8.
9.
reprogramming will be necessary to reflect the rather unusual incidence of payment. However, we shall endeavour to obtain at least an approximate indication of the impact on costs in time for the meeting on 15 September.
Presentation of Costs It would probably be helpful if the paper being prepared could be reasonably explicit about the basis of the estimates. The key element which affects the costs (if any) is the relationship between the Hong Kong dollar and sterling after 1997. It is, of course, impossible to be certain about the absolute level of the exchange rate many years hence, and costs can only be made on the basis of assumptions or illustrations of future changes. However, the figures can illustrate the relative potential costs of the different options and their likely incidence. It may also be helpful to demonstrate costs of different scenarios for the assumed rate of change in the exchange rate, e.g. one scenario might be a single large depreciation in 1997 to the levels assumed in your note, while another scenario might be a gradual depreciation over a considerable number of years beyond 1997. The latter scenario would clearly bring out a lower level of costs than the former. Do you wish to go down this route or should we simply provide the figures requested in your revised options paper? These should certainly be sufficient for Ministers to digest!
I have sent a copy of this letter to Kevin Woodfield and Don Rayson in Treasury, and to Richard Plumb at the ODA (in the absence of Dave Fish on holiday).
Yours sincerely,
DGrant Ballantine
D.G. Ballantine
3
0892-032
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