HWB 21/5
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CONFIDENTIAL
31 October, 1967.
79
Hong Kong Tunnel
In your letter reference SL/CW 24126/35 Pt. 3 of 5 October you raised various queries about the Governor's need to consult the Legislative Council over the security you require for the Government's guarantee.
2. Letters Patent issued for Hong Kong provide that the Governor legislates "with the advice and consent of the Legislative Council. The Legislative Council is accordingly the Colony's sole taxing and spending authority so that acceptance of the liability envisaged in the present proposals must be with the Council's consent. The first step must be to put the proposals before the Standing Finance Committee of the Legislative Council; if the Committee agrees, a resolution will then be moved in the Legislative Council seeking the Council's approval of the proposals in general terms.
3. The Governor could not conceal any details of the proposals from the Standing Finance Committee; it would be necessary to explain in full the nature of the guarantee and the requirement that it is secured on London assets of the Hong Kong Government. Since the terms now proposed are likely to encounter some opposition, there is sure to be debate on the resolution before the Legislative Council; the details of the guarantee are just the matters to which the opposition will give a thorough airing.
4. If the Hong Kong Government are to guarantee a loan, it would be perfectly normal and excite no comment for the Hong Kong Government to give a guarantee secured against its general assets and revenues. The political risk which is as totally unacceptable to H.M.G. as it is to the Hong Kong Government lies not in the fact that the Hong Kong Government must give a guarantee but in the demand that the guarantee should be enforceable against its London assets and that these assets should be adequately maintained for the purpose. The implication that would immediately be read into this requirement is that H.H.G. reckons that the Colony's only worthwhile assets are those which are held in London, The impact of this on confidence in and outside Hong Kong would be shattering; the whole purpose of the exercise would be lost.
5.
We therefore welcome your alternative proposal involving promissory notes. The arrangement could equally attract publicity but it is not susceptible of the dangerous inferences which must put the previous sugestion out of court. The Hong Kong Government
R.A. DICKINSON, ESQ., C.M.G.
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CONFIDENTIAL
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