CONFIDENTIAL
6. The really important power is finance. The power to make other laws may, from time to time, be significant and the Administration may creak if new laws cannot be enacted, though in a serious emergency which affects public order the Governor could himself make certain laws under the Emergency Powers Orders in Council or (?) the Emergency Regulations Ordinance without the assistance of the legislature. But without appropriation he, and the public service, are hamstrung.
7.
The Crown retains a power of legislation (as well as the constitutive power) for Hong kong. But the retention of that kind of power has not been a reason for depriving a Governor of reserved powers to enable him to carry out his executive functions in other dependent territories including dependent territories where the executive function is divided between the Governor and elected Ministers sitting in an elected legislature. Nor has it been, so far as I am aware, a compelling reason for seeking to deny the grant of reserved legislative powers to a Governor that it would give offence to elected Ministers exercising wide executive powers or elected members of the Legislature.
8.
It is frequently the case that matters relating to defence and certain external affairs are included in a Governor's reserved powers. It may well be that in the special circumstances of Hong Kong such matters should be left to HMG's own reserved powers; they would not form part of the autonomy of the future SAR. However, when it comes down to appropriation and laws on domestic matters, it would seem both to be more fitting, and a better example for the future, that such provision as is made against the possibility of a dispute between Legislature and Executive should provide for the resolution of that dispute in Hong Kong rather than by the metropolitan authorities. The Governor is a Hong Kong institution as well as an imperial functionary. There are two pointers to this which are particularly significant so far as money is concerned. First, revenue is raised in Hong Kong and therefore it is more fitting that it should be appropriated by a Hong Kong authority whether legislature or Governor acting under reserved powers (cf JD 79: the HKSAR "shall deal on its own with financial matters, including disposing of its financial resources ...") rather than by an external authority; secondly, to make such provision would be consistent with Article 51 of the Basic Law, which will enable the Chief Executive to make limited short term appropriations when, following a dispute with the legislature, the latter is dissolved. A further factor to be borne in mind is that if we do move to a proto-Chief Executive in due course, the responsibility for the exercise of a reserved power in respect of financing services for which he is responsible should lie with him.
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CONFIDENTIAL
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