375
PUBLIC RECORD OFFICE
Reference :--
PELLIC.O.882/11
|ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
PUBLIC RECORD OFFICE, LONDON
10
12. I trust that I shall be acquitted of any impertinent intention if I venture to suggest that, in these circumstances, the advantages to be gained by compelling the Legislative Council of the Straits Settlements to accept the proposals set forth in your despatch under reply would not be commensurate with the ill effects which such action is calculated to produce, even if the matter be judged exclusively from the standpoint of Imperial interests.
I have, &c.,
C. 52056/28 [No. 31).
No. 4.
HUGH CLIFFORD, M.C.S.,
Governor.
THE DEFENCE CONTRIBUTION OF THE STRAITS SETTLEMENTS. COLONIAL OFFICE MEMORANDUM.
During the years immediately preceding the war the cost of the garrison maintained by the War Office amounted to the full 20 per cent of assessable revenue. During the war the garrison was heavily reduced and the cost fell to a much lower figure. But the Colony, in addition to other contributions to His Majesty's Government, waived the refund of overpayments. The great slump of 1920 made it impossible for the Colony to continue this procedure and since then only the cost of the garrison, considerably less than 20 per cent maximum, has been paid. The decision of His Majesty's Government to develop a naval base at Singapore has radically altered the position. As a result of that decision the expenditure of the War Department is bound to rise steadily, and even with the exclusion of the capital cost of military works is expected by 1934 to reach the 20 per cent limit. The Unofficials, and one may fairly say the whole community of the Straits Settlements, are intensely alarmed and perturbed by this prospect.
They have good reason for their perturbation. The Estimates for 1928 show in round figures a revenue of 33 million dollars and an expenditure of 39 millions, involving a deficit of 6 millions. The revenue is strikingly inelastic, largely owing to the fact that the Colony lives on the free ports of Singapore and Penang and trade must not be driven away by heavy charges. Even so, its principal source of revenue-opium-is threatened, as a result of an Imperial policy in which the Colony has no faith. There are lean years in prospect owing to the low price of tin and the slump in rubber (the immediate cause of which was an act of His Majesty's Government). The Colony badly needs all the revenue it can raise for essential works of development and social services, and the threat of bigger and bigger slices of its revenue being taken away to be spent on works about which (necessarily) it has no say, hangs over it like an incubus. The Colony has already given freely the land required by the Air Ministry and Air Force for the Base, and it is faced with the expenditure on defence of considerable sums outside the contribution.
Volunteers. Average expenditure $390,000 (approximately).
Light Aeroplane Club. Grant already made $60,000. Annual subsidy $20,000. Royal Naval Volunteer Reserve. Strongly urged by Admiralty. In December, 1926, the Straits Settlements and Federated Malay States expressed readiness to spend up to $260,000 a year for 3 years. The Admiralty were at first unable to come within this limit, but are contemplating other arrangements to allow of the commencement of the scheme on a smaller scale.
Air Services. The Malayan Governments have expressed readiness to assist in the development of schemes recommended by Air Ministry. So far no practical proposal has. been put forward but sooner or later there is no doubt that a service will have to be subsidised, especially on the Imperial ground of not letting the Dutch get a monopoly on an important part of the route to Australia.
Victualling. The decision to make Singapore an important Naval Base makes it necessary to provide for food supply in time of war. The scheme put forward involved a capital expenditure of no less than $4,352,250, and a recurrent annual expenditure of $2,460,216 against a revenue of $2,702,268, but the revenue figure was highly conjectural, and probably there would be an annual loss also. A revision of the scheme on a less ambitious basis has been called for, but it is clear that a considerable expenditure will have to be faced; and the call for a large capital sum may come at any time.
In all these circumstances it is hardly surprising that the Colony should cry out that the burden of cost and of anxiety is greater than it can bear. In the hope of defining its liabilities the Unofficials have put forward a scheme for a contribution fixed over a period of 5 years. The War Office definitely refuse to entertain a proposal on this basis. It is, therefore, necessary to consider what other steps can be taken. It is practically a political impossibility to force on the Colony against its will the terms to which the
11
Colonial Office was prepared to agree, if the Unofficials could not be brought to consent to them. The effect of such action would inevitably be to create a strong demand for local control of expenditure in the shape of a more liberal constitution; a demand which might well obtain the support, in this country at least, from the other political parties; and one result of such a constitution would be to put the military contribution as a whole in jeopardy. Nor, on the facts as they now emerge, would it be just even if it were politic to extract the money by force. The facts set out above show that the arrangement would prove too heavy a strain on the finances of the Colony-in Sir H. Clifford's words it would have a definitely crippling effect. We cannot afford to cripple the Straits Settle- ments. On the other hand no arrangement could reasonably be suggested which would have the effect of reducing the amount payable in the next year or two.
Without any attempt to draw a definite line between local and Imperial defence, it is legitimate to argue that whereas before the war the cost of defence was in the main local and properly a charge on the Colony, the development of the Base has at any rate made the defence of Singapore much more of an Imperial matter than before. On this ground may fairly be based the suggestion that the maximum of 20 per cent of assessable revenue, which was considered tolerable before the war, is now too high. To lower that limit would be a reasonable concession to make to the Colony and would help to relieve its anxiety for the future and to reassure public confidence, which has been.badly shaken, in the desire of His Majesty's Government to act fairly. Such a method would also leave the War Office with a revenue still of some elasticity.
It remains to be considered what would be a fair figure to substitute for 20 per cent.
The table given in the Appendix is based on figures given by the War Office in November - last-(M.C.(27)-7).
From these figures it would seem that the sum to be expected by War Office would not be affected by the lowering of the maximum until 1931 if the contribution were fixed at 15 per cent, or until 1932 (or, indeed, to any appreciable extent until 1933) if it were fixed at 17 per cent.
As, however, the posibility of some fall in revenue must be faced, it is necessary to consider the probable effect of a minimum revenue. In Sir H. Clifford's opinion the total revenue of the Colony is not likely to fall below $30,000,000. If it should fall so low it is not probable that any deduction would be made for a contribution to the Opium Revenue Reserve Replacement Fund, and the minimum assessable revenue could be fixed at $26,000,000. Maximum contributions on this sum would be:-
=
At 20 per cent $5,200,000 At 17 per cent $4,550,000
At 15 per cent $3,900,000
=
£607,000 approximately £531,000
£455,000
There is, of course, per contra, the possibility of some increase of revenue after the next year or two which would raise the maxima well above the figure shown in the Appendix. In all the circumstances it would seem that the reduction of the limit to 17 per cent would be the most reasonable solution.
CONTRIBUTION ON BASIS OF 1925 REVENUE AND MAXIMUM OF:-
£
£
APPENDIX.
YEAR
COST OF GARRISON
Estimated in-
crease due to
"Normal" Naval Base, ex-
Figure
Total of
cluding Capital
2 and 3
20 per cent 171 per cent 15 per cent
Expenditure
1.
2.
3.
4.
5.
6.
7.
£
£
£
£
1927
416,000
416,000
416,000
416,000
416,000
1928
416,000
25,000
441,000
441,000
441,000
441,000
1929
416,000
30,000
446,000
446,000
446,000
446,000
1930
416,000
86,000
502,000
502,000
502,000
502,000
1991
416,000
193,000
609,000
609,000
609,000
546,000
1932
416,000
227,000
643,000
643,000
637,000
546,000
1933
416,000
262,000
678,000
678,000
637,000
546,000
1934
416,000
327,000
743,000
720,000
637,000
546,000
1935
416,000
331,000
747,000
720,000
637,000
546,000
1936
416,000
331,000
747,000
720,000
637,000
546,000
(C38051)
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