TNAG-0480-FCO40-545-Strength-of-garrison-in-Hong-Kong-1974 — Page 48

From:

Mr. A.P. Hockaday, CMG,

Deputy Under-Secretary of State (Policy and Programmes)

RECEIVĎ

MINISTRY OF DEFENCE

BUILDING, WHITEHALL, LONDON, S.W.I

DUS (P)505CISTA NO.52

$20 DEC1974

NKKIO/9

TELEPHONE

SECRET UK EYES A

218-2135

17th December, 1974.

LAST

(203)

Sir Duncan Watson, KCMG,

Foreign and Commonwealth Office, SW1.

NEXT

REF.

Dear Dunca

DEFENCE REVIEW: HONG KONG

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Spokes Sir Di Will und for Mackenda

Machadong

wa'd before the Gown 17/12

meiling with MOD 12

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"The Waliz

Thank you for your letter of 11th December about the Governor's visit tomorrow. As you will know, arrangements have been made for him to call on our Minister of State, Mr. Rodgers, at 3.15; and at 3.45 he will be coming on to my room for a meeting, at which I am getting together three or four of our people and John Hansford from the Treasury as well as your party.

2.

On paragraph 2 of your letter, you should have by now the results of the costing exercise. The costing reflects the promised further study of the command and support organisations which we have carried out in parallel and which has pointed the way to considerable economies in these areas.

3. The costings show an annual average expenditure of around £41m. at September 1974 prices over the 5-year period 1976/77 to 1980/81 if naval capital costs are excluded. So the figure of £40m. which you mention is not wide of the mark. Whether the figure would reach £50m. in current price terms by 1976 will, of course, depend on the future rate of inflation;

but we envisage that the negotiation should be conducted on a constant price basis at September 1974 prices, with appropriate provision for adjustment to meet inflation. This would, as we understand it, be consistent with the way in which the Hong Kong Government itself plans its future expenditure. It would also be consistent with the suggestion in your paragraph 7, with which we agree, about the general form of a new agreement; although in attempting to reach an understanding with the Governor on these lines, we shall, of course, have to make it clear that much work remains to be done before a detailed negotiating position can be worked out.

4. We have also examined the suggestion in your paragraph 4 that perhaps the defence requirements of Hong Kong could be met

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