TNAG-2120-FCO40-3026-Hong-Kong-Garrison-future-of-the-Royal-Navy-presence-1990 — Page 196

SECRET

102331

MDLIAN 7760

SATISFACTORY FINANCIAL ARRANGEMENTS BEING AGREED AND THE AVAILABILITY OF MANPOWER.

.

5. THE FINANCIAL ARRANGEMENTS ARE OF COURSE FOR MOD TO NEGOTIATE ON

BEHALF OF HMG GIVEN THAT WE ARE TALKING ABOUT DEFENCE EXPENDITURE AND RESOURCES. AS WE SAID AT FRIDAYS MEETING, THE LOGIC OF THE PRECEDING PARAGRAPHS POINTS TO 100 PERCENT OF THE COSTS OF THE RUN ON BEING MET BY THE HKG. BUT WE RECOGNISE THE POLITICAL DIFFICULTIES THIS WOULD CAUSE FOR YOU AND WE ARE THEREFORE PREPARED TO DISCUSS WAYS IN WHICH WE MIGHT PUT TOGETHER AN OVERALL FINANCIAL PACKAGE WHICH WOULD MEET BOTH OUR NEEDS. FOR OUR PART, WE NEED TO FIND SOME WAY OF OFFSETTING ANY ADDITIONAL RUNNING COST EXPENDITURE POST 1991/2 IN WHAT WILL IN ANY CASE BE A VERY DIFFICULT BUDGETARY PERIOD. WE CAND I AM SURE YOU) WOULD VERY MUCH WISH TO AVOID RE-OPENING MAJOR ISSUES COVERED IN THE DCA AND I HOPE IT WILL BE POSSIBLE TO REACH AGREEMENT QUICKLY ON A PRAGMATIC SOLUTION. SINCE THE PATROL CRAFT ARE OUTSIDE THE CURRENT DCA ITSELF, WE SHOULD CONCENTRATE ON THE ARRANGEMENTS CONTAINED IN THE SIDE LETTER TO THE 1981 DCA COVERING THE PROCUREMENT AND DISPOSAL OF THE PATROL CRAFT, THOUGH WE WOULD NEED TO COVER BOTH CAPITAL COSTS AND RUNNING COSTS IN ANY AGREEMENT.

5. I SHALL BE IN HONG KONG DURING THE FIRST WEEK OF MAY AND WOULD BE

VERY HAPPY ALONG WITH GF1 TO DISCUSS OPTIONS ONCE YOU HAVE HAD A CHANCE TO DISCUSS THIS WITH YOUR COLLEAGUES BOTH IN SECURITY DEPT

AND THE FINANCE

DEPT.

BT

YYYY

ΜΑΙΝ

19

MINIMAL

HKD

NNNN

DISTRIBUTION

19

DEFENCE D

MR MCLAREN