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5. I now proceed very briefly to set forth the situation which Her Majesty's Govern- ment have had before them, and the decision which they have arrived at thereon.
6. Since the transfer of the Straits Settlements from the control of the Indian to that of the Home Government, the Home and the Colonial authorities have frequently been at issue as to the claims which the former is entitled to make upon the latter on account of the cost of its garrison and its defences, with the practical result that while the cost of the garrison increased, the contribution received from the Colony decreased, so that the charge for the military protection of the Colony was an ever increasing burden on the Home Government, a burden from which, in its view of the matter, it should have been wholly relieved by the Colony. In 1889, the Government decided to put an end to this state of things, and to place the question on a more satisfactory footing. Whilst reaffirming the principle, on which the transfer of the Settlements was accepted by the Government in 1866, that it was entitled to look to the Colony for the whole cost of its garrison, it confined itself, as regarded the then current year and the four succeeding years, to a demand which amounted to an average charge of 99,0004, a-year, that is, 86,9511. for 1889 and 100,000. for each succeeding year, plus 8,000 dollars per annum military lodging allowance for all five years, although the total estimated cost of the garrison exceeded 136,000l. An intimation was at the same time given that thereafter the Colony must expect that the charge on its revenue would be enhanced. The latest returns of Colonial revenue before the Government were those of 1888, which showed receipts amounting to 3,858,909 dollars, whilst the Treasury rates of exchange for 1889 indicated that such a contribution as was then demanded might probably be discharged by an annual payment of 650,000 dollars a-year, or about 17 per cent. of the Colonial revenue. In the event, it proved that the average annual revenue was 3,973,000 dollars, whilst the Military Contribution was dis- charged by an average payment of about 639,000 dollars, involving a charge of a little over 16 per cent. of the average revenuc.
7. As regards the whole quinquennial period, therefore, the burden was slightly less onerous than that which the Government contemplated. In the latter months of that period however, the conditions began to change so rapidly, in a direction adverse to the Colony, that on examining them Her Majesty's Government came to the conclusion that the Straits Settlements had, in the words used by Mr. Goschen in the House of Commons during the Debate of 1891, " become less able to bear the contribution" of 100,000% than they were; and that, in accordance with the undertaking given by Mr. Goschen, Her Majesty's Government were bound to reconsider the question. But their view as to the ability of the Colony to bear the former charge must not be taken as applying further than to the immediate future. A careful examination of all the facts relating to trade, shipping, population, and revenue, has by no means convinced the Government that, taking the quinquennial period 1894-98 as a whole, the Colony may not be able to bear an average charge of 100,000l. per annum, the amounts foreborne in earlier years being made good in later and more prosperous ones.
8. They have, therefore, decided that the Colonial Military Contribution shall be reduced to 80,000% and 90,000%. for the years 1894 and 1895 respectively, and they have pro- visionally fixed the contributions for the years 1896, 1897, 1898 at 100,000%, 110,000, and 120,000l. This arrangement will give a sensible relief to the Colony for the years 1894-95, and during 1895 a more trustworthy forecast will be possible of the financial conditions that will probably rule the remainder of the quinquennial period.
9. Should unexpected circumstances arise, such as a farther material fall in silver, a serious check to, or diversion of, trade, or losses from other causes materially affecting the financial position of the Colony, Her Majesty's Government will not fail to take note of the altered situation and to consider any representation which the Colony may make as regards the situation generally, and especially as regards the enhanced payments for the later years of the present quinquennial period. In arriving at an immediate decision on such a question us this, the unexpected cannot be taken into calculation in one direction or another, and, assuming that the conditions remain normal, and that there is a continuation of that moderate expansion in the dollar value of the trade which is already apparent, Her Majesty's Government entertain the belief that the charge above proposed will prove to be a reasonable one. The claim of 80,000%, in respect of the current year, will be discharged by a payment of about 729,000 dollars, or about 113,000 dollars less than the sum authorized by the Colonial Estimates and Appropriation Ordinance. If in other respects the Estimates of the current year are realized, the anticipated deficit of 7,968 dollars will be converted into a surplus of about 105,000 dollars.
10. As regards the year 1895, I learn from you that the revenue (which has been materially increased by fresh taxation) is estimated approximately at 3,950,000 dollars, and 'the civil charges, on the expenditure side of the account, at about 3,075,000 dollars. To those charges must be added the Military Contribution of 90,000, which, at a probable ́exchange of about 9} dollars to the pound sterling, would bring up the total civil and military charge (excluding any sums voted by way of capital expenditure on barracks) to about 3,920,000 dollars, leaving an estimated surplus of 30,000 dollars.
11. I will not attempt to forecast in any detail the finances of the years beyond 1895, but Her Majesty's Government consider that they are not over sanguine in anticipating that there will be a moderate increase, under various heads, in the receipts of each year, and that by a steady application of the principles of economy recently formulated by the Retrenchment Committee, the necessary civil charge may be kept down to something like 3,000,000 dollars a-year. It seems, therefore, not too much to hope that the Colony may be able to provide [for] the Military Contribution now asked for [and all civil charges] without incurring a deficit in any year of [on] the quinquennial period, and that there will even be a balance on the period as a whole, which balance, together with what remains of existing Colonial balances, the Culony may be able to devote to some extent to the construction of the new barrack accommodation, rendered necessary by the increased and concentrated garcison of Singapore, for, as I need hardly explain, the obligations of the Colony in respect to military lands and buildings, must, in the view of Her Majesty's Government, continue, as it has existed since 1866, as explained in Lord Knutsford's despatch of the 13th December, 1889.
12. Should the Colony prefer to provide for the capital expenditure on barrack accommodation by way of loan, Her Majesty's Government would not object to such an alternative mode of proceeding.
13. With regard to the actual cost of the garrison, it may be as well that I should give the following explanation:-In 1888 the Government anticipated that the cost of the garrison would be about 136,000% a-year. As the garrison has been usually under its establishment, and as part of the expenditure has been in silver, it might be supposed that the actual charge would have fallen short of the estimate. I am informed, however, that the contrary was the case--and that owing to the cost of sea transport and other items having been under-estimated-the actual average cost, after converting the silver expendi- ture into sterling, has been at the rate of 144,0001, a-year.
14. As regards the quinquennial period now current, the estimated annual expenditure on the basis of an authorized strength of 1,570, is 154.7301, so that, assuming the Home Government makes good its anticipation of receiving 500,000l. for that period from the Colony, there will still remain a charge of 273,6501. to be borne by the people of this country, who are much more heavily taxed than the people of the Straits Settlements, and who are only able to devote to civil purposes about 36 per cent. of their revenue, as against
per cent, or more, so available at the Straits Settlements.
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15. In thus announcing to you the decision of Her Majesty's Government, I have avoided dwelling upon controversial matter. The question has been already argued out with great ability and mastery of detail in the papers presented to Parliament in 1891 (C. 6290) and in a further series of State papers, which will be presented to Parliament together with this despatch. It seems, therefore, superfluous for ine to say more than that Her Majesty's Government desires to associate themselves with the statements of principle and arguments set forth by Lord Knutsford in his various despatches, and that they reserve all rights claimed by him on behalf of the Home Government, should a fuller assertion of them appear reasonable on or after 1899.
RIPON.
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