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PUBLIC RECORD OFFICE

6

Reference :-

C.O.

882 /10

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC

COPYRIGHT PHOTOGRAPH-NOT TO

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3. I would make the leave rules applicable to all European officers. At present there are separate regulations for the police, and again separate regulations for all subordinate officers who have hitherto been granted free passages; their allowance of leave being less liberal, by reason of the grant of passages, than the allowance to officers who paid their own passages. Now that free passages have been granted to all European officers, there is no longer any ground for differentiation.

4. Under the authority of Mr. Long's telegram of the 24th December, 1918,* all subordinate officers are for the time being receiving full pay leave, to meet the increased cost of living at home; but the suggestion in that telegram, that the leave so granted should be regarded as commuted pay leave to be debited against leave earned in the future, is hardly practicable. A man returning from nine months' full pay leave would have to serve nine years on account of that leave, and it would take him a further nine years to earn another nine months' period. I in every case the leave due to an officer from the commencement of his service should that propose be calculated, and that he should be debited with the half or full pay leave already taken, one month's full pay leave to count as two months' half-pay leave; with the proviso that the first three months of each period of long leave taken will be written off as vacation leave. For example, an officer has served the necessary period of five and a-quarter years and has been granted nine months' half-pay leave, and he has served a second like period and has recently returned from nine months' full pay leave. He would be credited with twenty-one months' half-pay leave in respect of his ten and a-half years' resident service, and he would be debited with eighteen months' half-pay leave in respect of the leave already taken.

5. The arrangement for rent allowances, dealt with in paragraph 5 of your despatch under reference, is so unfavourable as compared with the existing scheme, which was approved in Mr. Long's telegram of the 4th May, 1917,† that I have for the time being allowed that scheme to stand. I am now satisfied that the suggestion in paragraph 6 of my Confidential despatch of the 11th December, 1919, that an officer might pay half the rent of the house occupied, did not make sufficient allow- ance for the extremely high cost of local accommodation of every description; and the added limitation that the amount to be paid by Government should not exceed eight per cent. of salary would involve heavy additional expense to the more junior officers concerned. For example, a married officer on £450 is entitled, under the existing rules, to rent a house at $125 a month, towards which he pay $40. If he paid half the rent, his contribution would be $8250, and with the proposed eight per cent. limitation he would be required to pay $95. Similarly, an officer on £1,500 would pay, for a house rented at $200, $60 under present rules, and $100 under both the half-rent rule and the eight per cent. limitation rule. It is mani- festly unfair that an officer drawing £450 should pay practically the same rent that an officer drawing £1,500 pays for considerably better accommodation.

6. There is the further point that if an officer who occupies Government quarters is required to pay six per cent, on salary by way of rent, it is bound to cause great dissatisfaction if an officer of similar standing, who cannot be provided with Government quarters, has to pay a rent out of all proportion to that of his more fortunate colleague.

7. It appears to me that the most satisfactory solution is that officers should pay six per cent. on salary for accommodation suited to their seniority and position in the service, which they rent with the approval of the Government; the Govern- ment paying the balance of the rent. In the alternative, I recommend that the present rent allowance system should be continued, subject to a readjustment of the limits of its three classes to suit the new rates of salary

I have, &c.

R. E. STUBBS,

* 61285: not printed.

| 20408: not printed. ↑ No. 4.

Governor, &c.

43495

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No. 23.

THE GOVERNOR to THE SECRETARY OF STATE.

(Confidential.)

MY LORD,

(Received 1st September, 1920.)

[Answered by No. 25.]

Government House, Hong Kong, 19th July, 1920.

I HAVE the honour to acknowledge the receipt of Your Lordship's telegram of the 16th June, 1920, regarding the question of the grant of a local allowance in counteraction of the fluctuations in exchange.

2.

When the members of the Salaries Commission recommended the adoption of an exchange rate of 28. to the $1, it is doubtful whether they realized the full effect of this departure from the former arrangement, whereby salaries were paid as to four-fifths at 18. 9d., and as to one-fifth at the rate of the day. When the dollar is worth 48. 8d., £100 becomes $1,000 under either method of calculation, but as the exchange value of the dollar falls the former system becomes increasingly advantageous. For example, with exchange at 38., that system gives $1,048 for £100, and $1,114 for £100 when exchange is at 28., an advantage in the one case of five and in the other of eleven per centum.

3. The Commissioners estimated that the cost of living had increased by at least thirty per cent. since the beginning of the War, and in the year that has elapsed it is probable that that cost has advanced by quite a further 10 per centum. Prices would undoubtedly have advanced much further, as they have done in other parts of the world, but for the counteracting factor of the rise in the value of silver; and as the exchange price of the dollar falls the upward tendency of prices at once reasserts itself.

4.

Given equal conditions of exchange, the increase in the emoluments of the sterling-paid Civil Service since 1914 may be put broadly at thirty per cent. I have shown, however, that the new system of exchange is less favourable than the old, and as the dollar falls all local charges rise. The exact effect of the fluctuations of the dollar must remain a matter of guess work; but, it is probable, as far as I can judge, that a fall in exchange from, for example, 4s. 8d. to 28. 8d., will, if sustained for a sufficient period of time, result in an increase in local prices of considerably over twenty per cent.

5. The simplest method of arranging a sliding scale would be to allow one per cent. in respect of each fall of 1d. in exchange; but this would give a range of twenty-six per cent. between 4s. 8d. and 2s. 6d., which would, in my opinion, be too great. I accordingly recommend the adoption of a scale with a range of twenty per cent. between 48. 8d. and 2s. 6d., as shown in the enclosure.

It is not likely that the dollar will fall below 2s. 6d. for some considerable time to come, and in any event I should prefer not to make any provision against such an eventuality until some experience has been gained of the practical working of the sliding scale.

Enclosure in-No. 23.

I have, &c.,

R. E. STUBBS,

Governor, &c.

Exchange TABLE SHOWING PROPOSED Percentage INCREASE when the Exchange Value of the Dollar 18 BELOW 48. 8d.

Exchange Value of Dollar.

When exchange is at or over 48. 4d. ... When exchange is at or over 48, and below 48. 4d. When exchange is at or over 38. 8d. and below 48. When exchange is at or over 38. 4d and below 3s. 8d. When exchange is at or over 38. and below 38. 4d. When exchange is at or over 28. 8d. and below 38. When exchange is over 2s. 6d. and below 28. 8d. When exchange is at or below 2s. 6d. ...

Percentage Increase

of Salaries.

0 per cent. 3 *

J

6

"

19

9 " 12

1

..

15

"

*

18 "

"

20

F

• No. 18.

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