OUTWARD TELEGRAM
FROM THE SECRETARY OF STATE FOR THE COLONIES
53652/51
Typex
IMMEDIATE
No. 313
TO HONG KONG ( Sir A. Grantham)
Sent 2nd March, 1951 21.30 hrs.
Confidential
Your telegram No. 206. (2)
1951/52 Estimates.
I note that a small surplus is to be
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budgetted for in 1951/52 and that a surplus of over $20 millions is now expected in 1950/51 after charging off 850 millions rehabilitation loan expenditure. outcome is most satisfactory especially bearing in mind the effect of the American embargo.
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As regards 1951/52, in view of considerable time lag which you expect before the full effects of the American embargo are felt, and the expected surplus this year, it appears that commercial activity may still be maintained at a comperitively high level. In these circumstances it would appear from the purely financial aspect that some increase in taxation could have been borne without difficulty, and would in fact, be desirable in order to assist in meeting the cost of schemes of capital development, in addition to building up proposed development fund referred to in paragraph 7 of your telegram. Moreover, the amount of the Colony's free reserves are still on the low side allowing e.g. for the amount locked up on food purchases, rehabilitation loan expenditure, etc., and might rapidly be exhausted in the event of a serious trade recession.
3. I fully appreciate, however, the difficulties to which you refer in paragraph 9 of your telegram and agree that avoidance of these is most important in present circumstances. I will not, therefore press for the imposition of additional taxation at this stage though in this connection I must draw your attention to paragraph 4 of my despatch No. 341 of 18th December regarding the financing of the Reservoir since with the increasing responsibilities of the United Kingdom Government for rearmament etc., there is unlikely to be any easing of the situation as regards the raising of Colonial loans in London. As regards the contribution towards the cost of reinforcements please see my telegram No. 299 in which the hope was expressed that the contribution would not be less than last year's.
4. Your paragraph 7. Development and Essential Commodities Equalization funds. I agree to these proposals and will be replying in detail separately.
5. Your paragraph 8. Consolidation, see my telegram No. 298 confidential.
Please
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