During our talk on the 12th December I mentioned an old claim which your Custodian of Enemy Property has recently revived against ours for an indemnity under an agreement dating to 1923 and relating to securities owned by our enemies in the 1914-18 War. This is a complicated matter and one which it has not so far been possible to settle in discussion among officials.

There is also a question which your people raised with us last August about a certain payment made by Canada under the clearing arrangements established for reparation purposes after the 1914-18 War. This again is a very old issue and Mr. Churchill, then Chancellor of the Exchequer, wrote to Mr. Larkin about it in February 1926.

It does seem rather embarrassing for both of us to have these old issues outstanding between us and I should be very grateful if you would look into them and say whether you feel it necessary for your Government to press the two claims.

Pension liabilities under the Commonwealth Air Training Scheme and the Canadian Option Scheme

I enclose separate notes on these two points.? Our dollar commitments under both these Schemes are heavy, and it would afford us considerable relief if you could see your way to waive the reimbursement of pension payments; -- and the outstanding liability for medical treatment -- under the Commonwealth Air Training Plan, and take over the supplementation in the case of other ranks who have exercised the option.

Interest-free Loan

I think you are well aware of our anxiety to regain full control of our dollar investments in Canada. Not only is the volume of securities which are subject to restriction quite out of proportion to the outstanding amount of the Loan; but the restriction prevents UK holders from adjusting their holdings to the best advantage. They are prevented from switching their securities into the more rapidly developing Canadian interests and the restriction must operate generally as a positive ban to new UK investment in Canada.

In order to free the existing securities we are, as I told you, ready to agree to amortise the outstanding balance of the Loan out of our current dollar income at about the same annual rate as the present rate of repayment. I very much hope that the Canadian Government will be able to agree to some plan on this basis and I should be grateful if you would let me know as soon as you conveniently can what you would consider to be a suitable arrangement.

Purchases of Cheese and Salmon

I am glad to let you know that I have felt able to authorize the Minister of Food to spend up to $1 ½ millions on buying cheese.

As regards canned salmon, I gather that the question will not arise in a practical form until April or May. In the meantime, I will, of course, bear in mind what you said on this.

R.A. BUTLER