TNAG-0941-FCO40-1160-Visit-by-Lord-Carrington--Secretary-of-State-for-Foreign-and-1980 — Page 52

CONFIDENTIAL

DEFENCE COSTS AGREEMENT: ESSENTIAL FACTS

PRESENT ARRANGEMENTS

1. Hong Kong Garrison consists of 4 battalions and supporting

units of the Army, Navy and Air Force. In 1975, HMG agreed with

the Hong Kong Government that, under the Defence Costs Agreement (DCA),

latter should contribute 75% of the cost. This amounted to

£37.5 million in 1979/80 excluding expenditure on works, plus

£7.5 million for reinforcements.

NEW NEGOTIATIONS

2. Hong Kong Government request for enlargement of Garrison and

MOD dissatisfaction with operation of DCA led to renegotiation this

year. An extra battalion agreed in principle by Ministers, subject

to satisfactory outcome of DCA negotiations.

3

ཉ་

Total cost of enlarged Garrison estimated at £120 million

(1981/82 prices) excluding works, of which Hong Kong Government

will have to contribute £91 million.

Two-fold increase in its

defence contribution likely to cause strong criticism in Hong Kong,

particularly by Unofficial Members of the Legislative Council.

Lord Privy Seal has written to Defence Secretary explaining difficulty

the Governor faces in trying to persuade Unofficials to approve this

increased expenditure. He suggested that some form of staging

of increased payments might be necessary.

NEXT ROUND

4. Mr Hayhoe (Parliamentary Under-Secretary of State for Defence)

will represent MOD at next round in October.

Hong Kong and General Department

September 1980

CONFIDENTIAL