4
The C.-in-C. himself suggests that $19 millions of expenditure coming within the course of the current year would embely be financed from loan funds and the raising of loans locally will assist in helping to combat inflation. There was no Post Office Savings Bank in Hong Kong prior to the war and there was no issue of Savings Certificates. The Civil Administration should, I think, be asked to consider both these methods of raising loans from the smaller income groups.
In addition, consideration should be given to raising local dollar loans of varying periods.
It is for consideration whether, in view of the many problems involved in putting the finances of Hong Kong on a sound basis, the Financial Secretary (Mr Followes) should not be invited to come home to discuss this matter in the same way as Brigadier Godsall came home from Malaya to discuss Malayan finances.
There are various other questions raised in this telegram. Reference is made to the difficulty of re-establishing the social services locally and it also puts forward the suggestion that it will be necessary to employ fewer Europeans and more Chinese in technical posts in future. These are matters which are hardly suitable for this discussion in connection with the estimates and we shall have to suggest to Hong Kong that they are dealt with in separate communications. Possibly some help might be obtained from the Development and Welfare Vote to assist in re-establishing the Social Services.
There is also the question of the form of Treasury control over the finances of Hong Kong which we shall have to accept until such time as Hong Kong is financially self-supporting. At the present time the control does not amount to much more than a general understanding that we will secure Treasury agreement to any particular class of fresh expenditure. This form of control to my mind, is as effective as
more detailed control, I imagine, only be agreed to by the Treasury as long as the assistance by H.M.G. has been provided on the Vote of Credit. Now that provision is made as from the 1st April on the Colonial and Middle Eastern Services Vote under Sub-Head F.1. Treasury may wish to insist upon a more detailed form of control. However, we can possibly leave them to raise this question, but this point and the others referred to above would seem to suggest that it would be advisable to have a preliminary discussion with the Treasury on Hong Kong finances generally before a reply is sent to No. 7 on this file.
Bremen
17/4.
Mr. J. B. Williams
I think you will like to see the telegram at (7) and Mr. Palmer's exhaustive minute above. I very much endorse the suggestion that Mr. Followes should, if possible, come home and discuss the financial position of Hong Kong here. I also entirely agree with the suggested means of increasing revenue through increased duties on liquor and tobacco, (and I would add "other non-essentials") and income tax at higher rates than those previously
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