TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 73

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

Present:

Mr A C Stuart, FCO (Hong Kong & Indian Ocean Dept.) Mr A F Thorpe, 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

2 1.

The meeting was held in view of the fact that the Price Index in respect of the Hong Kong Defence Contribution 1971/76 as embodied in the Memorandum of Understanding had gone over 50% of the base line level (see paragraph 3(i)(a) of the Memorandum) The meeting also had in mind that HMG had called for a Defence Review which might substantially alter the garrison and the allied defence costs in Hong Kong.

•

2.

The Chairman said that it was important from the political point of view if we wish to raise this question in Hong Kong, that we were sure of our ground. In the light of the Defence Review he asked whether this was the right time to go to Hong Kong to discuss this question and suggested that if we were going to cut forces the Hong Kong Government might under 3(i)(b) of the Memorandum also seek a review in the hope of a cut in the defence contribution.

3.

Mr Aggleton replied that if the current works programme (to which the bulk of the Hong Kong contribution was allocated at Hong Kong's request) were to continue after June, additional funds had to be raised. Up till now HMG had borne the full cost of inflation. The meeting's view was that even if a decision was taken to remove the garrison entirely (which was considered extremely unlikely) this could not take effect until 1976 and the following years after the expiry of the current agreement. The works programme which was mostly construction of married quarters would still be necessary in the intervening years and would thereafter be of use for the Hong Kong Government. Mr Aggleton said that when he was in Hong Kong recently with the Deputy 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. A figure of a minimum of HK$30 million as Hong Kong's additional contribution had been mooted. Mr Lockwood said, however, than an extra HK$80 million up to 31 March 1976 would be necessary to maintain the programme.

/In view of

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