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3. All sums paid from the revenue to make good the amounts due to the Commissioners of Currency are paid by way of advance, but with our currency policy (which involves an enhanced rate of exchange), these advances will not be recovered and consequently made available for the use of the Colony till the deficiency is ultimately gradually wiped off by means of the existing depreciation fund.

4. I need hardly point out that, unless there is an absolute necessity, the Colony should not be deprived of the use of a considerable portion of its balances, and also have the prospect of having in the future to part with a greatly increased amount for an indefinite period.

5. The currency note issue has so established itself here in the confidence of the public of the Colony and of neighbouring countries that I do not think that any further means of supporting the value of the investment is necessary beyond a Depreciation Fund. I would accordingly submit, for your consideration, that the law be amended so as to give the Governor power, with your approval, to cease any further payments from revenue on account of depreciation, and instead to increase the statutory annual payments to the Depreciation Fund. I would suggest that in the first instance the whole of the profit of the note issue he devoted to that purpose till the value of the investments exceeds by 10 per cent, the amount of the notes issued against investments.

6 The note issue now amounts to $17,195,365 and the investment to $6,272,181.15. The present annual payment to the Depreciation Fund is $62,721, while the estimated balance for the year, after paying the cost of working, is about $150,000, which would be available for the Depreciation Fund.

4723

No. 75.

I have, &c.,

JOHN ANDERSON.

COLONIAL OFFICE to TREASURY.

[Copy to Governor, 28th April, 1905. No. 100. L.F.] [Answered by No. 76.]

SIR,

Downing Street, 3rd March, 1905. WITH reference to your letter of the 21st of June, 1900,* I am directed by Mr. Secretary Lyttelton to transmit to you, to be laid before the Lords Commis- sioners of the Treasury, copy of a despatcht from the Governor of the Straits Settlements regarding the depreciation of the securities held against the note issue of that Colony.

Mr. Lyttelton agrees with the Governor in thinking that the provision in Section 10 (3) of Ordinance IV. of 1899, requiring any deficiency found at the annual audit of securities to be made good from general revenue, is unnecessary as well as highly inconvenient. He considers that the preferable course will be to employ all the profits on the note issue in adding to the Depreciation Fund invest- ments until that fund amounts to at least 10 per cent. of the investment portion of the Note Guarantee Fund, and until the Secretary of State is satisfied that it is unnecessary further to increase the Depreciation Fund, when the provision for depreciation might be temporarily suspended as in Section 9 (2) of the Ordinance. The provision of one per cent. of the cost price of securities for a Depreciation Fund under Sections 8 and 9 of the Ordinance would be superseded by the proposed new arrangement.

The liability of general revenue for the note issue will, of course, remain, but the actual transfer of lump sums from and to revenue will be avoided.

Mr. Lyttelton would be glad to learn whether their Lordships concur in the view expressed above. If so, the Governor will be requested to introduce the Bocessary amending Ordinance.

I am, &c.,

C. P. LUCAS,

12349

No. 76.

TREASURY to COLONIAL OFFICE.

(Received 15th April, 1905.)

[Copy to Governor, 28th April, 1905. No. 100. L.F. See No. 85.]

[Answered by No. 77.]

SIR,

Treasury Chambers, 14th April, 1905. THE Lord Commissioners of His Majesty's Treasury have had before them Mr. Lucas's letter (4723) of the 3rd ultimo,* and its accompanying copy of a despatch from the Governor of the Straits Settlements, with regard to the provisions of the Currency Note Ordinance, 1899.

In reply, I am directed to state, for the information of Mr. Secretary Lyttelton, that my Lords agree in his view that there is no imperative need to make good forthwith the whole amount of the deficiency on the Note Guarantee Fund which has recently arisen from special causes. But it is important to hold to the principle that the Guarantee Fund is intended to cover, in securities or in cash, the full amount of the notes în circulation. That purpose is secured by the provisions of the Ordinance as it now stands. With the alteration which the Governor proposes, it would be possible for similar causes to produce a rapidly growing deficiency in the fund, which might under conceivable circumstances prove a source of embarrassment to the finances of the Colony.

My Lords are of opinion that the requirements of the present situation could be met without upsetting the permanent arrangements for maintaining the sufficiency of the fund, and with due safeguard against the occurrence of a temporary deficiency of excessive amount, by the addition of a proviso to Section 10 (3) of the Ordinance. They would suggest such a proviso to the effect that, if at any time the deficiency shown on the investment portion of the Guarantee Fund exceeds the sum payable to the revenue of the Colony under Section 8 (4) (0), the Secretary of State may, if satisfied that the circumstances do not require the whole of the deficiency to be made good forthwith out of revenue, dispense the Government for the time being from the obligation to pay over to the Guarantee Fund more than the amount received under Section 8 (4) (c).

12349

I am, &c.,

E. W. HAMILTON.

No. 77.

COLONIAL OFFICE to TREASURY. [Copy to Governor, 28th April, 1905. No. 100. L.F.] [Answered by Nos. 79 and 83.]

Sn,

Downing Street, 26th April, 1905. I AM directed by Mr. Secretary Lyttelton to acknowledge the receipt of your letter of the 14th instant, and to request you to inform the Lords Commissioners of the Treasury, that he concurs in the views expressed in your letter with regard to the amendment of the Straits Settlements Note Ordinance. It will, however, be desirable, in addition to the amendment suggested by their Lordships, to provide explicitly in the amending Ordinance that so long as any deficiency exists under Section 10 of the principal Ordinance, the whole of the profits from the note issue shall be paid to the Depreciation Fund.

A copy of the correspondence is being sent to the Governor for his information and guidance.

I am, &c.,

C. P. LUCAS.

• 19791; not printed

↑ No. 74.

• No. 75.

+ No. 76.

81104

PUBLIC RECORD OFFICE

Reference :-

FELICO. 882

PUBLIC RECORD OFFICE, LONDON,

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