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No. 36.

C. 84556/31 [No. 41.]

Letter from the Treasury to the Colonial Office.

(S. 36220.)

SIR,

TREASURY CHAMBERS,

28th April, 1931.

I have laid before the Lords Commissioners of His Majesty's Treasury Mr. Ellis' letter of the 31st March, 1931,* and subse- quent semi-official correspondence, on the subject of the recent hurricane in Mauritius, and the financial position of that Colony; and They direct me to request you to convey to the Secretary of State for the Colonies the following observations.

2. The position, as My Lords understand it, is as follows:-

It is stated that the hurricane has caused damage to Gov- ernment property, estimated at Rs.1,100,000, and to sugar estates and crops, estimated at Rs.9,050,000 Owing to the long period of depression, the resources of the sugar industry in the Island are exhausted, and assistance from the Colonial Government, in the form of long-term loans, will be essential if the industry is to be carried on, and if widespread distress, which would involve the Colonial Government in considerable expenditure on relief works and a considerable loss of revenue, is to be avoided. Owing to the deterioration of its financial position, and the exhaustion of its reserves, the Colony is not in a position either to pay for the repair and replacement of its own damaged properties or to provide assistance to the sugar industry unless it can raise a loan for the purpose; and its present and prospective Budget deficits preclude the possi- bility of advantage being taken of the Colonial Stock Acts.

3. The Secretary of State proposes that, subject to the necessary statutory authority being obtained, the Colony should raise a loan with a guarantee by His Majesty's Government of the interest and sinking fund payments. He considers that the loan should be for a sum large enough to provide also for financing the com- pletion of certain public works on which the Colony has embarked, and on which it has already expended large sums. Lord Passfield

is not able to suggest, without reference to the Governor, what the precise amount of the loan should be, but he thinks it might have to be for approximately £1,000,000.

4. Subject to the conditions set out below, with which, it is understood, the Secretary of State concurs generally, and to the necessary statutory authority being obtained, My Lords are pre- pared to agree that the Colony should raise a loan for the mentioned above with a girantee by His Majesty's Government purposes of the interest and sinking fund payments.

• No. 31.

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5. The conditions referred to are as follows:-

(a) The Colony will be required to make provision to the satisfaction of the Secretary of State and the Treasury on the lines of subsection (2) of section 1 of the Palestine and East Africa Loans Act, 1926.

(b) The Colony will be expected to make every effort to secure and maintain a balanced Budget, and to build up as soon as practicable a Reserve Fund, suitably safeguarded for use only in times of distress, and of such an amount as might be expected to render unnecessary further appeals for the assistance of His Majesty's Government in the event of hurri- cane or other calamities in the future. For the purpose of advising on measures to achieve this object, a Financial Com- mission, appointed by the Secretary of State, with the con- currence of the Treasury, at the expense of the Colonial Gov- ernment, will be sent to the Colony as soon as practicable.

(c) Loans by the Colonial Government to companies and other private concerns engaged in industry will be limited to damage caused by the hurricane; repayable within a specified maximum period; and constituted by law first liens on the properties involved. The loans will be made on the recom- mendation of a local Advisory Committee, the constitution and terms of reference of which will be submitted for the approval of the Secretary of State and the Treasury, and the total amount of such loans will require approval by the same authorities.

6. Subject to any observations Lord Passfield may wish to offer after consultation with the Governor, My Lords consider that the guaranteed loan should carry a sinking fund of 1 per cent., and that the maximum period for repayment of the advances to planters, etc., should be 30 years; also that the rate of interest to be charged on the advances should be not less than 6 per cent.

7. In view of the fact that the Colony's deficit for the year to 30th June, 1931, is estimated at from Rs.2,200,000 to Rs.2,500,000, it is clear that drastic retrenchment will be necessary; and Their Lordships feel bound to stipulate that the Guaranteed Loan Bill shall include a provision limiting to 5 years at most the period during which Exchequer assistance may be granted, if necessary, towards meeting the Colony's general expenditure.

8. In view of the considerations urged in the fifth paragraph of the letter under reply, My Lords agree that Parliament should be invited to vote a sum of £5,000 as a free grant in aid of the relief of distress in the Colony, and They will cause a Supple- mentary Estimate to be presented in due course.

I am, etc.,

R. V. NIND HOPKINS.

I

PUBLIC PECORD

OFFICE

Reference:-

C.O.882/12

PUBLIC RECORD OFFICE, LONDON

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