CO885-(11-12) — Page 287

212

༅། ། ༄། །།

PUBLIC PECORD OFFICE

Reference -

C.O.882/12

COPYRIGHT PHOTOGRAPH-NOT TO

Br

PUBLIC RECORD OFFICE, LONDON |

ALLY WITHOUT PERMISSION OF THE¦ REPRODUCED PHOTOGRAPHIC-|

11.

22

A separate despatch will be sent reporting the views of the Sarawak Govern- ment on the Commission's report, and regarding its representation at the Bangkok Con- ference.

I have, &c.,

JOHN SCOTT,

Officer Administering the Government.

Enclosure in No. 19.

MEMORANDUM BY TREASURER, STRAITS SETTLEMENTS, on RecOMMENDATION 17.

On the question of the opium revenue the Commission reached the following conclusion:-

L

It would therefore be of economic advantage to the territories concerned

if the Governments began immediately to adjust their finances to the gradual loss of opium revenue by making their budgets independent of it."

Then follow various suggestions as to how this goal is to be reached.

It is not very clear whether the Commission suggests that the opium revenue should be taken out of the budget immediately or by some gradual process within a definite period of time. But, in any case, the action suggested seems to be merely a preliminary step to the process of abolishing the opium revenue, the real crux of the problem.

2. The suggestion that the opium revenue should be divorced entirely from the ordinary revenue is not a new one. It was before the Malayan Governments in 1924 and was, in fact, the very proposal which ultimately led to the establishment of an Opium Revenue Replacement Fund in this Colony. The principle that no State should draw any net opium revenue for the purposes of the budget was at the time most strenuously opposed by the Malayan Governments. The arguments against that principle not only hold good to-day, but so far as this Colony is concerned at any rate, are strengthened by the fact that adequate provision has already been made against the ultimate loss of the opium revenue.

3. It has already been mentioned that a previous proposal of this nature led to the establishment of an Opium Revenue Replacement Fund in this Colony. That Fund was established in 1925 by means of a contribution from Surplus Funds, i.e., from monies which would otherwise have been devoted to capital expenditure for the henefit of the community generally. The value of the Fund on 1st January, 1931, was The $46,592,880, equivalent to over six times the net opium revenue for 1930. object of the Fund was to tide over the financial difficulties of the transition period when the time came completely to abolish opium smoking, i.e., over the period of not more than 15 years referred to in Article II to the Protocol of the Opium Conference signed at Geneva on 11th February, 1925. When the Fund was established, it was on the clear understanding that this Government should have the continued use of the opium revenue during that period for the purposes of the ordinary budget, the deficiency in the opium revenue being made good by contributions from the Fund.

and purpose On that understanding it is considered that the Fund is ample for its this Government is in a position to meet its obligations under The Hague Opium Con- vention and Article II of the Geneva Protocol.

Proposals for new taxation to make good the ultimate loss of the opium revenue have also been considered and can be put into operation when the time comes. In the meantime, it may be emphasized that the setting aside of such a large sum for the benefit of future tax-payers already represents a very considerable sacrifice on the part of the community.

4. The importance of the opium revenue as part of the general revenue of the Colony may be realized from the following figures for the years 1928-1930 inclusive :—

Year.

1928

1929

1930

· Gross Opium Revenue.

$ 13,926,280

Net Opium Revenue.

$ 12,322,263

9,776,955

8,830,695

8,276,919

7,387,759

Proportion of Net Opium Revenue to total Revenue of Colony.

Per cent.

32.3

15.1* 23.0

* 1929 Revenue was swelled by a windfall of $19,000,000 from the Currency Commissioners. If this is excluded from the calculation, the proportion to normal revenue becomes 23 per cent.

23

For the year 1931, the estimated figures are:-

GTOS8 Opium Revenue. $9,000,000

Net Opium Revenue.

$7,400,000

Proportion of Net Opium Revenue to total Revenue of

Colony.

23 per cent.

If, therefore, this Government is deprived of the free use of its opium revenue for the purposes of the budget, an immediate sacrifice of roughly one-fourth of the tota' revenue is involved. To meet such a situation, it would be necessary either to impose new taxation at once, or, since the annually recurrent expenditure has already over- taken the revenue, to reduce expenditure in the same proportion.

Fresh taxation imposed before the period of 15 years begins to run and on such a scale would lay an intolerable burden on the present community. On the other hand, any reduction in expenditure would have the effect of curtailing those social and sanitary services which the Commission appears to regard as a legitimate object on which to expend the surplus opium revenue.

5. The Commission has made various suggestions as to how the opium revenue should be employed.

The primary use suggested is expenditure on a campaign against the smoking habit. In this Colony, auch expenditure would only absorb a very small fraction of that revenue and the problem of the disposal of the balance would still remain.

The suggested methods of disposing of the balance are:-

(a) to reserve it for an Opium Revenue Replacement Fund. This, as stated

above, has already been provided in this Colony.

(b) to transfer it to the ordinary budget to meet expenditure for social and sanitary purposes or to grants to Red Cross Societies or other organizations for social welfare.

The following figures give the estimated net expenditure for 1931 as shown in the budget on the principal social and sanitary services under this Government :-

Medical and Public Health Services ... Education

Total

Estimated Expenditure, 1931. $ 4,000,381 2,293,135

$6,293,516

گر

In addition there are various other social and sanitary services such as annual con- tribution to the Singapore Improvement Trust for use in improving housing conditions, contributions to Rural Boards for direct expenditure on village sanitation, contributions for medical research and the study of tropical medicine, contributions to educational institutions and other bodies engaged in social welfare work, totalling $906,498. This gives a grand total of direct expenditure of $7,200,014 on public health and educa tion.

These figures, moreover, take no account of expenditure on the provision and upkeep of public buildings occupied by the Departments mentioned.

It will be seen therefore that at the present time expenditure on social and sanitary services absorbs practically the whole of the next revenue derived from opium, and this state of affairs will undoubtedly continue until the process of abolishing the opium revenue begins.

It may, further, be mentioned that hospital treatment is free to all patients unable to pay the very moderate fees which are charged. Government itself is responsible for most of the social welfare work carried on in the Colony, but generous assistance

is also given to the few private bodies engaged in similar work.

In view of the above facts, it is difficult to see how a claim by this Government to utilize the balance of its net opium revenue for the purposes of the ordinary budget can be resisted.

(c) to transfer it to an extraordinary budget to be used on public works directly

or indirectly connected with the campaign against opium smoking. It is difficult to visualize what kind of public works are meant. If hospitals, the reply is that this Colony has expended and is still expending very considerable sums on the provision of adequate facilities. To devote any considerable sum to works directly connected with the campaign against opium smoking might not necessarily be of economic advantage, if there is any likelihood of such works becoming a permanent