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The Colonial Office has probably formed some valuable opinions on the subject during the two years since the Governor sent you his original despatches in 1926, and you may be able to set at rest some of our doubts before we reply officially.

(1) It is realized of course that we for our part do not want to make a change of method which might unintentionally give us in the future smaller contribu- tions on the average than we should receive if the present system continued. It appears, however, that if the proposed new method had been in operation in the past, we should have received considerably less than we have received on the existing basis. The table* referred to at the end of paragraph 16 of the Governor's despatch of 24th June, 1926, was not enclosed with the copy of that despatch sent to us with Colonial Office letter of 12th October, 1928, but we make out that if the proposed new basis had existed since 1901 we should have received a total of about 11,000,000 dollars less than we have in fact received. It is true that the Governor's despatch gives reasons why the revenue basis yielded much more in certain years (1922–25), but is this much comfort to us? Even if we miss out those years our total loss since 1901 would apparently have been over 5 million dollars.

(2) So much for the facts of the past. Endeavouring to peer into the future, it has been suggested to us by one of our own people who has recently served in Hong Kong that we are likely to lose on the change, and for this reason. In the past, rents (and presumably valuations) have been exceptionally high owing to the fact that the main residential and business area has been in Hong Kong itself, where building on steep slopes is expensive and where The extension of the Colony is now sites and accommodation are scarce.

taking place on the Kowloon side. Land there is practically unlimited and building is cheaper, as sites are level. Rents are much lower in Kowloon and this is tending to bring down the level of rents in the whole Colony. As Kowloon extends this will be more and more the case. Is it not possible then that of all the main items of revenue, rates will show the smallest proportional increase? Your opinion would be of value.

(3) We notice that the proposed rateable valuation is not to cover the whole of the I am not quite clear as to this Colony but" the most important districts."' limitation; are you satisfied that the point may not give rise to controversy as to the area of assessment?

(4) If a change from the basis of revenue to that of rateable valuation is made for Hong Kong, will it be followed by a similar proposal for the other Eastern Colonies, or are the conditions in Hong Kong so different as to call for such a change there more strongly than elsewhere?

(5) Mr. Amery, in alluding to this subject in his letter of 29th October§ to Sir Laming Worthington Evans on the Straits Settlements contribution, a claim for a remarks that the Hong Kong proposals "involve dropping refund of £114,000 which would be decidedly embarrassing to you at present." We were very glad to receive this assurance; no reference appears to have been made to it in the correspondence received from your Department as to the Hong Kong proposals.

(6) The Treasury would of course have to be a party to any change in the basis of assessment. The War Office would naturally express its views to the Treasury in due course, but it might save time if the Treasury were con- sidering the matter from their point of view simultaneously. I do not know whether you have in this case intentionally departed from your practice of sending the Treasury a copy of the proposals at the same time as they are sent to the War Office.

Yours, &c.,

C. 52802/28 [No. 18].

79

No. 63.

HONG KONG,

THE OFFICER ADMINISTERING THE GOVERNMENT

to

THE SECRETARY OF STATE.

(Received 4th December, 1928.)

(Confidential (2).) SIR,

I have the honour to confirm my telegram of 27th October, 1928*. regarding the military contribution payable by this Colony, in which 1 estimated the amounts which would have been paid for 1926 and 1927, had the deductions recommended in para- graph 8 of my despatch Confidential (1) of 28 July, 1928†, been made, at $2,367,584 and $2,645,566 respectively.

Government House, Hong Kong, 1st November, 1928.

2. The details of these figures are given in the enclosures.

It will be observed that no figures are given in respect of items (c) Aerodrome,

(d) Harbour Dredging, and (f) Ferries. The aerodrome is not yet earning revenue, the interest on the sums expended on dredging during the years in question is negligible, and the establishment of a Government vehicular ferry is still under consideration.

3. The calculation of Municipal revenue, exempt from military contribution, is based on the Singapore Municipal Estimates, and, in accordance with the practice in the Straits Settlements, deductions have been made in respect of rent for Government buildings let for profit, Hospital Board revenue, and Education Board revenue.

4. The figures given are by way of estimate only, but I think it may safely be reckoned that the deductions specified would have reduced the military contribution by about one-third.

(a) Wireless. Telegraphy

(b) Waterworks (included in (g))

(e) Post Office Operations

I have, &c.,

W. T. SOUTHORN, Officer Administering the Government.

Enclosure I in No. 63.

Details.

(g) Municipal revenue as per Statement No. 1 attached

*Rent of Government Buildings let for Profit

*Hospital Board revenue

*Education Board revenue

$

1926.

1927. $

85,612,24

68,133.29

-- 263,755.04

336,885.29 5,240,161.05

79,522.01

116.264.88

4,974,541.55 93,870.44 101,735.89

83,899.75

$5,585,935.96

121,981.75

$5,980,427.22

J. B. CROSLAND.

* Not printed.

† No. 54.

‡ No. 59.

§ C. 52802/28: not printed.

* As per Statement No. 2 attached.

1926.

$

++

The military contribution actually paid in respect of

year

Military contribution which would have been due if

the above deductions had been allowed

1927. $

3,484,722.00 3,841,652.00

2,367,584.81 2,645,566.56

• No. 60.

† No. 56.

. PUBLIC RECORD OFFICE

Reference :-

PEPEC.O.882/11

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

80

Enclosure 2 in No. 63.

STATEMENT No. 1.

ACTUAL REVENUE OF HONG KONG.

Revenue which would accrue to a Municipality (based on Singapore practice).