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4. Paragraphs 1 and 2 with its sub-paragraphs (a) and (b) set out certain circumstances connected with the passing of the Appropriation Ordinance, and pray that the Royal Assent may be withheld from the Ordinance. I have no remarks to offer on them.

5. Paragraph 3 contends that the votes of the Official Members were illegal and void inasmuch as those members were incompetent to vote by reason of the direct and personal pecuniary interest which they had in the rejection of the amendments for the reduction of salaries, and that consequently those amendments should have been declared to have been carried. On this point I would solicit reference to my despatch No. 344 of 21st ultimo (copy annexed) from which Your Lordship will see that even if the contention that under the constitution of this Colony Official Members of Council are disqualified from voting for their own salaries, (which I doubt) the conclusion that the Appropriation Ordinance as passed was not legally passed does not follow from the premises. For each item in the Bill was separately moved, and each amendment thereto likewise; and if the vote of the Official con- cerned in each case be counted as null and void, that of the Colonial Secretary, for example, in the case of the item of the Colonial Secretary's establishment, that of the Treasurer in the case of the Treasury, and so on, it will be seen that none the less every motion for the several items as moved by the Colonial Secretary was legally carried, and every amendment for reduction legally negatived, by a majority of the Council.

6. Paragraph 4 with its sub-paragraphs (a), (b) and (c) purports to submit a short history of the increased salaries question," and by way of so doing it relates some utterances by Sir W. DES VEUX regarding the condition and prospects of the Colony, recapitulates certain circumstances connected with the increase of the Military Contribution, asserts that Lord KNUTSFORD "directed the payment for 1891 of the increased rates of salary on the allegations that house rent for Europeans had increased from 100 to 150 per cent., and for Chinese 100 per cent.," and states that the Officials had notice that the increases of salaries were subject to future revision. The last point will be more conveniently dealt with in connection with the succeeding paragraph (5) of the Memorial. As regards the other points I would observe (1) that Sir W. DES Vœux's utterances have no bearing on the question unless the revenue has fallen away since they were made, which fortunately is precisely the reverse of the actual fact; (2) that the decision of Her Majesty's Government to increase the Military Contribution of Hongkong did somewhat illogically produce the demand made in 1891 by the Unofficial Members for the cancellation of the recently granted increases of salaries, and is also largely answer- able for the similar motions for reduction in Committee on 1893 Supply; and (3). that the allegation that the Secretary of State directed the payment of the increases of salaries in 1891 on the ground mentioned, is a mis-statement.

7. Paragraph 5 contends that the civil servants have no vested interest in the increases, and that the Unofficial Members have done right in moving the reduction thereof. The civil servants have, in my opinion, the same right, no more but no less, to expect a continuance of the payment of their present rates of salary while the Colony is able to pay them and the circumstances under which they were fixed have not materially altered, as civil servants elsewhere have to expect the payment of the salaries that have been assigned to them. I have never questioned the right of the Unofficial Members to move reductions of salaries; what I do question and most emphatically deny is that they have made out a fair case in support of their motion. My view on this head is clearly stated in the subjoined extract from the Colonial Secretary's speech in Committee on Supply.

"The side of the Unofficials is that the financial condition of the Colony requires that the salaries should be reduced, and they contend that they have a right to move such reduction. In support of their contention they quote the dictum of a previous Governor-it is quite unnecessary, their right being inherent and not requiring any such support. Your Excellency's predecessor pointed out that, as there was no longer a fixed Establishment Ordinance in the Colony, the Unofficial Members would annually have an opportunity of moving the reduction of salaries whenever they thought that such reduction was called for by circumstances. That opportunity lias now come round, and they have availed themselves of it. They have a perfect right to do so--nay more, it is their bounden duty to do so if circumstances demand it; the only question for them to consider is whether circumstances do demand it. As to that, let us examine a little."