*Enclosure No. 4.
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6. With regard to cost a comparative table of the amounts payable under the existing regulations and under the recommendations of the Report, at exchange rates of $1=1/10d., 1/9d. and 1/6d, respectively is enclosed. The Estimates for 1930 were framed on the basis of an exchange of $1-1/10d. and sterling salaries were calculated under existing regulations at the privileged rate of $12 to the £1. plus a high cost of living allowance of 8% or 16% for unmarried and married officers respectively. The total so payable would have been $8,931,096 and the first rough estimate of the cost of the revision made at the time of the introduction of the Budget and calculated at the same rate of exchange showed a total increase of $1,300,000. The estimate has subsequently been revised and the cost of the scheme at $1=1/107, is now estimated at $10,114,030 or an increase of $1,182,934 over the sum voted in the 1930 estimates. Since then the value of the dollar has declined in the most startling fashion until it reached the unprecedented figure of 1/64d. from which it has only slightly recovered. This fall in exchange has already in- volved the Government in payment of temporary allowances at 18% and 9% instead of 16% and 8% as provided for in the estimates, the additional cost of which, if extended throughout the year, is estimated at $214,500 over and above the $420,000 voted for the high-cost-of-living allowance. It has been found from the experience of 1929 that even at 16% and 8% the vote of $420,000 would have proved inade- quate and would require to be raised to $564,000. A recalculation of the effect of the new scheme based on exchange rate of 1/6d. and a detailed application of the new scales to existing staff raises the gross estimate to $11,472,054 or $2,541,458, in excess of the sum actually voted for 1930 and $1,358,524 over the revised es- timate at $1-1/10. of the additional cost. of the revision. Any revival in the value of silver will automatically result in a reduction of this sum. As the Table shows at exchange $1=1/9d, the net extra cost of the scheme would be under $1,350,000. It must, moreover, he borne in mind that the existing rules for conversion of sterl- ing salaries are powerless to mitigate the effects on officers with sterling commitments of an exchange of $1=1/6d. The sliding scale itself ceases to be of value below an exchange rate of 1/8d. and the temporary allowance does not compensate for any lower rate than 1/9d. Therefore, without any revision of salaries, it has already become necessary to consider what steps should be taken to compensate the officers with sterling commitments for this further drop in the sterling value of the dollar. Should it prove necessary to abandon the sliding scale and to convert sterling sala- ries at current rate with the maximum temporary allowance on the results so obtained, and assuming an exchange rate of 1/6d, it would be necessary to increase the sum voted for 1930 by $797,653. The maximum cost of the revision if the dollar should fall to tid. may therefore be put at $2,541,458 over the sum voted for 1930 but at only $1,743,805 over the sum which it may in any case be necessary to vote if the dollar should fall to and remain at 1/6d. I do not however anticipate that the dollar will fall as low as 1/6d. or that it will even remain at its present low level
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7. It is necessary at this point to consider how far the Colony can meet the in- creased cost of the scheme without resort to additional taxation. The estimates for 1929 as framed, foreshadowed a deficit of $2,521,050. The final figures for the year will not be available until the Crown Agents accounts are received, but the result of the year's working as estimated by the Treasurer shows, in place of the de- ficit, a surplus of $1,485,405;-revenue showing a surplus of $940,350 and expen- diture being $3,066,105 below the estimate.
8. When the Budget for 1930 was introduced in September last, the position had so far improved that a deficit of only $379,368 was anticipated at the end of 1929; but even this estimate proved unduly pessimistic, and (as stated above) the year ended with a surplus of about $1,485,405. We, therefore, start the year 1930 with the sum of $1,864,773 more than we expected. As a result of this our assets on the 1st January, 1930, are raised from the estimated figure of $7,712,265 to $9,577,038 of which $8,041,363 are considered to be liquid. Speaking generally, therefore, the financial position of the Colony cannot be regarded as unsatisfactory.
9. Turning now to the estimates for 1930, I would first premise that the un- expected fall in the exchange value of the dollar has upset our calculations both as regards the salaries scheme and as regards sterling expenditure on salaries and ma- terial. As however I remarked above, I can hardly believe that the dollar will re- main at its present almost unprecedented depreciation and I look for some improvement in the course of the year. There is, moreover, little doubt that the