TNAG-2962-FCO40-4241-Future-of-Hong-Kong-British-Consulate-General-building-incl-1993 — Page 109

Mr Smith OED

Reference.

Cos

1

HONG KONG CONSULATE GENERAL:

BRITISH COUNCIL CONTRIBUTION

Loy

1. Thank you for your minute of 27 October.

2.

Although the figures are not yet cut and dried, it is clear at this stage that the difference between the figure represented by annual running costs as set out in your paragraph 2 and the £800,000 budgeted by the British Council would not leave enough over to pay a rent which would fit the Treasury critieria set out in your paragraph 4 (TDR criteria) even if rent were to be applied only to that part of the accommodation devoted to non grant in aid activity. To meet such a rent in addition to running costs, the British Council would need to allocate new resources to Hong Kong. The British Council have left us in no doubt about the impossibility of allocating extra money to the Hong Kong operation to cover the substantial increase in costs which even the TDR based rent would represent, let alone a rent based on the going rate for office accommodation in the area.

•

-

I therefore agree that when we respond to the Treasury's original request (that we review arrangements envisaged for the British Council with a view to charging rent), there is no point in trying as we had originally thought might be possible to package the money available from the British Council into running costs plus rent. The equation will not work. Rather, we should argue that the British Council must not be penalised for their readiness to implement Ministers' decision on the collocation of the British presence in Hong Kong post 1997 and demonstrate that the British Council will not gain any unfair advantage over competitors for the non grant in aid activities. All this underpins our conclusion that no rent should arise to the British Council.

4. I will need to advise Mr Hum of our findings and recommendations and seek his agreement to a meeting with the Treasury and to our proposed brief for this. I therefore propose to draft briefing for the officials attending the Treasury meeting (we need to decide who/how many) and to invite you and Mr Wootton to discuss this with me on 8 November. We can then clear more widely with copy addressees and submit our plans to Mr Hum. Subject to his agreement, we can then set up the meeting with the Treasury.

5.

Copy addressees should not feel constrained by the suggested timetable if they have comments to make at this stage - I should be pleased to receive them.

bcc.0411 CONGEN.dbj

CODE 18-77