CO129-606-4 Hong Kong Loan- government grant 1-4-1947 - 2-3-1948 — Page 26

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(4) An interest-free loan of up to £3,500,000

towards the cost of constructing a new air- port, if it is decided to build one.

gents

7. The proposals in sub-paragraphs (1) and (2) are in line with those put forward by the Governor, in his despatch of the 12th December. The main difference is that under the Governor's proposals H.M.G. would actually assume liability for the itemns instead of making a free grant equivalent to their approximate total, as we propose. Our proposal, however, makes no provision for any further charges in the more recent Crown Agents accounts (paragraph 5 of the Governor's despatch) or the recurrent expenditure on Volunteer pensions (paragraph 9 of the Governor's despatch). It is possible that our proposal may not be altogether acceptable to the Governor, especially as the liabilities involved include at least two, repatriation passages and scorched earth clains, which Hong Kong feel ought certainly to be accepted by H.M.G., irrespective of the financial settlement. But we reel, and you will no doubt agree, that we should, if possible, avoid getting involved in the question whether these items were liabilities which should have been shouldered by H.M.G., especially as this is a question which might have wide implications and would certainly concern other territories besides Hong Kong. He should, of course, have to explain to the Governor the reasons why we did not feel that we should make inuch progress by considering his proposals in their original form.

8. The proposal in sub-paragraph (3) of paragraph 6 is one that we have ventured to put forward again on our own accord. You will recall the correspondence and discussions about the question of a contribution from U.K. funds to the University to assist in re- establishing it on a pre-1941 scale. We have been

under