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No, 35.
No. 23.
No. 28.
No. 30.
No. 28.
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No. 38.
Copy of despatch from Governor of Hongkong to Secretary of State for Colonies.
GOVERNMENT HOUSE,
HONGKONG, 26th June, 1911.
SIR,--The Local Auditor has addressed a letter, of which I attach a copy, to the Colonial Secretary stating that in his opinion the directions which I have given to the Treasurer to dispose of the Silver Subsidiary Coins belonging to Government involving a loss to Revenue in consequence of the discount at which these coins stand in the market, is contrary to Colonial Regulation 311 and would appear to be contrary to the policy sanctioned by the Secretary of State. He requests that your sauction should be obtained.
2. I will recall briefly to your recollection the circumstances of this matter. There accrues to the Government in the collection of taxes, sale of stamps, &c., annually a quantity of Subsidiary Silver Coin of the face value of about eight lakhs,--which will probably be increased by the takings on the Railway, Before my own arrival in the Colony Lord Elgin (Despatch of 18th June 1907) approved of the withdrawal of this Subsidiary Coin from circulation, and since that date up to the close of 1910 coins to the face value of $2,059,459.04 had been withdrawn and sent to England for sale as bullion, at a cost of about $407,820 or including $3,398,000 worth of new Subsidiary Coin which had been received in the Colony but never issued and was returned to England and demonetized at a loss of about 7 per centum-$793,293. The loss incurred by demonetization of silver is about 15 per centum (copper 50 per centum) and the coins circulate in the Colony at about 6 or 7 per centum discount. The average annual expenditure on demonetization for the
3 years, 1908, 1909, and 1910, was thus about $136,000, but the Votes provided in the Estimates stood only at $36,000 (1908), $36,000 (1909), and $40,000 (1910) whereas apart from demonetization the inevitable loss by discount would in each year be about $75,000. Accordingly in the Estimates for the current year the vote was raised to $75,000 but it was still erroneously described as for the " Redemption of Subsidiary Coin", though it is clear that within the scope of the vote it would be impossible to demonetize a single dollar's worth of coin, and the vote was only estimated to meet the loss due to discount.
3. In the present year the burden of the interest and sinking fund for the Railway Loan and other causes of financial strain of which you are aware, caused me to hesitate to incur an extra liability of some $72,000 for which no provision had been made in the Estimates prepared during my absence from the Colony, for as I have pointed out the vote of $75,000 was sufficient only for the estimated loss by discount without demonetization. I had on January 20th, 1910, addressed to you a long Despatch covering a proposal for dealing with the whole question, which had the approval of all the opposing schools of thought here. It was not antil February, 1911, that I received a reply dated 13th January, 1911. The enclosed letter from Mr. Cox to the Treasury stated that Lord Crewe considered that "the system of withdrawal of Subsidiary Coins paid in to the Treasury is a useless expense”. The Treasury endorsed this view observing that "any measures calculated to retard the fall (of Subsidiary Coin to bullion value) * * would merely involve the Colony in fruitless expenditure, upon the redemption of coins imported for that Colony has no alternative to submitting to the inconvenience of a depreciated Subsidiary * the purpose Coinage". That you intended me to give flect to these views and to put an end to with- drawal for purposes of demonetization was made amply clear in your Despatch of 1st March, 1911, in which while approving of the expenditure of $114,000 already spent on redemption you referred me to your Despatch of January 13th, as regards the policy to be followed in future in connection with the Subsidiary Coinage of Hongkong". In these circumstances the Local Auditor appears to be in error in assuming that my action in refusing to demo- netize the Subsidiary Coins now in possession of this Government is in contravention of the policy laid down by you.
*
*** *
4. The second point at issue is whether it was necessary for me to obtain your specific sanction for the instructions I had issued to the Treasurer in order to give effect to the policy you had laid down. These instructions were to the effect that he should dispose of this coin a lakh at a time so as not to flood the market and increase the discount suddenly to the detriment both of Government and of trade. In this connection I may explain that it has long been the custom for the Treasury to write down the face value of Subsidiary Coin received by Government by 7 per centain in view of the fact that its actual value is
41
The vote of
depreciated to that extent.
To this procedure the Local Auditor has never taken exception, though in theory it is identical with the course now pursued, and involves the writing off of loss by depreciation without the specific sanction of the Secretary of State. $75,000 in the Estimates is as I have said calculated to cover this loss, and was approved both by the Legislative Council and by yourself. No further reference therefore appeared necessary, and none has been made in the past. In the present ease, however, the circum- stances are much stronger, for I have your direct orders to desist from withdrawal for demonetization, and the only alternative is to pass the coin again into circulation and accept whatever loss occurs from the discount at which the coins stand. The Treasurer has pointed out that the expenditure of this Colony is increased by at least $35 a day" in interest by allowing the coins to lie idle in the Bank.
The sale of the first two lakiis ont of the 3 lakhs in hand was effected at a loss of under 7 per centun discount which was actually less than the amount already written off in the Treasury, and I am, therefore, at a loss to understand why the Local Auditor should take exception to the absence of specific authority from you to write off the loss, when he did not consider that the Treasury custom of writing down by 7 per centuin required specific sanction.
5. I subunit that it is beyond the Local Aulitor's function to record his opinion as to whether or not the Governor has acted in accordance with a policy laid down by the Secretary of State. The meaning which he has attached to Financial Regulation 311 is to me a novel one. I have understood that Regulation to refer to direct losses from theft or similar causes and not to indirect losses arising from causes such as this. I see no difference in principle between loss due to discount on coins (foreseen and provided for), and loss due to fall in exclange, but it has never been suggested by the Local Auditor that the specific sanction of the Secretary of State was necessary in the latter case. observe with regard to the title of the vote "Redemption of Subsidiary Coins" that I have repeatedly pointed out that the title is erroneous, and I believe that the Local Auditor has seen those minutes. (See enclosed Hansard Report for December 29th, 1910.)
The Right Honourable
LEWIS HARCOURT, M.P.,
de..
&c.
de.
I have, &c.,
F. D. LUGARD,
Governor, &e.
No. 39.
Telegram from Secretary of State for Colonies to Governor of Hongkong.
LONDON,
8th September, 1911.
I may
Refers to Confidential despatch of 26th June, approves action taken and directs No. 38. stoppage of sale of subsidiary coin pending receipt of later despatch.
Refers to Confidential despatch of 19th April, refuses to allow correspondence to be No. 34. published but states that Council can be informed that paragraph 2 of Treasury letter of 29th March represents views of His Majesty's Government.
No. 32.
No comments yet.
Private notes are available after approval.