TNAG-0126-FCO40-162-Sterling-balances-1970 — Page 14

5. Assuming that we need to retain the Secretary of State's control over this feature of the currency arrangements, we can

either:-

(a) insist that the limit continues to be prescribed by

6.

the Ordinance as now, OF

(b) allow the limit to be prescribed by resolution of

the Legislative Council, provided that the amendment

is so framed as to ensure that the Governor only may propose such a resolution and that it is understood (through an exchange of despatches) that the Governor would not put forward a resolution without the

approval of the Secretary of State.

We would not find it easy to argue a case for (a) as against (b). Both processes provide for sounding out the views

of the legislature; both provide the Secretary of State with the necessary control; but (b) undoubtedly provides a much

speedier means of obtaining legislative sanction for any change in the limit. We would recommend (b).

7. In the unlikely event that no reasons exist for retaining

the Secretary of State's control over the borrowing limit, we would consider course (b) minus the exchange of despatches. We would strongly advise the Governor to ensure that only he had the power to propose such resolutions, for constitutional and political reasons which we feel sure he would readily appreciate (see paragraph 5 of Background Note attached).

Hong Kong Department.