5
which happen to be in our favour. In any case I think we should tell Hong Kong to consider the advisability of paying all future land sale revenue into a separate fund which should be used
as far as possible for the purcose of making investments and should only be drawn upon (by means of specific transfers) for purposes of general revenue when the ordinary revenue of the Colony is not sufficient.
To sum up:
21
1) On the treatment of profits on securities we have a strong case and should not give way;
on the land sales point we have a good case on merits for symoathetic consideration but are very weak technically;
༢། on the question of allowance for capital expenditure on waterworks we are very strong technically, but quite possibly wrong on the merits; 4) on the main waterworks question we are
weak technically and not too strong on the merits;
51 on Ordinance 14 of 1927 we have very little case on the merits but happen to be
"in possession".
The next step is one of tactics.
There seem to be 3 courses:
(a) we can abandon some of our claims, where
we are weakest and concentrate on the rest;
(b) we
can plainly offer to do a deal to reach settlement (giving up, say, 4 and 5 for concessions, total or partial on 1, 2 and 3);
(c) we can propose arbitration. Possibly this might he linked up with the Mauritius
correspondence