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SECRET
RECEIVED IN REGISTRY No. 51 = 4 SEP 1974
HKK 10/91
DEFENCE REVIEW: STEERING COMMITTEE
HONG KONG: Misc 16/74
3 SEPTEMBER
1. The Sub-Committee agree with the Governor that Hong Kong should have forces slightly smaller than at present, but without a rapid reinforcement capability, rather than smaller forces with a reinforcement capability. This is satisfactory.
2. There is, however, no agreement on how the forces should be paid for. The cost is estimated at 238 m per year. The Governor has advised that he could, with difficulty, persuade ulo Hong Kong Government to double their prosent defence contribution to 217 m. He advises that Hong Kong could not afford more, and that it could have a disastrous effect on the future of the
Colony if we insisted on 100% contribution Promion, Kong. He is thinking broadly of a 50/50 division of costs between HMG anÜ hong dong.
3. The Treasury reject these arguments.
They assert that
They do
Hong Kong has enough money to pay for all its forces. not accept the Governor's political advice. Their economic case is represented in paragraphs 11 and 12 of the paper. political arguments are, however, no more than assertion.
4.
Their
The balancing passage in paras 13 and 14 of the paper was drafted by the FCC. Even with increased taxation and borrowing, forecasted capital expenditure in Hong Kong will exceed revenue by about 2300 m. It is politically important to Ministers that the Governor's social development programme in Hong Kong should not be cut back. The TUC has already complained about labour
On the political argument, we believe the
/Governor
conditions there.
SECRET
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