CONFIDENTIAL
In the light of the clear advice from Hong Kong that they cannot find extra money above the normal 65%/35% cost sharing arrangement, the Foreign Secretary sees no alternative to considering this as a normal cost of defending one of our Dependent Territories and therefore a proper charge to the MOD. He continues to believe that the patrol craft perform an important military role, as well as showing our commitment to the defence of Hong Kong up to 1997. He entirely agrees with the Defence Secretary's remark in his minute of 24 October to the Home Secretary that in addition to the reality "it is perceptions that count in Hong Kong". Chinese incursions over the last two years have shown that they have much less respect for the Hong Kong Marine Police. Without the Royal Navy there, it is inevitable that this challenge to Hong Kong's boundaries and flouting of our sovereignty could intensify. In such circumstances Police morale would suffer and we could face other serious security problems.
In these circumstances, we again pressed the Hong Kong Government to see if there was any creative option for re-allocating funds without the Finance Committee's involvement. But study of the ideas unfortunately showed that they would have been inconsistent with the British and Hong Kong Government's principles and procedures of public accounting and financial accountability. This position was confirmed during the Governor's visit here shortly afterwards.
I am copying this letter to Stephen Wall (No 10), Nicholas Holgate (Chief Secretary's Office) and Sonia Phippard (Cabinet Office).
euro ever
(S`` L Gass)
ви
Private Secretary
Simon Webb Esq
PS/Secretary of State for Defence
CONFIDENTIAL
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