CO129-582-7 Taxation 6-6-1939 - 5-2-1940 — Page 38

38

made!!

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There is a substantial "surplus"in the

Exchange Fund, but whether it could conveniently be

made available to serve the purpose of a

supplementary liquid reserve is more doubtful, and

whether the proposed expenditure, particularly on

the aircraft, is justifiable in the circumstances of

Hong Kong is to my mind more doubtful still. The

Governor cannot fairly ask the Secretary of State

to give approval to such expenditure in a hurry, and

in No. 22 he seems to recognise this In that

telegram we should for the present, I suggest,

concentrate on the first point, and should reply

to the Governor in terms favouring the first

alternative at A in 21 viz. without incurring any

commitment or pledge vis à vis unofficial members

of Council other than would be involved by a repeal

clause in the Bill now in preparation: and promise

further telegram on (2) and (3) in No. 22 as soon

as those proposals have been considered in

consultation with the defence authorities concerned,

but I think it would be as well to add that the

Secretary of State would be reluctant in any case

to agree to the Colonial Government committing itself

Such expenditure

to

in advance of the assured provision of the

necessary funds from the yield of the proposed

special revenue.

Then receic for action on (2) 0(3)

in No 22

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