No. 123

In my despatch No. 104 of the 27th of February last, I informed you
that the entire pay of the Royal Engineers in British Columbia being estimated at £22,000, one moiety would henceforward be required to be
defrayed from the Colonial Revenue and the other moiety be contributed
by this Country, the sum of £3,800 being borne on the Army Estimates and
the balance of £7,200 being provided by a Parliamentary Grant for
British Columbia. In the same despatch I noticed the heavy over drafts
made by you, to which serious attention had been called by the Lords
Commissoners of the Treasury.

There can be no doubt that to appropriate British money to the use
of the Colony without leave, by drawing unauthorized Bills on the
Treasury which place their Lordships in the dilemma of either
dishonoring the Governor's drafts or else allowing him to obtain funds
which were not intended for him, is a very grave irregularity. I trust
that you will be sufficiently warned against it by the admonition which
you have received; and without dwelling further on that point, I shall
now proceed to explain to you the measures which have occurred to me for
the settlement of the financial affairs of British Columbia. They have
been devised with the utmost consideration of the convenience of the
Colony, nor am I yet in a position to state that they have met with the
consent of the Lords Commissoners of the Treasury, but until you may
hear to the contrary, your best course will be to follow to the utmost
of your power the mode of settlement which I shall point out.

The topics to which I have directed my attention are these.
1st What are your resources
2ndly What are your liabilities to this country
3rdly From which portion of those liabilities Parliament
can with any propriety be asked to relieve you, and 4thly what should be
the method and order of repayment.

You have reckoned your Revenue for 1862 at £90,000, and that this
is no under estimate may be inferred from the subjoined table:

Revenue of 1859 actual £47,125

—Do—- " 1860 —do— 53,326

—Do—- " 1861 Estimated 63,368

—Do—- " 1862 —do— 90,000

This reckons on an increase of 50 per cent
upon the receipts of any previous year, and I much fear that the severe
winter, and consequent interruption of traffic, which you have since
reported, must tend to produce a temporary disappointment in your
expectations. With regard to expenditure I observe that after providing
for all charges of a fixed nature, your practice it so devote whatever
is to spare to "Roads, Streets and Bridges."  The amount this year is
£31,750. If you should realize the large increase of revenue on which
you have calculated, this sum of £31,750 represents the portion of
Revenue which is disposable for general purposes.

2ndly. Such being your estimated resources the following are the
demands which have since arisen:

Colonial moiety of total expenses of the Royal

Engineers imposed on the Colony by recent

instructions dated the 27th of February 1862————-£11,000

Value of Specie supplied from England—————————6,900

Excess in the cost of Assay Office———————————-152

Overdrafts of 1859 and 1860 for the Royal Engineers—-22,026

£40,078

Deduct

Available Revenue £31,750

The Specie itself  6,900—————————————-38,650

Deficiency—————————————————————-£ 1,428

Even if the whole expenditure on the indispensable object of Roads were
stopped, the Colony would be in a deficiency. And much outlay on
that account must have been incurred before the present instructions
can arrive.

But 3rdly, there is a question to which I have above
adverted, how far Parliament may be asked to relieve you from some of
these arrears and to assume the charge of part of your former over
drafts. The "Regimental Pay" of the engineers amounting to £3810 per
annum is provided for in Army Estimates, and may be left out of the
present account. Exclusive of that pay, the sums drawn for by you on
account of the Royal Engineers in 1859 and 1860 are reported by you to
have been as follows:

1859. £39,320

1860. 20,706
£60,026

The sums voted by Parliament for the same period in the Colonial
Estimates for the Engineers amount to £38,000; the excess is
£22,026.

One portion of these Bills, amounting to £10,704, is for
Roads, Bridges and Surveys, and evidently ought never to have been
charged except to the Colony. The other portion, amounting to
£11,322, is for the pay, sustenance and movement of the Engineers, and
for this sum I have suggested to the Lords Commissioners of the
Treasury that application may be made to Parliament. In order to
enable the Colony to succeed in defraying the intended liberal share
of its future military expenses, I hope that their Lordships may
assent to proposing to Parliament to grant it this relief.

4thly. On a review of all these circumstances, the following is
the course which has occurred to me as the best to be adopted This
year the Colony should pay the following items:

Moiety of cost of Royal Engineers——————-£11,000

Value of the Specie—————————————— 6,900

Remaining cost of Assay Office————————- 152

£18,052

This would leave you an available sum of £13,698 out of the amount
on which you have hitherto calculated of £31,750.

Next year you should pay

Moiety of cost of Royal Engineers——————————£11,000

Past overdrafts for Royal Engineers

as above selected—————————————————— 10,704

£21,704

By that time there will also be other debts to this Country, in
respect of the year 1861, for you to adjust.

I am well aware that the proposed repayments will seriously
impair your current means for the important object of the
construction of roads, which is in itself so material to the
prosperity of the Colony. I have however conveyed to the Lords
Commissoners of the Treasury my strong recommendation that you
should be authorized to make a fresh law providing for the
creation of a loan for this purpose, limited to the extent of
£50,000. Such a law could not however be followed by any
practical success in this country, unless it set forth with proper
distinctness that the debt was to have a priority over all other
demands upon the Revenue and unless it provided for the redemption of
the principal sum by means of a sinking fund. It would also require
to contain some express declaration that the Agents General for
Crown Colonies should profess authority to borrow the money.

In the meanwhile I shall be glad if you will to the best of your
power regulate your proceedings by the scheme which I have sketched
for discharging the liabilities of the Colony and placing its finances
on a satisfactory and independent footing.