TNAG-0377-FCO40-423-Defence-and-Oversea-Policy-Committee-review-of-UK-relations--1973 — Page 54

259) Dd.897459 250m 12/72 G.W.B.Ltd. Gp.863

941) Dd.897300 250m 9/72 G.W.B.Ltd.

Gp.863

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discussion by us in Hong Kong of most of the problems

It also

that have been complicating our relationship.

means that, when we achieve a solution of any of these

problems, we must rely on your information services and

your officials to make the best of it. Personal

relations help of course, and I believe we are beginning

to get these right. But the need to maintain your

Government's credibility in Hong Kong obviously limits

the amount your officials can do. We shall doubtless

hear more of this problem and I would be glad of

your thoughts on how it could be tackled.

Sterling Balances

As you will know, the Treasury have now agreed

to an MSP of 80% for Hong Kong for the interim period

up to March 1974. Our officials have worked hard for

this, which was your own official proposal, and I hope

you can welcome it.

As for your view that Hong Kong and UK/Hong

Kong relations would in the long run be better off

without a guarantee, you will be able to discuss the

financial implications with Barratt of the Treasury

next week. I know the Treasury take the view that

the guarantee is, in normal times, a valuable safeguard

for the recipients, which should not be lightly cast

aside. (Incidentally Barratt will know nothing of

your earlier suggestion to Duncan Watson, on the same

subject, as our officials decided not to muddy the

waters of Treasury consideration of the interim

arrangement.)

As far as our political relations are concerned,

I can see the attractions of responsible freedom, but

I still wonder whether in fact it would lead to less