TNAG-0480-FCO40-545-Strength-of-garrison-in-Hong-Kong-1974 — Page 37

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Mr Jackson, Defence Dept..

DEFENCE REVIEW: HONG KONG

1.

I attended Sir Murray MacLehose's meeting with Mr Hockaday in the Ministry of Defence on 18 December. Mr Westbrook and Mr Hansford of the Treasury were also present. of your department

2.

The Ministry of Defence will be circulating a record of the meeting. We did not get far on substance. The Ministry of Defence reiterated their view that, unless HMG is to shed some of its constitutional responsibility for the Colony, the proposed structure and nature of the garrison must remain essentially as now planned. For his part the Governor said that, if the proposed force was going to cost £40 m. at 1974 prices, and if HMG would pay no more than a quarter of this, there would be a gap of £10m. £13m. In its current financial and budgetary situation, Hong Kong could do no more than offer to double its previous contribution to £17 m. In these circumstances the Hong Kong Government might reluctantly have to propose that the garrison should be reduced to a £27 m. force.

3.

All parties agreed that whatever cost-sharing arrangement was finally adopted, it was important that Hong Kong's contribution should be expressed as a flat rate sum with an escalation clause. The alternative of agreeing that they should pay a fixed proportion of the actual costs would lead to continuous disputes about individual items of expenditure. The Governor handed over a suggested formula for an escalation clause which the MOD promised to consider.

4.

At the end of the meeting it was agreed that the Ministry of Defence should send a team to Hong Kong on about 9 January to examine with Hong Kong Civil Servants the proposed detailed costings and the possibility of any reductions. The Treasury might also send an official who would examine the Hong Kong budgetary situation, and also the possibility of any flexibility in HMG's contribution.

5.

3

On the last point, Mr Hansford suggested that, if Hong Kong was in temporary budgetary difficulties, we might be able to examine whether their contribution should be graduated over, say, ten years. The aim would be an average 75% contribution. This level might be reached after, say, five years.

Before then the

contribution would be less than this percentage, afterwards it would be greater.

6.

I encouraged the idea of Treasury participation. In so far as Hong Kong's budgetary difficulties are real, it is important that the Treasury should be convinced of this themselves. I also think it would be prudent to provide an FCO member of the team to help to

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