CO882-(8-9) — Page 544

PUBLIC RECORD OFFICE

Reference :--

TLC.O. 882

9

PUBLIC RECORD OFFICE, LONDON

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

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Customs dues as a free port, that it is in close proximity to the great market of China, and is able to obtain indefinite supplies of moderately cheap labour, and has, On in the past, derived benefit by being the distributing centre in the Far East. the other hand, it is geographically" in the highway of the world's navies, and is a port of great strategic value, and it has, therefore, to pay a high insurance against war risk-

Business men, when selecting the scene of their operations, cannot justly count up the advantages and ignore the liabilities.

Unfortunately, accurate figures are not available from which to form a reliable calenlation of the proportion of cost of its land defences which is borne by each Such Colony which relies on the Imperial Government to supply those defences

From these it appears that the Straits as are obtainable are shown in Table 11 Settlements and Ceylon pay almost the entire cost, while Hong Kong for the only year for which we have accurate' figures (190×) paid slightly over one-quarter

POPULAR MISSTATEMENTS

It hardly seems necessary to deal with such arguments as that Hong Kong should be released from her obligation to pay any part of the cost of her own defence because she contributes largely to the general trade of the Empire. As well might the United States claim a subsidy from England on the ground that she contributes £160,000,000 sterling to the trade of the United Kingdom (as against some three or four millions from Hong Kong) The trade of this Colony is not conducted on altruistic principles, but is carried on with whatever country is likely to most benefit its merchants.

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so much

A so-called argument of even less worth is that the Colony has " ceded land for military purposes that any further claim is preposterous. As well might a private owner who engaged a watchman claim that the guard-house set aside for his accommodation occupied so much valuable space that the idea of paying for his services was preposterous I do not propose to deal with other similar" arguments."

The contention that the garrison of Hong Kong is maintained largely for the defence of Imperial interests in the Far East, including the naval coaling station in this Colony, is one which merits more serious consideration, and is held by many whose opinion is entitled to carry weight.

I have already (p. 143) dealt with the question of the defence of the Naval Docks, The docks and coal depots &c., but I would add a further remark in this connection. represent an Imperial asset of immense capital value, which in case of war the Imperial Government could not afford to risk, not merely on account of their intrinsic value, but because of the vital necessity of preventing their falling into the hands of a hostile Power This fact constitutes à guarantee of active naval protection in time of war which is of immense value to Hong Kong.

In the exigencies of a great war it is recognised that certain outlying parts of take their chance of capture by an enemy's the Empire might for a time have to

fleet, but the fact of Hong Kong being a great naval base relieves it of this fear. As a naval station, moreover, it benefits from the presence of British and foreign ships-of war in its harbour

If we could assume the possibility of a transfer of the naval base from Hong Kong to, say, Singapore, involving on the one hand the possible abandonment of this Colony in time of war and on the other hand a very considerable reduction in the cost of its land forces, and therefore of its military contribution, is it con- ceivable that there would be one single British inhabitant, or loyal British subject, who would advocate such a change? The defence of our naval station here, in so far as land forces and armaments can protect them, is an integral part of the exis- tence of the Colony, and cannot be dissociated from it.

With regard to the second argument, that the troops here are in part main- tained for the defence of Imperial interests throughout the Far East-apart from the fact that those interests are most essentially the interests of Hong Kong, and no place benefits more than this Colony from their maintenance, it must be remembered that the Imperial Government maintains a strong garrison in the north at Peking and Tientsin for the defence of the Legation, &c., and it is admissible to assume that, in, the event of a crisis in South China, any Imperial forces would be as avail- able for the assistance of Hong Kong as the troops of Hong Kong are for the re- inforcement in time of need of the northern garrison.

In point of fact, the only occasion in the last 20 years in which a part of the Hong Kong garrison (745 officers and men) was employed beyond the Colony

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occurred in the crisis of 1900, when the Legations were besieged. That was a crisis affecting the interests and safety of Hong Kong equally with other British Settle ments in the East. Moreover, in the event of war with China, as in 1900, it may conceivably be in the best interests of the defence of Hong Kong for her troops to be transferred to a scene of operations not in the immediate vicinity of the Colony,

PRESENT SYSTEM OF ASSESSMENT.

The system adopted for the assessment of the sum paid by the Colony for its defence, viz., 20 per cent. of its gross revenue exclusive of land sales or other extra Ordinary revenue, is, however, open to many objections.

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(a) It is not (as will presently be shown) well calculated to achieve the object in view, which, in Mr. Chamberlain's words, was: That the Imperial Government would get full advantage from a prosperous state of the Colony, while at times not prosperous it would no longer have the alternative of pressing on the Colony to an undue extent, or of relaxing an arrangement which at another time the Colony would have no difficulty in carrying out, and the Colony would be in a better position to appreciate its own financial position."

() It is apt to give rise to constant misapprehension even on the part of Members of Council and responsible persons, and to be regarded as a tax levied upon the revenues by the Imperial Government, instead of a repayment for expenses incurred; and

(c) It cramps expansion, and furnishes a continual temptation to evasion when levied upon items which are not in fact sources of revenue and appear on both sides of the account merely for accounting purposes.

ALTERNATIVE METHOD.

The ordinary revenue and expenditure of a Colony represent, as it were, the turnover of the business of administration, while the balance available for capital expenditure on works which are remunerative either as sources of revenue, or in increased comfort and amenities, represents (together with any sums passed to reserve account) the profits or "margin."

The revenue and expenditure may be simultaneously increased, and are invari- ably increased, in a growing Colony from year to year without any necessary increase in wealth or expansion of this “margin."

The permanent establishments cannot be decreased or increased at will according to the fluctuations in the financial prosperity of the Colony from year to year, so that the expenses of administration remain practically the same however much the revenue may decline.

The assessment of a fixed percentage on gross revenue induces a tendency to decentralise by eliminating municipal revenue (as I believe is done in Singapore)* and similar revenue and expenditure by corporate bodies under Government control from the Colonial revenue subject to the percentage, and to bring to account in the Colonial Budget the net revenue only of all such subsidiary accounts. The items which appear on both sides of the account do not indicate increased wealth, and increase of revenue from such causes, though increasing the percentage payable to the defence fund, is no measure of the financial prosperity of the Colony.

The financial prosperity is more accurately represented by the margin which remains when the ordinary expenditure is deducted from the ordinary revenue. If then, as Mr. Chamberlain desired, the military contribution is to bear a constant relation to the financial prosperity or decline, should be a fixed proportion of the "margin ” and not of the gross revenue.

and

DEFINITION OF ORDINARY REVENUE And Expenditure, (1) Loans.

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The point at once presents itself what is to be treated as ordinary revenue ordinary" expenditure, and how more especially are loan accounts to be treated? What, for instance, is to prevent a Colony from balancing its ordinary

• It has lately been reported in the Press that this principle is to be extended in the coming year, by transferring all expenditure on Education to Municipalities, to by covered by an "Educational Rate" not liable to Military Contribution.

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