TNAG-1941-FCO40-2767-Future-of-Hong-Kong-defence-and-public-order-1989 — Page 171

CONFIDENTIAL

charges is making the UK increasingly less attractive as a

source of training. The difficulty lies in identifying a more satisfactory basis for setting charges. In theory, charges should be set equal to the long-run marginal costs of providing the training, with any shortfall between these figures and what the customer is prepared to pay being made up by means of a policy subsidy, where it is in our interests to provide one. In practice, true marginal costs are extremely

hard to identify, and for the time being there seems no

practical alternative to the present rather crude extra-costs formula. AUS (Management Strategy) is considering better options as part of his work on the budgets to be introduced under the New Management Strategy.

Appendix:

1.

Analysis of Costs of F&C Training (fmillion).

ang.1s2

G-7 CONFIDENTIAL