CONFIDENTIAL
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to giving the public increased insurance against local exploitation; it can do nothing about the level of import/world prices which is at the heart of the present situation.
Since the final remedy lies in a rise in wages, the Government should set an example as a good employer in its wages policy. This it is doing.
Apart from these steps the Government is of course being urged to take more drastic action and in particular:
a)
b)
a)
To use the reserves to subsidise food and reduce the cost of living (Comment: a subsidy sufficient to reduce the food bill by 20% would cost $1,300 m. a year. Government subsidies at present apply to Housing, Education, Medical and Health Services and to public assistance and to help for the handicapped. I should be most un- willing to cut back on these basic lour term policies on which I believe the future life of the population so largely depends. See also comments on the ur of the Hong Kong reserves in paragraph 201 of my immediately preceding deripatch. Either of these expedients would be worth considering in a crisis, but we are not in a crisis situation).
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For the Government to enter the food market and itself import some of the staple foodstuffs (Comment: judging by Hong Kong's own experience in the 1950s and Japan's last year, nothing would be more likely to produce confusion and expenno).
For the government to instituto prico control. (Conument: firstly
CONFIDENTIAL
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