TNAG-0310-FCO40-346-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 67

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over-burdensome on the other, but fair to both

Thus, after much anxious consideration, in London and in Hong Kong, a new Defence Costs Agreement has been concluded. It can conveniently be considered in three parts. It will be made largely in kind, but partly

in cash. The first contribution in kind will be towards the capital programme. The Hong Kong Government will make available to the Armed Services here, over the five years 1971-72 to 1975-76, major capital works - mainly married quarters which are badly needed to a total value of £17 million. All these buildings and so on will revert to the Hong Kong Government if and when they are no longer required by the Services, without cost to us. Expressed as an average annual figure the expenditure involved will be £3.4 million compared with the annual figure of £600,000 payable under the last agreement: but this figure of £3.4 million is a mere average since expenditure will not fall to be met evenly each year, but as and when works proceed and because the cost of the necessary works was calculated at a time when building costs had risen steeply. Though they have since risen again, nevertheless much can happen in five years; and for the protection of both sides it is intended that the figure of £17 million (or part of it) should be reviewed if costs rise or fall 50% over or below April 1971 building costs. Until very recently the base date for this review clause was April 1970 being a date conveniently near the time when the protracted negotiations for the new agreement began but the Finance Committee felt that Her Majesty's Government should be asked to consider making the base date coincidental with the beginning of the agreement period. I am happy to be able to inform honourable Members that Her Majesty's Government conceded the point a few days ago.

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The second contribution in kind is in

respect of maintenance of Services Buildings, and the provision of minor capital works, in continuation and extension of the current maintenance arrangement. The cost of this will

depend on contract prices from time to time, but, over the five years, the average annual cost is expected to be £2.2 million. The actual cost is under this figure at the present time, but £2.2 million is thought to be as realistic an average annual figure over the period as can be guessed at, This work also will be done under the control of the Public Works Department, as now.