12
Mr. Paskin.
1. Approval of Hong Kong's 1948/49 Estimates was given by telegram in (14), which promised a despatch to follow. A draft of this despatch for Treasury conson, is submitted herewith. It has been agreed in discussion with Mr. Bourdillon. There is also a draft covering letter to Mr. Bancroft of the Treasury.
2. I will not repeat in minutes what is set out in the despatch. It will be seen that both in our telegram approving the Estimates (14) and in a despatch of a few days later on C.D & W.
Oft. on 54403/4818 proposals (copy at 18) we stressed the importance
The
of increasing revenue and led Hong Kong to believe that we should have something to say about this in the despatch we are now proposing. As it turns out this despatch must be rather a damp squib. Governor in a reply to (14) at (16) tells us why there is objection to certain specific taxation measures suggested by us in (14) and also why there is a general objection to additional taxation at the moment. He also suggests a state lottery as the answer. Unfortunately this idea, which had been thought of and discussed here, had just been turned down (see minutes culminating in Secretary of State's minute of 5/7). So we are left with nothing to say to Hong Kong but what appears in paragraphs 4, 6 and 7 of the draft.
3. This is very considerably less than the Treasury, in the earlier stages of our discussions of the Estimates and Hong Kong's finances gener ally, would have wished (see (15) and original draft of the telegram approving the Estimates behind (14).) But it follows logically from the new approach which Sir Sidney Caine initiated in his minute of 6/7 and his draft of 14 (which was the telegram which went). Sir S. Caine has minuted that Mr. Pitblado agreed orally to (14). But I shall be surprised if Mr. Bancroft does not try to make us stiffen the terms of this despatch. If he does,
I consider we should be very firm. Even if we shared the Treasury's suspicions of everything that comes from Hong Kong we should still be wrong tactically to press the Governor any more now to introduce additional taxation. He has given reasons why this and that can't be done, he has told us why any taxation at the moment would give rise to violent political opposition, he has suggested an alternative method of raising money, and we have turned it down. If we go on nagging now about increasing taxation we lay ourselves open to the old charge that Whitehall cannot distinguish between theory and reality, between conditions as they ought to be an a community which does all the things the Treasury would like it to do and conditions in an Oriental community with an unsurpassed ability for avoiding taxation. Indeed
I am afraid that the methods by which Treasury control over Hong Kong has been exercised during the last year or two have stultified themselves by breeding annoyance untempered by the respect which comes from the feeling that your controller know s better than you do.
4.