My dear Minister,

1. I saw the Treasury people again today. They had been in touch once more with the Chancellor of the Exchequer and according to their information their claim still stood at a figure of £26,000,000 being the difference between the total estimated value of the sum alleged to be due by us, £104,000,000 less the estimated capital value of the Land Purchase Annuities, £78,000,000. This net figure of £26,000,000 was, they contended, exclusive of the capital value of the Damage to Property Compensation Annuity which they put at £5,850,000. I expressed surprise at this which was quite contrary to the impression conveyed in the course of Ministerial discussions. Without the Compensation Annuity the items claimed could not make up a total of £26,000,000, being as follows:

   R.I.C. (Internal) ................................	9.1	Million	Pounds
   R.I.C. (External) ................................	3.2	"	"
   Civil and Judicial Pensions	.4	"	"
   Local Loans ...................................	7.0	"	"
   	19.7	"	"

2. They then pursued another tack which was briefly as follows:
   1. The Chancellor puts aside all labels. He is collecting four and a quarter million pounds in duties and getting £250,000 per annum Compensation Annuity.
   2. The Chancellor would be prepared to reduce the duties so as to yield £2,000,000 a year - period not specified.
   3. The Chancellor and the Prime Minister are agreed on the advantages from our point of view of the lump sum and would regard £26,000,000 rounded down to £25,000,000 as a basis for discussion, to cover everything except Compensation Annuity.
   4. This takes account of the fact that if we get back the Ports considerable military expenditure, capital and recurring, will necessarily arise in respect of them as well as in respect of other defence measures.
   5. Despite the figures produced to them they repeated that the £25,000,000 was in addition to the Compensation Annuity.
3. I said I perfectly understood their own unwillingness to discuss labels in as much as their estimate under each particular label seemed to be grossly exaggerated. In regard to Local Loans the capital value outstanding was now only 3.9 million pounds as compared with their estimate of 7, while the R.I.C. (Internal) should be only about 6.5 million pounds as compared with their 9.1 million pounds. The R.I.C. (External) I completely rejected while the Civil Pensions of .4 million pounds I promised to go into if supplied with figures.
4. They then brought in some actuarial people who supplied me with a number of figures which I will examine tonight and I have arranged for another meeting at the Treasury tomorrow.
5. Leydon is meeting the Board of Trade people tomorrow and will remain in more or less continuous session until he gets finished. Twomey tells me that the Agriculture people informed him today that they might not be ready until Monday, but in the meantime he is having informal discussions with Street with a view to expediting consideration of our proposals.

I hope all the party had a successful journey across and that the weather was more favourable than on our previous trip.

P.S. We expect to have tomorrow the minutes of meetings, which will clear up the point about the Compensation Annuity.