CO129-622-6 Claims of War Supplies to Eastern Group Supply Council 21-1-1949 - 23-12-1949 — Page 27

Sec.49/8i1/47.

CONFIDENTIAL. No. 2/2

GOVERNMENT HOUSE,

HONG KONG.

27

28

December,1949.

Sir,

(21)

(13)

(9)

(16) mm 188957/17/+7

X

I have the honour to refer to your savingram No.582 of 15th June, 1949, concerning orders for stores placed with the Hong Kong War Supplies Board.

2.

On receipt of your confidential despatch No.87 of the 21st April, 1949, I did not immediately issue a statement conveying the decision of the Ministry of Supply and the general position in regard to claims against War Supplies Board debtors as it seemed undesirable to do so until the attitude of the Government of India towards the "A" claims had been more definitely determined as suggested in paragraph 2 of your telegram No. 347 of the 30th March, 1949. There was also the consideration that in the local view, there has always been a strong case for an equitable settlement of the Category "p" and "C" claims, and your despatch No.400 of the 24th December, 1947, shows that at least in regard to the "C" claims you to some extent shared those views. From every point of view, therefore, it seemed preferable to wait until more definite information was available regarding the "A" claims against the Governments of India and Burma before disclosing a decision and a state of affairs which was bound to provoke a storm of protest.

3.

If a summary of payments were prepared now, it would take the form shown in the enclosure to this despatch and cannot but show official policy on the War Supplies Board Claims in a most damaging light. It discloses that eight years after the transactions with which it is concerned, where the claimants have a legal claim it has not been met in full, and where there is an equitable claim it has not been met at all. The claims are against the War Supplies Board acting on behalf of the Eastern Group Supply Council, and the public will not understand why the successors to the Council should attempt to default on payment. Whatever explanation is offered, the commercial community will read into it but one meaning, namely that His Majesty' 's Government is not concerned with maintaining its reputation for fair dealing so laboriously built up in the past. The danger is that the public may be led to reason further that, in the event of another emergency, the Colony will not be asked to undertake War Supply projects because the Colony is to be abandoned. You will realise how important it is to prevent these impressions gaining ground.

4.

It will be impossible to prevent entirely the

THE RIGHT HONOURABLE

ARTHUR CREECH JONES, M.P.,