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 (b) Education will be a controversial question for which we have recommended appointment of a Working Party. It may prove convenient to treat primary education separately from higher education for a number of years. We feel that if Federation is to be meaningful, the final objective should be federal policy and local administration. We suggest that in the initial stage some ﬂexibility should be maintained so that the most sensible division between Federal and State functions can be devised in practice. In view of the strength of the evidence in favour of the continued use of English as the medium of instruction in schools, we do not recommend any change in the policy of the Governments in this respect.

(c) Similarly the overriding control of Finance should, in our view; lie with the Federation in the long term. But here again it will be necessary to proceed gradually and in the light of experience. Immediate alignment of taxation would cause extreme difficulty and resentment, though the objectors to Federation would do well to realise that taxation in Sarawak and North Borneo would increase sharply in future years without Federation, and much more sharply if the territories were to achieve independence on their own. For the longer term we entirely concur in the proposals made by our Malayan colleagues in paragraphs 216 to 217. We suggest that in any final arrangement room should be left for Sarawak and North Borneo to borrow on their own credit and that sufficient revenues should be left in State hands to assure the service of such borrowings.

(d) Tariffs

Here again progress would have to be gradual in order to avoid constant disturbances, but alignment of the tariff structure throughout the Federation should be the final objective and a Joint Working Party should be set up as early as possible to study ways and means.

(e) Shipping and Navigation: Ports and Harbours

Shipping and navigation on the high seas and in tidal and inland waters, and ports and harbours, are of great importance to the Borneo territories, particularly to Sarawak. Whilst we agree that in general these matters should remain on the Federal List, we think that there is a case for distinguishing between large port and harbour works on the one hand, and jetties and smaller installations on the other, and we consider that the latter would be more appropriate to the Concurrent List. Where the dividing line should be drawn is a matter for an expert Working Party.

(f) Fisheries (Maritime and Estuarine Fishing and Fisheries, excluding Turtles)

We consider that ﬁsheries are appropriate to the Concurrent List. On the one hand international complications sometimes arise which are the concern of the Federal Government; on the other hand there is the need to ensure that day—to—day administration is on a local basis and that traditional fishing grounds and local rights are fully protected, and this is properly the concern of the State Government.