CO129-597-3 Estimates 1950 22-2-1949 - 3-11-1950 — Page 80

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expenditure of the order of a further $150,000,000 in order to complete the work of rehabilitation and for purposes of development. The present 323 Rehabilitation Loan is limited to $150,000,000, and the amount expended up to date totals approximately $98,500,000. Something over $12,500,000 will be spent on buildings during the present year, and there will be other expenditure from Loan funds on a smaller scale. The balance is earmarked for various purposes, and to meet indent s for stores the supply of which is subject to long delay. Rolling stock for the railway is the best example of this, and, in view of the deteriorating situation, I am now considering whether goods traffic in the next few years will be likely to justify the purchase now of so much additional material. But even if it is decided to cancel as many of these indents as possible, the amount of Loan funds released for other purposes is not likely to exceed $10,000,000.

47.

Some of the further capital expenditure which this Government should undertake is unavoidable and cannot be delayed. The Tai Lam Chung scheme is an example of this. If any additional loan is limited to the amount necessary for this class of expenditure, the remaining works can only be executed very gradually over a long period of years and then only if revenue continues at about its present level. The possibility of negotiating further loans locally is being dealt with in separate correspondence, and I will only point out here that, even under the most favourable conditions, not more than $120,000,000 of the present issue could possibly be found locally, and that for the whole of any further issue it will be necessary to rely on the London market.

48.

I realise that there are still reasons why calls by the Colonial Governments on the London market should be kept to a minimum, but I observe that you are now prepared to consider borrowing in London up to a stated figure provided 54126/4/49 that all other available sources of finance have been fully

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utilised. A number of points of detail would have to be satisfactorily settled, but what I am anxious to obtain for the information of unofficial members is an indication of whether you would be prepared to consider the issue of a further loan in the knowledge that it would he necessary to have recarse to the London market. I realise that your approval would necessarily be dependent to a great extent on the political situation but I am anxious to establish the general principle. It is true that the surplus balances of the Colony only at present total some $65,000,000, which does not constitute an adequate reserve, but the total public debt when the present rehabilitation loan is fully issued will only amount to

170,046,000. The interest and sinking fund charges on a new issue of $150,000,000, assuming a rate of interest of 3%, would only amount to $6,000,000 a year, and it seems clear that the Colony could meet such a charge even if revenue falls considerably.

49.

Although Mr. Ross' investigations are sti 11 in their very early stages, the results so far tend to bear out my conviction that the cost of administration in Hong Kong is capable of reduction. By the time the 1950-51 estimates are prepared surveys of some six of the larger departments should be nearing completion and if our hopes of achieving a 10% re- duction in clerical and manual staff are realised, the resultant saving should be appreciable.

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