TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 62

relevant Hong Kong political facts, and particularly the need

for close and private consultation with you before even preliminary

conclusions are approached. My purpose is not to pre-empt all this,

or to spark off a reaction on the general question, which I think

would be premature. But it does at least seem possible that,

at the end of the day and when all precautions about presentation

etc. have been taken, we could not rule out the possibility of a

change which would trigger the second review provision of the

Memorandum of Understanding (Article 3(1)(b)), ie the removal of

more than one major unit.

5. We have questioned the Ministry of Defence experts on whether,

with this possibility in mind, it would be appropriate or desirable

to go ahead with a review of the defence contribution under the

cost escalation cause. Their answer has been three-fold. First they

say that planning of the capital works must continue if there is

not to be a serious hiatus in the programme; that decisions have

and to be taken by June for the reasons I have explained; while the

results of the Defence Review are unlikely to be known until several

months later. Second, they say that if the outcome of the Defence

Review was to affect any item in the programme significantly, the

letting of contracts for capital works could be stopped before any

new money had actually been spent (ie the middle of next year).

Thirdly they estimate that whatever the results of the Defence Review,

it would be unlikely, if only for practical reasons, to result in

the removal of significant numbers on the ground until 1976. They

argue therefore ithat it would be very late in the current agreement

before the second trigger point could be reached.

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