CO129-558-3 Levy on Salaries- petition from Chinese Civil Servants 3-1-1936 - 19-12-1936 — Page 239

2.

237

given till about the end of this month. From the enclosed

copy of the revised Estimate it will be seen that, after allowing for (i) a pruning of Public Works Department Estimates already undertaken, (ii) the benefit of the Conventional dollar for certain taxes and (iii) the crediting

of $500,000 from the Trade Loan the estimated deficit on the working for 1936 with the dollar at 1/3 would be $4,435,703

if no levy were made on salaries.

3.

In paragraph 12 of the petition the petitioners

dispute the seriousness of the financial position and the necessity for treating $10,000,000 as the standard surplus

balance of the Colony. The wisdom of aiming at a surplus of $10,000,000 is sufficiently justified by the present crisis

and no prudent Government could view with equanimity a probable reduction within one year of over $4,400,000 in reserve funds totalling $12,000,000 considering the present state of world unrest and of uncertainty as to how long the present depression

will continue in Hong Kong.

4.

.

I am examining all possible means of raising

increased revenue and am enforcing the utmost economy in expenditure, but in addition to these means of reducing the Budgetary deficit, the effect of which can only be gradual, the imposition of a temporary levy on salaries (partly by a graduated reduction of sterling and dollar salaries and partly by payment of sterling salaries at a fictitious rate of exchange diminishing quarterly) was plainly imperative. The total saving from the levy is estimated at $1,143,475 as against the estimated deficit of over $4,400,000 and unless therefore there is a decided and early improvement in the general prosperity of the Colony I anticipate that it will still be necessary to draw on the surplus balances for some three million dollars in the

course of the year's working.