CO129-598-2 Tai Lam Chung Reservoir Project 24-6-1948 - 3-3-1949 — Page 14

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1. It had been the intention to send out the draft despatch behind (9) much as it stands (since the financial considerations will be relevant whatever scheme is adopted), but to omit final acceptance of the Tai Lam Chung project as the only satisfactory answer, and to add requests for further information and views on the points raised in the minutes. Sir Charles Jeffries' minute of 15/10, however, requires that the question of whether the Tai Lam Chung project is or is not the only satisfactory answer to the problem should be cleared with the Governor before discussing our draft with the Treasury.

2. I have discussed with Mr. Sidebotham the best method of doing this. Sines, Knowing, as we already do, that it is practically certain that no financial assistance will be forthcoming from this country, we might lay ourselves open to a charge of leading the Governor up the garden path if at this stage we were to embark on discussion of alternative schemes without making it clear to the Governor that, whatever scheme is adopted, Hong Kong will have to pay for it. Further, since we acknowledge that a possible alternative to the Tai Lam Chung project which we asked to be considered may involve "undue capital expenditure" (which might have to be faced for political reasons) we can hardly in any case omit reference to finance.

3. The draft despatch behind (9) is, we know in line with Treasury views and there would be little delay or difficulty in getting Treasury concurrence in it. The passage near the end about bearer bonds, however, added by Mr. Bourdillon recently (see his minute of 14/10), raises a difficulty since it was drafted before Mr. Bourdillon had seen a copy of (10), in which the Governor says that insistence on registration of bearer bonds, particularly in the case of a premium bond issue, would result in the complete failure of the issue. I have spoken with Mr. Bourdillon on this point and about the action being taken on 54126/4/48 to try and secure the Bank of England and Treasury agreement. to the issue of bearer bonds in Hong Kong without

restriction.