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desirable to provide some means of terminating the associati on by agreement in case at some future time a better arrangement, such as union with a neighbouring state, became possible.
13. One way of doing this would be to embody the arrangement in a formal agreement, to which, as is already done in the case of Protected States, the constitution of the territory could be annexed. The agreement would provide for Britain to retain under her direct control defence, the conduct of external affairs and such other functions as might be agreed. Once made, the agreement could only be amended by mutual consent. It could of course provide for amendments within a defined area of the constitution to be made by the local legislature and without further consultations with us. But it would not be open to either party to amend the 'basic clauses' of the constitution, or to terminate the agreement, unilaterally. Independence would not be ruled out: it would merely require our agreement.
14. The other main problen in such a relationship would be the list of powers to be retained by the British Government, and the corresponding restrictions upon the local government's autonomy. The details of the arrangement would have to be worked out separately in each case, but the following general principles are suggested. 15. A main aim should be simplicity since the territories we have in mind are smell and rather unsophisticated. The fields in which we shall be mainly interested are defence, external affairs, finance, expatriate staff and in a few cases internal security. (i) Defence and external affairs. So far as these are concerned we should no doubt require, as in the Associated States, legislative powers (though there would probably be no need for the limited delegation of authority in the external affairs sphere that we have made in the Associated States).
(ii) Finance. To retain direct control of finance we should
require similar legislative powers, cxtensive executive porers and machinery, and a detailed demarcation of our responsibilities and those of the local government. Such a systen would make inpossible demands on both sides. The natter would only arise in territories that are dependent on budgetary aid and there seems no reason why the model of the block grant system now in force in those of the Associated States which are grant-aided should not be followed. Under that system, the sanction against financial irresponsibility would be a reduction in the grant for the next
/period.
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