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No. 3.

THE SECRETARY OF STATE to THE ACTING GOVERNOR.

(Sent 2.25 p.m., 18th July, 1919.)

TELEGRAM.

[Answered by No. 4.]

18TH JULY. Your Confidential despatches 31st March, 15th April,† 1st May, 7th May,§ salaries, etc. Matter has been discussed with new Governor, and he will put forward his proposals after arrival in the Colony. It is necessary for the whole question to be considered in connexion with the general financial outlook.-MILNER.

6174

No. 4.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 4th February, 1920.)

[Answered by No. 5.]

(Confidential.) MY LORD,

Government House, Hong Kong, 11th December, 1919. WITH reference to Your Lordship's telegram of 18th July, and to the con- nected correspondence, I have the honour to submit my recommendations with regard to the revision of the emoluments of the members of the public service of Hong Kong. 2. Before considering the details of the salaries to be attached to individual posts or classes, I propose to place before Your Lordship my views on certain principles of general application.

The first of these is that of the currency in which salaries should be expressed. For many years past the question of salaries in this Colony has been complicated by the endeavour to find some arrangement by which officers who are accustomed to think in terms of sterling could have assigned to them a salary which, while payable in the local currency, should be capable of expression as a definite sum in sterling, especially for the purposes of leave and pension. During the twenty years over which my personal acquaintance with the matter extends a number of methods have been tried. Salaries have been fixed in dollars with an artificial rate of exchange for leave and pension purposes; exchange compensation has been paid first on the half and then on the whole of an officer's salary; salaries have been fixed in sterling and converted at the current rate of exchange; later an arbitrary rate of exchange has been adopted for 80 per cent. of the salary. None of these expedients has provided a satisfactory solution of the problem, and I think that it must be recognised that it is really insoluble in the shape in which it has been raised. I suggest, therefore, that the matter be dealt with on new lines, and that in future salaries should be fixed in the dollar currency in which they are paid, while leave pay and pension are fixed in sterling.

It is not perhaps essential that there should be any definite relation between the dollar salary and the salary drawn on leave, and there is the precedent of the Indian Civil Service for the assignment of pensions on a basis entirely apart from that of salary, but there are of course obvious advantages in the existence of such a relation, and the course which I recommend is that all salaries should now be fixed in dollars, but that for purposes of leave pay and for the calculation of pension the officer's salary should be taken as the equivalent of his salary at 2 shillings to the dollar, i.e., an officer drawing $10,000 a year should be regarded for purposeS of leave and pension as receiving £1.000 a year.

This proposal amounts practically to the same thing as fixing the salaries in sterling, and paying them at the rate of 2 shillings to the dollar, as suggested by the Salaries Commission, but it seems to me to be more satisfactory as it gets rid of an artificiality. On the assumption that your Lordship will accept this suggestion the salaries referred to later in this despatch are expressed in dollars: if, how- ever, it is desired to retain the system of fixing salaries in sterling the figures need only to be divided by 10.

* 80689: not printed.

+ No. 1.

1 No. 2. § 88091: not printed.

|| No. 8.

I should add that I consider that during vacation leave in China and Japan the dollar salaries should continue to be paid.

3. The next principle of general application with which I desire to deal is that of leave.

The Commission appear to have been under some misapprehension when writing paragraph 10 of their report, since they have taken no account of the principle of commuted half-pay leave, which was introduced in 1911, and under which an officer usually draws full pay for any period up to ten months. That system appears to me to be satisfactory, but I think that it might be improved to a slight extent. An officer should as a rule take leave to Europe about once in five years. (To that extent I concur in the view expressed by the Commission, but I need hardly say that I am wholly unable to endorse the view that he should be able to demand leave as a right in every fifth year. I do not understand how any administration could be carried on satisfactorily if officers were in a position to insist on taking leave without regard to the exigencies of the service). An officer who has had five years' service will, supposing that he has not taken any vacation leave in the year in which he goes on leave or in the preceding year, be eligible for three months' vacation leave and ten months' half-pay leave, which may be commuted to five months' full pay leave. This, however, will only give eight months' leave in all (unless part of the leave is taken as half-pay leave and not commuted), while the Commission contemplate periods of nine months and the present rule actually allows ten months if the officer is eligible for so much commutable half-pay leave. In present circumstances, seeing that the voyage either way may extend to five or even six weeks, I do not think that a period of ten months' absence is excessive, and I would propose to relax the rule so as to enable this amount of leave to be taken on full

pay.

The method by which I would propose to effect this is by allowing vacation leave to be accumulated for a longer period than the three months now permitted. I would suggest that an officer should be permitted to accumulate his vacation leave for the whole of any consecutive period of resident service, provided that he is not given more than ten months' full pay when he takes leave. Thus an officer after five years' service might be eligible for seven and a half months' vacation leave and ten months' half-pay leave, so that he would have no difficulty in obtaining the maximum of ten months on full pay. This calculation assumes that he will have taken no vaca tion leave during the whole of his five years' service. This is not likely, but there is a margin of two and a half months which is probably more than the amount of vacation leave usually taken during five years' service in the Colony. In order, however, to enable this proposal to work more smoothly I would ask your Lordship to approve the extension to this Colony of the system of casual leave in force in Ceylon and the Malay Peninsula by which an 'officer is enabled to be absent from duty for an occasional day or two, up to a maximum of fourteen days in a year, without its being counted against his vacation leave.

4. Intimately connected with the question of leave is that of passage, since it is of little use to devise methods of enabling officers to take leave if they find themselves unable for pecuniary reasons to take advantage of the opportunity. The proposal of the Commission is that free passages should be provided for officers of European domicile and for their families when they go on leave, as well as for Indians born in India. In my opinion this proposal goes beyond the necessities of the case.

I am fully in accord with the views of the Commission so far as officers on small or moderate salaries are concerned, but I do not think that it is necessary to extend the same treatment to the highly paid officers at the top of the service. and it appears to me also that it is only reasonable to make a distinction between the case of bachelors and that of married men: I recommend that officers drawing salaries of not more than $6,000 a year should be provided with return passages for themselves and, if married, for their families up to a maximum of five persons in all (that being the maximum provided in Colonial Regulation 121), but that bachelors drawing salaries above that figure should not be provided with passages. In the case of married men I would extend the privilege up to a maximum salary of $12,000. Officers in receipt of higher salaries may, I think, reasonably be expected to be in a position to bear the expense themselves.

It would be desirable to establish a definite rule as to the intervals at which passages are to be provided, and I would suggest that it should be laid down that. in order to be entitled to the full privilege, an officer must have completed four and a half years' resident service since his last return from long leave, and that if he has not done so a proportionate reduction should be made in the payment allowed

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for passages, the Government having discretion to relax the rule in a case where ill-health necessitates the taking of leave before the completion of the prescribed period.

Passages on retirement from the service should be provided on the same con

ditions.

I would add that I make these suggestions without knowledge of the rules as to the grant of free passages which have been adopted in Ceylon and the Malay Peninsula. If officers serving in those countries have been granted more liberal terms in this respect than those which I have proposed here, I am strongly of opinion that Hong Kong officers should receive the same treatment.

5. In paragraph 10 of their report the Commission recommend that an officer acting for a superior officer when on leave should receive the salary due to an acting officer under the existing regulations from the date of assuming the duties of such acting appointment. Mr. Severn in paragraph 7 of his Confidential despatch of 15th April* makes the counter-suggestion that an officer should draw the minimum salary of the post in which he is acting. On the whole I am inclined to agree with Mr. Severn, as the adoption of the principle which he suggests would remove some minor anomalies (e.g., under the present rules it is occasionally found that the acting officer receives more than the substantive officer, owing to the fact that he draws the increments on his own salary in full in addition to the minimum salaries of the two posts), but I do not think that the principle could be adopted throughout the service, since in the case of such highly paid non-incremental posts as that of Chief Justice or Colonial Secretary the additional expense involved would be very large. I should be inclined to adopt a compromise and to accept Mr. Severn's view in regard to the service generally, but to make an exception in the case of the posts of Colonial Secretary, Chief Justice, Puisne Judge and Attorney-General, applying to them the existing rule as to the half-salaries of the two appointments.

In any case, however, I support the suggestion that the acting pay, however arrived at, should be payable from the date on which the officer begins to act instead of on the completion of the vacation leave of the substantive holder of the post. I do not propose that this course should be adopted when an officer is acting for another who is only taking vacation leave, but that it should apply only in cases where the substantive holder of the post is on long leave.

I desire to add that I am strongly of opinion that this concession should apply to the case of the Colonial Secretary when he is required to administer the Govern- ment. A Colonial Secretary who has to administer the Government on his own salary plus the entertainment allowance is bound, as I know from my own experi ence, to lose considerable sums of money by so doing, and it is not probable that he will be able to recoup himself out of the additional salary received while the Governor is on half-pay leave, unless the absence of the latter is unusually prolonged.

6. The last general question to which it is necessary to refer is that of quarters, with regard to which the Commission make certain suggestions in the penultimate clause of paragraph 7 of their report. I understand that the principle underlying their proposal that a certain rent should be charged for the use of a house or an allowance of equal amount given is that the rents suggested are intended to be approximately half of the normal rent which an officer would pay for a house suitable for a man of his standing. I think, however, that the adoption of their proposals would probably lead to difficulties if rents generally went either up or down, and, though I should be willing to accept their scheme, I should be greatly obliged if your Lordship would agree to the adoption of the system which is in force in Ceylon and is, as I know, highly appreciated by the service there; that is not to attempt to obtain an economic rent from the houses built by Government for its officers, but to make a deduction of 6 per cent. from the salary of all officers provided with quarters, other than those to whom free quarters are specifically assigned. It is my intention to push forward the construction of Government quarters until accommodation is provided for all European officers (the number is not so great as to make this an impracticable ideal). When that is done, we shall, if your Lord- ship accepts the suggestion which I have made above, have disposed finally of one of the worst of the difficulties which beset European officers in this Colony.

Meanwhile it will be necessary to make some arrangement in the case of those officers for whom it is impossible to provide quarters. I am inclined to think that the best course would be to pay a rent allowance equivalent to half the rent which

* No. 1.

23

an officer actually pays, provided that the head of his department (or the Governor where the case is that of a head of a department) is satisfied that it is a reasonable rent for a house suitable for a man of his standing. If, however, your Lordship prefers to fix the allowances at the rates suggested by the Commission or in the alternative to adhere to the existing system of house allowances, I have no objection. 7. The preceding paragraphs of this despatch cover most of the ground dealt with in the general remarks made by the Commission, and I come now to their specific proposals as to salaries.

I agree with Mr. Severn's view, as indicated in paragraph 4 of his despatch of 15th April,* that there is no advantage in grouping officers of various technical departments in one classification, and I propose, therefore, to deal with each depart- ment separately

First as to the Cadet Service.

If the present system of classification is to be adhered to, I agree that there should be four classes, and I consider that the scale of salaries set out in paragraph 15 of Mr. Severn's despatch of 15th April would be satisfactory, viz.:-

Class I. II.

"}

•

III. IV.

$12,000 $9,000 $7,000

$500

$500

$250

13

$5,000

$250

Passed Cadet, $4,000. Cadet, $3,000.

$15,000

$11,000

$8,000

$6,000

the increments in all cases being annual. A passed cadet should, I consider, be appointed a supernumerary member of Class IV if he does not obtain a substantive appointment within three years from the date of passing his examinations. I agree also generally with Mr. Severn's proposals as to the appointments to be assigned to the various classes (provided that it is understood that the appointments for which persons from outside the Cadet Service are now eligible continue to be open to the same extent), except that I am at present somewhat in doubt with regard to the suggestion for the appointment of a cadet officer to the Public Works Department. I am inclined to think that the duties which Mr. Severn proposes to assign to that post could be adequately discharged by a less expensive type of officer, but there is no need to settle the matter at the moment.

8. I wish, however, to submit for Your Lordship's consideration an alternative proposal in regard to the organisation of the Cadet Service. Owing to the small size of this service in Hong Kong such a system of classification as is at present in force is in my opinion very unsuitable. It must necessarily result in great inequoli- ties in promotion and in periods of stagnation, alternating probably with periods of excessive rapidity of promotion. For instance, the oldest member of Class I. (excluding Mr. Irving, who was transferred from the Federated Malay States) is aged 45, and entered Class I. at the age of 38. The second member of Class II. is now 43, and he may have to wait another ten years before there is a vacancy for him in Class I. I am convinced that inequalities of this kind do not tend to the good of the service, but in so small a body as the Cadet Service of Hong Kong there is no possibility of avoiding them so long as the present system is maintained. What I desire, therefore, to recommend to Your Lordship is that the whole system of classification should be abandoned, and that an officer who enters the service as a cadet should rise continuously throughout his service from the salary of a cadet to that now proposed to be assigned to Class I. I suggest that a cadet should be paid $3,000 a year, and that on passing his examinations he should receive $4,000 a year, rising by annual increments of $250 to $6,000 and then by $500 annually to $15,000 a year without regard to the post which he may be holding at any time. This would result in an officer's reaching the proposed salary for Class I. about the age of 45 or 46 and attaining his maximum at the age of 51 or 52, which appears to me to be a reasonable arrangement.

I am of course aware that such a scheme is open to considerable theoretical objections, but I am satisfied that, at least in the case of Hong Kong, these objections are not of such practical importance as to counterbalance the advantages which it offers.

It may be argued that such a system removes the incentive of ambition, offends against the principle that a man should be paid according to the importance of the work which he is doing and entails the risk that officers would content themselves

* No. 1.