No. 4, Financial

1. In continuation of my Despatch No 57, dated 18th July 1865,

*

I have the honor to submit for your information the following facts
relative to the condition of the finances of this Colony.

2. Referring to the 9th paragraph of that Despatch you will observe
 that there were voted for the service of the year 1865 sums amounting
in all to $313,558 (£64,650). The Revenue being
estimated to yield $239,799 (£49,445) a sum of $73,759
(£15,208), remained to be provided for by additional ways and means.

3. The only attempt made by the Legislative Assembly to meet that
which left unprovided for would be converted into a deficit at the
end of the year, was the imposition of import duties on live stock,
carcasses and vegetables, a tax of
one per cent on salaries above $727.50 (£150) per annum, and an
equilization and some alteration of the rates levied for harbour dues
and for trades licences. I am not aware that any estimate based upon
ascertained facts was made by the Assembly of the probable additional
income to be thereby obtained, and the actual receipts from those
sources during the remainder of the year 1865 amounted to about
$20,000 (£4123).

4. It was not to be expected that the slender provision thus made to
meet the expenditure would be adequate, and accordingly by the 31st
December 1865 there had occurred an excess of expenditure over income
amounting in round numbers to $61,000 (£12,577), the current account
of the Colony with the Bank of British North America being at that
date overdrawn rather beyond that sum. That overdraft had reached
about $69,000 (£14,226) on the 12th January 1866 on which day the
 Assembly began the consideration of the Estimates for 1866.

5. I may here remark that in prospect of such an occurrence, I
formally, so far back as 16th May 1865, drew the attention of the
Assembly to the fact that the public account with the Bank was then
overdrawn to the amount of $39,794 (£8163).

6. This communication has been left by the Assembly without any
notice or action whatever.

7. Irrespective of other causes which have doubtless contributed to
the result, much of the financial difficulty under which the Colony
at present labours is, in my opinion, due to the fact that in the
year 1862, at a time when a productive equalization of taxation, and,
by an enlargement of the number of taxpayers, an increase of Revenue
would have been possible, a loan of £40,000 ($194,000) bearing
interest at 6 per cent, was authorized. The proceeds of this loan
were to be expended in the proportions of £22,000 for the
construction of roads and £18,000 for the improvement of Victoria
Harbour. The portion of the loan laid out upon roads has been, from
causes with which I will not now trouble you in detail, to a great
extent bestowed on the construction of useless and unuseable roads,
and the portion of it expended upon the improvement of Victoria
 Harbour has been devoted to a work of a magnitude far beyond the
 means of the Colony and which has been undertaken despite high
scientific testimony pointing out the practical difficulties of the
work and its probable inutility if carried out to completion, and
above all without any engineer or other person in the Colony
competent to conduct it.

8. The sum expended upon this service, including construction of
steam tug, dredging machine and barges, and the wages of persons
employed to work them, has amounted to more than $109,000 or £22,000.

9. On the 29th June 1865 in view of the obvious failure and expense
of the work (and in the total absence of tenders for its completion
for which I called at the suggestion of the Assembly) I recommended
its discontinuence.

10. The Assembly left unnoticed my communication on this subject
making no provision for the prosecution of the undertaking, and I
took upon myself the responsibility of reducing the expenditure as
much as possible by the cessation of the work. Meantime the dredging
machine lies unemployed, useless and unsaleable, and of course
involving the expense of a caretaker and daily deterioration. I am
now, pending any action of the Assembly, utilizing the steam tug,
after six months of costly and enforced idleness, in the useful and,
as I hope it will prove, self supporting service of conveying Mails
and passengers along the eastern coast of the Island.

11. Nevertheless the annual payment of $19,400 (£4000) for interest
and sinking fund of the loan continues. This sum is equal to one
tenth part of the total of the sums proposed in the Estimates to be
expended for the service of the year 1866.

12. Large sums having thus been uselessly sunk in Victoria Harbour
(a process it is to be borne in mind, recurring in the shape of
interest) it became necessary in the ordinary course to submit to the
Assembly the Estimates of Revenue and Expenditure for the year 1866,
 a copy of which I enclose for your information.

13. The Assembly have commenced the consideration of these
Estimates, and in their desire to decrease expenditure have proceeded
not only to reject or reduce proposed votes, which it is competent
for them to do, but in many instances have "amalgamated" two and
three incongruous offices, and indicated the Officers who are to fill
them. They have gone the length of increasing salaries and of voting
salaries for offices not set down in the Estimates. They have thus
taken upon themselves Executive as well as Legislative functions and
appear from the report of a debate which I enclose
(the only means of information at present accessible to me) to intend
to assert formally and for the first time their right to exercise
them.

14. I enclose a statement of the principal alterations made in the
Estimates by the Assembly so far as they have yet proceeded. I
derive this information from two local newspapers which represent the
two parties at present existing in the House and from which I forward
extracts herewith.

15. Upon a general review of this treatment of the Estimates I can
only regard it as an attempt on the part of the Assembly to remodel
the whole of the Public Service without permitting the Executive
Government, which alone is responsible for the due administration of
the various Departments, to have a voice in the matter. I think the
reports of the debates will bear me out in the opinion that in many
cases the holders of offices have been regarded, favourably or
unfavourably as the case may be, rather than the offices themselves.

16. Should the Assembly adhere to the votes so far arrived at the
consequences will be that the Governor will be deprived of his
Private Secretary, and the Colonial Secretary of one Clerk out of two
(the one remaining acting also as Clerk of the Legislative Council)
and of his only messenger and office keeper. The Harbour Master is
deprived of his boatmen and will have to perform the duties of the
Treasurer and Post Office, a combination of offices for which he is
wholly unfitted by habit and education. The duties of the Assessor
are transferred to the Assistant Surveyor General, and the former
will enjoy a sinecure, his office having been created by a special
Act which provided the salary permanently. The salary of the Auditor
is refused and the accounts of the Colony are to be audited by the
Clerk of the Assembly gratis—I presume with the intention of
bringing the expenditure in detail under review of the Assembly. The
Surveyor General's salary is disallowed and the Assistant Surveyor
General is apparently to conduct the duties connected with Roads,
Bridges and Public Works in addition to the onerous duties of the
office of Assessor and of Secretary to the Lighthouse Board without
increased salary, and the Assistant Surveyor General's Clerk, besides
the duties proper to his own office is to fulfil those of Clerk of
Works, Collector of Taxes and Deputy Assistant Surveyor General,
three offices which have hitherto had no existence. The Registrar
General like the Assessor holds an office created by Special
enactment providing permanently four fifths of the salary now
proposed—and the Assembly make him a sinecurist by transferring his
duties to the Registrar of the Supreme Court. The salary of the
Lighthouse Commissioner and Secretary is refused and the duties of
the office added to those of the Assistant Surveyor General without
salary. The Chief Justice is not to be allowed the assistance of a
Clerk. The Registrar of the Supreme Court in addition to his own
duties is to perform those of the Registrar General, an office for
which he is wholly unqualified. The Attorney General is deprived of
his fees and the services of a Clerk—a change economical rather than
reasonable. The Sheriff is to be Governor of the Gaol without
salary. The Stipendiary Magistrate at Victoria is to be
Superintendent of Police an office from which he was relieved in
consequence of the great irregularities reported in my Despatch No
 100 dated 3rd December 1864. The Stipendiary Magistrate at Nanaimo
 (the place in the Colony next in importance to Victoria) is together
with his clerk to be obliterated and the duties of Harbour Master now
discharged by him and involving the collection of dues and taxes are
to be performed by the Postmaster at that place. The salary for
Superintendent of Police is disallowed and the force for the
whole Colony is to be reduced to an Inspector, a Serjeant and
five constables, the rates of pay of the serjeant and constables
being higher than those proposed. The unreasonableness of this
arrangement may be inferred from the fact of there being a mixed
population of 5000 to 6000 in Victoria alone with 85 licensed
drinking houses many of which are in addition brothels and gambling
houses. The salaries of two schoolmasters are raised, and three
schools are extemporized by votes without regard to the opinions of
the Executive Government or the Board of Education.

17. Under the head "Exclusive of Establishments" the reductions
appear to be arbitrary rather than based on any calculation, and of
course in the case of such necessary supplies and services as
"stationery," "fuel," "buoys," "expenses of witnesses" &c cannot
restrict the expenditure. The unreasonableness of reducing the votes
for fuel and light under the head of "Colonial Secretary" from $1000
(£206) to $300 (£62 nearly) will be apparent when I state that the
proposed sum was calculated to cover the cost of fuel and light for
all the public offices including the Supreme Court—that the contract
price of coals is $11 (£2.6s) per ton—that fires are necessary for
eight months of the year and that during the winter the alternation
of frosts (the thermometer ranging sometimes below zero) and heavy
rains render it impossible to limit the use of fuel in the offices.
The rejection of the entire vote for explorations will I fear prevent
any outlay for that useful purpose. Under the head of
"Administration of Justice" the Assembly refuse to vote the small sum
of $500 (£103) for the expenses of unpaid Magistrates which is
equivalent to laying it down that Magistrates shall not only be
unremunerated for their services but when (as is often the case)
their duty requires them to travel they shall do so at their own
expense. The votes for the Victoria Hospital and for the conveyance
of Mails to San Francisco have been increased with my concurrence
signified to the Assembly.
There are as many instances not now passed under review in which the
votes have been reduced to sums so absurdly low as to amount
virtually to their disallowance.

18. In connection with this subject I may refer you to the opinion I
expressed (Despatch No 73, 24th August 1865, paragraph 17) with
 regard to the possibility of reducing the number of public offices
and to the scale of salaries. I do not see any reason to change the
views therein given, nor those contained in my Despatch No 27 of
4th May 1865.

19. It may be proper for me to inform you that so far back as the
19th July 1865 I appointed a Board of Officers consisting of the
Colonial Secretary, the Treasurer, the Auditor, and the Assessor to
report upon the financial condition of the Colony and more
particularly upon the deficiency of ways and means to meet the
expenditure voted. You will observe in the report of that Board
(herewith) that those Gentlemen having pointed out such reductions of
expenditure as appeared to them practicable, proceed to say, "This
sum" (the prospective deficit) "could no doubt be still further
decreased by a general reduction of the Establishments but we believe
that without an entire re-organization of the whole system a saving
comparatively trifling would alone be effected, and in all
probability such saving would entail a sacrifice of efficiency that
in the end would prove a costly expedient." In that opinion I
concurred, believing that unless the whole system of taxation upon
which I have already expressed my views (Despatch, Separate 5th May
1864) were revised and adjusted no satisfactory arrangement could be
made by which offices and functions could be combined and
redistributed. Moreover the want of any legislative machinery which
could be brought into effective and harmonious co-operation with the
Executive Government precluded the possibility of any effort I might
have made with such objects, proving successful. And further holding
the views just expressed, I did not deem it desirable, pending the
decision of Her Majesty's Government upon the question of uniting
this Colony with British Columbia, to enter upon any attempt to
effect extensive changes or reforms.

20. It is due to myself, however, to state that I have been fully
alive to the fact that changes might with advantage be made which
such considerations have deterred me from undertaking. At the same
time I am bound to add that in no single instance can I give my
concurrence to the changes indicated by the Assembly.

21. In conclusion I beg to draw your attention to my Despatch No
81, 22nd September 1865 on the subject of the taxation of this
 Colony which has been and is so persistently and injuriously alleged
to be excessive. It will be seen by the Enclosure to that Despatch (a
copy of which I now forward) that the average rate of taxation
(including municipal taxes) per head of the population (not
reckoning the Aborigines) at the latest period for which I have
available figures, was $15.9 or £3.2.2 3/4 and if the Aborigines be
included $6.70 or £1.7.7 3/4 per head.

22. The value of money in this Colony is exceedingly low, and,
taking amount for amount, will not purchase at a moderate
computation, half what it will in England, and but a small fraction
of what it will buy in the Eastern North American and many other
Colonies.

23. Under these circumstances whatever may be my opinion as to the
crudities or inequalities of the modes of levying taxes at present in
use in this Colony, I cannot but conceive that, in the aggregate, the
people may fairly be congratulated upon the lightness of the taxes
imposed upon them.