PUBLIC RECORD OFFICE
Reference :--
TEC.O. 882
6
PUBLIC RECORD OFFICE, LONDON
| ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO】
116
revenues and expenditure so that little or no margir remained, and meeting its necessities for works by a loan! The reply to this question appears to me to be as follows No Colony van raise a loan without the sanction of the Secretary of State—
If his judgment the object is for a work wholly outside the ordinary development of a Colony, the imerest and sinking fund for the service of the board world be debited to ordinary expenditure. This would leave the margin unaffected, for additional revenue of an equal amount would have to be raised to meet the new charge. For example, suppose the ordinary revenue to be $6,000,000 and ordinary expenditure to be
half
goes to $4,000,000 The margin is $2,000,000 (of which, say, puldie works and half to military contribution. The Colony, with the Sanction of the Secretary of State, raises, say, a loan of $10,000,000, eather as was done by Hong Kong to enable a Chinese Viceroy to redeem a Chinese concession, or to build a railway which has Imperial results
The interest and sinking fund amount to, say, $400,000 per The Colony has to put où extra taxes to meet this charge, and it reases its revenue to 86,400,000, while its expenditure rises to of this liability The margin remains 84.400,000
Tam
account 4171
$2,000,000, (b) But if the Colony's ordinary revenue decreases and expenditure increases till they nearly balance, and instead of raising more revenue the Colony raises a loan to meet the cost of carrying on its necessary works, as was the case in Hong Kong in 1902 and 1903, the annual charge for the service of such a ban would not be chargeable to ordinary expendi ture, and in future years the revenue must therefore be increased by double the amount required to meet the charge, with a consequential permanent increase in the military contribution, which is thus auto- matically adjusted For example, the ordinary revenue is estimated in a given year to be $6,000,000 and the ordinary expenditure (viz., apart from the military contribution and Public Works Estimates) to be $5,000,000 This, when the margin is divided between the two. gives only $500,000 for public works, and the Colony instead of in creasing its revenue raises a loan of $1,000,000, the interest and fund for which amounts to $40,000 per annum. The military contribution, therefore, is only $500,000 for the year, and the sum available for works is $1,500,000. But the next year the debt charge falls due cand in each subsequent year) Suppose that the revenue and expendi- ture have adjusted themselves to the normal proportion of $6,000,000 and $4,000,000 respectively (if not the Colony must raise the extra revenue it omitted to do previously, without taking this debt charge into account, and suppose that the normal amount of $1,000,000 is required for public works Then the Colony must find not $40,000. but 880,000 extra in each succeeding year (for loan account) and the military contribution increases each year by $40,000, thus :—
Military Contribution
Public Works Estimates Ordinary Expenditure
$ 1,040,000
Ordinary Revenue 1,000,000 Deduct Expenditure 4,000,000
$
6,080,000 6,040,000
6,040,000
Available for service of
loan
40,000
The funds accruing from any work constructed by a loan of the class first re- ferred to- viz., outside the ordinary works of the Colony-would not be credited to ordinary revenue until such time as they equalled and exceeded the total lonn charges, together with any cost of maintenance and working expenses. Till then they would appear as extraordinary revenue not assessable to military contribution. When that time arrived they would be included in ordinary revenue as against the charges for working expenses, maintenance, and the annually decreasing amount for the service of the loan, which, as I have said, would from the beginning have been charged to ordinary expenditure. The yearly increasing profit as loan charges decreased and receipts increased from the work, eg., a railway, would go to swell the ordinary revenue and so to increase the margin and military contribution
147
(2) Special Funds.
The next case is that of Special Funds." Such, for instance, as the Widows and Orphans' Fund. It would, as now, rest with the Secretary of State to decide whether the contributions to any such fund should or should not be included in ordinary revenue, and similarly whether any special contributions raised by a special tax (as in the case of the typhoon refuge) should be similarly exempt.
(3) No question arises in case of extra-l'olonial works, &c
It will be noted that under this system any special task undertaken by a Colonial Government outside its own boundaries needs no special treatment, such as the cost of the administration of Christmas Island by the Straits, or the conduct of the Imperial Postal Agencies in China by the Hong Kong Government. The inclusion of such expenditure and revenue on both sides of the ordinary revenue and expendi- ture account does not affect the margin, and only the profit (if any) is assessable to military contribution.
PROPORTION OF MARGIN ASSIGNABLE TO DEFENCE.
Assuming that it were intended to retain the defence contribution at approxi- mately its present amount, the attached table, showing the amounts paid under the present system and the available margin for each year, would appear to indicate that the proportion of the margin which should be assigned to the defence contribu- tion would be approximately half.
Although, as I have shown, any sudden decrease in the margin due to a loan for current works must be automatically compensated in succeeding years, it may perhaps be considered advisable that a maximum and a minimum should be fixed, and these in Hong Kong, looking to the proportion hitherto paid, might be fixed at one-half and one-quarter of the actual cost of defence.
ANOTHER ALTERNATIVE.
An alternative method 'which would obviate any such misconception as was alluded to in a former paragraph (p. 144), would be for the Colony to pay a fixed proportion of the total cost of the forces and defence and barrack works. What this proportion should be, assuming again that the incidence on the Colonial revenue should remain such as at present, would be easily ascertainable by a comparison over a series of years of the actual cost to the Imperial Government, and the amount paid by the Colony. The precise figures are only available here for last year (Table II.). The proposal has the disadvantage which Mr. Chamberlain desired to avoid, viz., that the sum would fall upon the Colony equally in times of prosperity and in times less prosperous. It has also the disadvantage that the amount to be spent on defence each year must be fixed by the Imperial Government without reference to the Colony and the Legislative Council, which votes the Colonial proportion. I see no practical difficulty in this, however, if the Colony has consented to the principle to be adopted. Its simplicity is a recommendation, but I prefer the scheme I have proposed.
ILLUSTRATIONS OF DEFECTS of Present System.
It will perhaps render the latter part of this memorandum more clear if one or two illustrations are given of the contention that gross revenue does not provide a stable or just basis upon which to calculate the percentage to be assigned to defence (see page 145).
(a) Induces delegation of control. The system tends to encourage the employ ment of corporate bodies in administrative or quasi-administrative work, irrespective of whether direct Government control be more advantageous or not.
In no direction are expansion and progress more desirable than in the sphere of education. If Government establishes new schools, a heavy outlay is involved, but as all scholars' fees are credited to revenue they are subject to 20 per cent. deduction for the military contribution. If, however, an agency is used, such as a mission society, Government receives no fees, and merely gives a grant in aid.
Institutions not under direct Government control, therefore, receive a substantial preference; similarly, in the case of a municipality, whose funds, not being a part of Colonial revenue, are not subject to the deduction for defence.
14658
K+