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current year may be estimated at 16s. 5d. per head. These are the net amounts, after allowing for contributions received from India and the Colonies, but are exclusive of a very large expenditure chargeable to special defence loans.

17. If these payments are contrasted with the contribution asked from the Colony under your Government, you will see that 40,000l. a year is not only a very much smaller charge per head of the population, but, as I shall proceed to show, its payment is well within the ability of the flourishing Colony of Hong Kong. There are other objects on which the money might usefully be spent, but self- protection is the first duty of a community, to which other matters should be postponed, and it is hardly necessary to point out that, unless that is secured, very much of the other outlay may prove to have been undertaken in vain.

18. The revenue for 1888 amounted to $1,557,300, and 40,0001. (the con- tribution proposed for the next three years) taken only at 3s. a dollar amounts to about 17 per cent. of the revenue, and to about $1-24 (say 3s. 9d.) per head of the population of the Colony, the whole of which is vitally interested in the security of the port. It cannot be said that such a payment is excessive, either as a charge upon the people who throng to Hong Kong to seek the protection to life and pro- perty afforded by the British flag, or in its proportion to the total public revenue of the Colony, or by comparison with the expenditure on similar purposes in the United Kingdom.

19. I will only further point out in reference to the annual payments, what doubtless you will not have failed to notice, that the 40,000l. which the Colony will pay in each of the next three years is only one seventh of the cost of the garrison, while the remaining six sevenths, 240,000l., will still be borne by the mother country.

New Barracks.

20. A separate correspondence is proceeding with respect to the details of the additional barracks which will be required for the increased garrison, and I do not propose to touch upon these details; but I will state the reasons which in- fluenced Her Majesty's Government in determining that a portion of the cost of their construction should be borne by the Colony.

21. Four different heads of expenditure were required in 1884-5 for putting the Colony into a proper state of defence, viz.:-1. Ports. 2. Armaments. 3. Sabmarine defences. 4 Barracks for additional troops. It was determined in the special agreement of that year, that the Colony should provide the works, and the Imperial Government the armaments, the estimated expenditure being-

£

Works Armaments

.55,625 ..37,500

22. This estimate, as I have stated above, has, however, grown into an expenditure of 325,4271., of which 209,4271., or nearly two thirds, will have been borne by the Imperial Exchequer, and if Her Majesty's Government vow call upon the Colony to make a fair contribution towards the new barracks, it cannot complain of unfair treatment, especially as the additional barracks are in fact a necessary part of the defences.

23. It must be added that if, in the course of the three years, necessity for any new defence works should arise, their cost would form the subject of a separate agreement) and that it is not to be understood that the whole charge of them would be borne by the Imperial Exchequer.

24. In the confident hope that the present arrangement, which they consider equitable and reasonable, will be readily accepted by the Colony, Her Majesty's Government request that you will lose no time in laying this despatch before the Legislative Council, and in pressing forward the necessary votes by all the means in

your power.

I have the honour to be,

Sir,

Your most obedient humble servant,

Governor Sir George W. Des Voeux, K.C.M.G.,

&c.

&c.

&c.

KNUTSFORD.