TNAG-0480-FCO40-545-Strength-of-garrison-in-Hong-Kong-1974 — Page 100

SECRET AND STRICTLY PERSONAL

context of a fixed percentage contribution from Hong Kong would lead to endless, haggling throughout the duration of the agreement.

6. In this situation the way to play your visit might be to use the talks with the Ministry of Defence to explore the latest estimates in broad outline, and to try to pin them down a bit more tightly on whether this really is the minimum viable force. Despite the growing prospect of an unbridgeable gap between costings as they are at present evolving and the combined British and Hong Kong contributions, I am still not certain that they have examined carefully enough every possible alternative, for example, a purely internal security force without the training or equipment for general soldiering.

7. Your meeting with Lord Goronwy-Roberts will provide an opportunity to set the MOD figures (which means their estimate, since you will be seeing the Minister before the military) against your assessment of the economic realities of Hong Kong. For such a meeting you will need to come fully briefed on budgetary strategy, and with a cogent presentation of the maximum contribution you reckon would be politically and budgetarily tolerable in Hong Kong (at constant prices) over, say, the five years from 1976. You should, for example, be ready to deal with such questions as why, when Hong Kong tax rates are relatively low, and when each 1% increase would bring in about 210 million per year, it is not possible to pay for defence as well as for an expanded social programme by increase in taxes.

8. In arguing this I fear that the claim that Britain ought to pay for the Dependent Territories' defence is not likely to have much mileage. The precedent of India is against this and the present climate here is unpropitious. A more weighty argument might be to explore the likelihood and consequences of an impasse in which Executive Council refused to find the extra money. Clearly if there was a breakdown of administration and confidence, then the UK might have to find a great deal more than 250 million a year to keep Hong Kong going (we have calculated, for example, that if you required aid at the same rate as Gibraltar it might cost us nearer £200 million). But we must beware of crying wolf. For this reason we did not, in trying to persuade the Secretary of State that your tactical advice was sound, talk about the dangers of having to use the official majority or impose direct rule, since we calculated that he would probably discount this and thereafter be likely to aim off for the advice that he was getting from the Department.

9. I suggest therefore that the aim during your talks with Ministers here should be to try to secure agreement on the maximum that Hong Kong could and should reasonably be asked to pay (though clearly with some provision for inflation), and that the balance between that and the irreducible cost would have to be met by the

But you will need very cogent arguments indeed if the

UK.

/Secretary

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2.

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