TNAG-0542-FCO40-637-Strength-of-garrison-in-Hong-Kong-1975 — Page 189

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GRS 400

PRIORITY

CYPHER CAT/A

FM HONG KONG 1803117

RECEIVED IN

REGISTRY No. 50

18 AUG1975

LAKKION

244

SECRET

TO PRIORITY F C O TELEGRAM NO 797 OF 18 AUGUST.

LAST

M.I.P.T.

NEXT

REF.

(243) 261)

DEFENCE COSTS.

BEFORE THIS NEGOTIATION STARTS WE MUST KNOW WHAT ''£33.5M AT 1975/76 ESTIMATES PRICES'' IS LIKELY TO MEAN IN TERMS OF THE

AMOUNT THE HONG KONG GOVERNMENT WOULD BE REQUIRED TO PAY IN

1976/77, FOR WHICH PROVISION MUST BE MADE IN THE FORTHCOMING

ESTIMATES. OBVIOUSLY THE AMOUNT ACTUALLY PAYABLE WILL NOT BE KNOWN UNTIL THE END OF THE NEXT FINANCIAL YEAR, BUT WE MUST AT LEAST KNOW WHAT THIS FORMULA MEANS AT CURRENT PRICES OTHER-

WISE WE WILL NOT KNOW WHAT WE ARE TALKING ABOUT. IT IS NECESSARY TO APPRECIATE THAT WHEREAS THE PRINCIPLE OF COST-SHARING

PERCENTAGE LOOMS LARGE WITH H.M.G. HONG KONG IS PRINCIPALLY

CONCERNED WITH BUDGETARY CONSIDERATIONS AND CONSEQUENTLY WITH

ACTUALS.

2. WE ALSO NEED TO BE ASSURED THAT THE INFLATOR DEVISED AT ANNEX

B WORKS PROPERLY.

3. PLEASE THEREFORE SEND US AS SOON AS POSSIBLE THE COST OF THE 4 1/3 GARRISON (AT 1975/76 PRICES) EXPRESSED UNDER THE HEADINGS

REQUIRED FOR THE INFLATOR. THIS WOULD ALLOW US TO MAKE A ROUGH

CALCULATION. I SUGGEST WE ALSO MOUNT A TRIAL EXERCISE TO APPLY

THE INFLATOR TO SEPTEMBER 1975 INDICES. DO YOU AGREE? WHEN MAY

WE EXPECT THE BREAKDOWN?

4. NAVAL ELEMENT. THE ''PREFERRED'' ELEMENT WAS A FRIGATE PLUS 3

PATROL CRAFT. WE HAVE NEVER BEEN FORMALLY ASKED WHAT OUR PREFERENCE WOULD BE IF THIS HAD TO BE REDUCED, BUT OUR MARGINAL PREFERENCE HAS IN FACT BEEN FOR A FRIGATE ONLY. BUT IT HAS ALWAYS

| BEEN.

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