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CC(82) 2nd CONCLUSIONS
T h u r s d a y 21 January 1982
THE UNITED
KINGDOM
STRATEGIC
NUCLEAR
JTERRENT
Previous
Reference:
CC(80) 29th
Conclusions,
Minute 1
T H E P R I M E M I N I S T E R said that, as the Cabinet would r e c a l l , the
d e c i s i o n to a c q u i r e T r i d e n t to replace P o l a r i s as the United K i n g d o m
s t r a t e g i c nuclear d e t e r r e n t had been announced i n J u l y 1980,
f o l l o w i n g a g r e e m e n t w i t h the C a r t e r A d m i n i s t r a t i o n . The d e c i s i o n
was to adopt the A m e r i c a n T r i d e n t 1(C4) m i s s i l e to be c a r r i e d i n a
new B r i t i s h submarine based c l o s e l y on the A m e r i c a n submarines
c u r r e n t l y c a r r y i n g Poseidon and C4 m i s s i l e s .
Since then the
M i n i s t r y of Defence had c a r r i e d f o r w a r d the t e c h n i c a l and f i n a n c i a l
studies on the p r o j e c t w h i c h w e r e o n l y possible after the d e c i s i o n
had been made p u b l i c .
In October 1981 P r e s i d e n t Reagan had
announced h i s d e c i s i o n to deploy the T r i d e n t 2 (D5) m i s s i l e i n 1989,
and to phase out the T r i d e n t 1 m i s s i l e by 1998.
The P r e s i d e n t had
i n d i c a t e d that i f B r i t a i n w i s h e d to buy T r i d e n t 2 he would a g r e e .
A
group of M i n i s t e r s under her c h a i r m a n s h i p had been c o n s i d e r i n g t h i s
question.
They w e r e i n no doubt that B r i t a i n should continue to
have h e r own independent s t r a t e g i c n u c l e a r d e t e r r e n t ; and that the
p o s s i b i l i t y of a c q u i r i n g T r i d e n t 2 r a t h e r than T r i d e n t 1 should be
s e r i o u s l y c o n s i d e r e d , p r o v i d e d that s a t i s f a c t o r y t e r m s could be
negotiated w i t h the A m e r i c a n s .
The choice was one o f great
t e c h n i c a l c o m p l e x i t y and had considerable f i n a n c i a l i m p l i c a t i o n s .
Over the whole 15 year p e r i o d of the p r o j e c t the e x t r a c a p i t a l cost of
a c q u i r i n g T r i d e n t 2 would on a J u l y 1980 p r i c e and exchange r a t e
basis be about £600 m i l l i o n , b r i n g i n g the t o t a l c a p i t a l cost over the
p e r i o d to £6 b i l l i o n i f the d e c i s i o n were to go f o r a 4 boat f o r c e ; at
September 1981 p r i c e s and exchange r a t e s the t o t a l rose to
£7-| b i l l i o n .
The t h r o u g h - l i f e r u n n i n g costs would be l i k e l y to be
l o w e r i n the case o f T r i d e n t 2, because i t would be operating i n
p a r a l l e l w i t h an A m e r i c a n p r o g r a m m e .
B o t h c a p i t a l and running
costs could be accommodated w i t h i n the defence budget w i t h o u t
unacceptable consequences for the conventional defence effort; and
i n the next four y e a r s T r i d e n t 2 would i n fact cost less than T r i d e n t 1,
She therefore intended to send a message to P r e s i d e n t Reagan to
suggest that a s m a l l t e a m of senior o f f i c i a l s should v i s i t Washington
to discuss the t e r m s on w h i c h the A m e r i c a n s w o u l d be w i l l i n g to make
a v a i l a b l e , i f r e q u i r e d , the technology, equipment and m a t e r i a l s
n e c e s s a r y f o r T r i d e n t 2.
When these negotiations w e r e completed
the m a t t e r would be brought back to the Cabinet f o r d e c i s i o n .
Meanwhile the S e c r e t a r y of State f o r Defence would be ready to
a r r a n g e a f u l l b r i e f i n g , f o r any m e m b e r of the Cabinet who w i s h e d ,
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on the s t r a t e g i c , t e c h n i c a l and f i n a n c i a l background to the i s s u e .
It
was of the u t m o s t i m p o r t a n c e that there should be no leak or public
i n d i c a t i o n of the G o v e r n m e n t ' s p o s i t i o n , i n o r d e r not to p r e j u d i c e the
success of the negotiations i n Washington. The r e c o r d of the p r e s e n t
d i s c u s s i o n should t h e r e f o r e be r e t a i n e d by the S e c r e t a r y of the Cabinet
and not c i r c u l a t e d to m e m b e r s o f the Cabinet.
In the course of a b r i e f d i s c u s s i o n i t was noted that any m e m b e r of
the Cabinet who w i s h e d to r e c e i v e the suggested b r i e f i n g would need
to a l l o w 2-2 hours f o r the p u r p o s e .
The c o m p l e x i t i e s of the p o t e n t i a l
choice could not be adequately explained i n any s h o r t e r p e r i o d .
I n t e r e s t e d M i n i s t e r s would contact the S e c r e t a r y of State for Defence
on an i n d i v i d u a l b a s i s , o b s e r v i n g m a x i m u m d i s c r e t i o n .
The
S e c r e t a r y of State f o r Defence would be d i s c u s s i n g separately w i t h the
S e c r e t a r y of State f o r Scotland the i m p l i c a t i o n s f o r the shore
facilities required.
The Cabinet T o o k note.
Cabinet Office
2 5 January 1982
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CC(82) 3 r d C o n c l u s i o n s , M i n u t e 5
T h u r s d a y 28 January 1982
ECONOMIC
STRATEGY
Previous
Reference:
CC(81) 33rd
Conclusions,
Minute 5
The Cabinet c o n s i d e r e d a m e m o r a n d u m by the C h a n c e l l o r of the
Exchequer (C(82) 1) on the G o v e r n m e n t ' s economic s t r a t e g y and i t s
i m p l i c a t i o n s f o r the p r e p a r a t i o n of his f o r t h c o m i n g Budget on 9 M a r c h .
T H E C H A N C E L L O R O F T H E E X C H E Q U E R said that the l a t e s t f o r e c a s t s
p r e d i c t e d continuing, though slow, r e c o v e r y i n output and a f u r t h e r f a l l
in inflation.
U n e m p l o y m e n t was l i k e l y to edge up a l i t t l e f u r t h e r i n
1982, though at a d i m i n i s h i n g r a t e , w h i l e i n d u s t r i a l p r o d u c t i v i t y should
continue to i m p r o v e . The g e n e r a l p i c t u r e was one of continuing
r e c o v e r y , w i t h encouraging signs of r e a l i m p r o v e m e n t i n the economy,
though this could be i n v a l i d a t e d by events beyond the G o v e r n m e n t ' s
c o n t r o l such as high i n t e r e s t rates i n the United States o f A m e r i c a o r a
s e r i o u s set-back on pay.
F o r the r e c o v e r y to continue, and to secure
a genuine i m p r o v e m e n t i n the e m p l o y m e n t s i t u a t i o n , i t was essential to
p e r s e v e r e w i t h the p r e s e n t economic s t r a t e g y .
F o r d o m e s t i c and
overseas confidence i n the s t r a t e g y to be sustained, the f i n a n c i a l f r a m e ­
w o r k had to be c r e d i b l e . W i t h i n t h i s f r a m e w o r k the size o f the P u b l i c
Sector B o r r o w i n g R e q u i r e m e n t (PSBR) f o r 1982-83 was c r u c i a l .
The
p r e s e n t f o r e c a s t , w h i c h could change s u b s t a n t i a l l y before M a r c h , gave
a p r o v i s i o n a l f i g u r e of r a t h e r less than the £9 b i l l i o n f o r w h i c h the
G o v e r n m e n t had planned at the t i m e of the 1981 Budget.
This forecast
was based on the assumptions that p u b l i c spending next y e a r would be at
the l e v e l agreed by Cabinet i n N o v e m b e r - a p l a n n i n g t o t a l of about
£11 5 b i l l i o n ; and that i n c o m e tax t h r e s h o l d s and excise duties would be
i n c r e a s e d i n l i n e w i t h i n f l a t i o n , but that the tax s t r u c t u r e and r a t e s w e r e
i n other r e s p e c t s unchanged.
He would now w e l c o m e the views of the
Cabinet on what m i g h t be the a p p r o p r i a t e size of the PSBR i n 1982-83
and, i f some r e d u c t i o n s i n t a x a t i o n should t u r n out to be p o s s i b l e , how
these m i g h t be d i s t r i b u t e d .
In c o n s i d e r i n g the size o f the PSBR, a balance had to be s t r u c k between
the objectives of b r i n g i n g about l o w e r i n t e r e s t r a t e s and, w h e r e p o s s i b l e ,
making tax reductions,
To p l a n f o r a PSBR o f , say, £7 - £8 b i l l i o n
w o u l d give a b e t t e r p r o s p e c t f o r l o w e r i n t e r e s t rates w h i c h would be
helpful to i n d u s t r y and to people w i t h m o r t g a g e s ; i t w o u l d not, h o w e v e r ,
leave any r o o m f o r tax r e d u c t i o n s , a p a r t f r o m those changes a l r e a d y
assumed i n the f o r e c a s t s .
On the other hand, to go f o r a PSBR above
about £9 b i l l i o n was l i k e l y to lead to h i g h e r i n t e r e s t rates than now, to
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affect the confidence of the f i n a n c i a l m a r k e t s , and to r i s k so l a r g e a f a l l
i n s t e r l i n g as to j e o p a r d i s e the prospects of r e d u c i n g i n f l a t i o n and to
i m p a i r , or even r e v e r s e , r e c o v e r y .
In so far as t a x reductions w e r e p o s s i b l e , the choice was b r o a d l y
between m e a s u r e s w h i c h w o u l d d i r e c t l y affect p r i c e s , those w h i c h
w o u l d reduce i n c o m e tax, and those w h i c h would d i r e c t l y a s s i s t
companies; though elements of a l l three could be i n c l u d e d i n the f i n a l
Budget package and he w o u l d also be c o n s i d e r i n g a n u m b e r o f other
s m a l l e r i t e m s , as w e l l as the s t r u c t u r e of the N o r t h Sea tax r e g i m e .
M e a s u r e s to affect p r i c e s could include less than f u l l r e v a l o r i s a t i o n of
excise duties o r a r e d u c t i o n i n the rate of Value Added T a x ; such changes
w o u l d avoid additions to the R e t a i l P r i c e Index. F o r the p e r s o n a l
sector, an i n c r e a s e i n tax allowance of 10 to 11 percentage points above
i n f l a t i o n would be n e c e s s a r y to r e s t o r e tax t h r e s h o l d s , as a p r o p o r t i o n
of average e a r n i n g s , to t h e i r 1978-79 l e v e l s ; an i n c r e a s e would b r i n g
benefits i n wage b a r g a i n i n g , and would d i m i n i s h the p o v e r t y t r a p and 'why
w o r k ' p r o b l e m s . A s s i s t a n c e to companies w o u l d have the m o s t d i r e c t
i m p a c t on c o m p a n i e s ' i n c o m e , though at the r i s k o f some leakage into
wages; the m a i n p r o p o s a l w h i c h had been canvassed was for a r e d u c t i o n
i n the N a t i o n a l Insurance Surcharge (NIS).
In d i s c u s s i o n the f o l l o w i n g w e r e the m a i n points made:­
a.
I t was g e n e r a l l y agreed that the a i m should be to m a i n t a i n
the G o v e r n m e n t ' s b r o a d economic s t r a t e g y ; any r a d i c a l d e p a r t u r e
now, i n s e a r c h of benefits w h i c h could be only s h o r t - l i v e d , w o u l d
be damaging to the G o v e r n m e n t ' s c r e d i b i l i t y and deeply disappointing
to i t s s u p p o r t e r s .
The 1982 Budget should be seen as a development
of p r e s e n t p o l i c y .
Its a i m should be to give confidence and hope to
i n d u s t r y , to the p u b l i c g e n e r a l l y , and to the G o v e r n m e n t ' s
supporters.
b.
I t would be a m i s t a k e to go too far i n o f f e r i n g t a x and other
r e l i e f s i n the c o m i n g Budget.
Something should be kept i n hand
to deal w i t h d i f f i c u l t i e s w h i c h could emerge l a t e r i n the y e a r .
The
r i g h t course was to leave r o o m f o r p r o g r e s s i n l a t e r Budgets i n
w h i c h there could be f u r t h e r tax r e d u c t i o n s .
I t was p a r t i c u l a r l y
i m p o r t a n t to avoid the m i s t a k e of going so far i n the 1982 Budget
that r e t r e n c h m e n t m i g h t be n e c e s s a r y i n 1983.
The G o v e r n m e n t
should not put at r i s k the p u b l i c ' s sense o f i t s competence i n the
handling of the economy t h r o u g h a p e r i o d o f g r e a t d i f f i c u l t y and
recession.
I t would be i m p o r t a n t to be sure that m e a s u r e s i n c l u d e d
i n the Finance B i l l w o u l d be supported i n the House o f Commons and,
i n p a r t i c u l a r , to avoid any w h i c h m i g h t have to be w i t h d r a w n t h r o u g h
lack of support f r o m Conservative Members of P a r l i a m e n t .
Care
should be taken i n the r e m a i n i n g weeks before the Budget not to
arouse over o p t i m i s t i c expectations o f i t s contents.
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c.
I t was g e n e r a l l y agreed that i t would be b e t t e r to make tax
r e d u c t i o n s r a t h e r than to plan f o r a PSBR as l o w as £7 - £8 b i l l i o n
i n the hope of b r i n g i n g about l o w e r i n t e r e s t r a t e s .
T a x reductions
offered a m o r e c e r t a i n , and v i s i b l e , benefit than the possible
r e d u c t i o n of i n t e r e s t r a t e s .
The G o v e r n m e n t could influence the
l e v e l of i n t e r e s t r a t e s only to a l i m i t e d extent; the effect on i n t e r e s t
r a t e s o f a l o w e r PSBR could be m o r e than offset by o t h e r f a c t o r s
such as h i g h i n t e r e s t r a t e s i n other c o u n t r i e s , notably i n the United
States of A m e r i c a .
d.
A number of M i n i s t e r s thought that i t would be r i g h t to p l a n
for a PSBR o f up to £9 b i l l i o n .
T h i s should a l l o w f o r tax r e d u c t i o n s ;
i t should also avoid p u t t i n g at r i s k the r e c o v e r y o f the economy, and
the p r o s p e c t s f o r continuing e x p o r t l e d g r o w t h , by going so high as to
lose the confidence of the f i n a n c i a l m a r k e t s i n the G o v e r n m e n t ' s
economic p o l i c y .
e.
Some M i n i s t e r s thought that the PSBR should be somewhat
h i g h e r - perhaps £10 - £11 b i l l i o n - and that t h i s would not u n d e r m i n e
m a r k e t confidence, p r o v i d e d that the PSBR was no h i g h e r as a
percentage of Gross D o m e s t i c P r o d u c t than i n p r e v i o u s y e a r s .
The
f i n a n c i a l m a r k e t s m i g h t be encouraged to accept b o r r o w i n g at t h i s
l e v e l i f the PSBR w e r e r e c l a s s i f i e d to d i s t i n g u i s h public sector
b o r r o w i n g to finance c a p i t a l and p r o d u c t i v e i n v e s t m e n t , o r p o s s i b l y
to exclude some of such b o r r o w i n g f r o m the PSBR; on the other
hand, the m a r k e t s m i g h t discount such r e c l a s s i f i c a t i o n , and any
r e v i e w of the d e f i n i t i o n o f the PSBR could lead to the i n c l u s i o n o f
some types o f b o r r o w i n g at p r e s e n t outside i t s scope.
I t was f u r t h e r
suggested that, i f a high PSBR led to i n s t a b i l i t y i n the exchange r a t e ,
this m i g h t be m e t b y the United K i n g d o m d e c i d i n g to p a r t i c i p a t e i n
the exchange r a t e m e c h a n i s m of the European M o n e t a r y S y s t e m .
f.
In c o n s i d e r i n g how any f i n a n c i a l r e l i e f m i g h t be d i s t r i b u t e d ,
i t was g e n e r a l l y agreed that the emphasis should be on giving help
to companies r a t h e r than to i n d i v i d u a l s . While there w e r e now
signs of economic r e c o v e r y , there was s t i l l a long way to go, and
i t was i m p o r t a n t to take steps to strengthen the c o u n t r y ' s i n d u s t r i a l
and c o m m e r c i a l base.
T h i s , r a t h e r than r e d u c t i o n s i n the r e a l
r a t e of p e r s o n a l t a x a t i o n , was the best w a y to respond to the p r o b l e m
of u n e m p l o y m e n t and to open up the p r o s p e c t o f c r e a t i n g j o b s .
g.
I t was g e n e r a l l y agreed that income tax t h r e s h o l d s should be
i n c r e a s e d i n 1982-83 i n l i n e w i t h i n f l a t i o n ( " R o o k e r - W i s e " ) . I t was
suggested that the C h a n c e l l o r o f the Exchequer should not seek to
make good i n the 1982 Budget the effects of not i n d e x i n g t h r e s h o l d s
i n 1981-82, but that some r e l a t i v e l y modest changes i n p e r s o n a l
a l l o w a n c e s , over and above " R o o k e r - W i s e " m i g h t be considered f o r
the 1982 Budget.
F u r t h e r changes i n p e r s o n a l t a x a t i o n should be l e f t
f o r c o n s i d e r a t i o n i n the 1983 Budget.
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I t was agreed that, w i t h the exception of p e t r o l and d e r v ,
i n d i r e c t taxes should be f u l l y r e v a l o r i s e d .
I t would be helpful
to i n d u s t r y and to r u r a l c o m m u n i t i e s i f any i n c r e a s e s i n the
t a x on p e t r o l and d e r v w e r e less than f u l l r e v a l o r i s a t i o n ;
i t was u n l i k e l y that a m a j o r i t y i n the House of Commons would
support a m e a s u r e to i n c r e a s e the p r i c e of a g a l l o n of p e t r o l
by 9p, w h i c h would be the effect of f u l l r e v a l o r i s a t i o n .
i.
O p i n i o n was d i v i d e d on whether the m a i n m e a s u r e to help
i n d u s t r y should be a r e d u c t i o n i n the NIS. Some M i n i s t e r s
w i s h e d p r i o r i t y to be given to this r e d u c t i o n : the p u b l i c w e r e
r e s e n t f u l of what they saw as a t a x on e m p l o y m e n t , at a t i m e
when 3 m i l l i o n people w e r e unemployed; and i t w o u l d be w a r m l
w e l c o m e d by i n d u s t r y as a response by the G o v e r n m e n t to t h e i r
representations.
These M i n i s t e r s doubted whether i n p r e s e n t
c i r c u m s t a n c e s any s i g n i f i c a n t p a r t of the benefit would be
passed on i n the f o r m o f wages r a t h e r than used to r e s t o r e
p r o f i t a b i l i t y and to i n c r e a s e i n v e s t m e n t and output.
Other
M i n i s t e r s thought that a r e d u c t i o n i n the NIS w o u l d be m i s ­
d i r e c t e d : less than o n e - t h i r d of NIS payments w e r e made by
m a n u f a c t u r i n g i n d u s t r y and m u c h o f the benefit w o u l d go to the
banking and N o r t h Sea o i l s e c t o r s whose needs w e r e r e l a t i v e l y
less pressing.
Unless steps w e r e taken to p r e v e n t i t , some
of the benefit would also go to l o c a l a u t h o r i t i e s and n a t i o n a l i s e d
industries.
The trade unions would be l i k e l y to seize the
o p p o r t u n i t y of the r e d u c t i o n to r e i n f o r c e t h e i r c l a i m s f o r h i g h e r
i n c r e a s e s than o t h e r w i s e i n the c o m i n g round o f wage
negotiations; the r e s u l t could be that m u c h of the benefit would
be taken up by wage i n c r e a s e s .
j.
I t would be b e t t e r not to devote any f u r t h e r substantial
r e s o u r c e s to l a r g e p r o g r a m m e s of p u b l i c sector c a p i t a l i n v e s t ­
m e n t w h i c h w o u l d be slow i n f r u i t i o n and i n h e l p i n g to reduce
unemployment.
A b e t t e r c o u r s e would be to consider
m e a s u r e s to s t i m u l a t e , and to a c c e l e r a t e , i n v e s t m e n t i n
selected sectors by o f f e r i n g t i m e - l i m i t e d f i n a n c i a l incentives
w h i c h w o u l d be available f o r , say, i n v e s t m e n t undertaken i n
the next two y e a r s .
In p a r t i c u l a r , t h e r e was support for
m e a s u r e s to s t i m u l a t e a p r o g r a m m e o f house i m p r o v e m e n t :
this w o r k was labour i n t e n s i v e , and so w o u l d be useful i n
r e d u c i n g u n e m p l o y m e n t ; a p r o g r a m m e could take effect
q u i c k l y ; and i t w o u l d be seen as a p o s i t i v e and n e c e s s a r y
m e a s u r e to r e s t o r e the q u a l i t y of the c o u n t r y ' s housing stock
w h i c h was r a p i d l y d e t e r i o r a t i n g i n a number o f a r e a s .
P r o p o s a l s f o r i n v e s t m e n t by the n a t i o n a l i s e d i n d u s t r i e s showJQg
a s a t i s f a c t o r y r e t u r n should not be held back b y c a p i t a l r a t i o n ­
i n g ; cash planning systems i n the p u b l i c sector should be
operated so that c a p i t a l p r o g r a m m e s d i d not suffer and w e r e
able to benefit f r o m underspending e l s e w h e r e .
4
SECRET
SECRET k.
I t would however i n general be b e t t e r f o r any new
assistance to p a r t i c u l a r sectors of i n d u s t r y to be given by w a y
of t a x reductions r a t h e r than i n c r e a s e d public e x p e n d i t u r e .
A l t h o u g h some p u b l i c expenditure had the effect o f h e l p i n g the
p r i v a t e s e c t o r , this p o i n t was not g e n e r a l l y and r e a d i l y
p e r c e i v e d ; and i t was i m p o r t a n t that the G o v e r n m e n t should not
be c r i t i c i s e d f o r appearing to p r e s i d e over an i n e x o r a b l y ,
expanding public s e c t o r .
1.
F u r t h e r c o n s i d e r a t i o n should be given to proposals f o r
p r i v a t e sector p a r t i c i p a t i o n i n public sector p r o j e c t s , such as
the roads p r o g r a m m e .
There were possibilities for using
public sector money i n p a r t n e r s h i p w i t h p r i v a t e sector finance,
f o r example i n house b u i l d i n g , w i t h a v e r y b e n e f i c i a l g e a r i n g
effect i n the sense that a r e l a t i v e l y s m a l l i n j e c t i o n o f p u b l i c
sector money could lead to a c o n s i d e r a b l e i n v e s t m e n t p r o ­
gramme.
The S e c r e t a r y of State f o r the E n v i r o n m e n t , i n
c o n s u l t a t i o n w i t h the Chief S e c r e t a r y , T r e a s u r y , would s h o r t l y
be m a k i n g p r o p o s a l s to the M i n i s t e r i a l C o m m i t t e e on E c o n o m i c
Strategy on the p o s s i b i l i t i e s f o r the d i r e c t i n v o l v e m e n t of m a r k e t
finance i n c o n s t r u c t i o n p r o j e c t s i n the public s e c t o r .
m.
Although i t had so far p r o v e d i m p o s s i b l e to w o r k out a
p r a c t i c a b l e scheme, i t would be h e l p f u l i f there could be some
r e d u c t i o n i n i n d u s t r i a l energy c o s t s .
The S e c r e t a r y of State
f o r E n e r g y w o u l d s h o r t l y be m a k i n g p r o p o s a l s to the Chancellor
of the Exchequer on e l e c t r i c i t y p r i c e s f o r l a r g e i n d u s t r i a l u s e r s .
The S e c r e t a r y of State f o r I n d u s t r y had put proposals to the
C h a n c e l l o r of the Exchequer f o r m e a s u r e s to help s m a l l f i r m s ,
to s t i m u l a t e e n t e r p r i s e , and to encourage the development of
new technology.
n.
I n c o n s i d e r i n g the m e a s u r e s i n the 1982 Budget, account
should be taken o f t h e i r i m p a c t on the c o m i n g round of wage
negotiations.
M o s t wage e a r n e r s w e r e seeing t h e i r p e r s o n a l
d i s p o s a l incomes reduced by i n c r e a s e s i n tax, n a t i o n a l i n s u r a n c e ,
r a t e s and fuel b i l l s ; about t w o - t h i r d s of trade unionists l i v e d
i n c o u n c i l houses and they w e r e faced w i t h r e n t i n c r e a s e s too.
T h i s would i n c r e a s e the p r e s s u r e f o r h i g h e r wage i n c r e a s e s i n
the c o m i n g pay r o u n d .
I n the p u b l i c s e c t o r , where cash l i m i t s
operated, i t could i n d i r e c t l y lead to cuts i n c a p i t a l expenditure
to compensate f o r i n c r e a s e d wage c o s t s .
C o n s i d e r a t i o n should
be given to the p o s s i b i l i t y o f i n f l u e n c i n g wage b a r g a i n i n g i n
selected sectors of p r i v a t e i n d u s t r y ; f o r e x a m p l e , i t m i g h t be
i n d i c a t e d that i f the c o n s t r u c t i o n i n d u s t r y w e r e to settle at a
r e l a t i v e l y m o d e s t l e v e l o f wage i n c r e a s e s , the G o v e r n m e n t would
then be w i l l i n g to i n t r o d u c e tax allowances w h i c h would s t i m u l a t e
a c t i v i t y , and e m p l o y m e n t , i n the i n d u s t r y .
5
SECRET SECRET
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that the
Cabinet r e c o g n i s e d that the C h a n c e l l o r of the Exchequer would have to
d e t e r m i n e both the m a i n budgetary j u d g m e n t and the details of budgetary
m e a s u r e s i n the l i g h t o f the s i t u a t i o n and p r o s p e c t as they appeared
n e a r e r the t i m e .
The d i s c u s s i o n had shown that the Cabinet agreed
that i t would be r i g h t to continue on the b r o a d s t r a t e g y w h i c h the
G o v e r n m e n t had followed h i t h e r t o .
I t was e s s e n t i a l not to put at r i s k
the objective of r e d u c i n g i n f l a t i o n ; w i t h i n that the a i m should be to
enable the c o u n t r y to take advantage of the p r o s p e c t s of r e c o v e r y .
The Cabinet ­
1.
T o o k note, w i t h a p p r o v a l , of the P r i m e M i n i s t e r ' s
s u m m i n g up o f t h e i r d i s c u s s i o n .
2.
I n v i t e d the C h a n c e l l o r of the Exchequer to take
account of the views expressed and the points made i n
d i s c u s s i o n i n the p r e p a r a t i o n o f his f o r t h c o m i n g Budget.
Cabinet Office
28 January 1982
6
SECRET
Copy N o . / of 3 copies
TOP SECRET
CABINET
MOST C O N F I D E N T I A L RECORD
TO
CC(82) 8th Conclusions
T h u r s d a y 4 M a r c h 1982
THE UNITED
KINGDOM
STRATEGIC
NUCLEAR
DETERRENT
Previous
Reference:
CC(82) 2nd
Conclusions
T H E S E C R E T A R Y OF S T A T E FOR D E F E N C E said that the s t r a t e g i c
n u c l e a r d e t e r r e n t was c e n t r a l to the defence o f the United K i n g d o m .
No one could foresee what m i g h t o v e r the next 30-40 y e a r s happen to
the N o r t h A t l a n t i c T r e a t y O r g a n i s a t i o n or to the United States attitude
to the defence o f E u r o p e .
A s t r a t e g i c d e t e r r e n t under B r i t i s h n a t i o n a l
c o n t r o l was t h e r e f o r e e s s e n t i a l .
The P o l a r i s f o r c e w o u l d be 30 y e a r s
old by the 1990s and i t s c r e d i b i l i t y would be d e c l i n i n g . Only a f o u r ­
boat T r i d e n t f o r c e could p r o v i d e a successor w h i c h would be c r e d i b l e i n
Soviet eyes and r e m a i n o p e r a t i o n a l w e l l into the 21st C e n t u r y .
The
D5 T r i d e n t 2 m i s s i l e w o u l d be m o r e c o s t - e f f e c t i v e than the C4 T r i d e n t 1
v e r s i o n , because i t w o u l d p r e s e r v e c o m m o n a l i t y between B r i t a i n and
America.
I t would also be cheaper d u r i n g the y e a r s i m m e d i a t e l y ahead.
Its t o t a l cost over fifteen y e a r s would average £500 m i l l i o n a year o r
j u s t o v e r three p e r cent o f an annual Defence Budget of o v e r
£14, 000 m i l l i o n .
B y c o n t r a s t F r a n c e ' s n u c l e a r d e t e r r e n t was costing
twenty p e r cent of h e r defence e x p e n d i t u r e .
F o r both m i l i t a r y and
p o l i t i c a l reasons the B r i t i s h d e c i s i o n could not be f u r t h e r delayed.
F o l l o w i n g the Cabinet's d i s c u s s i o n on 21 January, t h e r e f o r e , s e c r e t
h i g h - l e v e l negotiations had been undertaken w i t h the U n i t e d States
a u t h o r i t i e s to e s t a b l i s h the t e r m s on w h i c h the T r i d e n t 2 m i s s i l e could
be made a v a i l a b l e .
The upshot of these negotiations had been exception­
a l l y f a v o u r a b l e ; after a d i f f i c u l t s t a r t the A m e r i c a n s had i n the end
made e v e r y e f f o r t to be h e l p f u l .
A s i n the case of the P o l a r i s and
T r i d e n t 1 a g r e e m e n t s , the m i s s i l e s w o u l d be made available at the
c o n t r a c t p r i c e applicable to the United States N a v y .
B y way o f offset
the United States a u t h o r i t i e s had undertaken to m o d i f y a d m i n i s t r a t i v e l y
the effect of t h e i r B u y A m e r i c a l e g i s l a t i o n , so that B r i t i s h i n d u s t r y
could compete f o r sub-contracts a c r o s s the whole range of the U n i t e d
States T r i d e n t p r o g r a m m e .
A m e r i c a n l i a i s o n staff i n L o n d o n would be
a v a i l a b l e to advise B r i t i s h f i r m s w i s h i n g to tender f o r such b u s i n e s s .
T h e i r success would of course depend on t h e i r c o m p e t i t i v e n e s s .
The
A m e r i c a n s had also i n d i c a t e d p r i v a t e l y that they hoped to continue t h e i r
c u r r e n t p o l i c y of p l a c i n g other l a r g e defence o r d e r s i n B r i t a i n .
The
s u r c h a r g e s applicable to a B r i t i s h purchase o f T r i d e n t 2 would be
£35 m i l l i o n l o w e r than those envisaged under the T r i d e n t 1 a g r e e m e n t ;
1
TOP SECRET T O P SECRET
the f a c i l i t i e s charge had been w a i v e d altogether and the R e s e a r c h and
D e v e l o p m e n t l e v y would be l i m i t e d to a fixed s u m i n constant d o l l a r s
r a t h e r than a p e r c e n t a g e , so that no c o s t e s c a l a t i o n r i s k w o u l d be
i n v o l v e d i n e i t h e r case.
In r e t u r n for these concessions the A m e r i c a n s
had sought assurances about B r i t i s h conventional deployments; and
w h i l e no specific undertakings of this k i n d would feature i n the proposed
a g r e e m e n t , the B r i t i s h n e g o t i a t o r s had been able to make good use of
h i s d e c i s i o n (which he had a l r e a d y taken on.other grounds) to r e t a i n the
R o y a l N a v y ' s two a s s a u l t ships F e a r l e s s and I n t r e p i d .
A s the r e s u l t
o f an unexplained l e a k some account o f these t e r m s had appeared i n the
British Press.
P u b l i c r e a c t i o n s had been f a v o u r a b l e .
Subject to the
Cabinet's a g r e e m e n t he now hoped that the negotiations could be
concluded and the new a g r e e m e n t announced on 11 M a r c h .
Thereafter
e v e r y e f f o r t would need to be made to m a x i m i s e p u b l i c support f o r the
decision.
A l t h o u g h a m a j o r i t y o f the e l e c t o r a t e c l e a r l y b e l i e v e d that
B r i t a i n should r e t a i n an independent d e t e r r e n t , there was as yet less
a g r e e m e n t that T r i d e n t 2 w o u l d be the r i g h t c h o i c e .
I t would be
i m p o r t a n t to show that i t s r e a l cost over t i m e w o u l d be no h i g h e r than
T r i d e n t l ' s would have been; that i t would leave r o o m w i t h i n the defence
p r o g r a m m e f o r s i g n i f i c a n t i n c r e a s e d expenditure on conventional f o r c e s ;
and that there would be no need f o r B r i t a i n to deploy the m a x i m u m
n u m b e r o f m i s s i l e s o r warheads p o s s i b l e w i t h the T r i d e n t 2 s y s t e m , i f
a m o r e l i m i t e d number p r o v e d m i l i t a r i l y adequate.
I n d i s c u s s i o n there was g e n e r a l support f o r the S e c r e t a r y o f State f o r
Defence's p r o p o s a l s and a p p r e c i a t i o n was expressed f o r the f u l l
b r i e f i n g w h i c h he had a r r a n g e d f o r m e m b e r s of the Cabinet f o l l o w i n g
t h e i r e a r l i e r d i s c u s s i o n o f the subject on 21 J a n u a r y .
The d e c i s i o n
would be w a r m l y w e l c o m e d by a l m o s t a l l the G o v e r n m e n t ' s s u p p o r t e r s
i n P a r l i a m e n t , as a m e e t i n g the p r e v i o u s evening had made c l e a r .
Cost e s c a l a t i o n r e m a i n e d a danger; but the proposed offset a r r a n g e ­
ments should p r o v e p a r t i c u l a r l y valuable, p r o v i d e d that they d i d not
encounter too m u c h o p p o s i t i o n i n the United States Congress.
A major
e f f o r t would now be n e c e s s a r y to r a l l y public support f o r the T r i d e n t 2
programme.
I t would not be possible to devise p e n a l t y a r r a n g e m e n t s
w h i c h would p r e c l u d e a future G o v e r n m e n t f r o m abandoning i t . B u t
p o l i t i c a l l y i t m i g h t not p r o v e disadvantageous that c o m p a r a t i v e l y l i t t l e
w o u l d have been spent on the p r o g r a m m e by the t i m e o f the n e x t
G e n e r a l E l e c t i o n ; the G o v e r n m e n t could not be accused of p r e - e m p t i n g
the i s s u e , and i n p r a c t i c e many of t h e i r opponents i n P a r l i a m e n t would
i f they came to office be f o r c e d to recognise that the d e c i s i o n now being
taken was the only possible one.
P u b l i c emphasis would need to be
p l a c e d on the annual r a t h e r than the f i f t e e n - y e a r cost of the p r o g r a m m e ;
on the i n a c c u r a c y of fears that i t would s e r i o u s l y u n d e r m i n e B r i t a i n ' s
conventional m i l i t a r y s t r e n g t h , w h i c h could i n fact be e f f e c t i v e l y
deployed o n l y i n conjunction w i t h an adequate s t r a t e g i c d e t e r r e n t ; and
on the c o n t i n u i n g search f o r n u c l e a r d i s a r m a m e n t , w h i c h would be
h a r d e r r a t h e r than e a s i e r i f B r i t a i n abandoned her p o s i t i o n o f s t r e n g t h .
2
TOP SECRET
TOP SECRET
The Campaign f o r N u c l e a r D i s a r m a m e n t (CND) gained f r o m being at
l e a s t n o m i n a l l y a n o n - p a r t y o r g a n i s a t i o n , and f r o m the support i t
enjoyed among the young and i n some c h u r c h c i r c l e s .
I t was perhaps
a p i t y that the C N D ' s many opponents w e r e not also o r g a n i s e d on a
non-party basis.
The CND r i g h t l y s t r e s s e d the t e r r i b l e nature o f
n u c l e a r weapons but failed to recognise that B r i t a i n ' s possession of a
s t r a t e g i c d e t e r r e n t lessened r a t h e r than i n c r e a s e d the danger o f
nuclear w a r .
A l t h o u g h there w e r e arguments against suggesting that
B r i t a i n m i g h t deploy fewer m i s s i l e s and warheads than the T r i d e n t 2
s y s t e m made p o s s i b l e , t h e r e would on balance be m a j o r advantage i n
m a k i n g c l e a r to those w i t h a s e r i o u s c o n c e r n f o r a r m s c o n t r o l that no
m i l i t a r y escalation w o u l d i n p r a c t i c e be i n v o l v e d i n the s w i t c h by
B r i t a i n f r o m T r i d e n t 1. L o c a l opinion i n Scotland should also be
r e a s s u r e d b y the fact t h a t T r i d e n t 2 would not i n v o l v e an extension
o f the a r e a o f the base f a c i l i t i e s i n the F i r t h of C l y d e . I n t e r n a t i o n a l l y
i t w o u l d have been unthinkable to leave F r a n c e as the only effective
n u c l e a r power i n W e s t e r n E u r o p e .
B r i t a i n ' s a l l i e s w e r e not expected
to oppose h e r T r i d e n t 2 d e c i s i o n .
N u c l e a r weapons w e r e at p r e s e n t
a v e r y e m o t i o n a l issue i n the F e d e r a l Republic of G e r m a n y ,
p a r t i c u l a r l y w i t h i n C h a n c e l l o r S c h m i d t ' s p a r t y ; but the p r i v a t e views
of even such l e f t - w i n g f i g u r e s as H e r r B a h r w e r e that the B r i t i s h and
F r e n c h d e t e r r e n t s w e r e v i t a l f o r the s e c u r i t y of E u r o p e .
The F r e n c h
G o v e r n m e n t , i n o r d e r to m e e t d o m e s t i c c r i t i c i s m o f the m u c h h i g h e r
cost o f t h e i r own d e t e r r e n t , f e l t obliged to argue that B r i t i s h n u c l e a r
f o r c e s w e r e not f u l l y independent of the A m e r i c a n s .
In o p e r a t i o n a l
t e r m s , o f c o u r s e , t h i s was quite u n t r u e .
L o g i s t i c a l l y , the B r i t i s h
T r i d e n t 2 f o r c e as at p r e s e n t conceived d i d i n v o l v e a degree of
dependence on A m e r i c a n support, though l e s s than would have been the
case w i t h T r i d e n t 1 m i s s i l e s w h i c h had a m u c h s h o r t e r i n - t u b e l i f e .
I f such s u p p o r t w e r e ever cut off, the success o f the Che valine
p r o g r a m m e suggested that B r i t a i n would not be t e c h n o l o g i c a l l y unable
to replace i t on a n a t i o n a l b a s i s .
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that the
Cabinet agreed that T r i d e n t 2 m i s s i l e s f o r a f o u r - b o a t B r i t i s h f o r c e
should be a c q u i r e d f r o m the United States on the t e r m s suggested.
Unless an e a r l i e r announcement became n e c e s s a r y because of leaks
f r o m Washington, the Cabinet would have an o p p o r t u n i t y of f o r m a l l y
r e c o n f i r m i n g this d e c i s i o n on 11 M a r c h , p r i o r to the a g r e e m e n t being
announced l a t e r that day.
The S e c r e t a r y of State f o r Defence would
be p u b l i s h i n g an Open G o v e r n m e n t Document e x p l a i n i n g the reasons for
the new p o l i c y .
T h i s m i g h t be c i r c u l a t e d to the Cabinet f o r t h e i r
i n f o r m a t i o n on 11 M a r c h . M e a n w h i l e i t was o f the u t m o s t i m p o r t a n c e
that the s t r i c t e s t s e c r e c y should be m a i n t a i n e d about the Cabinet's
c u r r e n t d i s c u s s i o n , the minutes of w h i c h should be r e t a i n e d by the
S e c r e t a r y of the Cabinet.
The Cabinet T o o k note w i t h a p p r o v a l o f the P r i m e M i n i s t e r ' s s u m m i n g up o f t h e i r d i s c u s s i o n . Cabinet Office 15 M a r c h 1982
3
TOP SECRET SECRET Copy N o . | of 3 Copies
MOST C O N F I D E N T I A L R E C O R D TO CC(82) 17th CONCLUSIONS
Wednesday 14 A p r i l 1982
FALKLAND
ISLANDS
Previous
Reference:
CC(82) 16th
Conclusions,
Minute 3
T H E P R I M E M I N I S T E R said that any leaks of the l a t e s t ideas f o r
s e t t l i n g the F a l k l a n d s c r i s i s could p r o v e f a t a l to the m i s s i o n being
undertaken b y the United States S e c r e t a r y of State, M r H a i g , who had
h i m s e l f been i n s i s t e n t on t h i s point.
On his f i r s t v i s i t to London on
8 A p r i l , the s t r e n g t h of B r i t i s h feeling about the A r g e n t i n e i n v a s i o n had
been b r o u g h t home to h i m . He had been left i n no doubt about B r i t i s h
o b j e c t i v e s : w i t h d r a w a l of A r g e n t i n e f o r c e s ; r e s t o r a t i o n of B r i t i s h
a d m i n i s t r a t i o n ; and the wishes of the F a l k l a n d I s l a n d e r s to be p a r a ­
mount i n any subsequent n e g o t i a t i o n .
M r Haig had then left f o r Buenos
A i r e s and r e t u r n e d w i t h a set of p r o p o s a l s , the status of w h i c h was
unclear.
He appeared to have discussed some but not a l l o f these
proposals w i t h P r e s i d e n t G a l t i e r i .
They w e r e now embodied i n a d r a f t
A g r e e d M e m o r a n d u m , to be signed by B r i t a i n and A r g e n t i n a .
This
d r a f t had been e x t e n s i v e l y discussed on 12 A p r i l between M r Haig and
the B r i t i s h M i n i s t e r s m o s t c l o s e l y concerned.
A g r e e m e n t on a
r e v i s e d v e r s i o n of i t had been reached.
T h i s envisaged the w i t h d r a w a l
of a l l m i l i t a r y and s e c u r i t y forces f r o m the F a l k l a n d Islands and the
Dependencies w i t h i n a p e r i o d of two weeks and banned t h e i r r e i n t r o d u c ­
tion.
F o r c e s i n v o l v e d i n the c r i s i s would r e t u r n to t h e i r n o r m a l
duties.
A n i n t e r i m C o m m i s s i o n would be set up, c o n s i s t i n g of
r e p r e s e n t a t i v e s f r o m the U n i t e d States, the United K i n g d o m and
A r g e n t i n a , each supported by a s m a l l staff.
I t would occupy a head­
q u a r t e r s on the Islands (not G o v e r n m e n t House) and each r e p r e s e n t a t i v e
would f l y his n a t i o n a l f l a g .
The t r a d i t i o n a l l o c a l a d m i n i s t r a t i o n would
continue, i n c l u d i n g the I s l a n d s ' E x e c u t i v e and L e g i s l a t i v e C o u n c i l s , to
each of w h i c h one r e p r e s e n t a t i v e of the A r g e n t i n e population would be
added.
T h e i r decisions would be s u b m i t t e d t o , and e x p e d i t i o u s l y
r a t i f i e d by, the C o m m i s s i o n .
The C o m m i s s i o n would also be
empowered to m a k e r e c o m m e n d a t i o n s to the B r i t i s h and A r g e n t i n e
Governments i n the f i e l d s of t r a v e l , c o m m u n i c a t i o n s and t r a d e between
A r g e n t i n a and the Islands; but either Government would be f r e e to
r e j e c t such r e c o m m e n d a t i o n s .
M e a n w h i l e the v a r i o u s r e s t r i c t i o n s and
sanctions i m p o s e d on A r g e n t i n a as a r e s u l t of the i n v a s i o n w o u l d be
lifted.
The i n t e r i m p e r i o d would end on 31 December 1982, by w h i c h
t i m e negotiations w e r e to be c o m p l e t e d f o r a f i n a l s e t t l e m e n t .
I t had
been made c l e a r to the A m e r i c a n s that B r i t a i n would r e g a r d self­
d e t e r m i n a t i o n f o r the I s l a n d e r s as an essential element i n such
negotiations.
M r Haig had intended to f l y to Buenos A i r e s d u r i n g the
night of 12-13 A p r i l .
But he had a l t e r e d h i s plans on l e a r n i n g by
1
SECRET SECRET telephone that the A r g e n t i n e s w e r e once m o r e adopting an e x t r e m e
p o s i t i o n , under w h i c h they would appoint the G o v e r n o r of the Islands
and would be a s s u r e d of s o v e r e i g n t y at the end of the i n t e r i m p e r i o d .
He now appeared t o have shifted t h e m back to a m o r e m o d e r a t e stance,
but was r i g h t l y not w i l l i n g to v i s i t Buenos A i r e s again u n t i l the p r o s p e c t s
were clearer.
He had t h e r e f o r e r e t u r n e d to Washington, after f u r t h e r
meetings w i t h B r i t i s h M i n i s t e r s , on 13 A p r i l .
His l a t e s t suggestion, i n
the face of A r g e n t i n e p r e s s u r e , had been to amend the p r o v i s i o n f o r
negotiations on a l o n g - t e r m settlement to i n c l u d e a r e f e r e n c e to United
Nations G e n e r a l A s s e m b l y R e s o l u t i o n No 1514 ( X V ) , w h i c h c a l l e d f o r the
d e c o l o n i s a t i o n of dependent t e r r i t o r i e s and upheld both the p r i n c i p l e of
t e r r i t o r i a l i n t e g r i t y (which u n d e r l a y A r g e n t i n a ' s c l a i m to the F a l k l a n d s )
and the p r i n c i p l e of s e l f - d e t e r m i n a t i o n .
T h i s p o s s i b i l i t y was now being
studied.
I t was not yet c l e a r whether o v e r a l l a g r e e m e n t could be
reached.
A n y document embodying such agreement would c l e a r l y be
i n t e r p r e t e d d i f f e r e n t l y by B r i t a i n and A r g e n t i n a .
But the p r e s e n t
proposals had the m a j o r v i r t u e s of s e c u r i n g both A r g e n t i n e w i t h d r a w a l
and the maintenance of the i n f r a s t r u c t u r e of B r i t i s h a d m i n i s t r a t i o n .
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said t h a t the
United States was anxious to a v e r t a c o n f l i c t i n the South A t l a n t i c i n
which the Soviet U n i o n was a l r e a d y d a b b l i n g . A l l the evidence was that
the A r g e n t i n e s had m i s c a l c u l a t e d .
U n i t e d Nations S e c u r i t y C o u n c i l
R e s o l u t i o n No 502 and the European C o m m u n i t y i m p o r t embargo had
been heavy and unexpected b l o w s .
C o m m o n w e a l t h support f o r B r i t a i n
had been s t r o n g .
These p r e s s u r e s , together w i t h the B r i t i s h Task
F o r c e , had l e d t h e m to contemplate a negotiated settlement under which
A r g e n t i n e t r o o p s would be w i t h d r a w n . I t would be a r e m a r k a b l e
achievement i f t h i s could be brought about, at a t i m e when B r i t a i n ' s
m i l i t a r y p o s i t i o n was s t i l l weak.
Negotiations w e r e now at a v e r y
d e l i c a t e stage.
M r H a i g ' s next v i s i t to Busnos A i r e s would be c r u c i a l .
T H E S E C R E T A R Y OF S T A T E FOR D E F E N C E said that t h e r e w e r e no
A r g e n t i n e n a v a l v e s s e l s i n the M a r i t i m e E x c l u s i o n Zone ( M E Z ) although
the b u i l d - u p of forces on the Islands was c o n t i n u i n g . The A r g e n t i n e
propaganda m a c h i n e was a c t i v e , for example putting i t out that the a i r ­
f i e l d at P o r t Stanley had been extended to take M i r a g e a i r c r a f t .
B r i t i s h n u c l e a r - p r o p e l l e d submarines w e r e enforcing the M E Z . I f
A r g e n t i n e w a r s h i p s entered the M E Z , i t would be the c l e a r e s t sign that
they had abandoned the peace p r o c e s s .
The B r i t i s h T a s k F o r c e
continued on i t s way south; M r Haig had agreed that i t was r i g h t to add
to p r e s s u e on the A r g e n t i n i a n s i n t h i s way.
He h i m s e l f would announce
l a t e r that day the doubling of the n u m b e r of H a r r i e r s i n the Task F o r c e
and the adding of HMS I n t r e p i d to the amphibious c a p a b i l i t y .
Military
planning was proceeding on a w o r s t case b a s i s .
Argentine m i l i t a r y
d i f f i c u l t i e s should not be u n d e r e s t i m a t e d , notably i n supplying and
sustaining the m o r a l e of the forces on the Island d u r i n g the w i n t e r .
2
SECRET SECRET In d i s c u s s i o n t h e r e was g e n e r a l support f o r the manner i n w h i c h the d i s ­
cussions had been conducted, acceptance of the need f o r secrecy and
r e c o g n i t i o n that the best way f o r w a r d l a y i n d i p l o m a t i c and economic
p r e s s u r e s on A r g e n t i n a , backed by the T a s k F o r c e continuing on i t s way.
In P a r l i a m e n t i t should be made c l e a r that B r i t i s h p o l i c y a i m e d at the
s u p e r v i s e d w i t h d r a w a l of a l l f o r c e s f r o m the Islands and an i n t e r i m
p e r i o d of l o c a l a d m i n i s t r a t i o n leading to a f i n a l settlement i n w h i c h the
s t i c k i n g point f o r us would be that the wishes of the I s l a n d e r s w e r e
paramount.
In f u r t h e r d i s c u s s i o n the f o l l o w i n g points w e r e made ­
a.
A l t h o u g h at the t i m e of his f i r s t v i s i t M r Haig had t r i e d to
adopt a p o s i t i o n of s t r i c t n e u t r a l i t y , by the t i m e he l e f t he had
r e c o g n i s e d the i m p o r t a n t p r i n c i p l e w h i c h was at stake, n a m e l y
whether o r not naked a g g r e s s i o n should be a l l o w e d to succeed.
N e v e r t h e l e s s , although he understood our a r g u m e n t s , M r Haig
had to m a i n t a i n h i s p o s i t i o n as a go-between.
He had to avoid
any appearance of c o l l u s i o n w i t h B r i t a i n i f he was to c a r r y the
Argentinians.
b.
Whatever s o l u t i o n m i g h t emerge f r o m n e g o t i a t i o n , the
A r g e n t i n e s would present i t as some k i n d of v i c t o r y and as the
a t t a i n m e n t of at least p a r t of t h e i r objectives by m i l i t a r y means.
T h e i r c a l c u l a t i o n m i g h t be that they would need two bites of the
c h e r r y instead of one.
I t was v i t a l to p r e v e n t a second b i t e .
Continued United States i n v o l v e m e n t would be v e r y i m p o r t a n t i n
that context.
B r i t a i n had been the v i c t i m of u n p r o v o k e d a g g r e s s i o n .
It
c.
w o u l d not be r i g h t to accept that that had placed the A r g e n t i n e s i n
a better negotiating position.
The a g g r e s s o r m u s t not be
p e r m i t t e d to benefit f r o m his a g g r e s s i o n .
The w i d e r p r i n c i p l e
was even m o r e i m p o r t a n t than the fate of the I s l a n d e r s . I f
a g g r e s s i o n was shown to pay, i t would be a d i s a s t r o u s precedent
for the w o r l d as a whole.
A g a i n s t t h i s , i t was argued that the
s i t u a t i o n had to be dealt w i t h as i t existed.
B r i t a i n would need
the help of w o r l d opinion to get the A r g e n t i n e s to w i t h d r a w .
T h e r e was also a r i s k of l o s i n g the b r o a d support of B r i t i s h
public opinion i f a p u r e l y m i l i t a r y solution w e r e p u r s u e d and the
p r o s p e c t of a l l c o m p r o m i s e r u l e d out.
d.
I n any s e t t l e m e n t i t would be i m p o r t a n t to safeguard
B r i t i s h t i t l e to South G e o r g i a , the South Sandwich Islands and the
British Antarctic t e r r i t o r y .
A l e a s e - b a c k a r r a n g e m e n t f o r the
F a l k l a n d Islands m i g h t strengthen A r g e n t i n a ' s t e r r i t o r i a l c l a i m s
i n the A n t a r c t i c , w h i c h w e r e s e c t o r a l l y based.
3
SECRET SECRET e.
I t seemed p o s s i b l e that f i n a n c i a l sanctions against
A r g e n t i n a w e r e not being p r e s s e d to the f u l l f o r fear of
p r e c i p i t a t i n g her default.
T h i s was understandable f r o m the
point of v i e w of the banking c o m m u n i t y . B u t c a r e should be
taken that A r g e n t i n a was not f o r t h i s reason enabled to sustain
h e r p r e s e n t p o l i c y of a g g r e s s i o n m o r e e a s i l y .
f.
When the T a s k F o r c e was w i t h i n s t r i k i n g distance of the
F a l k l a n d I s l a n d s , an a i r e x c l u s i o n zone would be n e c e s s a r y as
p a r t of a blockade and as a p r e c o n d i t i o n to any assault.
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that a
d i p l o m a t i c s o l u t i o n on the l i n e s o u t l i n e d would be a c o n s i d e r a b l e p r i z e .
The w i t h d r a w a l of A r g e n t i n e forces would have been secured without
m i l i t a r y a c t i o n . A r g e n t i n a w o u l d gain r e p r e s e n t a t i o n on the i n t e r i m
C o m m i s s i o n and on the l o c a l C o u n c i l s ; and a c o m m i t m e n t to n e g o t i a ­
tions to decide the d e f i n i t i v e status of the Islands by the end of the y e a r ,
although without any c o m m i t m e n t to a t r a n s f e r of s o v e r e i g n t y .
Repug­
nant as i t was that the a g g r e s s o r should gain anything f r o m his
a g g r e s s i o n , t h i s seemed an acceptable p r i c e to pay.
B u t i t would be
c r u c i a l to ensure against a second i n v a s i o n and the best way of
achieving t h i s appeared to be to i n v o l v e the United States G o v e r n m e n t i n
the enforcement of the i n t e r i m agreement and i n the s e c u r i t y of the
Islands t h e r e a f t e r .
The
Cabinet -
Took note.
Cabinet Office
7 June 1982
4
SECRET Copy N o . /
o f 3 copies
SECRET
MOST C O N F I D E N T I A L RECORD TO CC(82) 19th CONCLUSIONS T h u r s d a y 22 A p r i l 1982 FALKLAND
ISLANDS
Previous
Reference:
CC(82) 18th
Conclusions
The Cabinet r e v i e w e d the state of the dispute over the Falkland I s l a n d s .
T H E S E C R E T A R Y OF S T A T E F O R D E F E N C E i n f o r m e d the Cabinet o f
the B r i t i s h f o r c e s deployed i n connection w i t h the c r i s i s and gave an
account of the p r e s e n t l o c a t i o n o f A r g e n t i n e naval f o r c e s .
No A r g e n t i n e
w a r s h i p s had so f a r entered the M a r i t i m e E x c l u s i o n Zone ( M E Z )
d e c l a r e d by the United K i n g d o m around the F a l k l a n d I s l a n d s .
A number
of m i l i t a r y options would be open to the G o v e r n m e n t i f efforts to reach a
peaceful s o l u t i o n f a i l e d .
I t would be p o s s i b l e , when the c a r r i e r borne
H a r r i e r a i r c r a f t reached the a r e a , to d e c l a r e an A i r Exclusion Zone,
i n a d d i t i o n to the M E Z . To make a blockade of the Islands effective,
i t would be n e c e s s a r y to render the a i r f i e l d at P o r t Stanley unusable.
The A r g e n t i n e g a r r i s o n was thought to have sufficient stocks f o r about
60 days, but the m o r a l e o f the young c o n s c r i p t s who c o m p r i s e d about
80 per cent of i t would be affected sooner.
Given a i r superiority,
B r i t i s h f o r c e s could successfully r e c o v e r the I s l a n d s , though the o p e r a t i o
w o u l d be d i f f i c u l t and r e q u i r e m o r e c o n s i d e r a t i o n before any d e c i s i o n was
taken.
The option to r e c o v e r the Islands m i l i t a r i l y would not always be
a v a i l a b l e since the d i f f i c u l t y of the o p e r a t i o n would i n c r e a s e i f i t w e r e
delayed.
Ships and t r o o p s had l i m i t e d endurance i n the h a r d conditions
o f the South A t l a n t i c w i n t e r .
I n d i s c u s s i o n the f o l l o w i n g points w e r e
raade:­
a.
Care should be taken to avoid a c t i o n o f w h i c h the
Americans might disapprove.
B u t the United States S e c r e t a r y
of State, M r H a i g , r e g a r d e d the application o f m i l i t a r y p r e s s u r e
as helpful i n b r i n g i n g the A r g e n t i n e Junta to make concessions.
A s a r e s u l t of P r e s s speculation, i t was w i d e l y b e l i e v e d that
B r i t i s h forces would soon retake South G e o r g i a .
Unless t h i s
w e r e done, i t would not be b e l i e v e d that the G o v e r n m e n t was i n
earnest.
The Island m i g h t be valuable as a s h e l t e r e d anchorage
for B r i t i s h ships
1-
SECRET
SECRET
b.
T h e r e r e m a i n e d a danger that m i l i t a r y a c t i o n such as
the o p e r a t i o n to retake South G e o r g i a , as opposed to m i l i t a r y
p r e s s u r e , m i g h t both reduce M r H a i g ' s influence i n Buenos
A i r e s and take some o f the i n t e r n a t i o n a l p r e s s u r e off the
Argentine Government.
The effect of the South G e o r g i a
o p e r a t i o n on M r H a i g ' s p o s i t i o n would depend on whether many
lives were lost.
F u r t h e r action of a m i l i t a r y nature, which
m i g h t p r e v e n t a negotiated settlement, should not be taken o v e r
the next few days, w h i l e the F o r e i g n and C o m m o n w e a l t h S e c r e t a r y
was i n Washington.
c.
I t was i m p o r t a n t to counter the A r g e n t i n e c l a i m , w h i c h
was m a n i f e s t l y u n t r u e , that i n taking t h e i r m i l i t a r y a c t i o n against
the F a l k l a n d Islands they had sought to a v o i d c a s u a l t i e s .
I t was
unfortunate that B r i t i s h t e l e v i s i o n r e p o r t s w e r e g i v i n g the
i m p r e s s i o n that the m o r a l e of the A r g e n t i n e g a r r i s o n was h i g h .
d.
R e p o r t s o f M r H a i g ' s discussions i n Buenos A i r e s had
shown the d i f f i c u l t y of dealing w i t h the A r g e n t i n e G o v e r n m e n t ;
m a j o r decisions i n v o l v e d some 50 people and could be vetoed by
Corps Commanders.
P r e s i d e n t G a l t i e r i was an a l c o h o l i c and
a p p a r e n t l y incapable of r a t i o n a l thought; h i s future as head of
the g o v e r n m e n t seemed doubtful.
The F o r e i g n M i n i s t e r ,
M r Costa Mendez, was w i t h o u t influence.
B u t i t was essential
that any f a i l u r e to secure a negotiated s e t t l e m e n t o c c u r r e d i n a
w a y that l e f t the U n i t e d States f i r m l y i n support of the United
Kingdom's position.
f.
Once the amphibious force had sailed f r o m A s c e n s i o n
I s l a n d , i t w o u l d be d i f f i c u l t p o l i t i c a l l y to t u r n i t back.
A decision
to i n s t r u c t the force to s a i l should o n l y be taken after c a r e f u l
c o n s i d e r a t i o n of the f u l l i m p l i c a t i o n s , i n c l u d i n g the p o s s i b i l i t y
o f i t s use to make an a s s a u l t landing on the I s l a n d s .
If military
a c t i o n became n e c e s s a r y , i t w o u l d be i m p o r t a n t to move q u i c k l y
i f the p r e s e n t l e v e l o f a l l - P a r t y support was to be m a i n t a i n e d .
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that a number
o f d i f f i c u l t decisions w o u l d be r e q u i r e d , often at s h o r t n o t i c e , d u r i n g the
forthcoming weeks.
The Defence and Oversea P o l i c y S u b - C o m m i t t e e on
the South A t l a n t i c and the F a l k l a n d Islands, under her C h a i r m a n s h i p ,
would r e m a i n i n d a y - t o - d a y charge; but i f possible the Cabinet would be
consulted before a d e c i s i o n was taken to m o u n t an a s s a u l t on the F a l k l a n d
Islands t h e m s e l v e s .
Meanwhile i t was of the highest i m p o r t a n c e to
m a i n t a i n complete s e c r e c y about possible o p e r a t i o n a l p l a n s .
The Cabinet Took note.
Cabinet Office
7 June 1982
-2­
SECRET
Copy No | of 3 Copies
MOST C O N F I D E N T I A L R E C O R D TO CC(82) 20th CONCLUSIONS
Wednesday 28 A p r i l 1982
FALKLAND
ISLANDS
Previous
Reference •
CC(82) 17th
Conclusions,
Minute 2
The Cabinet had before t h e m a Note by the S e c r e t a r y of the Cabinet
(C(82) 15) to w h i c h were attached d r a f t proposals f o r a settlement
t r a n s m i t t e d by the United States S e c r e t a r y of State, M r Haig, after
his m o s t recent v i s i t to A r g e n t i n a ; and f o r c o m p a r i s o n the e a r l i e r
draft agreed between h i m and B r i t i s h M i n i s t e r s the p r e v i o u s week.
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that the
latest proposals were i n a number of i m p o r t a n t respects less
s a t i s f a c t o r y than the e a r l i e r d r a f t .
The m i l i t a r y w i t h d r a w a l p r o ­
v i s i o n s were unbalanced; the i n t e r i m r e g i m e envisaged would
involve excessive A r g e n t i n e r e p r e s e n t a t i o n on the l o c a l Councils
and m i g h t allow m a s s i v e A r g e n t i n e i m m i g r a t i o n ; above a l l , the
a r r a n g e m e n t s f o r the longer t e r m were unacceptable since there
was i n s u f f i c i e n t prospect of s e l f - d e t e r m i n a t i o n .
Nevertheless i t
was i m p o r t a n t to t r y to m a i n t a i n the m o m e n t u m of M r H a i g ' s
attempt to secure a negotiated settlement, even though t h i s would
have the unwelcome side-effect of p r e v e n t i n g the United States
openly e n d o r s i n g B r i t a i n ' s cause.
Any a l t e r n a t i v e negotiating
p r o c e s s would be w o r s e f r o m B r i t a i n ' s point of v i e w .
He t h e r e ­
fore intended to put f o r w a r d c o u n t e r - p r o p o s a l s .
He was also
p r e p a r i n g a c o m m e n t a r y on the e x i s t i n g d r a f t w h i c h would expose
i t s weakness i f i t were ever published, w h i c h at present M r Haig
d i d not w i s h i t to be.
M e a n w h i l e , the steady m o v e m e n t of the
B r i t i s h T a s k F o r c e t o w a r d s the F a l k l a n d s should serve to
strengthen B r i t a i n ' s p o s i t i o n .
In d i s c u s s i o n , there was w i d e s p r e a d agreement that the l a t e s t
proposals would be seen as a s e l l - o u t of the I s l a n d e r s .
Whatever
t h e i r wishes, they would not be a l l o w e d to r e t a i n t h e i r present
status.
M o r e o v e r the A r g e n t i n e s c l e a r l y wanted to flood the
Islands w i t h i m m i g r a n t s , so that even i f there was a test of l o c a l
opinion they would s t i l l be able to take o v e r .
I t was a m a t t e r of
p a r t i c u l a r c o n c e r n that they wished to c o n t r o l the police force
d u r i n g the i n t e r i m p e r i o d .
N o r was there any safeguard against
a second A r g e n t i n e i n v a s i o n some t i m e i n the future when the
B r i t i s h T a s k F o r c e had gone away.
F o r that reason the United
States G o v e r n m e n t would need to be i n v o l v e d i n guaranteeing the
independence of the Islands and the s e c u r i t y of Stanley a i r f i e l d .
T h i s u n d e r l i n e d the i m p o r t a n c e of r e t a i n i n g A m e r i c a n g o o d w i l l at
the present stage.
1.
SECRET
SECRET I n d i s c u s s i o n of what would happen i f M r Haig's m i s s i o n f a i l e d , i t
was pointed out that the m o s t obvious next move would be at the
United Nations.
But action there would c a r r y w i t h i t c e r t a i n
dangers.
I t would not be possible to repeat the m a s s i v e support
for B r i t a i n w h i c h had produced the S e c u r i t y C o u n c i l ' s R e s o l u t i o n
No. 502.
I f h o s t i l i t i e s s t a r t e d , w o r l d opinion would v e r y l i k e l y
change and there would be a s e r i e s of hostile United Nations
r e s o l u t i o n s ; i t m i g h t be possible to p a r r y these for a short p e r i o d ,
but i n the end use of the B r i t i s h veto would be i n e v i t a b l e .
Pressur
would grow for B r i t a i n to r e f r a i n f r o m f u r t h e r h o s t i l i t i e s and she
would be t h r o w n on the defensive.
R e f e r r i n g the dispute to the
I n t e r n a t i o n a l C o u r t of Justice would be too r i s k y because the p o l i t i ­
c a l c o m p o s i t i o n of the C o u r t made success u n c e r t a i n , however
w a t e r t i g h t the objective l e g a l case.
I f a c a l l for i m m e d i a t e
r e f e r r a l to the I n t e r n a t i o n a l C o u r t were to be made, i t could
p r o b a b l y not be i g n o r e d ; but agreement to i t would have to be made
dependent on the p r i o r w i t h d r a w a l of A r g e n t i n e forces f r o m the
Islands.
The r e a l l y decisive f a c t o r , i f the Haig m i s s i o n collapsed
and no a l t e r n a t i v e could be found, would be the attitude of the
United States.
I f war was to be avoided, B r i t i s h p o l i c y would need
to command continued A m e r i c a n support.
B r i t i s h p o l i c y p r i o r to
the i n v a s i o n had been w i l l i n g to contemplate a lease-back a r r a n g e ­
ment of some k i n d .
T h i s m i g h t be held to weaken B r i t a i n ' s
p r e s e n t stand on s o v e r e i g n t y .
But i t had always been made c l e a r
that the a c c e p t a b i l i t y of any such plan would r e m a i n subject to the
wishes of the I s l a n d e r s .
In p r a c t i c a l t e r m s , a d m i n i s t r a t i o n
m a t t e r e d m o r e than sovereignty; but the i n v a s i o n had made the
p r o s p e c t s of a l e a s e - b a c k a r r a n g e m e n t much m o r e d i f f i c u l t .
I n f u r t h e r d i s c u s s i o n , the f o l l o w i n g points were made ­
a.
Although the A r g e n t i n e s sought sovereignty
over the F a l k l a n d Islands, South Georgia and the South
Sandwich Islands, the r o o t s of B r i t i s h t i t l e d i f f e r e d i n
each case.
I t would be i m p o r t a n t to m a i n t a i n the
d i s t i n c t i o n i n any future negotiation; and to p r e s e r v e
the p o s i t i o n of B r i t a i n ' s A n t a r c t i c T e r r i t o r y .
b.
I t was v i t a l to m o b i l i s e w o r l d opinion as
w i d e l y as possible against the i l l e g a l seizure of the
Falkland Islands.
Support f r o m Germany, Japan
and A u s t r a l i a would be p a r t i c u l a r l y valuable since
they had close l i n k s w i t h A r g e n t i n a .
c.
The other m e m b e r s of the European
C o m m u n i t y (EC) had so far shown a d m i r a b l e s o l i d a r i t y
with Britain.
But they d i d not want w a r .
They were
w o r r i e d by the spectre of Soviet i n v o l v e m e n t and by
d i v i s i o n and d i s u n i t y i n the n o n - C o m m u n i s t w o r l d .
2
SECRET SECRET T h e r e was also concern at the possible damage to
United States p r e s t i g e i f the Haig m i s s i o n f a i l e d .
The continuance of sanctions could not be taken f o r
granted; and some EC m e m b e r s were c o n s i d e r i n g
how to e x t r a c t t a c t i c a l advantage f r o m the present
situation.
d.
T h e r e were many stages s t i l l to be gone
t h r o u g h before the B r i t i s h Task F o r c e would be on
the scene.
P u b l i c opinion would expect m o r e f r o m
negotiations as i t approached.
The Opposition i n
P a r l i a m e n t were no less pledged to the p r i n c i p l e of
s e l f - d e t e r m i n a t i o n than the Government.
Maximum
m o r a l advantage should be sought f r o m A r g e n t i n a ' s
status as an a g g r e s s o r .
e.
The present A r g e n t i n e r e g i m e was v e r y elusive
to deal w i t h .
Power r e s i d e d at many l e v e l s . I t
m i g h t t h e r e f o r e take a v e r y long t i m e to achieve a
negotiated settlement w h i c h would s t i c k .
But the t i m e
a c t u a l l y available f o r negotiation was l i m i t e d .
Once
the B r i t i s h T a s k F o r c e reached the F a l k l a n d s a r e a
i t could not be kept w a i t i n g .
M i l i t a r y action would
become unavoidable.
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that
m a x i m u m d i p l o m a t i c , economic and m i l i t a r y p r e s s u r e would need
to be e x e r t e d i f the A r g e n t i n e Government were to be brought to
agree to a reasonable settlement.
The F o r e i g n and Commonwealth
S e c r e t a r y would be v i s i t i n g Washington on 22 A p r i l to discuss those
aspects of the present d r a f t w h i c h were unacceptable to B r i t a i n .
Meanwhile i t was i m p o r t a n t to p r e s e r v e the c o n f i d e n t i a l i t y of the
d r a f t p r o p o s a l s , and c o m m e n t should be kept to a m i n i m u m .
She
would a r r a n g e f o r the P r e s s to be t o l d that the Cabinet had taken
stock of the present p o s i t i o n , p a r t i c u l a r l y i n the l i g h t of the latest
proposals c o m m u n i c a t e d by M r H a i g .
The Cabinet Took note.
Cabinet Office
7 June 1982
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o f 3 copies
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MOST C O N F I D E N T I A L RECORD
TO
CC(82) 42nd Conclusions, Minute 2
T h u r s d a y 30 September 1982 at 10. 00 a m
CHINA
T H E P R I M E M I N I S T E R , r e p o r t i n g on h e r r e c e n t v i s i t to China, said
that the second o f her two days o f t a l k s w i t h the Chinese P r e m i e r
Zhao Z i y a n g had been on the future o f Hong Kong. She had a l s o had
a t a l k on the same subject w i t h the V i c e - C h a i r m a n of the C e n t r a l
C o m m i t t e e of the Chinese C o m m u n i s t P a r t y , Deng X i a o p i n g . When
allowance was made for t r a n s l a t i o n , the t i m e spent on substantive
d i s c u s s i o n came down to less than two h o u r s .
I t was i m p o s s i b l e i n
so short a t i m e to move far towards a g r e e m e n t : and e s s e n t i a l l y both
sides had outlined t h e i r opening p o s i t i o n .
The Chinese G o v e r n m e n t ' s
p o s i t i o n was that they wanted to assume c o n t r o l over the whole Colony
when the lease o f the New T e r r i t o r i e s e x p i r e d i n 1997.
She had
explained that the B r i t i s h p o s i t i o n was that the three t r e a t i e s governing
the status of Hong Kong r e m a i n e d v a l i d and could not be u n i l a t e r a l l y
abrogated.
B u t i f the Chinese w o u l d accept the continuation of B r i t i s h
a d m i n i s t r a t i o n over the whole of Hong Kong i t m i g h t be possible for the
B r i t i s h G o v e r n m e n t to consider r e c o m m e n d i n g to P a r l i a m e n t that
sovereignty should be ceded to China.
H a v i n g no understanding of how a
free society w o r k e d , the Chinese l e a d e r s h i p f a i l e d to grasp that public
assurances that l i f e i n Hong Kong under the c o n t r o l of a C o m m u n i s t
G o v e r n m e n t could go on as before would be i n s u f f i c i e n t to m a i n t a i n
c o m m e r c i a l confidence; and that this was dependent on the continuation
of a B r i t i s h a d m i n i s t r a t i o n .
Given this difference o f view, the c e n t r a l
feature of the communique had been the statement that both sides wanted
to assure the s t a b i l i t y and p r o s p e r i t y of Hong Kong and w e r e p r e p a r e d
to enter into talks on how to achieve this c o m m o n a i m .
The t a l k s , w h i c h
would now begin through d i p l o m a t i c channels, would be d i f f i c u l t : the
p r o b l e m w o u l d be to persuade the Chinese that the c o m m e r c i a l p r o s p e r i t y
of Hong Kong, w h i c h i t was an i m p o r t a n t Chinese i n t e r e s t to m a i n t a i n ,
could not continue w i t h o u t B r i t i s h a d m i n i s t r a t i o n .
On balance, she
thought that an a c c o m m o d a t i o n should be achievable.
H e r own t a l k s
w i t h the Chinese l e a d e r s h i p , although tough, had not been a c r i m o n i o u s ;
and the statement i n the communique that they had been conducted i n a
f r i e n d l y atmosphere had been i n s e r t e d on Chinese i n i t i a t i v e .
I t was
i n e v i t a b l e that her v i s i t to China had aroused hopes i n Hong Kong for an
e a r l y r e s o l u t i o n o f the p r o b l e m w h i c h could not be satisfied, but she was
hopeful that the t e r m s of the communique would be sufficient to sustain
confidence f o r the m o m e n t .
A c r i t i c a l point w o u l d be reached i n 198 5,
since a l l Hong Kong mortgages w e r e f o r a t e r m of 12 y e a r s .
Agreement
w i t h China consequently needed to be reached w i t h i n the next two to three
years.
The u n i v e r s a l c o n c e r n f o r the future f e l t i n Hong Kong was
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understandable: 5-| m i l l i o n people there had escaped f r o m c o m m u n i s m i n
China, and B r i t a i n had absolute r e s p o n s i b i l i t y f o r t h e m .
I n this
connection account should be taken o f the anxieties f e l t i n the Colony on
the n a t i o n a l i t y question.
T h i s was one of the subjects w h i c h would have
to be covered i n the discussions w i t h the Chinese G o v e r n m e n t .
Meanwhile
the fact that under the 1981 N a t i o n a l i t y A c t c i t i z e n s o f Hong Kong would
no l o n g e r be d e s c r i b e d as B r i t i s h subjects was a cause of p a r t i c u l a r
concern i n the Colony and should be r e - e x a m i n e d .
In c a r r y i n g out this
r e - e x a m i n a t i o n the r i s k of appearing to confer on Hong Kong c i t i z e n s some
r e s i d u a l , m o r a l r i g h t of access to the United K i n g d o m would have to be
c a r e f u l l y weighed against B r i t a i n ' s o b l i g a t i o n to the people o f Hong Kong
and the need to m a i n t a i n t h e i r confidence.
The Cabinet Took Note.
Cabinet Office
1 October 1982
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