TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 64

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RECORD OF A MEETING HELD IN THE FCO ON 29 MARCH 1974

Present:

Mr AC Stuart, FCO (Hong Kong & Indian Ocean Dept)

Mr A F Thorp, MOD (F1(Air))

Mr FT Lockwood, MOD (DDQ Army)

Mr M C Scholar, HM Treasury

Mr P C Aggleton, DOE(PSA)

Mr AF Morris, HM Treasury

Mr M A Price, FCO (Defence Dept)

Mr M A Goodfellow, FCO (Hong Kong & Indian Ocean Dept)

HONG KONG DEFENCE CONTRIBUTION

1. The meeting was held because one of the conditions which made the Defence Contribution subject to review had arisen ie. Capital Works costs had increased by 50% at April 1971 price indices (para 3(i)(a) of the Memorandum of Understanding referred). The meeting also would wish to bear in mind that HMC is undertaking a full scale Defence Review which could affect the size of the garrison and hence have some effect on another of the conditions which made the Defence Contribution subject to review ie. a decrease in the size of the garrison by more than one major unit or equivalent.

2. The Chairman said that it was important from the political point of view if we wished to raise the works cost area formally with Hong Kong, that we were sure of our ground. In the light of the Defence Review he wondered whether this was the right time to go to Hong Kong to discuss an addition to the contribution since Hong Kong might well suggest that there were grounds for a reduction if we were going to cut the size of the forces there.

3. Mr Thorp said there was a clear distinction between the two points. On the works costs, the condition covering a review of the contribution had happened and there was every justification for seeking some additional assistance from the Hong Kong Government.

On the size of

the garrison no change of any kind had occurred and it would be quite wrong to attempt to pre-empt the outcome of the Defence Review. It would be a few months before any decisions were taken and there was no justification at this stage for assuming there was going to be any change which affected 3(1)(b) on the Memorandum of Understanding during the duration of the Agreement.

4. Mr Aggleton said that when he was in Hong Kong recently with the Quarter Master General, unofficial talks had been held with the Hong Kong Government and with the Governor who had accepted that inflation had increased the cost of the works programme to such an extent that the provision in the Memorandum of Understanding would be triggered. Various options as to an additional contribution by Hong Kong were discussed with a figure of HK$ 30M as a minimum. If the current works programme (to which the bulk of the Hong Kong contribution was allocated at Hong Kong request) were to continue

An extra HK$80м up after June, additional funds had to be raised.

to 31 March 1976 would probably be necessary to maintain the programme.

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