13
(a)
(b)
to confirm that expenses in connection with the first 5 already in this country should be borne by Hong Kong Government funds
to agree to the award of a further 5
scholarships already recommended, again on the understanding that the expenses would be borne by Hong Kong funds.
4. The only reply we have had to that despatch is the Governor's telegram at No.4 on this file, in which he asks that an application be made for the cost to be met from C.D. & W. Funds. We have interpreted that request to refer to the further 5 which have been recommended but not yet awarded, and have assumed that the Governor has agreed to accept as a charge on the Colony's revenue all expenses in connection with the 5 students who are already over here. We have also assumed for the purposes of the C. D. & W. application at No. 12, which has now been approved, that the Governor was referring in No.4 to the Colony's C. D. & W. allocation, and not to central funds. I am not myself
convinced that these two assumptions are entirely justified, and feel that we must clear these two points up with Hong Kong.
5. There is the further difficulty about income tax. I see that in para. 6 of the C.D. & W. application at No. 12 we say that, if the Board of Inland Revenue maintain that the standard allowance must be regarded as liable to U.K. Income Tax, it will be necessary to consider raising the allowance to take this factor into account. In this connection I draw attention to Mr. Mayle's minute of 5th September on the 1946 papers. If this principle is adopted, and Hong Kong do in fact agree to accept all charges in connection with the first batch, then presumably we should have to ask Hong Kong to increase their
contributions