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3 1 am further to point out that receipts of a similar character are included in assessing the military contributions payable by Hong Kong and Mauritius, and that the exemption of such revenue in the case of the Straits would involve similar concessions in those colonies

4 The Army Connell strongly deprecate the marked tendency which has been recently exhibited to depart from the broad rule on which the percentage system of contribution is based, a system which, without reference to the suitability of the various classes of receipts for assessment, was designed to secure readily a contribution to the cost of the garrison duly proportioned to the means of the Colony. 5. In view of these considerations, and of the considerable disparity between the contribution and the cost of the garrison, I am to express a hope that the Secretary of State for the Colonies will agree that, for the purposes of the military contribution, the school fees from Government schools should continue to be included in the revenue of the Colony.

Cust

Contribution

26602

SIR.

19007 ON

£266,939.

213.708.

No 158.

STRAITS SETTLEMENTS

I am, &..

E. W D. WARD

COLONIAL OFFICE to WAR OFFICE.

[#Austered by No. 172.]

Downing Street, 26 August, 1909. I AM directed by the Earl of Crewe to acknowledge the receipt of your letter of the 30th of July,* in which you state that the Army Council consider that the fees received in Government schools in the Straits Settlements should continue to be included in the revenue of the Colony for the purposes of the calculation of the Military Contribution.

2. In reply, I am to state that Lord Crewe regrets that he is unable to agree The fees in question are of a in the views of the Army Council on this matter. municipal character, such as in this and other countries are paid to local bodies; and, in his Lordship's opinion, such fees should not be paid to a central Government if it can be avoided. It has not hitherto been possible to avoid this course in the Straits Settlements owing to the absence of a local authority to which they could be paid.

Such an authority has, however, now been established under the new system described in Sir John Anderson's despatch of the 27th of May, and the fees will accordingly be paid to the new Board. They cease, therefore, to form part of the Colonial Revenue (in which they would never have been included had such a Board existed from the first), and, in consequence, they cease, ipso facto, to be liable to Military Contribution.

3. As regards the fifth paragraph of your letter, I am to observe that his Lordship cannot admit that the Army Council are entitled to object to the removal from the Colonial Estimates of a class of revenue which was included in those estimates at the time when the Military Contribution was fixed at a percentage of the Revenue, unless the Army Council are prepared to admit the converse proposi- tion that no class of revenue which was not then included is subject to the contribution.

4. I am to add that, in his Lordship's opinion, the time has now come when it is necessary to reconsider the whole question of the Military Contributions of the Eastern Colonies. A separate letter is being addressed to you on this subject.

I am, &c.,

FRANCIS J. S. HOPWOOD.

24088

SIR,

No 159

STRAITS SETTLEMENTS

COLONIAL OFFICE to TREASURY.

[Answered by No, 170.]

Downing Street, 26th August, 1909. I AM directed by the Secretary of State to forward to you, to be laid before the Lords Commissioners of the Treasury, the enclosed copy of a despatch from the Governor of the Straits Settlements with regard to the effect on the finances of the Colony of the opium policy which has been adopted in deference to the wishes of His Majesty's Government.

2. Under the new arrangements, the opium and spirits farms will be abolished (except in Penang, where the opium farm will be renewed for one year), and the trade in opium will become a Government monopoly, and a Government factory will be established to prepare opium for consumption. As Sir John Anderson points out, the practical effect of the farm system was that only the net receipts from opium and spirits were included in the Colonial Revenue and assessed for military contri- bution, whereas now the gross receipts will appear as revenue, but there will be heavy expenditure charges to set against them. In these circumstances, Lord Crewe has no doubt that their Lordships will agree that it is impossible to dispute the justice of the contention that the military contribution should be paid only on the net revenue from opium and spirits.

3. In his Lordship's opinion also, there is ample reason for accepting the view, put forward in the third paragraph of the despatch, that the receipts from the new taxation which will be required to make up for the diminution of revenue caused by the new policy should be exempted from military contribution until they exceed the amount of the deficiency. The new policy has been pressed upon the Colony by His Majesty's Government, and justice appears to demand that the loss involved should, at least to some extent, fall upon the country whose policy is responsible for it.

4. It will be observed that the Governor raises the further question of the grant of assistance to the Colony from Imperial funds, such as has already been promised in the case of Hong Kong. On this point also Lord Crewe considers that there is very strong ground for meeting the Governor's wishes, but it may perhaps be thought desirable to defer a decision until the Estimates for 1910 are available, as it will then be possible to see exactly to what extent the revenue of the Colony has been affected.

5. In dealing with these papers it has been necessary to give attention to the effects of the present arrangements for the assessment of the military contribution and Lord Crewe has come to the conclusion that the time has now come when those arrangements must be reconsidered.

As their Lordships are aware, even in the period of prosperity which the Straits Settlements have recently enjoyed, the payment of 20 per cent. of the Colonial revenue as a military contribution has given rise to frequent protests from the repre- sentatives of the unofficial community. Now that the prosperity of the Colony has received a check, it cannot be doubted that these complaints will be more constant and more urgent, and his Lordship fears that it will be difficult to resist the argu. ments which the Unofficia! Members of Council will bring forward for a material reduction of the amount of the payments made on this account.

In a debate which took place in the Legislative Council in 1907, attention was called to the fact that the cost of the garrison had increased very greatly in recent years. In 1896 it was £88,000; in 1904 it was £246,635: an increase in eight years of about 133 per cent., whereas in the same period the strength of the garrison had been increased by only about 50 per cent. It is obvious that such a state of affairs must cause great dissatisfaction to the community which is required to pay nearly the whole of the bill, while it has no voice in determining the size or the cost

• No. 157.

↑ No. 152.

24058

• No. 156.

I a

PUBLIC RECORD OFFICE

Reference :-

TTILLIC.O. 882

9

PUBLIC RECORD OFFICE, LONDON

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