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6. It became clear early in 1974 that the initial problem of ensuring that the money was fully spent had given way to the probability of overspend through a combination of cost inflation and the falling £. Once the building cost index had triggered the 50% inflation clause in the Agreement, strenuous gotlaviere resulted in the Hong Kong Government agreeing ay 1974 to make en additional contribution of HK 35M (specified in dollars).
7. Although about half of this additional sun should be spent by March 76, it has not been taken up in full because certain projects have been held over pending resolution of the position of the Hong Kong garrison and consequent works programme post Defence Review. It might be possible to take credit in the forthcoming negotiation, for this underspent balance of £1.5M or so (unspent only because we did not want to waste Hong Kong Government money).
8.
As regards maintance we understand (although the accounts of the Hong Kong Public Works Department are not available to us) that their expenditure did not reach the nominal £2.2M per annum until 1974/75. It would have soared to well over £3M in 75/76 however, had the Hong Kong authorities not asked us to accept a reduced standard (by a strange coincidence costed at almost exactly £2.2M!) in conformity with their public expenditure economy campaign. We might be able to take some credit for this also in negotiation.
Works Element of Proposed New Agreement
9.
Had the capital works programme stimulated by the present agreement been allowed to proceed unchecked, it would have spent some £28M over the next quinquenniwa. However, once the limits of the finance likely to be available during the next agreement period, either from Hong Kong or IK sources had become apparent, CRF decreed that this programme should be reduced to £20M over a 5-year period and this figure has been reduced further to 15M (nominally £3M per annum) pari passu with the reducing force level.
10. The list of projects drawn up to illustrate how £15M might be spent (by no means the whole remaining programme in Hong Kong) includes:-
a.
alterations to 3 barracks to accommodate new occupants;
two of these projects when complete will enable us to release to the Hong Kong Government substantial sites in which they have a strong development interest
b.
C.
additional married quarters for the Army and RAF
improvements to two Gurkha barracks.
Most of these projects have not yet received financial approval.
11. The other works component of the proposed annual cost package of $33.5M is maintenance (costed at £2M per annum). It seems likely
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