TNAG-0309-FCO40-345-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 44

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Mr Gaminara

HONG KONG DEFENCE CONTRIBUTION

1. I have been thinking about the form of the brief for the Secretary of State for the meeting of the DOPC and, subject to your views, I think we should put forward something on the following lines -

I am in no doubt that we must do everything we can to arrive at a settlement acceptable to the Unofficial Members of the 2 Councils. In a matter of this kind I am reluctant to go against the advice of the man on the spot. If we decided to ask Sir D Trench to try to negotiate a settlement on the lines of Annex II and the Unofficial Members of the Executive Council refused to accept the proposals we would have to force the contribution through - a course I cannot recommend or else reduce our bid. The steady whittling away of our position from £8.5 million to £8.0 million to £7.5 million would encourage the Unofficial Members to press for a final reduction to £7 million.

On the other hand, acceptance of the Governor's proposals would have the following advantages

(a) They could be represented as a compromise

between £8.5 million and £7 million, but with the advantage to Hong Kong.

(6) The agreement would be for 7 years, a point

to which the Unofficial Members attach particular importance.

(c) The Governor thinks he has a good chance

of persuading a majority of the Unofficial Members of his Executive Council to accept the proposals. This is an important consideration because we should be in a much better position to approve the use of the reserved powers if their use had already been discussed in the Executive Council.

It may be suggested in DOPC that the difference between £8.5 million a year for 5 years and whatever it is eventually decided Hong Kong should contribute should be carried on a FCO vote and paid to the MOD insert the "Treasury formula" used when the MOD first raised this point in the early discussions last year7.

Something about the MOD having assumed that they would be getting the £8.5 million and that if they don't they will go short. Mr Wilford would, I know, like to support the MOD on this point because neither we nor the Governor gave any guarantee at any time that the £8.5 million would be agreed to in Hong Kong. It is presumably the Treasury who told the MOD that they should off set the £8.5 million against their estimated total expenditure7.

DD 737719 557664 500M 2/71 GM 3643/2

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