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financing any project and then, with reference to the undesirability of constructing the new reservoir in the New Territories (the lease of which from China expires in 1998), asked him to consider and give his views on two specific points:-
(a)
(b)
whether pursuit of an alternative scheme
on Hong Kong Island might not go at
least far enough to ensure that the Island could be self-supporting, even though Kowloon were to remain depen ent on the New Territories, and
whether the Island scheme could not perhaps be combined with a modified Tai Lam Chung scheme.
(Important minutes leading up to the issue of (11) end with Sir Charles Jeffries' minute of 15/10).
3. In (16) the Governor answers both points.
Briefly, he says that the Island scheme (likely in any case to be comparatively more expensive than the Tai Lam Chung scheme) would not be adequate for the Island (which would still have to draw considerable ad itional supplies from the Mainland) and would of course not help Kowloon at all. would it be possible to modify the main initial cons.ructional requirements of the Tai Lam Chung- scheme so as to reduce expenditure on that, thereby making it possible to eke out the Island scheme by a modified Tai Lam Chung scheme.
Nor
4. I think the Governor has made his case for Tai Lam Chung and we are driven back to the hard fact enunciated in the last sentence of paragraph 5 of (1) "in the event of the return of the New Territories to China, some arrangement about water supply will in any case" (i. e. whether the Tai Lam Chung scheme is pursued or not) "have to be made if the Colony is to survive".
5. If it is now agreed that we should accept the desirability of pursuing the Tai Lam Chung scheme, we have to tell the Governor so, and we also to have to give him what advice we can about financing the scheme. That advice is extremely gloomy and, except on one point, is already crystallized in the draft despatch behind (9) - viz. loan on London market can only be considered as a last resort; G.D. & W. assistance not available; C.D.C. not interested; reliance must therefore be on local resources, a small fraction from revenue perhaps, most from loan. And here we come to the important point on which we have not yet got Treasury agreement to say what we want to say to Hong Kong - viz. that Hong Kong may issue future loans in the form of bearer bonds (for exchange control reasons, the Treasury don't like this.) In (17) Mr. Bourdillon has told the Treasury that we see no alternative to allowing Hong Kong to raise further loans in the form of bearer bonds.
We