7
PRIORITY
CYPHER/CAT A
FM HONG KONG 160415Z
SECRET
RECEIVED IN
T
SEC
R RECEIV
REGISTRY No. 51
16 SEP 1971
HILIL16/0
14 DOL
TO PRIORITY FCO TELNO 668 OF 16TH SEPTEMBER WEO PRIORITY
HONG KONG GOVERNMENT OFFICE LONDON
MY TELEGRAM NUMBER 642.
DEFENCE CONTRIBUTION.
NO
149
115
150
THE COLONIAL SECRETARY TOOK THE PROPOSALS THROUGH FINANCE COMMITTEE YESTERDAY, AND ALTHOUGH THE PASSAGE WAS BY NO MEANS EASY, THE FINANCIAL COMMITMENT WAS ACCEPTED AND SUPPLEMEN- TARY PROVISION FOR THE CURRENT FINANCIAL YEAR WAS APPROVED.
2. ALTHOUGH A CONSENSUS OF MEMBERS RATHER RESIGNEDLY ACCEPTED THE
TOTAL SUMS INVOLVED, DISPUTE AND DISCUSSION CENTRED ON THE CONDITIONS ATTACHING, AND IN PARTICULAR ON THE CONDITION THAT CAPITAL
COSTS SHOULD BE SUBJECT TO REVIEW ON THE BASIS OF COSTS AT
APRIL 1978, IF PRICES ALTER BY OVER 50 PER CENT. THE GENERAL
OPINION WAS THAT THE BASE SHOULD BE APRIL 1971, WHICH WOULD
REFLECT THE DATE THE NEW AGREEMENT STARTS.
3. I APPRECIATE THAT SUCH A CHANGE WOULD NOT BE ALTOGETHER LOGICAL
AS MOST COSTINGS USED APRIL 1970 FIGURES. BUT
(A) THE ESTIMATED TOTAL WAS ACTUALLY STERLING 16,690,030 NOT
£ STERLING 17 MILLION AND SOME UP-COSTING TO AUTUMN 1970
PRICES HAD BEEN DONE (SEE YOUR TELEGRAM 43) SO THERE IS A
LITTLE LEEWAY:
(B) YOU ALWAYS EMPHASISED THAT THE FIGURES HAD NOT BEEN SUBJECTED TO DETAILED SCURTINY (SEE ALSO YOUR TELEGRAM 43) -THOUGH
THIS COULD OF COURSE LEAD TO AMENDMENTS EITHER WAY:
(C) ANY REVIEW WILL IN PRACTICE PROBABLY HAVE TO TAKE ACCOUNT
OF PRICE LEVELS OVER THE WHOLE PERIOD, DURING WHICH PRICES ARE LIKELY TO COME DOWN AGAIN (SEE MY TELEGRAM 619), SO THAT
146) THERE IS LITTLE REAL CHANCE OF THE SIZE OF THE CONTRIBUTION BEING
AFFECTED - AN ARGUMENT WHICH CAN ALSO LEAD EITHER WAY.
4. I BELIEVE NOW THAT THE PROPOSALS WILL GO THROUGH LEGISLATIVE COUNCIL, BUT AM NATURALLY ANXIOUS TO AVOID PUBLIC CRITICISM TO THE MAXIMUM EXTENT POSSIBLE, SUCH AS MIGHT BE SPARKED OFF
BY CRITICISM IN COUNCIL OF WHAT IS A COMPARATIVELY MINOR POINT.
I BELIEVE THAT IF WE COULD ALTER THE DATE TO 1ST APRIL 1971,
THE MATTER WILL GO THROUGH LEGISLATIVE COUNCIL ALMOST WITHOUT
DEBATE.
SECRET
15.
NO UNDERTAKING
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