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*Enclosure
No. 4.
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.. 1/97. 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 $1,800,000. The estimate has subsequently been revised and the cost of the scheme at $1=1/107. is now estimated at $10.114,080 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 1/63d. 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 $11,472,554 or $2,541,458, in excess of the sum actually voted for 1930 and $1,358,524 over the revised es- timate at $1=1/107. 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/C3d. 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 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, 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 1/6d. may therefore be put at 82,541,458 over the sum voted for 1930 but at only $1.743,805 over the sum which it may in any case he 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
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 $8,066,105 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- 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
terial.
3
savings which inevitably occur every year will more than offset the loss from the fall of the dollar. If the liquid surplus balances of the Colony, estimated on January 1930 at $8,041,363 may properly be used to supplement normal revenue for the purpose of meeting votes for Public Works Extraordinary and for certain heavy items of non-recurrent expenditure included under the heading of special expendi- ture, we are left with the following analysis for 1930 :-
Estimated Total Revenue Deduct Land Sales
Estimated Recurrent Revenue
Estimated Total Expenditure Deduct Public Works Extraordinary
Royal Naval Volunteer Reserve (disallowed) Certain heavy items of non-recurrent special
expenditure
Gross Recurrent Expenditure
$22,712,920 1,000,000
$21,712,920
$27,268,515
$ 3,840,750
25,433
1,015,000
* 4,881,183
$22,387,332
10. These figures show an estimated deficit of $674,412, as between estimated recurrent revenue and gross estimated recurrent expenditure; but I fully expect the recurrent revenue to exceed the already approved recurrent expenditure in the light of past experience Even without deducting "special expenditure" items, the re- current revenue has for the past few years in every case exceeded recurrent expen- diture, as is shown in the table which forms enclosure No. 5 to this despatch. I, therefore, view the future with less apprehension than the printed estimates might appear to warrant,
11. On the figures for 1929, it would have been possible to meet the full cost of the salaries scheme estimated at $1,038.934 for that year and still have shown a surplus at the end of the year. The position for 1930 is not quite so favourable owing to the drop in exchange and I consider that it would be advisable to make pro- vision for an increased recurrent revenue of about $1,000,000. I have already un- der consideration a tax on petrol, which should bring in some $200,000 and the possibilities of an amusement tax and of a tax on betting are being investigated: but I cannot anticipate any large revenue from these sources. The only taxes which bring in large sums are the Assessment Tax, the Stamp Tax and the taxes on liquor and tobacco. Of these the taxes on liquor and tobacco have recently been reviewed and are probably as high as it is wise to make them at present, though they may be capable of future enhancement. The Stamp Duties I should prefer not to disturb. There remains the Assessment Tax. The present general rate is 13% and it is expected to yield $4,250,000 in 1930. This cannot be called a high rate in com- parison with other large cities, and I think it could be raised by 4% without any appreciable rise in rents or other undue hardship. An increase in the Assessment rate by 4% should bring in about $1,300,000. From the $1,500,000 thus raised it would be necessary under the present method of calculation to deduct 20% $300,000 as Military Contribution, for which the Colony will obtain no additional benefit. Your Lordship will no doubt realize that this deduction of 20% acts as a very strong deterrent to the raising of additional revenue and, if Your Lordship could arrange that Military Contribution should not be charged on this additional revenue, necessitated as it is by the normal expansion of activities and by an increase in the cost of living, it would go far to remove any opposition to the proposed in- crease in Taxation.
OF
12. I would accordingly request Your Lordship's authority, if possible by tele- graph, to lay the recommendations of the Commission, as modified by the schedule herein, before the Finance Committee of the Legislative Council with a view to the approval of a vote enabling me to put the new scheme into force with effect from the 1st of January, 1930, and at the same time to proceed with my proposals for raising additional revenue.
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