CAB148-30-Defence and Oversea Policy Committee Meetings Relating to 1967 Disturbances-1967 — Page 108

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If we did not accept an agreement on these lines, some parts of the offers

would probably be withdrawn, and the offset we should lose might well be

greater than the savings we could make from the withdrawal of a second brigade.

For presentational purposes we could reduce the gap by counting the whole of

the £12.5 million purchases by the United States Government, although this was

part of the arrangement under which we had agreed to postpone any changes in the combat strength of our forces in Germany until 1st July 1967. Withdrawals in 1967-68 should therefore be limited to one brigade.

THE DEFENCE SECRETARY sail that accommodation in the United Kingdom for

more than one brigade withdrawn from Germany would not be ready before

1st April 1968. The whole of the first brigade could not be accommodated

before that date, whether the withdrawal were begun on 1st October 1967 or 1st January 1968. If we accepted the German request to delay the start of our withdrawals until 1st January 1968 the actual saving in 1967-68 would be

reduced by £1 million but we should still achieve an annual rate of saving of £4 million by 1st April 1968.

THE CHANCELLOR OF THE EXCHEQUER said that the arrangements proposed would

only in fact definitely cover £47 million of the foreign exchange cost of our

forces in Germany, since only the £36 million firmly offered by the Germans,

the latest United States offer of £7 million and the £4 million saving from

the withdrawal of one brigade represented additional funds or savings. This

would leave a true gap of £20-25 million. We should in any event nake our

acceptance of the United States and German offers conditional on obtaining their support for our application to the Western European Union (WEU) for

release from our numerical commitment to maintain as the forces on the

continent of Europe. We should also seek to cover the balance of the foreign

exchange cost of our forces by obtaining from the Germans an undertaking to

purchase United Kingdom Government bonds for financing British development

aid loans to other countries; the undertaking would provide for the bonds to

be repaid when aid loans were repaid to us.

In discussion it was argued that the gap, even if this were calculated as

proposed by the Chancellor of the Exchequer, was still smaller than in

previous years.

Furthermore the £7 million from the United States forces

stationed in the United Kingdom should also be counted since there was no

doubt that they had been moved to the United Kingdom, rather than brought

back to the United States, in order to provide us with additional offset. For presentational purposes it would moreover be reasonable to count in full

the earlier United States offer of £12.5 million. We should be able to say

in consequence that we had achieved more than the £100 million reduction in Government oversea expenditure promised in the Prime Minister's statement of

20th July 1966, consistently with recent statements in the House of Commons

that the reduction in oversea expenditure applied to the rate of saving we

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