CO885-(11-12) — Page 32

703

PUBLIC RECORD OFFICE

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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of the State's revenues, will be, sufficient to make the State independent of the revenue derived from opium.

(e) The British Resident, Brunei, proposes to earmark 20 per cent. of the opium revenue until 1927, and thereafter the whole of such revenue, towards a replacement fund. In 1927 half-yearly rent begins to come in from the oil-leases, after which it is hoped that rent and royalty will more than compensate for the loss of opium revenue. If, however, the export of oil reaches 30,000 tons before 1927 it may be possible to set aside a larger percentage of opium revenue earlier than is now suggested. 5. I have already despatched a telegram to you on the 5th August* reporting the above proposals, and I trust that they will be found acceptable.

YOUR EXCELLENCY,

I have, &c.,

E. S. HOSE,

Officer Administering the Government.

Enclosure 1 in No. 212

The Treasury,

Singapore, 10th August, 1925. WE, the Committee appointed by Your Excellency to consider and make recom- mendations for the building up of a fund for the ultimate replacement of opium revenue, have the honour to submit our report.

2. We referred to the terms of the International Convention on Opium, known as The Hague Convention, 1912, by which all signatories (Great Britain included) bound themselves to take such steps as were locally applicable with a view to the abolition of opium smoking in their territories, and to the Protocol signed at Geneva in February, 1925, under the terms of which within a period of 15 years from a date to be agreed upon, opium smoking is to be abolished in the signatories' territories. In view of these we are of opinion that it is desirable to so arrange the finances of the Colony as to assist our successors at the time when the revenue derivable from opium smoking commences to dwindle appreciably.

3. Having regard to the fact that since the signing of The Hague Convention the Colony's gross revenue from opium had amounted by the end of 1924 to $149,866,262 and that the Colony's surplus at that date stood at $66,828,327, we recommend that a Reserve Fund should be constituted to be called the Revenue Replacement Reserve Fund," and that a sum should be set aside now as the Opium nucleus of such Reserve Fund.

4. We discussed the question of the proper method to be adopted, and were unanimously of the opinion that the Reserve Fund should be fully covered by gilt- edged securities held by the Crown Agents for the Colonies on behalf of the Colony. We further recommend that the income from the investments representing the Reserve Fund should be similarly invested by the Crown Agents and accumulated as part of the fund.

5. On the question of the amount which could reasonably be set aside now as a lump sum, we felt that it should be as large as possible having regard to the Colony's commitments.

6. The Colonial Treasurer summed up for us his view of the currency position and satisfied us that the Governor, with propriety, could, under Section 16 (3) of the Currency Ordinance, 1923, order $20 million of the net balance of the Currency Guarantee Fund to be paid to the general revenue of the Colony.

7. We think it desirable to state that the Colonial Treasurer assured us that if the $20 million were paid by the Currency Guarantee Fund, the resultant state of that Fund would be sufficient to cover the total nominal value of the notes in irculation, and the difference between the bullion and face value of all the Straits Settlements silver current coin and silver subsidiary coin in circulation, and also provide a reserve which would allow of the fall in the price of silver to 24d. per standard ounce (present price 32d.) and of 10 per cent. depreciation in the market price of the Fund's invest- ments. This appeared to us to be a position of absolute safety.

8. From the Colony's surplus as augmented by the $20 million to which we have just referred, we felt that, having due regard to the commitments of the Colony, it would be possible to appropriate $30 million as the nucleus of the Reserve Fund

* 36089/25: not printed.

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under consideration. We accordingly recommend the Legislative Council to appro- priate that amount for that purpose.

9. In considering the question of subsequent additions to the Fund, we had necessarily to examine the existing programme of Public Works Extraordinary. It appeared to us difficult to contemplate the creation of any annual surpluses until the completion of this heavy and costly programme, even without burdening the Colony with any further appropriations.

10. But we felt that the pace at which the expenditure on this would be disbursed would not be so great as that anticipated by a provision of $8

programnic million in the current year's budget, and, moreover, we felt that on completion of the existing programme, Public Works Extraordinary" would drop to a relatively small figure.

11. We were of opinion that it would not be proper to delay the appropriation of annual contributions to the Opium Revenue Replacement Fund, especially as to do so would throw an additional burden on the future.

12. We felt that it was desirable and eminently proper that these annual con- tributions should commence in and from 1926.

13. We are of opinion that the Legislative Council should be asked to vote from revenue in the year 1926 an additional contribution to be appropriated to the Reserve Fund, and to authorize similar annual contributions in successive budgets.

14. Our examination of statements furnished by the Colonial Treasurer shows us that our annually recurrent expenditure should not be estimated under existing conditions at less than $20 million, nor could we under the recent decline of opium revenue forecast an annual revenue in excess of $27 million to meet this annually recurrent as well as special expenditure.

15. We were of opinion that, if we made no recommendation as to imposing new taxation, the creation of a fund which would in a reasonable, period provide an annual income in the neighbourhood of $5 million would be a sufficient discharge of the obligations to posterity.

16.

We accordingly examined the figures furnished by the Colonial Treasurer and were satisfied that such an objective could only be achieved by an annual con- tribution in the neighbourhood of $3 million.

17. We discussed the question of whether the annual contribution should be a fixed amount or should bear some, relation to the revenue of the Colony, and decided in favour of the latter alternative. We recommend that ten per centum of the actual revenue of the Colony be appropriated annually to the Opium Revenue Replacement Reserve Fund.

18. We attach a table, annexure

C

a 4 per cent. investment of a fund built up as we have recommended after 5 years, A," showing the income to be derived from 10 years, 15 years, and 20 years. We have shown in different columns an annual contribution based on an actual revenue of $25 million, $27 million, $30 million, and $35 million respectively. This table indicates that, if the revenue is steady at about $30 million per annum, the income derivable from the fund after 15 years would amount to over $4 million.

19. So that with a revenue steadily approximating to $30 million, if that can be derived without imposing fresh taxation, an annual contribution of ten per centum of the revenue would appear to be an adequate fulfilment of any obligations to rid posterity of dependence on opium revenue."

20. Even if existing rates of taxation are raised as we propose, with a possible resultant increase of $1 million annually, we feel that there will be some call on the Colony's surplus during the time that such works as the Post Office and General and Mental Hospitals in Singapore are under construction, but we think that these calls will not prove unduly burdensome,

21. We consider that the increased duties set out by us on annexure can be imposed without undue inconvenience and irritation, and we accordingly "B"* recommend their imposition.

22. The Colony is not at present paying the higher limit of Defence Contribution, 20 per cent. of its assessable revenue, but that may come into operation in the future, and we suggest for Your Excellency's consideration that representations be made to the Secretary of State for the Colonies with a view to providing that the income of *Not printed.

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