713
PUBLIC RECORD OFFICE
Reference :-
། ། ། ། ། །། mimimmtm.C.O.882/11
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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from the Fund. I propose, in future, that interest earned on the Fund's investments shall in the first place be credited to revenue, but that there shall be a special provision on the Expenditure side for a corresponding amount to be credited to the Fund.
I have, &c.,
HUGH CLIFFORD,
Malayan Civil Service,
Governor.
Enclosure in No. 230.
EXTRACT FROM AN ADDRESS BY HIS EXCELLENCY THE GOVERNOR TO MEMBERS OF THE LEGISLATIVE Council at a MEETING HELD ON THE 10TH OF OCTOBER, 1927.
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I have made a careful study of the papers which relate to the genesis and to the inauguration of the Opium Revenue Replacement Fund; and, speaking as one who has until now had no acquaintance with any similar financial experiment, I find myself in some sympathy with those to whom it does not commend itself. matter very full consideration, however, and after discussing it with my principal After giving the advisers, I strongly feel that, as the Fund has actually been brought into being, it would be at once inexpedient and unwise were this Government to withhold further contributions to it, until the whole question of international policy with regard to the production and consumption of opium comes up for further consideration at Geneva in two years' time. As Honourable Members are aware, the idea of the designers of this Fund was that if, as the result of international action over which, of course, the Government of this Colony cannot exercise any control, the Straits Settlements are suddenly deprived of their opium revenue--which still forms a very material portion of our total annual income-the money accumulated in the Fund could be drawn upon for a period, more or less prolonged, in order to make good at any rate a portion of the loss while the very considerable task of readjusting our whole fiscal system was in progress. There was also a suggestion that the Fund might, in course of time, assume such large dimensions that the interest annually accruing from it might be sufficient in some measure to compensate for the loss of revenue from opium. At the end of this year the Opium Revenue Replacement Fund should amount to $40 million and I, personally, see scant prospect of the expectation just noted being realized, even if the strong local opposition to the continued amassment of it, after the policy of the Powers with regard to opium has again been considered at Geneva in two years' time, can be overcome. I think, therefore, that we may assume that, if we are suddenly deprived of our revenue from opium, the Fund will be placed to the use first mentioned, viz., that it will be employed to furnish the Colony with moneys wherewith to defray its unavoidable expenditure during the period that its fiscal system is being recast in a fashion that will enable it to cope with the loss of all revenue from opium in perpetuity.
I am aware that apprehensions are entertained in certain quarters lest the posses- sion of this financial nest-egg by the Colony should tempt the Imperial Government to seek to divert it, or some portion of it, to purposes other than those which the public of the Straits Settlements would regard as best adapted to its interests. I have accordingly approached the Secretary of State on this subject and, though theoretically it is not within his competence to bind his successors in this or in any similar matter, it will be recognized that a pledge given by one Secretary of State to the Legislature of a Colony on an important question of public policy is, in practice, little likely to be disregarded or set aside at any future time. I am authorized by the Secretary of State to announce that no part of the capital of the Opium Reserve Fund will be diverted from its original object to any Imperial purpose or to any local purpose without the consent of a majority of the Unofficial Members of this Council.
In these circumstances, I would earnestly counsel Honourable Members not to withhold their approval of the inclusion in the Estimates of Expenditure for 1928 of the contribution toward the Opium Revenue Replacement Fund.
C. 52056/28 [No. 11].
(No. 186.)
SIE,
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No. 231.
STRAITS SETTLEMENTS.
THE SECRETARY OF STATE to THE GOVERNOR.
I HAVE the honour to inform you that His Majesty's Government have had
Downing Street, 30th April, 1928. under consideration the question whether payments from the revenue of the Straits Settlements to the Opium Revenue Reserve Replacement Fund could properly be taken into account for calculating the defence contribution. It was strongly urged upon me by your predecessor that such payments should not be regarded as assessable for purposes of defence contribution and I fully sympathised with his view. It became necessary, however, to defer consideration of this particular question, as His Majesty's Government decided that it was desirable to undertake a general examination of contributions made by the non-self-governing colonies to their defence. This examination has now taken place, and it has been agreed that the annual con- tribution of the Colony to the Opium Revenue Reserve Replacement Fund should be excluded from the revenue assessable to defence contribution, on the understanding that any sums drawn from the Fund either in the form of interest or capital drawings and used as income for revenue purposes should be included in the assessable revenue.
I have, &c.,
L. S. AMERY.
C. 52056/28 [No. 12].
SIR,
No 232.
STRAITS SETTLEMENTS.
THE SECRETARY OF STATE to THE GOVERNOR. [Answered by No. 234.]
(Confidential.)
I HAVE the honour to acknowledge the receipt of your Confidential despatch
Downing Street, 30th April, 1928. of 31st October* concerning the Opium Revenue Reserve Replacement Fund.
I understand that you differ from the views of your predecessor on the ground that the annual contributions to the Fund have not in actual fact been derived from "additional taxation to meet abnormal expenditure.' But although this wording
may not actually cover the facts I do not feel that the argument is seriously affected. In order to provide the annual contributions some taxation was increased at the outset and other taxation was applied to the service of the Fund when it might have been lightened or, if it had been maintained at the same level, its proceeds need not have been diverted from works of development in the Colony. As you have clearly shown, if the contribution had been maintained in 1928 it would have been necessary to increase taxation.
It is not solely on this ground, however, that I have supported with the utmost vigour the views urged by your predecessor. Largely in view of charges levelled at His Majesty's Government that they were debarred by financial considerations from taking effective steps to suppress opium smoking, the Straits Settlements Government was encouraged in the policy of setting up an Opium Revenue Reserve Replacement Fund to which they decided to make annual contributions of 10 per cent. of their total revenue. If His Majesty's Government were to insist on the right to take toll up to 20 per cent. of the abnormal revenue raised for this purpose before it could be placed in the Fund, I felt that they would expose themselves to the charge that they had first made the Colony tax itself to relieve His Majesty's Government of embarrassment caused at Geneva and in America, by and in pursuance of a policy
of opium suppression not locally popular and had forthwith raided for their own use the funds so provided. Such a suggestion seemed to me so damaging that I considered it essential that the contributions should be allowed to pass intact into the Fund. On the other hand it appeared reasonable that, when, at some perhaps distant
* No. 230.
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