It.marr.NATjoyce
space would be funded from capital to be dedicated to the Council's specific purpose in Hong Kong after 1997 and that no
rent would be payable by the British Council.
9. However, as you pointed out in your letter under reference, the Council would be making a saving (on the costs of their operations in their present premises) if they were
only to pay for their share of running costs once they moved
into the new accommodation. This saving would, in effect, be
an additional subsidy to the British Council and we recognise
that this should not occur. The FCO has therefore had several
discussions with the British Council. The British Council
accept that they should not make savings and have agreed to pay outgoings of not less than at present, which will include
a rent element as well as their full share of ground rent and
running costs. We are still in discussion with them about how
future payments should be negotiated. The main difficulty for the Council is that collocation, although clearly in wider HMG
interests, could pose some risk for their language teaching courses in the early years if a rent based on the Treasury
formula for economic return on capital forced them to put up their fees before they had fully established themselves in their new location. A regular review procedure, with some
indexing formula, may be the answer. We expect to find a
formula, satisfactory to FCO, British Council and to Treasury,
which could in due course become incorporated into the
Memorandum of Terms of Occupation (MTO) to take effect from 1
July 1996.
10. This letter has been seen and agreed by RFD and our
Economic Advisers.
A D Smith
PPU/OED
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