TNAG-0525-FCO40-620-Visit-of-UK-Members-of-Parliament-(Defence-and-External-Affa-1975 — Page 7

frigate rather than five patrol boats, and they decided in favour of the

patrol boats, and, secondly, whether there was any score in further reducing

the tail. There is no disagreement between ourselves and the Hong Kong

Government on the desirability of reducing support costs in the garrison

both now and at any later date. That much was foreclosed virtually before

I reached Hong Kong. The matters we then discussed were the share of the

cost of the 242 nillion, and, secondly, the time scale for the agreement.

That is how long it should run. Thirdly, there was the question of defence

lends, which is something you are bound to have looked at during the course

of your visit, and fourthly, the rather detailed and complex questions of

what provision should be made for any inflation in the costs which occurs,

and whether there should be more attributable to inflation in Hong Kong or

to inflation in the United Kingdom, or how any increase should be shared.

On the first of those points, the share of the cost, I think I can say that

we are likely to reach agreement on the Hong Kong Government roying 50 per cent of the costs of the semison in the year 1976/77, 62 per cent of the

cost of the garrison in 1977/73, and 75 per cent of the cost of the camison

thereafter. In other words, we should nove up from 50 per cent in two

steps to 75 per cent. I think it is likely we shall reach agreement on

that basis. Secondly, my own negotiating brief allowed for a further five

year agreement. I think it would be no surprise to you to learn that the

Governor was seeking a ten year agreement. I think we can find a settlement

on the middle ground giving reasonable stability for as long as both parties

I think the are content that the agreement meets each of their needs.

Governor and I, congenial though our negotiations have been, do not want

ourselves or our successors to go through another round sooner than

necessary. We have that in common. As I say, I was bound to start off on

five years and the Governor started off on ten years.

vas the question of defence lends.

he third natter

As I think you will know, agreenont

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