TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 65

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Mr Lockwood said that there would be extreme difficulty in finding any of this money from with the Defence Budget.

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Mr Scholar said that Ministers (have committed themselves to cutting defence expenditure and this was likely to be of such an arder that there would be considerable reductions which would involve Hong Kong probably to an extensive degree. There were many likely options. Ministers had asked for the full background by July.

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In further discussion it was pointed out that decisions on the Defence Review could well not be reached until October. This would be too late if the works programme was to be kept going. Planning of new schemes would stop in June unless onward funding was available. However, a decision to continue the programme taken after discussions with Hong Kong, would not necessarily mean spending more money until well into 1975. The programme could therefore be halted if the decisions arising out of the Defence Review were such that the works programme was no longer required. It was however stressed that the work immediately to be planned was of a type as to make such an outcome unlikely. There was also the point that much of this work consisted of Married Quarters which would have considerable residual value. Therefore, it was important we should go to Hong Kong to discuss the question of additional funds under provision 3(1)(a) now and not wait until the outcome of the Defence Review. Moreover, it was a reasonable assumption that even if the Defence Review were to set off condition 3(i)(b), any effect before 31 March 1976 would not be great.

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The meeting concluded that:-

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a review under 3(i)(a) for an additional contribution by Hong Kong was needed urgently

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it was unlikely that a review under 3(1)(b)

could have any significant effect before the end of the Agreement

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a continuing works programme was required on any account up to 1976

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if contrary to expectation, the Defence Review resulted in any rapid withdrawal from late 1974 onwards, it would be possible to halt the works programme before any new money had been spent.

9. On this basis the Chairman agreed that the FCO would send a personal letter to the Governor informing him of the situation and seeking his confirmation that Hong Kong would contribute a further sum under 3(1)(a) of the Memorandum of Understanding. The Governor would also be asked what extra sum he expected to be able to offer.

10. In any event, a MOD/PSA team was visiting Hong Kong in early May to decide what projects should enter into planning from June onwards and it would be helpful if they could be made aware of what the Hong Kong Government's formal offer was likely to be.

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