Sessional_Paper_1907 — Page 988

HONGKONG.

No. 57.

592

DOWNING STREET,

28th March, 1907.

SIR,- With reference to paragraph of my despatch No. 236 of November 26th last, I have the honour to inform you that I have now given further consideration to the question of the effect of the increased exchange value of the dollar on the emoluments of those officers of the Government service, whose salaries are fixed in sterling or, being paid at the rate of 3/- to the dollar, are practically on a sterling basis.

2. As you are aware, I have previously not seen my way to allow any concession on this account, mainly on the ground that, if exchange continues to rule high a reduction in local prices must presumably be only a matter of time.

I understand, however, that the adjustment of prices, which might be expected, has not yet taken place and, in the circumstances, I am willing to modify my previous opinion and to consent to some additional payment, as a temporary measure to officers paid on a sterling basis, who under present conditions find it difficult to live with fair comfort on their salaries.

3. I would, therefore, propose that, if you and the Legislative Council agree, a local allowance should be paid to these officers (within the limitations mentioned hereafter) for three years from January 1st, 1907, subject to the following conditions :--

The allowance will be at the rate of 5% per annum on the officer's salary, so long as the exchange value of the dollar is 2/2d. or more.

If the dollar rises to 24d. or more the allowance will be at the rate of 10%. If the lollar falls below 2/2d. no allowance will be paid.

These allowances will not be pensionable and will not be paid while an officer is on leave of absence.

4. As at present advised, I am not satisfied that there are sufficient grounds for granting these allowances to officers whose salaries exceed £1,000 a year. It can scarcely be argued that such officers find it difficult to live with fair comfort on their salaries and it must be remembered that their local expenditure (which alone is affected by the rise in the exchange value of the dollar) is less in proportion to their income than that of less highly paid officers. If, however, you take a different view I shall be glad to receive and consider your observa- tions on the point and in the meantime I will defer coming to a final decision upon it. I may add that, if the limit of £1,000 is finally adopted, in the case of officers, whose salaries are nominally fixed in dollars, payable at 3/-, the salary should be regarded as exceeding £1,000 if the sterling salary attached to the post is more than that sum.

5. Shortly before the end of the period of three years, to which I have proposed to limit the grant of the allowance, I shall expect to receive a full report on the cost of living and on market prices in Hongkong shewing how far local prices have adjusted themselves to the enhanced sterling value of the dollar, supposing the rate of exchange still to be high. On the receipt of this report, the question of continuing the local allowance will be recon- sidered, but it must be understood that it will not be renewed unless the step can be justified by reference to the local conditions obtaining at the time.

Governor

Sir M. NATHAN, K.C.M.G.,

St.,

g'.,

I have, &c.,

ELGIN.