TNAG-1461-FCO40-1987-Future-of-the-Dependent-Territories-Hong-Kong--Gibraltar-and-1986 — Page 12

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CONFIDENTIAL

7 An accurate assessment of the movement in benefits and costs

since 1973 is difficult. In terms of benefit Bermuda continues to provide defence facilities of value both nationally and to NATO. St Helena has lost its value as a diplomatic communications relay station. But Ascension has an increased value because of its role in Falklands re-supply and its use by

the US as a rocket testing facility. None of the other seven territories offers any particular benefit to the UK though the political alignment of the Caribbean region is important to NATO since it lies on a reinforcement route in times of tension.

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On costs, the main current financial costs remain aid and defence. The cost to the aid budget of the ten territories rose from about £4.7m in 1973 to about £17.1m in 1985 (more than half

of this in St Helena). In real terms this represents a reduction of about 11%, and as a proportion of total UK public expenditure on aid a fall from 1.6% to 1.3%. Though these costs are planned to rise further and are high in per capita terms (£132 per head in 1985 against under £1 per head in sub-Saharan Africa) they remain relatively small in absolute terms. The same is true of

the current defence costs. For the ten territories the full cost

to the MOD of providing for their defence in 1973 was put at between £2m and £3m (though the calculation was somewhat

arbitrary). Costs have increased in real terms since 1973 in line with the general rise in defence costs and because additional expenditure has become necessary, for example in the Caribbean, in recognition of the security needs of small states following the Grenada affair. Because of their functional costing methods the MOD has not however been able to attribute costs to each dependent territory for example the West Indies Guardship costs about £10m pa but this sum cannot be broken down between the dependent and independent islands. As with aid however the current defence costs of the dependent territories do not present an unacceptable burden.

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We are therefore driven to the conclusion similar to that

reached in the 1973 review that the main burden of holding onto

the territories is the potential additional cost of providing for

their adequate defence either to deter a specific threat or to

CONFIDENTIAL