TNAG-2674-FCO40-3871-Hong-Kong-garrison-withdrawal-plan-1993 — Page 46

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THE HONG KONG GARRISON

Total costs of the garrison

Under the Defence Costs Agreement (DCA) Hong Kong pay 65% of the costs of the Hong Kong garrison and the MOD pay 35%. The MOD estimate the gross LTC (Long Term Costing) costs of the garrison in the financial year 1992/93 to be £124m, and they estimate that receipts from Hong Kong Government based on HKG meeting 65% of the full costs of the garrison in 1992/93 will be £135m.

The total estimated cost for Hong Kong in 1992/93 was 1.65 billion Hong Kong dollars, but the actual cost has come out as 1.92 billion Hong Kong dollars. This represents a 16% over-run on the initial estimate, equivalent to £21m. Hong Kong Government have refused to pay their share of the DCA for the fourth quarter of 1992/93 (approx. £40m) until they have received a detailed and satisfactory explanation of the over-run from the MOD. This means that the £40m (if paid in full) will roll over into the 1993/94 budget. Hong Kong have already said that they want to see a decrease in real terms in the costs of the 1993/94 DCA.

Hong Kong's main concerns

A) One-fifth of the over-run is accounted for by the fluctuation of the sterling/Hong Kong dollar exchange rate. We can safely leave the details of this issue to be hammered out between HKG and MOD.

B) Hong Kong have seen media reports that UK officials paid over 700 garrison-connected visits to Hong Kong in 1992/93, and that there have also been visits by family members. want to know whether these visits were charged to the DCA and have requested a detailed account of their cost and purpose.

They

C) Hong Kong have further seen reports that the Auditor-General's report on Hong Kong to the Commons Public Accounts Committee criticised inappropriate garrison levels of expenditure on entertainment and social activities. They have requested a detailed breakdown of all entertainments expenditure.

D)

Hong Kong are concerned that expenditure on stores and equipment has been 42% above estimate. This expenditure has included the purchase of 168 new cars and vans. They have asked for a full explanation.

E) Hong Kong have also commented that they have little information on the size, composition and cost of the operational and support units of the garrison. They have requested detailed information on the above.

F) MOD have threatened to charge Hong Kong interest if the DCA costs are not met on time. Hong Kong have replied that the MOD has in the past refunded monies to HKG three years late, and that retrospective interest could be charged.