6
7
342
Ibid., Enclosure No. $.
Para, 7,
the fluctuating value of silver, to forecast its liabilities, and "that if some such inconvenience" (this apparently means loss) "must necessarily fall on one of the parties to the trans- action it ought, in common fairness, to fall on the one that receives the contribution, and not on the one who has to find the money and make the payment."
(b.) "That a material but temporary reduction of the sterling amount of the contribution should be made, and that this should be effected by fixing the contribution at the number of dollars that sufficed to satisfy the demand when it was originally made."*
22. From the point of view of policy, there is a good deal to be said for proposal (a). It is argued that this country is better able than the Eastern Colonies are to bear the loss arising from fluctuations in the currency in which their Military Contributions are paid. The unforeseen augmentation to the burden of defence charges due to this cause of late years has given rise to much discontent and friction in the Colonies, a discontent which finds an echo in this country, and which tends to some extent to jeopardise the contribution. On this ground, therefore, the proposal that Colonial Military Contributions should be fixed in local currency and should not vary during the period they remain in force is not unworthy of consideration. Before the expiration of the periods for which contributions are fixed, the value of the local currency, the condition of the Colonial revenues, and the cost of the garrison would be reconsidered, with a view to readjusting the Military Contributions. Loss, or occasionally gain, to the Imperial Government from fluctuations in the value of silver, would be limited in duration to the few years intervening between the periodical revisions of the contributions. This would be a very convenient time to make this concession, silver having fallen to such a point as to render any further serious fall improbable without necessitating the adoption of remedial measures.
23. The fall in silver which, since 1874, has added nearly 90 per cent. to the burden of Colonial sterling charges, has to a considerable extent lightened the charge to the Mother Country for local military expenditure incurred in dollars, Apart therefore from difference of capacity for bearing the burden, the Mother Country, to a certain extent, finds a compensating advantage in the fall of silver. Moreover, when a Colony cannot afford to pay the whole cost of its garrison, and the contribution made by it falls short, as in the case of Hong Kong, of the local dollar expenditure of the Mother Country, there seems to be something reasonable in accepting the contribution as part of that dollar expenditure, and accepting payment in dollars.
24. While, however, there is much to be said for proposal (a) as a matter of policy, the Colony cannot demand its concession as a right. This will be apparent if the question be considered in connection with other Colonial sterling payments.
25. In 1887 Hong Kong raised in England a 4 per cent, loan of 200,0001. At that time the dollar was worth 3s. 4d., and the annual interest of 8,0001. was met by a payment of 48,000 dollars. With the value of the dollar reduced to 28. 8d., 48,000 dollars would now only produce 5,4001, or 27ths per cent. interest on the loan. A proposal by the Colony that 26ths, instead of 4, per cent. interest should be accepted, because the inconvenience arising from the reduction in the value of the dollar "ought, in common fairness," to fall on the receiver rather than on the payer of the interest, would probably not be sympathetically received by the bondholders.
26 The greater portion of the cost of the land defence of a Colony is necessarily incurred by the Mother Country in sterling; and in accordance with the principle laid down in the despatch of 20th January, 1890, its by the Colony is a sterling liability. The whole charge is in equity as much payment due by the Colony as any part of it; therefore the contribution of the Colony ought by rights to be fixed in the currency in which the charge as a whole is incurred.
* This proposal apparently emanated from the unofficial members of the Council, but is specially endorsed by the Governor. Appendix No. 6, Enclosure No. 8, paragraph 8.
27. The proposal (b) that the contribution of the future should be fixed "at Appendix Je number of dollars that sufficed to satisfy the demand when it was originally No. 6, mposed," is one that will not bear examination.
Enclosure No. 3.
28. When the contribution was fixed at the end of 1889 the dollar was worth 3s., and the contribution of 40,0001. amounted to 266,666 dollars, a See para, 9. charge equal to 17-12 per cent. of the revenues of 1888, as recorded in the Blue Book of that year. Owing to the growth of the Colonial revenues since 1888,266,666 dollars now amounts to only 13-28 per cent. of the estimated revenues of 1894, as compared with 16:50 and 17-12 per cent. fixed in 1865 and 1890.
29. As shown in paragraphs 31 to 33, there is nothing in the present condi- tion of the finances of the Colony to require, or to justify, such a concession.
Sections 1
and 9,
30. In dealing in 1888, and again this year, with the question of Colonial Committee's currency, the Committee, in their reports upon the Straits Settlements, Reports, stated-
"Loss arising from depreciation of its currency properly falls on the Colony, and such paras. 167 loss is not, in itself, a reasoù for relieving Colonial at the expense of Imperial funds. At the and 56. same time, if that depreciation so augmented the military charges as to render them excessive, the Colony would have reasonable grounds for claiming relief from some portion of the charge.'
31
31. In the case of the Straits Settlements, the Committee found that to exact in 1894 the same sterling contribution that had been fixed in 1889 (100,000Z.), would raise the military charges of the Colony to 23 68 per cent of its revenues, being 2.18 per cent. above the charge recommended by the Committee in 1888, and 6:58 per cent, above that sanctioned by the Government in 1889, when the financial condition of the Colony was most flourishing,
32. In view of the fact that the revenue of the Settlements had fallen since 1888 by over 200,000 dollars, that the expenditure on public works had been cut down to the lowest possible limits, that trade was stagnant, and the resources of the Colony severely strained, the Committee considered that some temporary reduction in the Military Contribution should be made. They pointed out that, as a general rule, such losses of revenue and increases of expenditure should be met in the Colonies, as elsewhere, by increased taxation and by economies in general expenditure. They were informed that, under instructions from the Secretary of State, a Committee had been appointed in the Colony to consider the measures that should be taken to diminish the general expenditure of the Straits Settlements, and that the question of increasing its revenue was under the consideration of its Government, but as remedial measures could not take full effect for at least two years, the Committee recommended a temporary reduction of the contribution for the years 1894 and 1895, on the understanding that if those measures were successful, and if no severe losses were incurred by the Colony through a further serious depreciation of its currency, the contribution should be gradually increased in the last three years of the quinquennial period so as to give an average for the whole period of 100,000l. a-year, the rate fixed in 1889. The reduction recommended by the Committee left the contribution of the Straits Settlements for 1894 at 17-86 per cent. of the estimated revenue of that year, as compared with 17-10 per cent. the estimated incidence of the contribution of 1889.
Paper
0.6857-35
33. With regard to Hong Kong, there are no available statistics bearing on Parlia- the trade of the Colony, beyond those relating to shipping. These show a wentary steady general increase in the amount of shipping, while the revenue collected; by the Harbour Master's Department in 1892 amounted to 181,157 dollars, of 1893, being an increase of 16,485 dollars over that collected in 1891, The Annual page 10. Report on Hong Kong for 1892 states--
"Although no statistics taken in the Colony are available to show the trade of the port, yet it may not be out of place to mention that from the returns of the Chinese Imperial Maritime Customs, it has been ascertained that the approximate value of the trade of Hong Kong with China alone for 1891 and 1892 was 126,346,736 Ilaikwan taela (about 31,000,000% sterling) and 128,973,819 Haikwan taels (about $1,600,000% sterling) respectively, showing an increase in the latter year of 2,627,083 Haikwan taels (about 600,000l. sterling),'
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