My dear Prime Minister,

I have now in preparation two statements which I hope to be able
to forward to you in the course of the next fortnight. As neither
are ready at present, my letter will be shorter than usual.

MR. G. A. JULIUS [1]

Mr. Julius arrived in London late on Tuesday evening. I spent the
greater part of Wednesday morning with him and last night he dined
with me and we had a long discussion which lasted until 11.30.

It was most pleasant to meet a man of Mr. Julius's outlook and not
only on scientific questions but also on the broad lines of
Australian economic policy we found that we were in very
substantial agreement. So much was this the case that I hope to be
able to forward to you shortly a further reinforcement of the
views which I expressed in my memorandum on Australian Tariff
Policy as a result of gathering from Mr. Julius his own standpoint
in this matter.

Tonight Julius, Professor Watt [2] and myself are dining with
Walter Elliot [3] and Ormsby-Gore [4] to discuss cooperation
between the Commonwealth Council for Scientific and Industrial
Research and the Empire Marketing Board in scientific research.

Mr. Julius appears to have arrived in London with the definite
idea that the form of liaison temporarily set up whereby I am
acting for the C.C.S.I.R. is one which is sound. I have, however,
particularly asked him to keep an entirely open mind on the
subject until he has had a couple of months in which to turn round
and to learn the whole of the complexities of Research
Organisations in Great Britain.

AUSTRALIAN DRIED FRUITS

Yesterday the London Agency of the Commonwealth Dried Fruit Board
gave a trade luncheon at Australia House at which we were
fortunate enough to secure, as the chief guests, Lord Birkenhead
[5] and the Rt. Hon. J. H. Thomas [6] M.P. There were no other
speakers and Birkenhead and Thomas amply filled the bill, making
interesting statements of very considerable benefit to the
industry.

The guests numbered just under 200, of whom over 120 were members
of the trade. These gentry were highly delighted to be asked to
meet Lord Birkenhead and I feel certain that the whole of the
traders present went away with a warmer feeling towards the
Australian dried fruit industry as a consequence of this function.

Mr. Pratten [7] was one of our guests and he was seated next to
Lord Birkenhead, so that I hope he enjoyed it.

EMPIRE MARKETING BOARD

You are probably aware that a Cabinet Economy Committee has been
sitting for some time. I understand that the Treasury, headed by
Sir Warren Fisher [8], has commenced an attack before the Cabinet
Economy Committee on the 1,000,000 Annual Grant to the Empire
Marketing Board. I think that the Treasury's idea is to put
forward a proposal to reduce the value of the Grant and also to
insist on strict Treasury control and the surrender of unexpended
balances.

I do not anticipate that My Lords of the Treasury will have it
their own way but it is extremely significant of the state of mind
of the Treasury and the Bank of England that they should even put
forward suggestions for a reduction in the Annual Grant at the
present moment.

I shall watch the position with keenest interest and keep you
informed & should any untoward development seem in the least
likely, shall immediately cable.

BRANDY PREFERENCE

I had a letter from Gepp [9] asking me to look into the
possibility of an improved market for Brandy in the United
Kingdom, pointing out that an extension of the market would
entirely be dependent upon increased preference.

It so happened that, at the same time, I found that some of the
Parliamentary Members of the Empire Industries Association were
anxious to press for increased preference on Brandy in the debate
on the Finance Bill. I have, therefore, provided them with a good
deal of information and today discussed the matter with Sir Horace
Hamilton, the head of the Customs. He tells me that at the moment
there is an insuperable objection to any increase in the
preference on Brandy, namely that no such increase could well be
given without some concession being given to the Whisky Distillers
in the United Kingdom. Financial conditions have made it
impossible to give the concession to the Whisky people that was
anticipated and under those circumstances he feels that, although
the Chancellor [10] was quite well disposed towards an improved
preference on Brandy yet it would be quite impossible for him to
accept the amendment.

I conclude from this that should it be possible at the next budget
for the Chancellor to give any substantial concession to the
Distillers in Great Britain it would be practical politics to
press at the same time for an increase in the preferential rate
upon Empire Brandy.

WINE DUTIES

In my letter of the 1st June [11], I drew attention to a possible
concession to British Merchants holding Tarragona and Lisbon wines
in bond. I now find that an amendment has been formed to the
Finance Bill in order to allow the duty of 8/- per gallon on
foreign wines over 25 strength to be reduced to 5/- so far as the
quantity held in bonded store before the budget came into
operation is concerned. The total amount of wine involved is
something in the neighbourhood of 1,000,000 gallons-in other words
about 2 1/2 months supply.

I am inclined to think that the Chancellor will probably accept
this amendment provided that the debate shows that there is no
strong objection to it in the House. I had Hamilton to lunch with
me today and he said that he was by no means sure what action the
Chancellor would take but he thought it was a reasonable thing to
give the unfortunate holders of Tarragona wines an opportunity to
get quit of this stock without having to accept entirely ruinous
prices. So far as I am able to gather, this concession, being of a
purely temporary nature, cannot have any important effect on the
trade in Australian wines.

Yours sincerely,
F. L. MCDOUGALL