Peel to Rogers (Permanent Under-Secretary)

I am desired by the Lords Commissioners of Her Majesty's
Treasury to acquaint you, for the information of Mr
Secretary Cardwell, that Their Lordships have had under Their
consideration the British Columbia Ordinance, No 7 of 1864
to authorize a Loan of £100,000, enclosed in Mr Elliot's
letter of the 26th Ultimo.

My Lords will not object to the confirmation of this
Ordinance, but They request that the following observations may
be forwarded to the Governor for the guidance of the Colonial
Government in bringing the Ordinance into operation.

My Lords are of opinion with reference to Clauses Nos
1 & 9 that the application of the Money to be borrowed should
be confined to the Survey and fresh construction of Roads
Bridges & Public Works, & that no part of it should be expended
in defraying the ordinary charge of Repair & Maintenance which
should in British Columbia, as elsewhere, be provided for out
of current revenue.

Their Lordships observe that Clause 12 of the Ordinance
empowers the Governor & Council to redeem portions of the
Loan before the Debentures arrive at Maturity, and to employ
for that purpose either current Revenue or the Moneys of
the Sinking Fund: and that Clause 13 directs that the amount
thereafter payable to the Sinking Fund shall be reduced in
the proportion of the Debentures paid off to those remaining outstanding.

Assuming that the Sinking Fund, as created by the Ordinance
will suffice for the ultimate liquidation of the whole debt,
and that the 2 1/4 per Cent is the amount required to accomplish
that object in thirty years, then the payments to the Fund—after
a portion of the Loan shall have been redeemed by purchase out
of the accumulations for the time being of the Sinking Fund—must
not be reduced in the same ratio as the Loan itself, otherwise
it will not be possible to avoid a deficiency of the Sinking
Fund at the end. On the contrary as the principal is
reduced by the appropriation of Sinking Fund, the per Centage
to be contributed to that Fund in respect to the balance
of the Loan should be increased, the limitation of the annual rate to
2 1/4 per Cent provided by Clause 10 being in such a case set aside.

In any future Ordinance that may be passed & that may
afford an opportunity of doing so provision should be made
for increasing the rate accordingly on the Debentures outstanding.