Draft notes of a conference held in the Board Room, Treasury Chambers,
Whitehall, London
(Secret) (C.A./H./48 - 6th Minutes)

At 3.30 p.m. when the meeting was about to begin, Mr. Cosgrave stated that he saw no basis for a proposal from his side. Neither he nor Mr. O'Higgins were expert financiers. He was satisfied that Sir James Craig would not meet them with adequate concessions. He then indicated that he desired a private conversation with the Chancellor of the Exchequer. They adjourned to the room of the Financial Secretary to the Treasury and returned about 3.50 p.m.

On their return, the Chancellor of the Exchequer said that two alternative proposals had been suggested by Mr. Cosgrave:

(a) The debt of the Free State should be fixed at £6 millions, the payment spread over an agreed period, or

(b) Article 5 should be waived and the Free State should repay the British Government moneys paid for compensation since 1921 plus 10 per cent on the awards made by the Courts under the Damage to Property Act 1923.

LORD SALISBURY, who had to leave at this point for the House of Lords, said that as then advised he was unable to accept either of these proposals.

THE CHANCELLOR OF THE EXCHEQUER emphasised that outside these payments there were others which would not be affected and he referred specifically to the importance of reaching agreement on the payment of income tax deducted by the Free State from the Land Purchase Annuities.

THE CHANCELLOR OF THE EXCHEQUER undertook to place the Free State proposals before the Cabinet at a special meeting which had been summoned for six o'clock that evening.

After the Free State representatives had withdrawn, LORD BIRKENHEAD called attention to the unfortunate economic situation of the Free State and to the undesirability of fixing payments which they could not possibly hope to discharge.

After the meeting, Mr. Cosgrave dictated to Mr. Jones the following as roughly embodying the proposals which he had in mind:-

Proposed Agreement under Article V.

Courts for damage to property. The Wood Renton Commission was set up to review these awards and apportion the liability to each Government. Our proposal is that we take over and repay to British Government sums they have paid under these awards. The Irish Free State undertakes to pay also 10 per cent of the total sums awarded by the Courts under the Damage to Property Act, 1923, in 5% compensation bonds.

Or -

As an alternative the Irish Free State will pay subject to allowances in respect of a moratorium £250,000 a year for 60 years.