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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

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

9 PUBLIC RECORD OFFICE, LONDON

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the same lines as Colonial Government railways they have no difficulty in agreeing. in principle, with the Colonial Office view that only the net revenue of the factory should be assessed for the purpose of the military contribution ment would be in accordance with the general principles at present in force.

Such an arrange

3 With regard to the proposal that the receipts from the new taxation pro posed to be levied to meet the loss of revenue caused by the new policy should be exempt from military contribution until they exceed the amount of the deficiency. I am to state that while the Council recognise that they must accept a proportionate reduction of the military contribution whenever there is in fact a reduction of assessable revenue, they can see no justification whatever for reducing that contribu tion, not on account of a reduction of revenue, but of a change in the mode of raising it, adopted in pursuance of a policy which has no connection with military affairs. Moreover, apart from the obvious difficulty of determining at what date the amount of the deficiency will be met, it appears to the Council that the increase in the military contribution by the discontinuance of the deduction) when that time arrives would be certain to furnish a further occasion for expressions of dissatisfaction.

4. The further proposal in the Colonial Office letter that an inter-departmental Committee should be appointed to consider de noro the whole question of the military contribution paid by the Eastern Colonies, with a view to a material reduction in their amount, appears to be based, with reference to the Straits Settlements, on three grounds: (1) the frequent protests of the Unofficial Members of Council, (2) a recent check in the growth of the prosperity of the Colony, and (3) the alleged increase of 133 per cent. in the cost of the garrison since 1×96, as compared with an increase of only about 50 per cent. in the strength of the garrison.

5. With regard to the first of these grounds the Council do not understand Lord Crewe to suggest that such protests against the contributions constitute any new or recent feature in the case It is, however, worthy of notice that the principle f a fixed percentage of revenue was strongly advocated by the Unofficial Members of Council in a Memorandum, dated 14th January, 1895 and that the 20 per cent. at present in force was the figure suggested by the Governor of the Colony about the

same time

6. The system of a fixed percentage of revenue, which commended itself to all parties concerned after the fullest consideration, possesses the obvious advantage, from the Colonial point of view, that it affords automatically a measure of relief in case of a decline in the revenue, such as has recently taken place in the Straits

Settlements

7. The alleged disproportionate growth in the cost of the garrison, to which must cause great dissatisfaction such prominence is given, and which, it is stated, to the community," is based on the figure of £88,000 quoted for 1896, as compared with £246,635 quoted for 1904. This comparison is, however, entirely fallacious. The former figure appears to be taken from a statement in the Colonial Blue Book The total showing local expenditure only, while the latter represents total cost. cost of the garrison in the financial year in question (1898-7) was really £154,198. There has, in fact, been no abnormal increase in the cost per head of the garrison.

The difference between the Blue Book figures and the total cost has been fre- quently referred to and explained in correspondence with the Colonial Office and the Colonial Government.

8. In this connexion I am to observe that the contributions paid by the Eastern Colonies are in every case much below the cost of the respective garrisons.

9. The Council cannot hold, therefore, that the reasons advanced with regard to the Straits Settlements- and it appears to be admitted that the other Eastern Colonies have still less ground for complaint-are such as to warrant the general enquiry suggested; nor are they aware of any change in circumstances of a nature to invalidate the conclusions arrived at after exhaustive discussion extending over a period of seven years. The proposal to reconsider the question generally, in a sense avowedly unfavourable to Army funds, appears at a moment when the duty of the Colonies generally to contribute towards their own defence is receiving increasing recognition; and the Council, for their part, desire strongly to recommend their Lordships not to consent to the appointment of the proposed Committee.

I am, &c.,

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No. 171

STRAITS SETTLEMENTS.

WAR OFFICE to COLONIAL OFFICE.

(Received 25 May, 1910.)

[Answered by No. 176.]

War Office, London, S. W., 24th May, 1910. I AM Commanded by the Army Council to refer to your letter of 26th August, 1909, No. 23601/09,* regarding the Straits Settlements Military Contribution.

The questions at issue are as follows:-

(i.) The exclusion from the assessment of the portion of the liquor farm rents carried to the Improvement Fund, under Section 113 of Ordin- ance XIX. of 1906;

(ii) The assessment of the net, instead of the gross, receipts from Govern-

ment buildings let for profit;

and, though in the correspondence the contribution for the year 1907 alone has been referred to, similar questions arise in regard to that for 1908.

With regard to the former question, I am to ask whether the result of the enquiries promised in paragraph 4 of Colonial Office letter, 17224/1909, dated

th June, 1909,† can now be communicated to this Department.

The further discussion of the latter question was deferred in your letter of 26th August, 1909, in view of your proposal that an interdepartmental committee should be appointed to reconsider the whole question of the military contributions paid by the Eastern Colonies. As this proposal has been negatived by the Treasury, it is now necessary to settle the question as to the receipts from Government buildings let for profit.

In

your letter of 26th August last* it is urged that the receipts from this source, which were comparatively small when the percentage system was introduced and have since greatly increased, should be regarded as a new class of revenue, and that, in accordance with the general principle adopted in regard to remunerative under- takings, military contribution should be levied only on the net receipts." The Army Council cannot admit that the growth of a particular class of revenue can, in any case, be regarded as a reason for its exceptional treatment. One of the principal objects of the percentage system was to secure automatically to Army funds a contribution proportioned to the Colony's revenue. As regards the assess- ment of net receipts, the Council are not aware that this has ever been admitted as a general principle applicable to all remunerative undertakings. On reference to Treasury letter dated 22nd June, 1899-a copy of which accompanied War Office letter dated 14th July, 1909§-it will be seen that their Lordships specifically limited its application to undertakings that are "not different in character and productive- ness from railways." The assessment of the net receipts from railways and other undertakings of similar productiveness is intended to relieve the Colony of the necessity of paying a contribution based on revenue of which a large proportion is hypothecated for expenditure essential to the production of that revenue, and thus to avoid the restriction of enterprise that might otherwise result.

It does not appear to the Army Council that these considerations can properly be applied to the receipts in question, and they are therefore of opinion that the letting of Government buildings for profit does not fall within the class of remunera- tive undertakings to which the principle of net assessment is applicable.

In conclusion, I am to draw attention to Treasury letter of 11th March, 1910,§ in which the Lords Commissioners have declined to sanction the exemption from assessment of classes of receipts which formed part of the general revenue of the Colony when the military contribution was fixed on its present basis, and I am to express a hope that the Secretary of State for the Colonies will now agree to the inclusion of the gross receipts from Government buildings in the assessment as heretofore.

I am, &c..

E. W. D. WARD.

E. W. D. Ward.

• No. 160.

↑ No. 150.

‡ No. 12.

No. 155.

| No. 170.

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