TNAG-0543-FCO40-638-Strength-of-garrison-in-Hong-Kong-1975 — Page 41

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require a substantial shift of resources from private and public

consumption and will be made more difficult while the world economy

remains in recession. Moreover, in order to allow time for our

economy and particularly the balance of payments to adjust to the new

situation we had to borrow abroad on an unprecedented scale during

1974, and are still having to borrow, 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. The public sector has recently

been and is now being financed by deficit borrowing on a scale which

is simply not compatible with the long-term health of our economy.

With your own traditions or prudent and careful financing you will

understand that this cannot continue. The Government has already

announced therefore that planned public expenditure next year will

be lower than it is this year, and that it will/seeking further

substantial economies in the following two years after that. All

our public expenditure programmes are therefore under the greatest

pressure and as even now being subjected to the closest scrutiny,

particularly when the expenditure is overseas.

be

5. This then is the background against which we conducted our

Defence Review in 1974 and are continuing to scrutinise our Defence

programme I do not want to go into details of the Defence Review. It is sufficient to say that the review proceeded from a careful

appraisal of the strategic priorities and the implications -

-

military, political, economic, industrial and led to conclusions for the

future allocation of defence resources.

conclusion could only be that NATO

to British and European Security

ar

In strategic torms the

the area of prime importance

the

must be our first and overriding

charge on defonce resourcom though even here significant economies wore

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