محمد
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WHITEHALL LONDON SW1A/2HB
MINISTRY OF DEFENCE
TELEPHONE 01-830 7022
SECRET UK EYFS A
MO 5/14 Part 7
PRIME MINISTER
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Mn Sykes
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HONG KONG DEFENCE COSTS AGREEMENT
35
In my minute of 3rd November I reported the outcome of the Minister of State for Defence's negotiations in Hong Kong. The Chief Secretary to the Treasury commented in his minute of 6th November on a number of points in my report; and I have delayed replying until I had seen the Foreign and Commonwealth Secretary's reactions, which are set out in his minute of 18th November.
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2. I see no difficulty in meeting most of the conditions contained in the Chief Secretary's minute. On land release we are very con- scious of the importance of meeting the dates set out in the Heads of Agreement. The joint feasibility studies are well in hand and no serious problems have been identified, provided that we are prepared to take some procedural short cuts. There is no reason to suppose that we will not be ready, when the Governor of Hong Kong calls on the Minister of State on 4th December, to confirm that for the UK's part the land releases are feasible within the required time- scale. On reprovisioning we recognise that our requirements must not exceed the limits of what is essential and reasonable: be agreed with the Hong Kong side. On differential inflation we have reassured Hong Kong that this problem is less extensive than they at first thought and, in consultation with Treasury officials, have put to them proposals for dealing with the relatively small proportion of the garrison costs to which differential inflation could apply. On economies in the garrison, the savings already found will inevitably limit scope for further significant economies in the short term; but we have confirmed to Hong Kong that we regard it as important that the maximum economy should be sought in running the garrison and that in this context we shall be looking particularly carefully at the relocation plans.
3. On the key issue of the duration of the agreement I was grateful for the Chief Secretary's acceptance of the possibility of extension to seven years after an initial period of five.
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SECRET UK EYES A
SPORLAY EXIS A
/ believe
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SECRET UK EYES A
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