TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 89

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SECRET

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CELLOR

THE EXCHEQUER

and expenditure which we shall be carrying out over the

next few months, and which will I hope result in the

achievement of substantial savings from 1975-76 onwards.

However, I suggest we need in the Budget Speech to announce

our intention of implementing the decision we took in

1968 after full interdepartmental discussion to end our

military presence east of Suez (other than Hong Kong).

This means withdrawing the Forces which are now in

Singapore in support of the Five Power defence arrangements

and perhaps reducing some naval and air capabilities. This should secure some net saving in 1974-75.

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3. The major part of the additional savings I propose

would need to come from Defence procurement. Although as a

result of the measures we have already taken we expect industrial output to recover over the next few months, it

seems to me that there is still likely to be a very

substantial shortfall in deliveries from industry as

compared with the planned defence programmes for 1974-75.

The Defence Budget in 1973-74 is being underspent by

something like £250m at constant prices, mainly because of

a shortfall of deliveries of equipment etc, and while

shortfall in the current year may be exceptionally high it

does perhaps give an indication of the degree of under-

spending that can be expected in 1974-75.

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14. In these

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