TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 172

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RECEIVED IN

REGISTRY No. 51

28 MAR 1974

HKK 57,0.

SW Payton Esq CMG Bank of England Threadneedle Strelet.

LONDON EC2R 8AH

АКК

Dom Payton,

Treasury Chambers Parliament Street

London SW1P 3AG Telephone 01-930 1234 ext

2F(RMSA) 120/91/01

20 March 1974

28

paissed

New draft with P/A

Des

ACCIDENTAL BREACH PROVISION:

HONG KONG

I refer to your letter of today's date on this subject. Since what Hong Kong has been doing does seem to be the result of a genuine misunderstanding (though I frankly do not see how the relative provision can be interpreted in the way they have done) and since insisting on a proper rectification of the position by the end of March would involve us in compensating on larger amounts than otherwise, I am inclined to favour an alternative solution to that suggested in your letter. I suggest that the best course in

genuine this situation is to accept that there has been misunderstanding on Hong Kong's part and their basis of interpret- ation of the relative provision for the purpose of settlement under the present arrangement. On the assumption that this involves an end-March amount of some €10 million lower (a quite probable shortfall, I understand) than the strictly "correct" amount, saving in compensation will be upwards of £300,000.

the

With this in mind, therefore, I have prepared a draft telegram to Hong Kong, attached below, on which I would be grateful for your comments and those of Cambridge and Aust, to whom I am copying this letter.

As to the new Declaration, I understand Aust's advice to be that there is no ambiguity in the present accidental breach provinion and that the Accountant General cannot really be regarded an justified (even though acting in good faith) in interpreting this provision in the way he has done. On the basis of this advice, the new Declarations are being despatched with the relative provision unchanged.

Unless there is dissent from the substance of what I have proposed

I above, and subject to specific comments on the draft telegram, would like to be able to put this forward for decision within the Treasury tomorrow: I would therefore be grateful for your urgent comments.

Yours omveroly

D-A WALKER

CONFIDENTIAL