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on the year's working and would bring the Colony's real cash reserves to the high figure of about $139 million. My own feeling is that, unless something catastrophic happens in the Far East the surplus is likely to be more than $60 million, particularly if the economy drive on departmental expenditure goes well.
6. Be this as it may however the Governor, basing himself on a possible $60 million surplus, prefers not to create a paper deficit as large as $15 million this year by setting off the whole of the $59 million Rehabilitation Loan expenditure but rather to aim at only a small deficit of $6 million by setting off only $50 million of the Rehabilitation Loan expenditure. It seems clear from (21) that in fact the Governor hopes that by setting off only $50 million of the Rehabilitation Loan expenditure it may still be possible to show a small surplus on the year and if this seems likely to occur both he and Finance Committee would agree to setting off a portion of the $9 million Rehabilitation Loan expenditure which would still remaint. be cleared.
7. The proposal to set off $50 million of the Rehabilitation Loan expenditure pretty well meets our wish that the finances of the Colony should be presented in a realistic way and I do not think we can quarrel with it even though it seems rather unnecessary to leave such a comparatively small amount outstanding. Moreover it might well have been useful to us in our attempts to persuade Hong Kong to increase income tax if a deficit (even though a rather fictitious one) had been shown on the year's working. However in all the circumstances I think it is clear that we should approve the supplementary provision of $49,887,461 for which the Governor asks in (21). I attch a brief draft reply to (21).
8. Various projects for which provision of $112,539 had been made under the Rehabilitation Loan but which have now been completed are to be allowed to lapse from the loan schedule; this with the setting off of expenditure totalling $49,887,461 against revenue produces a $50 million reduction in authorised Rehabilitation Loan expenditure and necessitates the revision of the loan schedule to provide for only $100 million expenditure (the loan was originally for $150,000,000). Appendix A to (21) shows the particular items which are being charged off to expenditure and Appendix 'B' is the revised loan schedule which now replaces that on pp 102-3 of the 1950/51 Estimates (see enclosure to (14)). Further amendments to the schedule will be needed in due course if, as seems inevitable, the remainder of the actual loan expenditure over and above $50 million is eventually charged off.
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24.11.50.
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