TNAG-0423-FCO40-469-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 33

I am told that the Bank of England have made calculations which suggest that the degree of subsidy involved in our proposals would be some 36%. I have not had time to examine fully these calculations. They are in the nature of things theoretical, and depend on the assumptions made. But my officials have doubts about them, since the Bank's calculations treat capitalisation of interest as a cash flow. An alternative approach (comparing the present value of the advances with the present value of the receipts) would produce a subsidy figure of just over 20%. I am perfectly willing that our officials should have further talks about these calculations, but time is against us. We need to decide now whether we want this contract or not, and whether we are prepared to tell British industry that the Government will not match Japanese and European credit terms in a major project in Hong Kong.

I hope you will agree that we should match our competitors' terms, both as to date of repayment of capital, and capitalisation of interest.

I am copying this letter to the Prime Minister, the other members of the EPC and Sir Burke Trend.

You

رکھتی

PETER WALKER

VRATA www.

• to

•

: 1.