DIACDS(0)/ 181134 DATED L. DOAR 93. tory Muse
CONFIDENTIAL
HKSC MEETING 18/2/93: DEFENCE COSTS AGREEMENT
SPEAKING NOTE FOR AUS(GF)
Our 1988 Defence Costs Agreement is now about half way through
its 9 year life. The first half has on the whole run smoothly
apart from the saga of the Patrol Craft. But it is none too
clear how the DCA will fare in the remaining period to 1997.
Our own MOD position is easily stated. We support the
continuation of the DCA to 1997. We would hope both sides can
honour its terms. We would be very unhappy if the DCA began to
unravel and we would be horrified if we had to renegotiate parts
or the whole.
The Defence Budget also needs the planned receipts. Ministers
and the Accounting Officer do not want to overspend the cash.
allocation either this year or next. The budgetary position is
very tight. £16M in £24bn may be less than 0.1% but it does
matter.
The main problem taxing the DCA [as we have heard] is the
non-payment by the HKG of £16M in the current quarter, and the
consequences for following years. The shortfall arose from the
HKG unilaterally block adjusting our forecast, the fall in
sterling and Gurkha pay enhancements. Despite a $6bn surplus,
HKG concluded that LEGCO Finance Committee must not be approached
on Defence Costs. I expect PUS to raise the matter again in Hong
Kong next Monday.
CONFIDENTIAL
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