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which their Lordships state that they are prepared to accept for two years the contri- bution of 40,000% a-year, which was the annual sun recommended by the Committee, and accepted by the Secretary of State.
2. I am, however, to request you to recall their Lordships' attention to your letter of the 10th of August, relating to the Straits Contribution, in which their Lordships state, that so far as the two Colonies of the Straits Settlements and Hong Kong are concerned, the Chancellor of the Exchequer, the Secretary of State for War, and the Secretary of State for the Colonies have in conference arrived at an understanding upon the amount of contribution to be paid in this and the next three or four years. This coueurs with Lord Kantsford's recollection of what passed at the conference, and he is not therefore prepared to agree that the payment by the Colony of 40,0001, a-year should be demanded for less than the five years, commencing from 1st January, 1889, recogumended by the Committee, and accepted at the conference on the 3rd of June.
3. As regards the barracks, his Lordship is enquiring from the War Office whether any more definite estimate of cost has been prepared since July, 1888, when the Com- mittee made their report; and a further communication will be addressed to you on the subject.
4. Lord Kantsford has referred to the Report of the Select Committee of 1861 on Colonial Military Expenditure, and observes that it was instructed to enquire and report whether any and what alterations may be advantageously adopted in regard to the defence of the British dependencies, and the proportions of cost of such defence as now defrayed from Imperial and Colonial Funds respectively." It does not appear that the Committee, as stated in the 3rd paragraph of their Lordships' letter," was directed to enquire whether the most wealthy and important Colonies might not, with duc regard to justice and to their own interests, defray a larger proportion of the cost of their military defence than up to that time had been laid to their charge." This passage is found in a letter of 25th April, 1863, from Mr. Elliott, of this department, to Sir Hercules Robinson, who was then in England, summarizing the nature of the enquiry. The next sentence which their Lordships quote as the advice of the Com- mittee is taken from the same letter.
5. As far as concerns Hong Kong, the report begins by classing it among "military garrisons, naval stations, convict depots, and dependencies maintained chiefly for objects of Imperial policy," and in the 9th paragraph the report states that, "as to the second class of dependencies above defined (ie, military garrisons, naval stations, &c.) the responsibility and main cost of their defences properly devolves on the Imperial Government."
6. This principle will be seen to run through the correspondence between the Duke of Newcastle and the Governor respecting the contribution of 20,0001, a-year, and although their Lordships, in the 12th paragraph of their letter, demur to this assumption," the position, in the opinion of Lord Knutsford, holds equally true at the present time.
7. The Imperial Government bas the control of peace and war, and has decided that Hong Kong must be defended with powerful forts and held by a garrison costing 280,0001. a-year.
It cannot be supposed that in fixing this garrison Her Majesty's fiovernment was specially concerned for the safety of the alien Chinese who frequent the Colony, or even of the British merchants who have established themselves there; and there can be no doubt that the Colony has been selected as a coaling station, solely ou account of its harbour. This harbour is of great value to the Empire, apart from the welfare of the people living on its shores; and the real ground for defending Hong Kong is its importance as a naval station, where Her Majesty's ships may refit, and where they may obtain coal necessary to keep the sea and protect the British shipping engaged in the trade between the mother country and the Empires of China and Japan: a trade which is mainly independent of Hong Kong, and which is carried on for the benefit of the other country and the British taxpayer. Hong Kong is also defended in order that its harbour may not fall into the hands of a foreign enemy, and be used as a naval base from which to destroy the ships owned in the mother country and engaged in carrying on this trade with the East. And as a guarantee against such a misfortune, its increased strength and additional garrison are demanded by the increasing strength of Russia at Vladivostock, and by the presence of large French forces in Tonquin and Cochin China.
8. Lord Knutsford agrees with their Lordships that comparison between the sums expended by different countries on certain services is always difficult, and in the present ease the comparison seems misleading; for the countries to which their Lordships refer in the 21st paragraph of their letter are Sovereign States, whose defences are main- tained solely for the protection of these interests which they themselves administer. But Hong Kong, as Mr. Stanhope pointed out in the War Office memorandum of the
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15th December last,* produces nothing; and it seems impossible to make any satis factory comparison between the taxpaying capacity of its mixed population and that of the populations of producing countries such as their Lordships refer to.
9. Nor is there any real analogy between the circumstances of Hong Kong and of the Australian Colonies to which their Lordships refer. These great dependencies are concerned only for the defence of themselves and of their own trade and produce, and their contributions to the Navy are required for the protection of the very considerable trade between their own ports, and from those ports to the mother country. These ports differ, therefore, from those of Hong Kong and Singapore in so far as they are not merely naval bases and harbours of refuge for the trade which passes them in its transit between the United Kingdom and foreign countries.
10. Unless this distinction is kept well in view, no proper and fair consideration will be given to the conditions which govern the defence of these Eastern coaling stations. It is, of course, reasonable and just that the mercantile community and alien inhabitants of Singapore and Hong Kong should bear their full share of the cost of protecting the ports in which they carry on their business, and of the security which they enjoy. The amount which they should contribute is a subject for careful examina- tion and discussion; but, as regards Hong Kong, Lord Knutsford must observe that the discussion was closed for the present by the conference of himself and his colleagues, when the contribution was fixed for five years at 40,000%. a-year.
*The following is the memorandum in question :→→→
MILITARY CONTRIBUTIONS.-HONG KONG.
The principle that Colonies should contribute to their defence to the utmost extent that their means will permit is fully concurred in.
This principle was recognized by the Select Committee of 1884 on Military Establishments and Expenditure in the Colonies." It recommended that the strictest economy should be observed in every branch of the military expenditure of the Colonies, and that any surplus revenue that may remain after defraying their civil expenses should, in accordance with the regulations which have been adopted by the Ordnance and Colonial Departments, be applied to the payment of their military charges."
The Select Committee on Colonial Military Expenditure of 1881 took the same view, but gave it more definite expression. It divided the Colonies into two classes-
1. Those, the main cost of whose defence should fall on Imperial revenues,
2. Those, the main cost of whose defence should devolve upon themselves. The second recommendation was qualified by the statement that the practical application of such recommendations, both as to time and place, must necessarily be left to the discretion of Her Majesty's Government, having regard to the local resources of each dependency, to its dangers from external attack, and to the general exigencies of the Empire."
The Committee included Hong Hong in the first category and Mauritius in the second, Immediately after the report of the Committee of 1861, the contributions to be made by three dependencies came under the consideration of Her Majesty's Government, viz., Singapore, Mauritius, Hong Kong. In the case of Singapore, the Government insisted on it paying the full cost of the garrison necessary for its defence, and refused to take it over from India until that condition was accepted.
It increased the Mauritius contribution from about 33,000%, to 45,000%. a-year, making it about
36 per cent, of the estimated cost of its garrison, and about 10 per cent of its revenue.
In the case of Hong Kong, which up to that time had contributed nothing towards its defence. it imposed a contribution of 20,0001. a-year, or about 20 per cent, of the cost of its garrison, and 164 per cent. of its revenue. In both cases it was estimated that the contribution would be subsequently increased.
Looking to the fact that the proportion of charge imposed in each of these cases differed, it scoms evident that although the Government of the day had the principle laid down by the Com- mittee of 1861 in view, it had regard in its application to the local resources of each dependency, to its dangers from external attack, and to the general exigencies of the Empire."
It would probably be found impracticable to take any one Colony and make the contribution found suitable to its conditions the standard for fixing the contributions of other dependencies. No hard or fast rule can be laid down applicable to all defended Colonies, and each must be dealt with on its own merits.
The comparative statements of revenue and military expenditure in Hong Kong, and in the United Kingdom and other countries, contained in the memorandum of the Chancellor of the Exchequer, are based upon figures which omit items essential to a correct comparison,
The revenue of Hong Kong includes all its resources from both rates and taxes, and covers its total expenditure, general and local, but it has been compared with only that part of the reveme of the United Kingdom which provides what may be called the Imperial expenditure, omitting entirely the local revenues derived from rates and other local taxes. At the same time
the military expenditure intarred by Hong Kong has been largely underestimated.
The following is the corrected data on which the comparative statements may be recast :--- During the five years ending 1888, the military expenditure of Hong Kong, including its expenditure (116,000%) on defence works, and on local forces, amounted to an annual average of 48,7007.
During the same period its average annual revenue amounted to 235,8831 sterling, and its average population to about 184,000.
Taking the defence expenditure of the United Kingdom at 29,800,000%, and its Imperial revenue at 86,800,000%, as given in the Chancellor's memorandum, and adding to the latter
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