TNAG-0480-FCO40-545-Strength-of-garrison-in-Hong-Kong-1974 — Page 129

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5. WITH REGARD TO SUBSTANCE, I AM AFRAID THAT THE NEW COSTINGS WHEN APPLIED TO THE MOD'S PREFERRED GARRISON OF 5 2/3 UNITS AND TO THE ARRANGEMENTS FOR APPORTIONMENT SET OUT IN YOUR TEL. 805 (1.E. 75/25) PRODUCE AN INCREASE IN FINANCIAL BURDEN FOR HONG KONG (ALMOST 4 TIMES) WHICH WOULD NOT BE SUSTAINABLE EITHER POLITICALLY OR BUDGETWISE AND WOULD BE DAMAGING TO OUR SOCIAL

PROGRAMMES.

6. I UNDERSTAND ALL CONCERNED AT THE LONDON MEETING SHOWED DISENCHANTMENT WITH APPORTIONMENT AS THE BASIS FOR THE AGREEMENT. THIS WAS BECAUSE, FIRSTLY OF THE APPALLING COMPLEXITIES AND CAPACITY FOR FRICTION THAT THE ACCOUNTING ARRANGEMENTS WOULD INVOLVE, PARTICULARLY IF HMG PAYS LESS THAN HALF THE BILL, AND IN CONSEQUENCE HONG KONG GOVERNMENT FELT IT SHOULD HAVE A SAY IN NOT ONLY HOW MUCH WAS SPENT BUT HOW IT WAS SPENT: AND SECONDLY, THOUGH THIS IS PURELY A HONG KONG POINT, THERE WOULD NEED TO BE SOME LIMIT ON WHAT HONG KONG MIGHT HAVE TO PAY.

7. THIS SUGGESTS THAT WHILE A NOTIONAL APPORTIONMENT MIGHT BE A USEFUL GUIDE IN DRAFTING AN AGREEMENT, AND HAVE SOME PRESENTAT- IONAL VALUE, THE AGREEMENT ITSELF SHOULD BE EXPRESSED IN TERMS OF ANNUAL CASH COMMITMENTS FOR THE HONG KONG GOVERNMENT, RELATED TO A GIVEN LEVEL OF GARRISON, WITH A FORMULA TO PROVIDE FOR ESCALATION FROM AGREED COSTINGS FOR A BASE YEAR (WHICH WOULD PRESUMABLY BE OCT. '74). PRESUMABLY THIS FORMULA WOULD HAVE TO CONTAIN FACTORS FOR RELEVANT ESCALATION IN BOTH HONG KONG AND THE

. U.K.

6. DO YOU THINK IT WOULD HELP IF I WERE NOW TO MAKE NEW PROPOSALS ALONG THE ABOVE LINES? I MUST WARN YOU THAT MY JUDGEMENT OF WHAT THE SYSTEM WILL BEAR HERE IS STILL ROUGHTLY AS IN MY TELEGRAM 853 OF 23 AUGUST, I.E. A DOUBLING OF THE HONG KONG CONTRIBUTION AND A CEILING OF POUNDS 17 MILLION WHICH I TOOK TO BE AT CURRENT PRICES AND THUS RELATED TO OUR OWN BUDGETARY 5 YEAR FORECASTS (WHICH IS BASED ON JULY 74 FIGURES).

MACLEHOSE

FILE S HD/HKIOD

HD/DEFENCE DEPT

PS PS/PUS

SIR D WATSON

MR THOMSON

MR MALE

MR WILFORD

2.

COPIES TO:

MR HOCKADAY MR BRYARS

CDR PERONE, KR. SMITH

SECRET

MOD. AUS (GS) MOD

D OF DP(C) MOD CABINET OFFICE.