CO129-618-6 Proposed reclamation of additional building sites 3-3-1948 - 8-9-1948 — Page 7

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Mr. Sidebotham.

You will see that the suggestion has been made (emanating from Mr. Wallace) that Hong Kong should acquire the funds which form the subject of No.1. by means of a State lottery. State lotteries are not unknown in the Colonial Empire for instance one has existed in Malta for a number of years and another has just been introduced in Gibraltar. Nevertheless, the accepted policy is rather to frown upon State lotteries as an expedient of general application in the Colonial Empire, and the reasons for this are, I think, sufficiently clear. State lotteries are very far from being a stable source of revenue, and they tend to deceive Colonial populations into thinking that a pleasant and easy source of revenue has been found and that more positive (if less palatable) methods are therefore unnecessary.

They may, therefore, act as a real brake on the introduction of sound fiscal policies, particularly at a time of difficulty and crisis.

I have a feeling that such arguments would be particularly applicable to Hong Kong at the present time, and I should be very loth to see an official suggestion to Hong Kong from this end, to the effect that State lotteries should be introduced particularly at a time when the Treasury are releasing Hong Kong from Treasury control on the acid assumption that the financial administration of the Colony, about which there have been doubts in the past, will be vigorously pursued. There may, however, be arguments on the other side, and given the Chinese mentality it is certainly possible that a State lottery in Hong Kong might be highly successful in the direct and limited sense of bringing in money.

It seems to me obvious that we must now wait until Mr. Follows arrives home and then discuss with him, as part of our general talks about the finances of Hong Kong, the whole question of financing the projects in No.1. I can see no harm at all in our mentioning possibility of State lotteries in conversation with Mr. Follows. No doubt the Treasury would be present, and they could add their own comments, if any.

If you agree, perhaps we could send on the interim reply which I have now attached, and the file could then be recirculated to Mr. Wallace to ensure that it is brought up when Mr. Follows arrives (I am not sure of the date).

I/