have to be forced through the Legislative Council against the opposition of the Unofficial Members. However, unpalatable though this may be, the alternative of accepting their latest offer of £7M a year for seven years seems to us even less palatable. In relation to the total cost of maintaining a garrison in Hong Kong £8.5M a year is certainly not excessive and is roughly equivalent to the contribution negotiated in 1966 in relation to the costs of the garrison at that time. We see no grounds for recovering a smaller proportion of our costs now than under the previous agreement, particularly as the contribution will be fixed for a period of five years during which its value will almost certainly be eroded by inflation.

4. In our view, therefore, £8.5M a year for five years represents the minimum acceptable contribution. Moreover, this is a figure which the Governor himself advised us that he felt able to recommend to the Council, with a reasonable chance of securing their agreement. Provision has been made in our long term costings for receipts of this order and we simply cannot afford to accept a further loss of £1.5M a year to Defence Budget appropriations-in-aid, which would result from agreement to a lower figure.

5. We are also unhappy about the idea of a seven year agreement, particularly at the lower rate proposed. It remains our view that the annual average represented by a seven year agreement (whether incremental or in equal payments) should be significantly higher than that which Ministers have agreed to accept for a five year contribution.

SSECRET

16.