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PUBLIC RECORD OFFICE

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PUBLIC RECORD OFFICE, LONDON

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SIR,

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No. 49.

THE ACTING GOVERNOR to THE SECRETARY OF STATE.

(No. 475.)

(Received 23rd November, 1903.)

[Copy to Treasury, May 25, 1904. L.F.] [Answered by No. 58,]

Government House, Singapore, 29th October, 1903. I HAVE the honour to acknowledge the receipt of your despatch, No. 317, of the 25th ultimo, pointing out that Sub-sections (3) and (4) of the new Section 7a contained in the Ordinance to amend the Currency Note Ordinance No. XIII. of 1903 appear to require amendment.

2. In reply I have to state that I referred the matter to the Attorney-General and to the Treasurer, the latter of whom has furnished the enclosed memorandum on the subject. It would appear, therefore, that no amendment of the Ordinance is necessary at present.

I have, &c.,

Enclosure in No. 49.

MEMORANDUM by the COLONIAL TREASURER.

W. T. TAYLOR.

The new Sub-section (4), Section 7a, provides for any loss being made forth- with good from the general revenue of the Colony (in this instance it would be met from the special vote for re-minting coin). This is on the lines of Section 10 (3) of the principal Ordinance, which orders that any deficiency at the annual valuation of securities shall forthwith be paid into the Note Guarantee Fund out of the general revenue of the Colony. The characteristic of the provision is that it shall be immediate, apart from the general principle that the revenue shall bear the expenses of the Ordinance, so far as they are not defrayed out of the income of the

Note Guarantee Fund.

2. Except as regards the suspension for a time of the contributions to the Depreciation Fund, the criticism of Section 7a (Sub-section 3) is hypercritical. It is true that Section 11 of the principal Ordinance says, "All expenses of and inci- dental to the execution of this Ordinance shall, so as not defrayed out of the income of the Note Guarantee Fund, be paid out of the general revenue of the Colony." But this does not mean that in our accounting the fund shall be first drawn on to pay expenditure and the deficiency, if any, then separately voted. According to our practice and instructions regarding reproductive undertakings, the annual estimated cost of the note issue is provided in the budget, the actual cost, when ascertained, being afterwards made good from the Investment Fund, any balance being devoted to (a) the Depreciation Fund and to (b) general revenue, net profits of the note issue in accordance with Section 8 (4) of the principal Ordinance.

3. The amending Ordinance was framed so that the cost of re-minting should be reimbursed to what one may call advances made from revenue before any balance was credited to revenue as net profits, with the view that, as only net profits are liable to military contribution, the returns from the Investment Fund would be proportionately relieved from such contribution. If the cost of re-minting is to be considered as ordinary expenditure and not to be reimbursed from the Currency Note Fund, then the amount of the profits of the fund to be so taxed will be pro- portionately increased. With the large amount involved this would be consider- able, say, 20 per cent. on $900,000, apart from any portion of the cost borne by the Federated Malay States.

4. As I have said above, further contributions to the Depreciation Fund would be delayed according to the letter of the Ordinance as it stands, because of the special expenses incurred by Government for re-minting which have first of all to be reimbursed, but contributions could be continued without any amendment of the

• No. 37.

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Ordinance as the Government could simply postpone its claim to full reim- bursement.

5. I do not think that the amendment proposed by the Secretary of State is a good one. It seems to assume that the Commissioners have sufficient funds to pay for the cost of the re-minting in the first instance and that they can then recover them from the Government, instead of the actual case, which is that the Govern- ment will first advance the cost to be afterwards recovered from the Currency Note Investment Fund. If any amendment of the law is needed in order to provide for the continuance of contributions to the Depreciation Fund, it would be best done by adding a proviso to Section 8 (4) of the principal Ordinance as follows:-

Provided that, with the consent of a Secretary of State, the payment to the Depreciation Fund may be made even though the income derived from securities should not suffice to pay all the expenses of and incidental to the execution of the Ordinance."

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6. But I think any amendment of the Ordinance might be delayed until further amendments are necessary, such as those which will be needed on the intro- duction of a gold ratio (cf. Ceylon Ordinance XIII. of 1901) and that there should simply be a direction to continue the contributions to the Deprecia- tion Fund even though the expenses of the Ordinance are not reimbursed to revenue in any one year from the currency note securities.

7. The paragraph of the Governor's despatch referred to by the Secretary of State must mean that the cost of re-minting, as in the case of the ordinary expenses of the Currency Note Ordinance, would in the first instance be provided from revenue subject to the reimbursement which the law provides.

23rd October, 1903.

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No. 50.

COLONIAL OFFICE to TREASURY.

[Answered by No. 56.]

FRED. G. PENNEY.

SIR,

Downing Street, 25th November, 1903. WITH reference to previous correspondence on the subject of currency in the Straits Settlements, I am directed by Mr. Secretary Lyttelton to transmit to you, to be laid before the Lords Commissioners of the Treasury, a despatch from the Officer Administering the Government of the Colony (in original to be returned) making certain proposals for guarding against the danger of excessive inflation of the exchange value of the dollar, together with a draft of the replyt which, with their Lordships' concurrence, Mr. Lyttelton proposes to return to it.

I am to add that the Commissioners of Currency have or will shortly have in hand a stock of notes amounting to 6,600,000 dollars, and in a recent despatch (extract enclosed) the Secretary of State pointed out that it may be advisable to keep a considerable stock of notes to be issued if necessary in case of any sudden emergency.

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SIB,

No. 51.

TREASURY to COLONIAL OFFICE. (Received 30th November, 1903.)

[Answered by No. 54.]

I am, &c.,

C. P. LUCAS.

Treasury Chambers, 28th November, 1903.

I AM directed by the Lords Commissioners of His Majesty's Treasury to acknowledge the receipt of Mr. Lucas's letter of the 21st instant (40731/1903),§ enclosing copies of an Ordinance recently passed by the Legislature of the Straits Settlements, entitled "The coin import and export Ordinance 1903," and of three

I No. 48.

• No. 42.

↑ No. 57.

‡ No. 38 (paragraph 3),

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