CO537-1651 — Page 19

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On the purely financial points, I agree generally with the proposals and have only three comments :-

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I would emphasise again the importance of giving any municipality genuine financial responsibility within its allocated functions

Paragraph 34 No.69 reference to "the requestte assent of the Legislature in the case of new taxation". If this means that the authority of the Legislature will be necessary before the Municipality embarks on a new field of taxation not allotted to it in the first instance, that is all right; but if it means, as it could mean, that the Municipality cannot increase the rates of existing taxation within its allotted field, I think that is in complete conflict with the fundamental principle of genuine financial responsibility. I suggest that the ambiguity should be cleared up, and that it be made clear that the Municipal Council will be able to vary the rates of taxation in accordance with its own estimate of its needs.

I sould let them have commercial auditors if they want them.

I accept Mr. Lloyd's invitation to comment on the non-financial aspects. In my minute of the 27th September, 1945, I remarked that this was a rather curious experiment in local Government, since the locality to been was practically co-extensive with the whole Colony, and what was really being set I up was a form of diarchy. Although the area of the

Municipality has now been reduced, this comment is still in the main valid, because it will still include very much the greater part of the population and all the really important part of the Colony. My doubts as to the wisdom of the whole project, therefore, remain, and are much strengthened by the Governor's observations in No.70, which make clear that there is only the most lukewarm acquiescence in the project among the general public in the Colony, and no real demand for it at all. It seems to me that we are in danger of either on the one hand setting up a kind of alternative Government in the Colony, or, on the other, setting up something which will be, and will appear to be, a sham, in order to avoid introducing an element of greater democracy into the real Government of the territory. I doubt very much whether in the circumstances of Hong Kong this device will give the. kind of training in self-government which we desire, or at least whether it will give a better training than a fuller participation in the Government of the whole Colony. I confess, therefore, that my own inclination would be quite definitely to drop the Municipality scheme and to go for a greater democratisation of the Colonial Government itself. I am naturally commenting with only a very distant acquaintance with the current political situation, but I should hazard the guess that that course would be no more dangerous from the political point of view than setting up an independent scumption of Government which could perhaps even more easily become the focus of anti-British agitation.

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