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PUBLIC

། ། ། ། ། །

RECORD OFFICE

Reference :-

mimi C.O.882/12

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE | BE REPRODUCED PHOTOGRAPHIC-

| COPYRIGHT PHOTOGRAPH-NOI TO

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be unable to bear and would precipitate a financial collapse. Argu- ments drawn from conditions in England and elsewhere as to the burdens which may be borne are dangerously misleading when applied to a small and isolated community dependent for its enter- prise and stability on a small minority of whites. I have heard the opinion expressed that inasmuch as the financial position of the proprietary classes is unsound and a large number of the estates over capitalized it would be better that they should not be sup- ported but that the inevitable collapse should be allowed to take its course. That there must be a writing down of values, in the course of which much nominal capital will disappear, is undoubtedly true but I think every endeavour must be made to secure that this re- adjustment comes gradually and not by a widespread collapse of which under present conditions there is a real danger. The effects of such a collapse in a small and overcrowded island dependent for its subsistence on a single industry which involves large capital outlay, cannot be compared with the position in a larger country with a variety of resources. Where the capital is (speaking generally) in the hands of a white minority and the labouring classes form a large coloured majority of a decidedly ignorant and rather helpless type the position is aggravated in a manner which needs no emphasis.

20. It was with these contingencies in view that my telegramı No. 116 of the 7th September was despatched. I feel very strongly that in the highly uncertain situation which I have endeavoured to outline above it would be unwise to deprive the Colony of the prospect held out to it by the Mauritius Loan Guarantee Ordinance of making up from the guaranteed loan the advances to the La Nicolière irrigation works made from general revenue in a time of stringency in the expectation that they would be recouped from loan funds. If these advances could be recovered from that source I think there is a fair prospect that the adjustment of budget charges could be spread over a period within which it would be practicable to achieve the proposed reorganization, including in this the settlement, at least for the time being, of the railway problem which is dealt with below. If, however, the prospect of assistance which the Loan Act held out is withheld on grounds of financial correctitude, however justifiable these may be, it may I think be impossible to induce the Colony to accept the necessary sacrifices to bring about a financial balance by orthodox means.

It may be recollected that when it was proposed that funds should be made available under the loan for the completion of unfinished works I expressed, in my telegram No. 52 of the 4th May,† doubts as to the ability of the Colony to afford the charges on this portion of the loan. Now, however, that the offer has been definitely made and accepted, and has been covered by an Act of Parliament I think

* C. 84590/31 [No. 17]: not printed. † C. 84556/31 [No. 44]: not printed.

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it would be unwise to withhold the benefit of it even though it may If the general be open to objection on grounds of orthodoxy. situation of the sugar industry shows improvement the additional charges and the moneys refunded to the Treasury will, in my opinion, serve to bring the process of re-establishing a balanced budget within the bounds of practicability by extending the period of readjustment over two years. If there is no improvement in the position I do not think these or any other measures proposed will be adequate for this purpose. The extension of the period of re- organization over a period of two years does at least, however, afford a better prospect that normal conditions may have been restored before the available resources have been exhausted.

21. In the foregoing paragraphs the position of the Railway has not been taken into account except in so far as the anticipated deficit on railway working serves to exhaust the whole of the available resources. 1 now turn to the more particular considera- tion of the Railway position, which as previously pointed out differs from the rest of the financial problem in that the situation is not due mainly to the general depression but to a change in transporta- tion conditions.

22. In previous discussions of this question it has been insisted that in order to keep the Railway in being as a goods-carrying system which it is agreed is essential, the passenger traffic must also be maintained and schemes of traffic control have been considered from this standpoint. The Commissioners object to these schemes in that they force higher transport charges on the travelling public for services which can be equally well or perhaps better performed by road transport. It cannot be denied that there is much force in that view, though on the other hand it should not be lost sight of that if the Railway is run at a loss the burden of that loss will equally fall on the public in the form of taxation, and that a strict control of traffic will in any case be necessary to protect the public from exploitation by private transport agencies when railway competition is removed. The Railway will, in any case, be run at a loss for some time whatever steps are taken. The estimated loss in the figures furnished to the Commission by the Acting General Manager, assuming that the Railway is operated only as a goods line, was given at Rs.264,328 making no allowance at all for Some allowance for renewals will be depreciation or renewals. necessary and the allowance for pensions was, I think, insufficient, but there may be other economies to counterbalance these additions. The Commissioners take Rs.300,000 as the figure of railway deficit and I think this may be accepted for the time being. To achieve this figure, however, it will be necessary to discharge some 800 men. This is the crucial difficulty of the position. I have already enlarged on the difficulties of drastic retrenchment in the case of the Civil Service: if these difficulties are aggravated by a wholesale discharge of railway employees the resultant situation would be

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