No. 71

Your Lordship's Original Despatch of the 23rd February, No 13,
transmitting a Report from Mr Julyan upon the position of the
Public Debt of this Colony with a Scheme for its readjustment,
did not arrive here until after the close of the Legislative
Session. An Ordinance entitled—

An Ordinance to authorize a Loan of £75,000
had already been passed, the usual printed Copies of which I now
enclose with the Attorney General's Report.

2. It was therefore too late to act during this Year upon Mr
Julyan's suggestion even if it appeared desirable to do so.
But I think the Scheme which he proposes is not quite so
advantageous as it appears, besides being open to the objection
that it could not be carried into effect without the consent of
all parties at present holding our Debentures under existing
engagements.

3. Mr Julyan assumes that his proposal would result finally in
the payment of about £47,000, Forty seven thousand pounds less
in the aggregate than will otherwise have to be paid. I venture
to think not. It could only effect this result if the Colony
should otherwise continue to pay 12 per cent, per annum,
interest for 25 years on the Floating Debt of £56,000, Fifty-six
thousand now paying that rate. But it is quite possible to
avoid this without disturbing the engagements for the old loans.
It is tolerably certain that an amount sufficient to consolidate
the floating debt can be raised at 6 per cent on an issue at 85,
or 15 per cent discount, repayable in 30 Years. By doing this
we should pay less in the aggregate than under Mr Julyan's
scheme. And I enclose a Statement which shews that the amount
would be £13,069, Thirteen thousand and sixty nine pounds in
favor of the Colony.

4. With regard to the Loan of £100,000, falling due in
1894 Mr Julyan's scheme would have no effect. We should still
have to provide 8 1/4 per cent per annum, for sinking fund and
interest as we do now; except that the distribution would be 6
1/4 per cent interest and 2 per cent fund, instead of 6 per cent
interest and 2 1/4 fund.

5. The present pressure is felt in respect of the earlier loans
which fall due in 1872 and 1880, and especially from that due in
1872. This latter Mr Julyan proposes to pay off from the
sinking fund. But this relief could at once be obtained by
raising an amount under the new Loan Act, distributed over
thirty Years, sufficient, besides liquidating the floating debt,
to furnish the provision necessary for the sinking fund of the
debt of £50,000, Fifty thousand pounds payable in 1872. The
annual draft of £7,500, Seven thousand five hundred
pounds which must otherwise be provided during the next two
Years would thus be at once removed.

6. I enclose another Statement No 2, shewing the effect of
this. If the amounts due to the Savings Bank, the Crown Fund,
and the overdrawn Bank Account, which may be otherwise dealt
with, be omitted, the aggregate of the floating debt overdue
will not be quite £50,000, Fifty thousand pounds. The sum which
may be realized from the Debentures for £75,000 Seventy-five
thousand pounds, under the Act of last Session would be
sufficient to pay this, besides providing at once for the
liquidation of the portion wanting for the £50,000, Fifty
thousand pounds Loan due in 1872. And the annual contribution
from the Revenue for all liabilities would be immediately
reduced to £23,437, Twenty-three thousand, four hundred and
thirty seven pounds, while in the end there will be difference
in favor of the Colony of £13,019, Thirteen thousand and
nineteen pounds, as against Mr Julyan's scheme. Mr Julyan's
proposal presents therefore no special advantage as regards the
first Loan of £50,000, Fifty thousand pounds, nor the fourth
Loan of £100,000, One Hundred Thousand pounds, nor the floating
debt, estimated in his scheme at £56,000, Fifty six thousand pounds.

7. There remains only the second and third Loans amounting
together to £90,000, Ninety thousand pounds, falling due in
1880, upon which the proposed rearrangement would have any
effect which cannot otherwise be obtained. But to substitute
new debentures for those now extant would require the consent of
all the holders before the existing securities and engagements
could be modified. It is doubtful whether this consent would be
given even with the inducement of an additional quarter per cent
interest. And I admit some disinclination to make any proposal
which may have the effect of lessening confidence in the
stability of our credit, while the advantage will be trifling
even if we should succeed in spreading the repayment of these
£90,000, Ninety thousand pounds, over twenty five years instead
of ten, at a sacrifice of the additional quarter per cent
interest which alone would offer any inducement to Debenture holders.

*

In any case, however, if the course proposed by Mr Julyan
should be adopted it would be preferable to limit it to the
loans falling due in 1880, and this might be attempted as a
separate transaction.

8. In the event of a probability of early Union with Canada, it
will not be financially desirable for this Colony to escape from
a little present pressure by adding to the corpus of her debts,
on which she would then lose interest permanently in the
arrangements with the Dominion. I do not therefore propose to
take any action until I shall have received the Report of the
Delegation now on their way to Ottawa to discuss the terms of
Union. But if the prospect of Confederation with the other
Provinces should appear from any cause to be deferred, I would
certainly recommend that I should be allowed to proceed with the
financial arrangements I propose under the Loan Act which I transmit.

9. I think it probable that many of the Debenture holders will
allow their money to remain with the Government under the new
arrangements at six per cent, so soon as they know that they
will otherwise be paid off. And I have already ascertained that
the Colonial Securities Company will furnish what may be
required besides within £75,000, Seventy-five thousand pounds,
at an issue guaranteed as not less than 87, with a Commission of
2 per cent, and sharing with the Government all that may be
obtained above 87.