,
as representing the bondholders, and the government was maintained by
the London Convention. The revenue assigned to the service of the debt,
namely, that derived from the railway, telegraphs, port of Alexandria,
customs (including tobacco) and from four of the provinces, remained as
before. It was recognized, however, that the non-assigned revenue was
insufficient to meet the necessary expenses of government, and a scale
of administrative expenditure was drawn up. This was originally fixed at
LE.5,237,000,[6] but subsequently other items were allowed, and in 1904,
the last year in which the system described existed, it was
LE.6,300,600. The Caisse was authorized, after payment of the coupons on
the debt, to make good out of their balance in hand the difference
between the authorized expenditure and the non-assigned revenue. If a
surplus remained to the Caisse after making good such deficit the
surplus was to be divided equally between the Caisse and the government;
the government to be free to spend its share as it pleased, while the
Caisse had to devote its share to the reduction of the debt. This
limitation of administrative expenditure was the cardinal feature and
the leading defect of the convention. Those responsible for this
arrangement--the most favourable for Egypt that Great Britain could
secure--failed to recognize the complete change likely to result from
the British occupation of Egypt, and probably regarded that occupation
as temporary. The system devised might have been justifiable as a check
on a retrograde government, but was wholly inapplicable to a reforming
government and a serious obstacle to the attainment of national
prosperity. In practice administrative expenditure always exceeded the
amount fixed by the convention. Any excess could, however, only be met
out of the half-share of the eventual surplus reached in the manner
described. Consequently, in order to meet new expenditure necessitated
by the growing wants of a country in process of development, just double
the amount of revenue had to be raised.

To return to the provisions of the London Convention. The convention
left the permanent rate of interest on the debt, as fixed by the Law of
Liquidation, unchanged, but to afford temporary relief to the Egyptian
exchequer a reduction of 5% on the interest of the debt was granted for
two years, on condition that if at the end of that period payment,
including the arrears of the two years, was not