TNAG-2120-FCO40-3026-Hong-Kong-Garrison-future-of-the-Royal-Navy-presence-1990 — Page 221

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and the changed perception of

the Hong Kong government that the retention of the RN presence

is important in demonstrating British political commitment and

preserving confidence. Similarly, while the substitution of

Bird class vessels for the Peacocks would have offered a

cheaper way of maintaining a presence, we recognise this would

create major political difficulties for the HKG. On the clear

which you confirmed on Friday that the Hong

Kong government for political reasons now wishes to retain the

RN afloat presence, it has been agreed in principle to

recommend to Ministers that the Peacocks be retained in Hong

Kong waters until 1997, subject to satisfactory financial

arrangements being agreed and the availability of manpower.

understanding

4. 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 Friday's

meeting, the logic of the preceding paragraphs points to 100%

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.

Rather than adjust the terms of the DCA itself it might be

more productive to concentrate on the arrangements contained

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