§ 1. In October, 1942, a declaration was made on behalf of His Majesty's Government to the effect that it would be the general aim of His Majesty's Government after the war that, with a view to the well-being of the people and the resumption of productive activity, property and goods destroyed or damaged in the Colonial Empire should be replaced or repaired to such extent and over such a period of time as resources might permit. It was added that, if the resources of any part of the Colonial Empire were insufficient to enable this purpose to be achieved without aid, His Majesty's Government would be ready to give what assistance they could in conjunction with such common fund or organisation as might be established for post-war reconstruction.
§ 2. In the light of above declaration Government of Hong Kong appointed a Commissioner to make an expert examination into the problem of war damage compensation. As a result of his findings, Government is satisfied that even were the U.K. in a position to pay part of cost, 19W introduction of a compensation scheme would inflict an altogether crippling weight of taxation upon local community. In the circumstances, and in view of the fact that the Colony did not participate in a war damage insurance scheme prior to outbreak of Pacific war, and of the fact that rehabilitation of industry and commerce does not appear to be hampered to any material extent by lack of financial resources, the Government of Hong Kong has recommended that no compensation from public funds should be paid for war damage.
§ 3. His Majesty's Government, after most careful consideration, have decided to accept this recommendation by the Government of Hong Kong. Nevertheless, they are anxious to give practical assistance to the Colony, as evidence of good will. The extent of such assistance must necessarily be determined by the ability of His Majesty's Government to help having regard to conditions in the United Kingdom following the crippling losses entailed by the war and the heavy burden of taxation falling on the United Kingdom taxpayer. In spite of these factors, they have felt able to offer substantial assistance to the Colony, and have accordingly agreed to ask Parliament for the necessary authority to implement the following decisions.
§ 4. As regards expenditure arising out of the war it has been agreed that:
- (a) In the first place, His Majesty's Government will not seek any contribution from Hong Kong towards the cost of the military administration; and
- (b) His Majesty's Government will treat as free grants the advances made
20 prior to and after the establishment of civil government in Hong Kong, amounting to £3,250,000 in all, except in so far as that sum has been used for the purchase of stores for re-sale which has resulted in cash receipts by the Hong Kong Government.
- (c) His Majesty's Government will give a further free grant of £1,000,000 to assist the Colony in resolving problems arising out of expenditure connected with the war.
§ 5. As a further expression of their willingness to assist Hong Kong, His Majesty's Government are prepared:
- (a) to make an interest-free loan to the Colony up to a maximum of £3,000,000 to supplement any funds available to Hong Kong for the construction of a modern airport of international standards;
- (b) to make a free grant of £250,000 for the Hong Kong University.
§ 6. Further discussions will take place between His Majesty's Government and the Government of Hong Kong on the apportionment of the expenditure incurred on goods supplied by His Majesty's Government to Hong Kong after civil government had been re-established.
§ 7. Having regard to the financial difficulties with which the United Kingdom is itself faced as a result of losses incurred during the war, and having regard to the heavy burden which the United Kingdom taxpayer is called upon to bear, the above proposals represent a great effort and a very real proof of sympathy and good will.