PUBLIC RECORD OFFICE
Reference :--
PIC.O. 882
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9
PUBLIC RECORD OFFICE, LONDON
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be prepared to agree to the proposal, in the principle of which the Army Council express their concurrence, that only the net revenue from opium and spirits should De assessable to military contribution.
In this connection I am to enclose a copy of the Chandu Revenue Ordinance, No 21 of 1909, and a copy of the Liquors Revenue Ordinance, No. 22 of 1909. It will be seen that Section 47 of the former Ordinance makes provision for the deduc- tion from the proceeds of the sale of chandu of all expenditure on the purchase. preparation and distribution of opium, all charges incurred in carrying out the pro- visions of the Ordinance, and all interest on moneys advanced or capital expenditure for its purposes; and that similar provisions occur in Section 86 (1) of the Liquors Revenue Ordinance. These sections are in agreement with the proposals made in the Governor's confidential despatch of the 24th of June last* (a copy of which was enclosed in Colonial Office letter of the 26th of August, 1909†) and Lord Crewe trusts that their Lordships will accept the arrangement indicated. which, for the reasons stated in that letter, he considers to be no more than just
9.
I am to take this opportunity to acknowledge the receipt of your letter of the 19th of April, in which the Lords Commissioners accept as correct the ordinary methods of accounting by which refunds of revenue are deducted from the previously recorded receipts, and only the net amount received is shown as revenue. Your letter under acknowledgment referred to the specific case of Hong Kong, but Lord Crewe assumes that their Lordships will have no difficulty in agreeing that the same course should be followed in the Straits Settlements.
10.
Lord Crewe desires me to draw attention to the converse case, where sums paid out by the Government are subsequently reimbursed. The point was not raised at the time when the letter from this Department of the 24th of November last was written Large sums of money are paid by the Government as agent for other corporations, which may be sometimes another Administration; and these sums, when subsequently repaid by the bodies concerned, appear as revenue because a sound system of book-keeping requires that the repayment should be brought into the revenue account The amounts thus repaid add nothing to the actual revenue of the Colony; but, since they figure in the revenue account, are made subject to assessment for military contribution. In such cases as that of over-payments of the contribution itself no difficulty arises, since the War Office do not refund the amount paid in excess but agree to its deduction from the sum paid in the following year. This, as their Lordships will observe, involves an acknowledgment of the principle that sums paid out by the Colony and subsequently reimbursed should not be assessable to military contribution. Lord Crewe feels assured that the Lords Com- missioners will recognise the justice of this contention and will explicitly concur in his opinion that such reimbursements should be exempted from assessment.
11. I am now to refer to Sir John Anderson's proposal, in his confidential despatch of 24th June, 1909.* that the revenue from the new sources of taxation should not be assessable until it exceeds the amount of the deficiency caused by the loss on opium and spirits revenue. Their Lordships' consent to this suggestion was invited in the 3rd paragraph of the letter from this Department of the 26th of Augustt; but, if Lord Crewe rightly apprehends their Lordships' wishes, they would prefer that the assistance to be given to the Colony should take the form of the payment of an annual sum, as proposed above, and should not be dealt with by means or waiving military contri- bution on new revenue which is being raised to meet a deficit. In that case, on learning that the Lords Commissioners agree to an annual contribution of £80,000 for three years, he will be ready to request the repeal of Section 86 (2) of the Liquors Revenue Ordinance, No. 22 of 1909, and of Section 38 of the Petroleum Revenue Ordinance. No. 19 of 1909, which have been passed with a view to carrying out the Governor's proposal. A copy of the latter Ordinance is enclosed for the Lords Commissioners' information.
12. With regard, however, to the last paragraph of your letter under acknow. ledgment, Lord Crewe desires me to express his regret that he is unable to accept their Lordships' view that the exclusion of certain receipts from the Colonial Esti- mates of revenue is a matter which should be submitted for their approval. I am to invite attention to the letter addressed to the War Office from this Department on the 28th of August, 1909,|| a copy of which was enclosed in the letter to the Treasury of
• No. 156. ↑ No. 159.
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No. 158.
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the 16th of October " The fees received from the Government schools in the Straits Settlements have, as was pointed out, a municipal character, and would never have formed an item in the Colonial revenue had a properly constituted Education Board existed in the Colony. The establishment of the Board is a measure for the improve- ment of educational administration, for which the Government of the Colony and the Secretary of State for the Colonies are responsible. The same remarks may be applied to the receipts which it is proposed to hand over to the Hospital Board.
13. It is true that the result of this desirable reform has been to withdraw a small sum from the assessable revenue of the Colony: but Lord Crewe holds the view that the raising of new, and the abandonment of old, sources of revenue are matters of administration in which the Government, subject to the approval of the Secretary of State for the Colonies, should have unfettered control. The Secretary
of State is aware that the recommendations of the Committee of 1895 were based on the assumption that no important change in the revenue systems of the Colony affected, or in the method of bringing revenue to account, would be authorised without the concurrence of the Treasury. But, except in regard to really important changes of system, it is, in his Lordship's view, impossible that the administrative policy of the Government or the Secretary of State should be liable to be hampered by consideration of the effect which that policy will have on the amount assessable to military contribution.
ments.
14. Their Lordships have referred to the burden which is thrown upon the taxpayer in the United Kingdom in making good the difference between the cost of the garrison and the contribution paid by the Government of the Straits Settle- The taxpayer in the Straits Settlements has also a good claim to be con- sidered. According to the latest returns furnished by the War Office the total cost of the garrison of one of the most important strategic points of Imperial defence is £279,141, inclusive of non-effective services and home effective charges. The Colonial contribution amounted to £192,596, so that the taxpayer of the United Kingdom is called upon to pay only £86,545 for the safeguarding of a port of the highest Imperial importance, as against £192,596 paid by the Colony.
15.
Lord Crewe is prepared to undertake that changes which adversely affect the revenue assessable to contribution will not be made by the Colonial Government for purposes other than those of good administration: and he considers that the control exercised by the Secretary of State is sufficient adequately to safeguard the interests of the British taxpayer and the War Department; and further, he would point out that in any case sufficient revenue must be found to meet the growing necessities of administration.
18. The particular instances to which their Lordships object are clearly changes made or proposed in the interests of good administration, and Lord Crewe must adhere to his view that the revenue which is now paid to the Education Board, and the sums which it is proposed to pay to the Hospitals Board, should not properly form part of the general Colonial revenue.
17. There is one further aspect of the question to which the Secretary of State desires to invite the attention of the Lords Commissioners. Under the present system the Colonial Government receives every year from the War Office a statement showing the expenditure incurred on the garrison. A copy of the form is enclosed. It will be seen that the total sums expended under various heads is stated, but that no information is given as to the details of expenditure.
18. The Colonial Government is required to pay a very large proportion of the cost of the garrison, and the view has frequently been expressed that the Govern ment is entitled to receive proper accounts of the expenditure which it is called upon to defray. It has been pointed out in previous correspondence that the cost of the garrison has increased largely since 1896. Lord Crewe regrets the oversight which led to the statement in the letter from this Department of the 26th of August† that the cost of the garrison in 1896 was only £80.000. According, however, to the War Office letter of the 8th of October, 1909, the cost in 1896-7 was £154,198, whereas for the year 1906-7 the total cost was £280,491.
19.
No detailed information beyond the figures given in the annual War Office statement has been furnished to the Colony which might serve to explain why the cost of the garrison should have increased by nearly £130,000 a year in ten years. Lord Crewe is in entire agreement with the Colonial Government in thinking that
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• No. 165.
† No. 159.
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