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July 22, 1907.1
for themselves and families; they are thus better off than other European public officers in the Colony.
6. From a consideration of the memorials and petitions and of such other information bearing on the matter as I bave been able to collect I have come to the conclusion that the case for the memorialists and petitioners can succinctly and fairly be put in the following terms:-
In the last five years the number of dollars received on account of sterling and exobange compensation salaries has been reduced 25 per cent. In the same time dollar payments which make up about frds of the expenditure of senior and somewhat more of the junior officers have in- creased by rise of prices at least 20 per cent, while sterling payments which scount frd or less of the total have decreased by not more than 10 per cent.
7. The purchasing power of an official's sterling salary according to the above statement is in 1907 - (2/5 by 45 plus plus 11/10) or 67.5 per cent. of what it was in 1902.
Neglecting rise in prices for local produce and labour as being probably independent in its cause of the alteration in the gold value of the dollar the proportion of purchasing power of sterling salaries in 1907 to what it was in 1902 resulting solely from this alteration is ( plus by 1/10.) or 77:5 per cent.
On similar lines the proportion of the par- chasing power of sterling salaries in March 1907 to what it was in November 1905 is due solely to the alteration in the value of the dollar from 1/10th to 1/9th of a £ is less than 9/10 (2/3 plus 1/3 by 11/10) or 93 per cent,
8.
From whatever point of view these figures are considered it cannot be questioned that there has been a heavy fall in the purchasing power of sterling salaries in the last few years Lud it could scarcely be expected that this fall should be without its effect on the efficiency of the Service generally. Apart from general dissatisfaction several cases have already occurred in which good men have been lost to the Colony by the unattractiveness of the present outlook.
9. Since the memorials above discussed were submitted, I bave received de patch No. 236 of the 26th November, 1906, in the 4th paragr. ph of which Your Lordship regrets being unable to reconsider the decision that measures of relief were unjustifiable and unnecessary at the present time and goes on to state that "in any case the fact that in spite of economy of Public Works the estimated revenue for 1907 barely covers the estimated expenditure is sufficient reason against any general increase in salaries." In this connection I would point out that the Estimates were drawn up on the ba-is of a 2/-dollar and that the current rate is now over 28. 2jd, so that unless this rate falls appreciably or compensation is given for its high level, the amount that will be expended on sterling salaries in the year will fall considerably short of the estimate.
10. Subsequent to the above quoted despatch I understand that Your Lordship on the 8th January last asked of the Governor of the Straits Settlements what solution of the galaries question would be applicable to Hongkong as well as to the Straits Settlements and Federated Malay States. tir John Anderson has been good enough to favour me with a copy of the despatch he wrote in reply-No. 6) dated the 31st January, 1907, the 11th paragraph of which suggests that salaries in Hongkong should be paid at the rate of the day so long as it does not exceed 2/2 and that if the rate exceeds 2/2 the salary should have a percentage added to it equivalent to 148th of the excess of the rate ⚫Over 2j..
CHINA OVERLAND TRADE REPORT.
The actual effect of the scheme is practically to pay salaries at a fictitious rate of 2/- to the dollar. On the whole the scheme suggested in paragraph 7 of my confidential despatch of the 13th July, 1906, appears simpler.
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For simplicity it is suggested that in place of the above an additional cent should le given on every dollar for every id. that the dollar rises above 2/-. With nine dollars to the pound sterling, or the dollar at rather more than 2/24d. as at present, Sir John Anderson's scheme would mean an immediate addition of 5 per cent to salaries. This would not remove present grounds of complaint.
12. I regret the delay, due to my recent illness and absence and to the complicated nature of the question, in forwarding the memorials and petitions submitted to me in October and November of last year, and I would urge of Your Lordship the necessity for some early action bing taken in the matter with which they deal.
11. A more acceptable scheme would be if an additional cent were given on every dollar for every d. that the dollar rises abora 2j.. With the dollar at 2/2 the addition would then be 10 per cent. If it went to 2/6 the addition would be 24 per ont which might be laid down as a maximum instead of the 12 per cent suggested by Sir John Anderson.
The reply of the Secretary of State for the Colonies is appended :
Downing Street,
28th March, 1997. Sir,-With reference to paragraph 4 of my despatch No. 236 of November 26th last, I have the honour to inform you that I bave now given further consideration to the question of the effect of the increased exchange value of the dollar on the emoluments of those officer of the Government service, whose salaries are fixed in sterling or, bing paid at the rate of 3-to the dollar, are practically on a sterling basis.
2. As you are aware, I have previously not seen my way to allow any concession on this account, maiuly on the ground that, if exchange continues to rule high a reduction in local prices must presumably be only a matter of time.
I understand, however, that the adjustment of prices, which might be expected, has not yet taken place and, in the orcumstances, I am willing to modify my previous opinion and to consent to some additional payment, as a tem- porary measure to officers paid on a sterling basis, who under present conditions find it diffi cult to live with fair comfort on their salaries.
3. I would, therefore, propose that, if you and the Legislative Council agree, a local allowance should be paid to these officers (within the limitations mentioned hereafter for three years from January 1st, 1907, subject to the following conditions:--
more.
The allowance will be at the rate of 5 per cent per annum on the officer's salary, so long as the exchange value of the dollar is 2.2d, or
If the dollar rises to 24d. or
more the allowance will be at the rate of 10 per cent. 1f the dollar falls below 2:2d, no allowance will be paid.
These allowances will not be pensionable and will not be paid while an officer is on leave of absence.
4. As at present, advised, I am not satisfied that there are sufficient grounds for granting these allowances to officers whose salaries exceed £1,000 a year. It can scarcely le argued that such officers find it difficult to live with fair comfort on their salaries, and it must be remem- bered that their 1. cal expenditure (which alone is affected by the rise iu the exchange value of the dollar) is less in proportion to their income than that of less highly paid officers. If, how. ever, you take a different view, I shall be glad to receive, and consider, your observations on the point and in the meantime I will defer coming to a final decision upon it. may add that, if the limit of £1,000 is finally adopted, in the case of officers whose salaries are nominally fixed in dollars, payable at 33.. the salary should be regarded as exceeding £1.000 if the sterling salary attached to the post is more than that
aum.
5. Shortly before the end of the period of three years, to which I have proposed to limit the grant of the allowance, I shall expect to receive a full report on the cost of living and on market prices in Hongkong showing how far local prices have adjusted themselves to the enhanced sterling value of the dollar, 8 pposing the rate of exchange still to be high. On the receipt of this report, the question of continuing the local allowance will be reconsidered, but it must be understood that it will not be renewed unless the step can be justified by reference to the local con ditions obtaining at the time. -I have, c.,
ELGIN.
Governor Sir M. Nathan, K.^.M.G., Then followed this correspondence:
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and I propose to suspend action until I shall have received a reply to Sir M. Nathan's despatch No. 37 of the 8th March.
Downing Street,
16th April, 1907. SIR, I have the honour to acknowledge the receipt of your despatch No. 73 of the 8th of March forwarding memorials of Government officers with regard to the salaries of the Hong. kong Service as affected by the high exchange value of the dollar.
2. I propose to defer replying to your despatch until I have had the opportunity of discussing the matter with you on your arrival here.
I have, &c.,
Governor Sir M. Nathan, K.C.M.G.
ELGIN.
Dowsing Street,
11th June, 1907. Sir, I bave the honour to acknowledge the receipt of your telegram of the 1st of May, in which you informed me that the proposa's made in my despatch No, 57 of the 28th of March for the grant of a local allowance would not satisfy the service, and added that you proposed to defer action in anticipation of my reply to the Governor's despatch No. 37 of the 8th of March. I had already replied to that despatch to the effect that I would discuss the matter with Sir M. Nathan on his arrival in this country.
1st May, 1907. Officer Administering the Government to Secretary of State. Your despatch No. 57 of 28th March. The allowance offered would not satisfy the Service'
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viewz, and, subject to the consent of the 2. I have now ascertained Sir M. Nathan's
Legislative Council, I am prepared to approve the following arrangement:-
Officers drawing sterling salaries, or dollar salaries with double exchange compensation, at the rate of 2 to the dollar, so long as the will be paid their salaries, when in the Colony, exchange value of the dollar is at or above that figure.
When the exchange value of the dollar is below 2 these salaries will be paid, as at present, at a rate of exchange fixed monthly by the Government and based on the average exchange value of the dollar during the preceding month.
Officers whose salaries are fixed in sterling will draw leave pay and pension on the basis of the fixed sterling salary.
Officers drawing double exchange compensˆ• tion will continue to draw leave pay and pension on the basis of their nomiual dollar salaries at the privileged rates of exchange to which they are entitled,
3. I have, therefore, to request that you will place these proposals before the Legislative arrangement, you are authorised to put it in Council. If the Council approves the suggested
force at once with effect from the 1st of January las*.
I have, &c.,
The Officer Administering the Government of
ELGIN.
Hongkong.
The memorials sent by the various depart- ments in the Civil Servios, relative to their pleas for a change in the system on which salaries were paid, afford interesting reading, and show how justified were Sir Matthew Nathan's remarks that they were somewhat exaggerated.
The memorial signed by Sir Francis Piggott, Sir Henry Berkeley and Mr. S. Da in states that Hongkong is, probably, the dearest Crown Colony in the Empire, and this even with the dollar at 1,8. There are many things which tend to make it so the expenses of living are far higher than in any other Colony and they are enormously increased by many causes : the chief of which is the rapid deterioration owing to the climate of clothes, books and stores. So far as European trades. men are concerned. the price of goods has for long been at the rate of one'dollar to one shilling charged in England, and ther- is no sign of any alteration being made in this respect. This excessive soals of profit is accou ted for in part by high rents and rapid deterioration of goods. It compares unfavourably with prices in other Colonies within our experience: even where customs duties are charged, which at most add 10 per cent to the prios. High rent is the keynote of the situation, and it is certain that if
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