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The Secretary of State instructed us that in the light of the Governor's despatch and his great disquiet at the effect in the Colony of the defence reluctions, some aspects of which are still being pursued with the intstor of Defence, the suggestion of an increased defence contri- bution should not be rut to the Governor in isolation at the present time but should be considered in the context of the Governor's counter proposal and of the problems raised by the implications of what imst necessarily be our attitude to U.li. assistance in the matter of rofusées,
This business raises a mixture of political and financial probleria whose difficulties you vill I think reccanise, and on which we have not yet reached any conclu- sions ourselves. Le vory much need to discuss their impli- cations with the people in Hong Kong, and as the Colonial Secretary 13 arriving hore in a wook's time, and the Financial Secretary a little later we would like to defor making sry proposals to you until we have had a chance of going over the problems with them. I hope this will be acceptable to you and to Charlton and Tussell anda to whom I as sending copies of this letter. I think that in the terms of the lefence Committee'a reccmentation what we are proposing constitutes a proper examination into the possibility of an increased defence contribution, in that the matter cannot be dealt with entirely in vacuo “and account must be taken of the other cognate problems I have mentioned above.
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(3. B. Johnston)
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File No. FED. 382/400/01
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