t
2
157
66,500,000 4,650,000 6, 600, 00.0
$ 79,750,000
6.
The exact figure of expenditure for the first six months cannot be ascertained until the Crown Agents accounts for September have been received, but in my telegram No.919 I gave an estimated figure of $77,000,000.
7.
(29)
Two heavy additional items of expenditure were incur- red during the period. One for $8,600,000 was in respect of back pay for those officers who benefitted under the Salaries Commission Report. The other was for $9,000,000 in respect of Occupation Period Pay. Practically all liabilities under the former heading have been met, and approximately $4,650,000 has been spent on Occupation Period Pay. Allowing for these non- recurrent items, what I might call the normal expenditure for the six months was approximately $66,500,000 as compared with an estimated expenditure of $150,284,105 for the full year.
8.
It seems probable that there will be considerable savings under many Heads of expenditure, and that if expendi- ture were to be limited to services provided for in the Estimates a substantial surplus would be shown. The problem of the Colony's obligations arising out of the war period has, however, not yet been solved. It was necessary to discharge at once the liability for Occupation Period Pay, but there still remain a number of which I regard one as urgent. This is the reinstatement of pre-war deposits with this Government, liquidated by the Japanese, for which you consider this (5) on Government must assume liability (your despatch No.273 of the 54126/3/4 3rd September, 1948); I propose to take a supplementary vote
for $2,000,000 at once as a first step. A further liability which has to be borne in mind is the cost of the small craft supplied to Hong Kong by the Ministry of Transport after the reoccupation. This matter is now, I understand, under discussion between the Colonial Office and the Ministry of Transport.
9.
It is clearly desirable to dispose of outstanding wartime liabilities as early as possible, but it is important that the Colony should not show a budgetary deficit at a time when it may desire to raise money by way of loan. therefore to keep the position under close review and to
I propose discharge as many of the outstanding liabilities as possible during the current year without thereby incurring a deficit.
10.
Two other factors which must be borne in mind in assessing the probable budgetary position at the end of the current financial year are the cost of living and the economic and political situation in China. You are aware that the question of the adequacy of the present rates of Cost of Living Allowances is now under review. This may result in further heavy expenditure. The possibility of the present economic crisis in China developing into a political upheaval is one that must be regarded with some concern. bilities appear to be that such an upheaval will bring yet
The proba- another influx of flight capital, with consequent increases in revenue from indirect taxation.
The long term effect of
the disruption of trade with the affected areas, on the other hand, must be adverse.
AC:bj.
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