SECRET
UK EYES A
defence and that the UK's share should be the minimum compatible with its political objectives. HMG has decided that this means that the UK contribution should not exceed 25%."
Second, we should like to substitute the following for paragraph 4:-
"We are satisfied that this step is right on its merits for
the reasons I have explained. And I must make it plain that the UK's economic situation is such that a rapid and substantial step is needed. The simple fact is that the British economy is facing a crisis more serious than at any time since 1945. Despite a modest improvement in our balance of payments since 1974 our deficit so far this year is still running at an annual rate of £1,500m. By itself the elimination of our remaining current account deficit will require a substantial shift of resources from private and public consumption and the need to service and repay the foreign debt is going to be a burden on our economy and balance of payments for several years ahead. This means that all our public expenditure programmes continue to be under the greatest pressure and are even now being subjected to the closest scrutiny, particularly when the expenditure is
overseas,
Finally, I attach a shortened assessment of the Hong Kong economy which you may find more manageable than the rather longer analysis at present attached to the Steering Brief.
I am copying this to Milton, FCO.
SECRET
JE HANSFORD
UK EYES A
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