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assistance. Subsequent to the financial settlement referred to above there has been a change from "control" to "consultation". In these circumstances, you will no doubt agree that any discussion of difficulties and delays which may have occurred in the past would be academic. The speed with which the recent increases in the cost of living allowances were approved are, I think, proof of our desire that con- sultation should not involve any unnecessary delay. The increases in the cost of living allowance were, of course, more than a mere periodical review and constituted an important change in the staff emoluments and reference Home was necessary, apart from any question of "consultation", because of the possible repercussions on employees of Service and other Departments of His Majesty's Government in Hong Kong; that was clearly quite unavoidable in the circumstances.
40 On the matter of local loans we agree that the potentialities of local investments can best be judged by those on the spot, but there are questions of exchange control and other aspects of the matter which inevitably present difficulties outside Hong Kong and therefore necessitate consideration at this end. we have been considering the question of further local borrowing referred to in para. 9 of your telegram No. 173 and hope to let you have a reply in the near future. The suggestion that Hong Kong should borrow from the Currency Fund was not agreed to when it was considered in 1947 (see paragraph 4 of the Secretary of State's telegram No. 1492 of the 17th September, 1947). We are however looking into the question again to see whether the objection to such borrowing still holds good and will let you know the outcome as soon as possible.
Ужи
sm.
(J.B. Sidebotham)