Sir D Watson
SECRET
92
88
HONG KONG:
1.
DEFENCE COSTS
You will remember that last evening you discussed a Flag A possible answer to the Governor's telegram no. 178 with Mr Stuart
and The.
2.
This question was discussed at a meeting at the Ministry of Defence this morning which was called to consider the terms of reference of the Working Party leaving for Hong Kong next week. As a result, the attached telegram has been drafted which, in my view, covers the various points of difficulty we mentioned last night without the need to send the Governor an additional explanatory letter. You will see that it clearly sets out the differences between HMG and the Hong Kong Government on the proportionate sharing of the burden while explaining that the purpose of the present exercise is to go some way to closing the gap. It furthermore reaffirms that the question of graduation will have to be explored at a later stage, without revealing HMG's fallback position. Mr Jackson, who was present, argued that while the team's terms of reference specifically excluded the question of burden sharing, the question is bound to be aired to some extent by the Hong Kong officials if options are to be discussed realistically (c.f. the Governor's desire for a "practical solution" in para. 2(iii) of the telegram under reference). This point is covered in para. 3
of the attached draft reply which leaves it open to the Governor, rather than the Working Party, to comment on the financial aspects when conveying their report to London on or about 19 March.
3.
The draft, in my view, admirably covers the points that we wish to make at this stage and I recommend that it be sent out tonight. Mr Jackson concurs.
Pullukk
28 February 1975
сс
Mr Male
Mr Jackson, Defence Dept.
PL O'Keeffe
Hong Kong & Indian Ocean Dept.
SECRET
PA
3/3
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