CO882-(8-9) — Page 276

PUBLIC RECORD OFFICE

Reference :-

TLC.O. 882

62

I gather that the above conclusion has been anticipated. and that with respect, at least, to the two first mentioned services recourse to borrowing would seem to be the eventual solution. Consideration of the third problem must, I think, await the report and final recommendations of Professor Ross.

11 It is not possible, however, at present to put forward a definite scheme for providing the interest and sinking fund for any loan which may be required. It will be necessary to have ascertained the exact result of the current year's opera- tions, and to have arrived at an estimate of the revenue and expenditure for 1908-9, before the question of borrowing can be dealt with; and I can only hope that it may be found possible to continue the railway service under existing conditions during the time which must necessarily elapse before the work of reconstruction and improvement of permanent way and rolling stock can be taken in hand. The college question can more easily e allowed to stand over; and, as I have observed, con-ideration of the scheme for a systematic anti-malarial campaign should await the expert's advice.

12.

It is possible that the labours of a Select Committee of the Council, who will report shortly, may lead to such a readjustment of the Customs Tariff as will produce some increase of revenue, but the effect must of necessity be gradual, and the addition cannot be expected to afford any immediately appreciable relief of the

situation

13 It is estimated that the deficit for the current financial year will not fall short of Rs. 600,000, it may possibly exceed that figure on account of unavoidable expenditure incurred in the relief of distress since the storm of the 1st-2nd of March. A sum not much exceeding Rs. 700,000 will then be left of the surplus balances of last year, and it is unnecessary for me to dwell on the paramount necessity for avoid- ing any further diminution of them, or to enlarge on the expediency of continuing It is essential, therefore, that in the budget to build up a permanent reserve fund. for the coming year provision should be made from revenue to cover all the ordinary charges of Administration, and from present returns and anticipations that opera- tion does not appear easy of accomplishment.

14. I regret that I can suggest no method of materially and immediately increasing the revenue; good crops, abundant harvests, and fair market prices will conduce to that end. but it is impossible to rely on any of those conditions, and the estimates of revenue can only be framed on prospects which may be reasonably in view.

15. Reduction in the expenditure on establishments cannot be effected rapidly. Nearly four years' experience in this Government have convinced me of the difficulty, indeed, of the impossibility, of carrying into immediate effect any generally remedial measure in that connection; and, whilst I feel justified in stating that appreciable economies have been secured by systematic retrenchment whenever opportunity has offered, the automatic growth of charges for education, and the unceasing, but increasing, drain on the resources of the Colony brought about by such visitations as plague and surra, and by the methods taken to prevent their further ravages, have more than counter-balanced the effect of all such economies as it has been possible to effect.

16. The officers in the service are generally underpaid, and the only salary which would admit of reduction is, in my opinion, that of the Governor, for whilst the work required of him is constantly onerous, the amount of Rs. 75,000 is out of proportion to the status and resources of the Colony, and to the emoluments of his subordinates. I have already addressed myself to one of your Lordship's prede- cessors* in connection with this point; and, subject to your concurrence, I am pre- pared to recommend that in future the salary of the Governor should be Rs. 50,000; and to submit, in my own case, to a reduction of Rs. 25,000 as soon as I shall have completed four years in this Administration. It may be observed that this would cause but a comparatively small saving, but it would afford evidence of a desire on the part of His Majesty's Government, and, if I may be permitted to add, on the part of the present writer, to effect economy in Administrative expenditure wherever possible, whilst the object lesson would. I venture to think, serve a useful purpose.

17. There remains one other item of expenditure for consideration. A contri- bution of five and one-half per cent. of the general revenue is made towards Imperial military expenditure in the Colony. The amount varies between Rs. 400,000 and Rs. 430,000 per annum, and if the operation of Ordinance No. 33 of 1897 were

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suspended for, say, two or three years, I have no reason to doubt that the revenue would suffice to meet all ordinary requirements, as well as such extraordinary charges as may be entailed in providing adequate college accommodation, and in combating the spread of malaria; whilst there should be no difficulty in finding funds for the service of such a loan as it might be necessary to raise for the improve- ment and proper equipment of the railways.

18. The recuperative power of the Colony is undeniable; given good crops and fair prices the revenue ceases to be insufficient to meet and cover all the expenditure requisite under careful management. There is full evidence of these facts in the results of the periods affected by the crops and produce of 1904-1905, and 1905-1906.

19. I believe, therefore, that such temporary relief as I now propose would have the effect of placing the public finances of the Colony on a satisfactory basis, so that the general requirements of administration may be provided, without hav ing recourse to increased taxation or to any extravagant enlargement of the public debt.

20. I am aware that my suggestion amounts to a request that the Imperial Exchequer will forgo for two or three years an annual payment of £26,600 or £30,000, but in view of the recent reduction of the garrison without any concurrent diminution of the contribution claimed from the Colony, and having regard to the effect which the concession would have upon a somewhat susceptible community, struggling under circumstances of exceptional adversity and admittedly beyond their control, and feeling acutely their failure to obtain permission for raising any loan in aid of their staple industry, I beg to submit the request in the earnest hope that your Lordship will view it with favour, and will be pleased to induce His Majesty's Government to afford the relief prayed for.

21. Provision for the contribution will be inserted as usual in the Estimates to be presented to the Council on the 5th proximo, and this communication can only reach your Lordship towards the end of that month; but I would ask to be informed of the decision taken on both of my proposals before the 30th of June, in order that, if they are favourably entertained, the consequent alteration of the Estimates may be made before they are submitted for your approval.

17387

No. 59.

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I have, &c.,

CAVENDISH BOYLE.

THE SECRETARY OF STATE to THE GOVERNOR. [Answered by No. 77.]

(Confidential.)

Downing Street, 8 June, 1908. SIB,

I HAVE the honour to acknowledge the receipt of your telegram of the 15th of May* reporting that the whole of the loan of Rs. 1,000,000 has now been repaid by the Commercial Bank.

2. As I explained in my telegram of the 21st of May, the rate of interest to be charged upon this loan was fixed at 10 per cent, not only to secure its early repayment, but also to discourage such applications to the Government for financial assistance and to prevent the Bank from making a profit upon the advance, and I am accordingly unable to accept your suggestion that only six per cent. should be charged.

3. I will await the receipt of the despatch, which is no doubt on its way, before dealing generally with this transaction, but there is one aspect of the matter to which I desire at once to draw your attention.

4. You will recollect that the ground upon which the Bank applied for the loan, and on which you supported their application, was that there was a run upon it which, if not stopped at once, would inevitably lead to an immediate suspension of payment. Thus, in your telegram of 20 January, No. 1, you stated that unless assistance were given promptly a run on the Bank was inevitable, with probable suspension and disastrous effect on the whole Colony, which should be avoided if possible. On the 2nd of February§ you telegraphed that the position had not

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No. 25.

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PUBLIC RECORD OFFICE, LONDON

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