Sec.36/2321/51 CONFIDENTIAL.
N0:148
12 740
GOVERNMENT HOUSE,
HONG KONG.
22 December, 1951.
(4)
Sir,
I have the honour to inform you that I have for some time been considering the establishment in this Colony of some form of Reserve Fund, which would have the effect of cushioning the shock which might be occasioned to the financial position of the Colony by a sudden depression such as that which occurred in the thirties. You will recollect that the position at that time was such that in 1936 it was necessary drastically to curtail public services and even to impose a levy on the salaries of civil servants in order to balance expenditure against revenue.
Copy out /30037/51
2.
Any such course of action must now, I feel, be regarded as highly undesirable, but any sudden crisis would still under present circumstances have to be met by reductions in establishment, and in expenditure on items other than personal emoluments; and by increased taxation. Such measures might on the one hand prove in the event to have been quite unnecessary, as the duration of the crisis might have been over-estimated; and on the other hand might prove inadequate, or too late, to forestall a deficit on the year's working, with consequent injury to the Colony's credit despite the existence of a substantial General Revenue Balance.
3. The problem seems to me to have been solved by the Government of Nigeria with its Revenue Equalization Fund, a memorandum on which was forwarded under cover of your Note No.284 of the 16th October,1951, and I request your approval for the inauguration of a similar fund for this Colony.
4.
I propose that the aim should be to bring the balance of such a fund up to a figure representing approximately three years' revenue, and that an initial contribution of $100,000,000 should be made by transfer from the General Revenue Balance, a figure which will represent less than half the total of that balance as estimated for the end of the current financial year, and will leave an adequate amount for current purposes. Contributions from revenue would thereafter be budgetted for annually.
5.
I also propose to transfer to the Revenue Equalization Fund the balance standing to the credit of the Waterworks Renewals and Improvements Fund. Due to the loss of pre-war records, the reasons for the establishment of this fund are far from clear, and the mode of reckoning of the amount of the annual contribution from revenue has been the Lee
subject of numerous queries from the Director of Audit during the past few years. It appears to me that with a 126/19/1/ Development Fund already established and with a Revenue
Equalization Fund established as well, the continued existence of a Waterworks Renewals and Improvements Fund would be an anachronism. I propose also to pursue no further the suggestion for the establishment of a Railway Renewals Fund, provision of $250,000 for which was made under Head 14, sub-head 7 of the current estimates.
"GISTRAR'S "EFIC 31 DEC 1951
COLONIAL OFFI
The Right Honourable
Oliver Lyttelton, D.S.0.,M.C.,M.P.