TNAG-0543-FCO40-638-Strength-of-garrison-in-Hong-Kong-1975 — Page 115

SECRETZA EYES A

increased contribution; and with the further pressure on our public expenditure

this year we attach even greater importance to this than before.

I am aware

that Hong Kong has also suffered as a result of the world-wide trading recession

pressure on your budget because of, for example,

In

and that there is severe/social programmes and a tax structure designed to

preserve incentives. But I would ask you to see the issue in the round.

the decade prior to the onset of the recession Hong Kong's GDP grew at an average

Moreover, annual rate of almost 9% while the UK could only achieve three per cent.

Hong Kong stands to benefit more substantially from the expected upturn in world

trade. I see from your 1975/76 Budget speech that a growth rate of 7% after 1976

is being assumed for budgetary planning purposes. This is far in excess of

possible growth in the UK which faces a period of hard slog if it is to overcome

its economic problems. Even on a rough basis of comparison your current defece

contribution is less than of 1%

a

of your national income. In our case,

Tax revenue

The

we are spending over 52% of GNP on defence and even after the Defence Review we

will be spending over 5% for some years to come. This is in a situation where

the British people already face a much heavier burden of taxation.

as a proportion of GDP is three times higher in the UK than it is in Hong Kong.

On any objective view the level of your current defence contribution, determined

in an agreement made against quite different UK situation, and eroded by the

progress of inf tion and the relative movement of currencies, is low indeed.

time has surely come for Hong Kong to bear a share of its defence costs more

in keeping with your wealth and stage of development. Accordingly we are

asking that in the new defence costs agreement Hong Kong should contribute the

greater part,

75%, of the cost of the garrison, required for its security.

This cannot be other than unwelcome to you though it will hardly come as a surprise

given the gravity of the economic situation I have described.

SEORET,

SECRET UK EYES

EYES A