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No. 7 on the financial background, is very relevant, n particular, the psychological effect on the unofficial members of the Legislative Council of their feeling that H.M.G. has been niggardly and dilatory in the extreme in the matter of what they regard as the financial responsibilities of H.M.C. in respect of war-time expenditure, and claims arising from "denial". It is against this psychological background that we have so far encountered a solid resistance to our exhortations to increase taxation in Hong Kong. My own personal view has all along beer that the Hong Kong attitude has been
keto unreasonable. On the one hand, Hong Kong has been passing through a period of unprecedented prosperity owing solely to the fact that, by virtue of its British connection and British Administration, it has remained an oasis of security, and the rule of law, in the post-war chaos of China. On the other hand, Hong Kong has looked to this over-taxed and over-burdened country for financial assistance to make good a substantial part of its war losses, which it is in a position to undertake for itself.
6. But the fact that it is possible to hold this view (I am not sure that it is shared even by everyone concerned in this Office) does not alter the stubborn fact that a contrary view is held by the unofficial business community in Hong Kong, and that this is undoubtedly a serious psychological obstacle to our exhortations that they should tax themselves more heavily.
7 As to what our next step should be, I am in two minds. One course would be to send a reasoned despatch (or possibly, better, a semi- official letter) to the Governor. This will no doubt have to be done in due course; but I am myself disposed to postpone that step until we have had an opportunity of discussing the position fully with Mr. Nicol, the Colonial Secretary who is shortly coming on leave. In this matter, a discussion with Mr. Nicol might be particularly useful in that he went himself to Hong Kong as a new-comer last summer, and will have seen
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