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the cost of a smaller force could still in theory mean no increase or no substantial increase in the contribution. You will want to consider whether this degree of blurring could be used to lessen the public impact of the statement in H ng Kong.
But as
far as ExCo is concerned it would seem unwise to
mislead them on the point.
4.
A
On the way ahead, we have held up a reply to your telegram no. 1143 while we tried to sort out the statement. I agree that we should if possible continue to try to work to the timetable in your para. 2. But will it be possible to move so deliberately after the Ministerial statement, or will the response from ExCo and public in Hong Kong make earlier negotiations unavoidable? You should also be aware of continuing Treasury pressure here for early negotiations, on the grounds that your budget is likely to pre-empt available finance and
increased tax revenue for improvements to the social programme, thus making it more difficult to secure an increased defence contribution. We have pointed out that they have no evidence for such a judgment, that the social programme matters to the UK, and that the queen's visit is important; but they have not given up.
5.
I think we must at least try to avoid any further hardening of attitudes on either side until your visit here. Meanwhile we are asking the Ministry of Defence to hurry up their November costings and to look once again at whether a different kind of force (i.e. one that was only good for internal security in Hong Kong and not for general soldiering) would have any chance of being cheaper.
6.
For your part I think you should come here armed with a clear statement of the maximum that you think Hong Kong could pay in 1976 and why; bearing in mind that a 1% increase in Hong Kong tax rates would raise about £10 million per year and that many
/Ministers
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