CO882-(8-9) — Page 543

PUBLIC RECORD OFFICE

Reference :-

C.O. 882

9

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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Some of these Colonies and Protectorates have frontiers coterminous with those of foreign Powers, e.g. Northern and Southern Nigeria, the Gold Coast, Sierra Leone, East Africa, and Uganda, &c., whose frontiers run with those of Germany and France. In case of war with either of those Powers these possessions would have to depend entirely on their own forces, nor would even the Navy assist them The large forces they have to maintain, though primarily for the control of the vast areas they cumprise, are also for their defence against a European enemy in war Whether they are sufficiently insured against war risks is their own affair. insurance they pay is the utmost their revenues can afford.

The

It is pertinent to the matter under discussion to ascertain what proportion of their revenue those Colonies who provide their own defence spend on that defence, and how that proportion compares with the percentage paid by Colonies which borrow their defensive forces from the Imperial Government.

It is extremely difficult to arrive at any reliable figures by which such a compari son can be instituted In the first place, the sum shown as military expenditure in the published Financial Statements represents only a portion of the total cost of the forces Medical services, transport, defence, and barrack buildings are included under the heads of Expenditure, while accounting and clerical work and many other In the second place, it is not easy to services are rendered by civil departments

Armed distinguish m many cases between the military and the police services.

Add constabulary form part of the defensive force, yet perform some civil duties. ing one third of ordinary civil expenditure to cover the former (which is probably too low an estimate), and excluding police except where shown definitely as constabu lary, and even then debiting only half their cost to military expenditure, a very rough approximation of the proportion which military expenditure bears to general revenue may be arrived at. So far as it has been possible to make this calculation from available data, it will be found in Table 1.*

In three out of five it appears to range from 22 to 24 per cent., and in the remain- ing two from 47 to 50 per cent.

It is interesting also to see what proportion the military charges bear to the amount which a Colony is able to spend on public works (other than recurrent charges)

In three the amount was about one-third of the military expenditure, and in one about half, and in two about one-seventh. Corresponding figures for Hong Kong are given in Table 3, and they show that the amount available for public works (or passed to reserve funds) for the last five completed years has been about equal to the amount paid for military expenditure This would appear to indicate that Hong Kong secures a very much larger margin for capital expenditure on public works, such as roads, railways, waterworks, buildings, &c., many of which are remunerative, and that the 20 per cent. paid for defence is favourable as contrasted with those Colonies which provide their own defence.

REGARDED AS INSURANCE.

The force and defensive works required for the adequate protection of Hong Kong has been fixed by experts, and is presumably adequate to ensure the Colony against such war risks as land forces and defences are designed to guard against.

The cost of insurance is usually proportionate to the value of the property insured In the Colonies to which allusion has been made, though the cost of insur- ance probably varies from 22 to 50 per cent. of the total revenue, and two-thirds to six-sevenths of the available margin,† the value of the material property at stake is comparatively small, and great areas of territory in case of war might be temporarily

Since this Memorandum was written application has been made to the different Colonies and Protectorates for the figures necessary to complete this table, and copies of their replies are attached. From these it will be seen that, with the exception of Northern Nigeria, (the figures from which place are, I think, based on calculations made by myself when there), the data regarding indirect expenser of defence are so vague (where given at all) that they are useless for purposes of precise calculation. Northern Nigeria gives full figures, and may be taken as a fair type. An accurate calculation can probably only be made at the Colonial Office where full data are available. I am on the whole inclined to think that my rough approximations above are probably fairly correct. They are based on my experience in a l'rotectorate providing its own defence.

The term "margin "in this Memorandum is used to indicate the balance available to meet the cost of defence and of Public Works when Ordinary Expenditure exclusive of these items has been deducted from Ordinary Revenue. It will be more fully explained further on.

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abandoned without much material loss, either to the Government or to private individuals.

In Hong Kong, on the other hand, the value of the material property which it is desired to insure against war risks is enormous. The Colonial Assessor of Rates estimates that the capital value of property belonging to the Colonial and Imperial Governments is not less than 25 millions sterling, and that private property is not less than 25 millions, making a total of 50 millions in all.

The Chinese pay the bulk of the taxes, but it will not be denied that of the material property here a large proportion belongs to Europeans-- in one case probably falling not far short of three millions sterling. Yet it is from the European community alone that the complaint of an unduly heavy contribution has arisen. If the figures assessed be approximately correct, the insurance against war risks which the Colony pays amounts to no more than a quarter of one per cent. of the capital value of the property insured.

To our first line of defence the Navy--we contribute nothing, except the pro- portionate share of the defence of the docks. Residence in Hong Kong has proved profitable to many, and considerable fortunes have been acquired both by Europeans and Chinese. It cannot, therefore, be considered unjust that they should pay a reasonable proportion of their business profits to revenue to provide among other things for the insurance against war risks afforded by our land forces.

The protection afforded to the naval docks and coal depôts by the land forces. even supposing that the Colony paid the entire cost of the forces and land defences finstead of only about one-quarter of their cost, see Table II.). would be but a very partial return for the protection afforded by the Navy. Since, therefore, the Colony is not prepared (like those referred to above) to raise its own local forces and insure itself against war risks, it remains liable for the whole cost of the forces it borrows for the purpose, and if the contribution does not exceed the cost of those forces and defences it has no logical ground for complaint.

RATIO TO REVENUE.

If the payment of the military contribution leaves too little margin for capital expenditure on works, the remedy is to find a means of increasing the revenue.

If

it can be shown that a Colony is so over-burdened by taxation that it is too poor to meet its obligations, it may urge a plea for exemption, not on the grounds of the injustice of the tax, but on grounds of poverty.

The ability to pay an assigned contribution is not measured by the actual revenue shown in the yearly budget. This represents only the amount which the Colony has seen fit to contribute to the cost of administration and defence, not the amount that it is capable, without undue burden, of contributing. It is not the purpose of this memorandum to discuss whether the limit of reasonable taxation has, or has not, yet been reached, but the plea of poverty has never been put forward by Hong Kong.

INCIDENCE IN HONG KONG AND OTHER COLONIES.

It has been stated that the contribution for defence paid by Hong Kong is much heavier than that paid by other Crown Colonies whose forces are borrowed from the Imperial Government.

ment.

The actual cost of military establishments and defence works depends, of course, on geographical position and similar questions. The one and only standard of com- parison between Colonies in regard to the comparative onus of the burden is the proportion of the actual cost of their defence which they pay to the Imperial Govern- The method by which that proportion is paid is a mere matter of detail, and subject to rearrangement at any time between the Imperial Government and the Colony. Thus a Colony may enjoy a large revenue, and at the same time its strate- gic position may be such that the cost of its defence is small. In that case even though it paid the entire cost of its defence, that cost would be but a small percentage of its revenue.

To represent that there is a perversion of justice in such a case because the percentage is low without reference to the fact that the Colony pays the entire cost of its defence is a wilful misrepresentation.

The geographical position of Hong Kong has been, and is, the cause of its wealth and prosperity. Unfortunately, that geographical position involves a corres- pondingly greater cost for defence, and this corollary is only natural and inevitable. In other words, the conditions of Hong Kong are that it enjoys immunity from