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3. I have now again carefully considered the position as presented by the Unofficial Members in their "Memorial," and will proceed to explain the reasons which confirm me in the view that my decision was the right one. I fully admit that the reduction of salaries of Civil servants is a measure which may be taken under stress of financial necessity, but I do not see that the condition of the finances of Hongkong justifies such an exceptional step. The Revenue has steadily improved every year for the last nine years, rising from $1,193,000 in 1884 to a sum (omitting exceptional windfalls) of about $2,100,000 in 1892, a rise of 76 %. It is true that the Expenditure has largely increased in the same period, a result, I may observe, due more to the addition to "Services exclusive of Establishments" than to the growth of Establishments which have only increased by 37 % against a rise of 76% in Revenue. But I see nothing in the cxisting financial position which can not be remedied by ordinary measures of prudence and retrenchment not involving hardship to existing holders of office.
4. Before discussing the question of retrenchment it may be well to make clear what has been the attitude taken up on the salary question by successive Secretaries of State, and by the Unofficial Members of the Legislative Council respectively.
5. In 1883 a Memorial was received from a number of Civil servants, apply- ing for a general increase of pay; the answer of the Earl of Derby was a decisive refusal to accede to the application, (as will be seen by reference to the corres- 19.3.83. pondence noted in the margin). For the next five years the question appears to 9, of 6. No. 93 12.5.83. have remained in abeyance.
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6. The question, however, was raised afresh in connection with the Estimates for 1889, and the proposals then put forward were supported by the Unofficial Members, or at all events by some of them, who expressed an opinion in favour of an increase amounting to 20 or 25% all round. In dealing with this phase of the question, my Predecessor refrained from committing himself to any approval of such general increase, confining himself in the first instance to a suggestion that a Committee composed of Officials and Unofficial Members should be appointed to investigate and to report upon the general cost of living under specified heads of expenditure, in the years 1874, 1879, 1884, and 1889 respectively.
7. The suggested Committee, with the exception of its President, was composed wholly of Unofficial Members; and in its report it was unanimous in expressing the opinion that there had been a rise not only in house rent, but also in the cost of living generally since 1874, and in recommending that the salaries of the higher officers should be restored to their sterling value, taking the dollar at what was its exchange value in 1875. This recommendation, had it been adopted, would have had the effect of immediately increasing salaries by 35 per cent. in dollars, an increase that would by now, owing to the further fall in the sterling value of the dollar, have even exceeded 35 per cent. The claims of the Civil service being thus vouched and recommended by the Unofficial Members of Council, who may be regarded as in some degree special guardians of the public purse, and there being, moreover, a quantity of evidence, tending to prove that the views of those on the spot were based on fact, Lord Knutsford could not well have taken any other course than that of accepting in principle what was being urged upon him. But he declined to go so far as to sanction the somewhat hazardous proposal of fixing the salaries in sterling, and adopted what has proved the more cautious alternative of a fixed addition in dollars not exceeding 35 per cent. to the salaries as they stood in 1875. His Lordship's views were embodied in great detail in his despatch No. 110 of the 19th of June 1890, and the conditions and exceptions therein laid down were, I would point out, almost entirely in the direction of restricting the operation of what the local Government proposed, and afford strong evidence of a desire to protect the public purse.
8. The despatch of the 19th of June, together with the revised scheme of salaries which it authorized, came before the Legislature in connection with the Estimates for 1891, at a time when, I may observe, the members were fully aware of the demand made by the Imperial Government for a larger Military Contribu- tion, but notwithstanding this knowledge the Council voted the increases; and these were in due course, but subject to certain criticisms and exceptions, sanctioned by the Secretary of State in his despatch No. 71 of 3rd April 1891. Shortly after that despatch was posted, he was made aware by a telegram from the Unofficial Members that they had altered their views on the question, but when the reasons on which that change of opinion was based came to be examined by him, they did not appear to him to justify a reversal of a decision which had been arrived at largely in deference to the views put forward by Unofficial Members.