Sessional_Paper_1905 — Page 237

for "cost of sections" and after making certain deductions, which are detailed, a total annual contribution of £12,893.

12. During the years 1901-1904 the Colonial Office carried on a lengthy correspondence with the Imperial Post Office and the Treasury with a view to getting these departments to agree to an apportionment of the subsidy on lines that would be acceptable to the three Eastern Colonies. No agreement having been arrived at, Mr. LYTTELTON informed Mr. MAY on the 20th May last that the question was to be submitted to the arbitration of Lord BALFOUR OF BURLEIGH, for whose consideration statements were prepared by the Imperial Post Office and by the Colonial Office, the Colonies concerned being consulted in the preparation of the case for the Eastern Colonies.

13. The case for the Eastern Colonies dated the 12th October, 1904, is printed as Appendix V to this, Minute, that of the Imperial Post Office dated the 22nd October, 1904, as Appendix VI.

14. Appendix. VII is the rejoinder of the Imperial Post Office dated the 7th November, 1904, and Appendix VIII the Colonial Office reply to that rejoinder. This reply was prescribed verbally to Lord BALFOUR OF BURLEIGH on the 21st November, 1904.

15. On that date and on the 19th December, 1904, the Arbitrator heard Mr. G. W. JOHNSON of the Colonial Office and Mr. C. A. KING of the Post Office on behalf of their respective departments.

16. His award dated the 21st December, 1904, is printed as Appendix IX to this Minute. It will be seen, as regards the annual payments in respect of the cost of sections no principle which would be thoroughly logical could be arrived at and that these have been fixed arbitrarily, while the principles laid down in Lord MORLEY'S award as to sea-sorting and incidental expenses have been applied but under deduction of the respective shares of extra receipts on Foreign Closed Mails and one half excess collected in the United Kingdom. The cost of sections" for Hongkong was fixed at £11,500 against £13,131 according to the principle of Lord MORLEY's award applied to India and the Eastern Colonies only and against £9,605 proposed by the Colonial Office applying Lord MORLEY's award also to Australia and taking speed into calculation.

CL

The financial effect of the award as far as Hongkong is concerned is a total annual contribution in respect of the P. & O. Service of £12,170 for the 7 years ending the 31st January, 1905, this amounts to £85,190.

17. The Secretary of State's despatch No. 26 of the 10th February, 1905, communicating the award, which is printed as Appendix X to this Minute, explains that for the 3 years ending the 31st January, 1898, for which the contract with the P. & O. Company has been extended with an addition of £10,000 per annum to the subsidy, the total annual contribution of Hongkong is respect of the P. & 0. Service will be £12,529.

18. It also explains that the arrears for the 7 years ending the 31st January, 1905, due from the Post Office of Hongkong to the Imperial Post Office in accord- ance with an account, which it encloses, amount to £18,933, of which sum about £15,680 is actually due in consequence of the award (.e., £2,240 per aunum for seven years).

19. The Secretary of State asks that the sum of £18,933 may be paid as soon as convenient after March 31st, 1905. Of this sum a refund of some £3,753 will be made to the Colony when certain accounts are brought down to date.

20. The Governor accordingly recommends the Council to vote a sum of £18,933 for payment of arrears to the Imperial Post Office on account of the P. & O. Company's Mail Service.