SECRET
CHANCE
CELLOR OF
THE EXCHEQUER
I am aware of the difficulties in the defence costs talks with the Hong Kong Government, but I fail to see how we make them any easier by negotiating on one basis only to introduce a new thought - if that is our decision - early next year.
On the substance of the case, you identify three penalties from pursuing my alternative. We have addressed in the Survey your concern about the availability of infantry; I do not believe that the administrative difficulties in advancing the Gurkha run-down should stand in the way of savings of £30m; and since the solution to the problems of the Defence Costs Agreement is likely to be some form of deferral of payments, I am disinclined to put much weight on the fact that my alternative has marginally higher upfront costs than yours (the fact is that under both schemes we are unlikely to be paid immediately).
In summary, I see no reason to defer a decision, and every reason to press ahead with the cheaper alternative which I have identified.
I am copying this letter to other members of OPD (K) Sir Robin Butler.
and to
2
L
KENNETH CLARKE
No comments yet.
Private notes are available after approval.