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2. I shall be glad if the Bill and the Objects and Reasons may be amended in accord- ance with paragraphs (c) and (d) of the letter from the War Office, provided that you have no objections to offer to that course. Subject to these amendments, I approve the introduction of the Bill into the Legislative Council.

3. I shall be glad to be furnished in due course with your observations on para- graph (a) of the War Office letter. I propose, subject to any observations that you may have to offer to give the assurance requested in paragraph (b) of the letter.

33756/34 [No. 8].

I have, &c.,

PLYMOUTH,

for the Secretary of State.

33756/34 [No. 9).

SIR,

137

No. 91.

COLONIAL OFFICE

to

WAR OFFICE.

[Answered by No. 92.]

Downing Street, 19th September, 1934.

I am directed by Secretary Sir Philip Cunliffe-Lister to refer to your letter of the 30th January, and to transmit to you, to be laid before the Army Council, a copy of a despatch† from the Governor of Hong Kong forwarding copies of a Bill to amend the Defence Contribution Ordinance 1901.

2. Subject to the Army Council's concurrence, the Secretary of State proposes to inform the Governor telegraph that the Bill as now drafted may be introduced in the Legislative Council.

(Confidential (2).) SIR,

No. 90.

THE GOVERNOR

to

THE SECRETARY OF STATE. (Received 23rd August, 1934.) [Answered by No. 97.]

Government House, Hong Kong, 19th July, 1934. With reference to your despatch confidential (2) of the 27th February, 1934*, I have the honour to enclose copies of the Bill to amend the Defence Contribution Ordinance 1901 amended in accordance with paragraph (c) of the letter from the War Office which accompanied your despatch. I agree that the assurances requested in paragraphs (a) and (b) of the letter may be given.

2. As regards paragraph (d) of the same letter I have to point out that the position has now somewhat altered.

It was originally proposed that the total of the new loan should be $28,000,000 which included an amount sufficient to redeem the 6 per cent Public Works Loan, 1927. This loan was, however, converted separately last year the total amount being $4,838,000, but the decision to pay off the 3 per cent Inscribed Stock, 1918-43, has brought in

4 per cent Loan, 1933

3 per cent Dollar Loan

$ 4,838,000 25,000,000

4 per cent Loan, 1933

$29,838,000

4,838,000

3

per cent Dollar Loan

$25,000,000 less $3,400,000

21,600,000

$26,438,000

another factor and it is estimated that approximately $3,400,000 will be required to be found for this purpose from the new 3 per cent Dollar Loan. This has brought the com- bined total of the two loans to $29,838,000, the excess

the over $28,000,000 for which approval has already been given being due to the inclusion of the amount of $3,400,000 referred to above.

Excluding the amount required for conversion of the Inscribed Stock the combined total would be only $26,438,000.

3. From the end of this year therefore the actual moneys to which section 3 (2) (ix) of the amended bill will apply will be the yearly appropriations necessary to provide the sinking fund and interest in the case of the 1933 Redemption Loan, and a yearly sum for the redemption of bonds drawn, plus the amount required for the payment of interest in the case of the new Dollar Loan.

facts.

Paragraph (IX) of the Objects and Reasons has been amended in the light of these

4. I shall be glad to learn in due course by telegraph whether you concur in the introduction of the Bill as amended into Legislative Council,

I have, &c.,

W. PEEL,

Governor, &c.

33706/34 [No. 36].

SIR,

No. 92.

WAR OFFICE

to

COLONIAL OFFICE.

[Answered by No. 95.]

I am, &c.,

G. E. J. GENT.

War Office, 25th October, 1934.

I am commanded by the Army Council to refer to your letter of the 13th September, 1934, transmitting a copy of Hong Kong Dollar Loan Ordinance (Ordinance No. 11 of 1934), and also of your letter of the 19th September, 1934§, transmitting a copy of the Bill to amend the Defence Contribution Ordinance 1901.

2. With regard to the Dollar Loan Ordinance (Ordinance No. 11 of 1934), the Council understand that this is in effect the authority for the raising of the major part of the loan referred to in paragraph 8 of Colonial Office letter of the 19th August, 1932||, and in sub-paragraph 8 of paragraph 4 of the Objects and Reasons explaining the purposes of the draft bill forwarded with Colonial Office letter of the 30th December, 1933. Ordinance No. 15 of 1933 has already authorised the issue of bonds to the amount of approximately $5,000,000 for the redemption of the 1927 6 per cent loan which formed one of the constituent items of the $28,000,000 loan enumerated in paragraph 8 of Colonial Office letter of the 19th August, 1932.

3. The Council observe that one item is included in the schedule of the Ordinance forwarded with your letter of 13th September, which was not covered by the projected loan of about $28,000,000 referred to in the Colonial Office letter of 19th August, 1932; namely the provision for the redemption of Hong Kong 3 per cent Inscribed Stock 1918-43 by new borrowing to the amount of $3,400,000. So far as the Council have been able to ascertain, the 34 per cent 1918-43 loan represents a consolidation of various issues made in 1887, 1898 and 1906, the greater part being a loan of £1,143,000 raised in 1906 for the financing of the Kowloon Railway.

4. The net receipts only of this Railway are assessable to military contribution, and the net earnings on the railway, representing the difference between gross receipts and working expenses-not taking into account, that is, the service of the loan-have been sufficient to pay only a portion of the annual loan requirements. The balance has had to be made up presumably from general revenue which has already paid military contribution.

6. If, therefore, the loan were itself exempted from military contribution Army Funds would lose the portion of the contribution corresponding to the amount just mentioned as paid from general revenue to cover the railway deficit, so long as a deficit continued. If this is a correct representation of the facts, the Council see no reason why this loss should

• No. 88. † No. 90. † 33706/34 [No. 29]: not printed. § No. 91. || No. 78. € No. 87.

• No. 89.

↑ Not reprinted.

(C38051)

1* 2

1. PUBLIC RECORD OFFICE

Reference :-

FREEC.O. 882/11

liuiliulu

PUBLIC RECORD OFFICE, LONDON

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