I quite agree.
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also persuaded the Treasury (making it clear, of course, that our recommendations are subject to the approval of higher authority here) that in the circumstances of Hong Kong, while local contributions towards development must be encouraged within reason, the conception of Development with a capital D, if pursued too far,
can become positively dangerous. The reasons for this view are set out in the draft despatch, and I need not say much about them here, save to express my own conviction (which is shared by Mr. Harding) that in the circumstances of Hong Kong the development theme can easily be overplayed. There is no quarrel, of course, with the thesis that Hong Kong should take all possible steps to increase revenue. We and the Treasury are entirely at one on this point, as will be shown in the draft despatch which we hope shortly to submit on Hong Kong finances per se. There is a very great danger, however, that by telling Hong Kong to do different and contradictory things with her surplus, we may be advocating what is in fact sheer financial folly both from the budgetary and the inflationary point of view. It is perfectly true Hong Kong, in the last full fiscal year, managed to build up a surplus of over $30 millions. is also probable, particularly if we succeed in persuading Hong Kong to increase taxation and bring in further revenue, e.g., by State Lottery, that there may be another substantial surplus this year.
Hong Kong, however, is starting from nothing, and even at this rate surpluses will still not be at a healthy level for another year or two. As against this, there is an unknown commitment, possibly amounting to about $16 millions, in respect of Denial Claims, and another probable commitment of about half that amount in respect
that
It
of equipping the local forces. Needless to say,
it is H.M.G. who will be pressing Hong Kong to meet these commitments. There is thus a real
11
danger that .M.G. may be endeavouring to persuade Hong Kong, at one and the same time,to spend her surpluses on meeting Denial Claims and equipping her local forces, to spend her surpluses
on vast schemes of development (which can only encourage more people to come in from China and
thereby aggravate the very problem it is designed to solve), and to keep her surpluses for the purpose of building up large reserves against hard times. I hope I have said enough to make to clear that a good deal of sanity, or of putting first things first (as Mr. Sidebotham has described it), is required in considering this matter!
It has been
I am
5. The draft despatch is now submitted. agreed
eonsidered, incidentally, that it would not be wise to put forward the Treasury suggestion of a local Development Corporation, at least so long as there is any question of interesting the Colonial Development Corporation in Hong Kong affairs. not passing the papers through Mr. K.E. Robinson since, as I have explained above, we are not really concerned at this juncture with a Development Plan at all. He should, however, see the papers after action and when the real Development Plan comes in, early stage.
he should of course, be consulted at an
MOT.B
29th June
June, 1948,