Peel to Elliot (Assistant Under-Secretary)

In reply to your letter of the 31st Ult, I am directed
by The Lords Commissoners of Her Majesty's Treasury to acquaint
you, for the information of the Duke of Newcastle that the British
Columbia Loan Act 1862 appears to contain the necessary provisions
for the raising and repayment of the Loan of £50,000 and Their
Lordships will not object to its confirmation.

They do not think however that the Governor has made a prudent
arrangement with the Bank of British Columbia. The Bank becomes
practically the Agent for the Loan. The Colonial Government does not
get the Premium which would have accrued on the public sale of its
Debentures in London by the Agents General and it has to pay Interest
at the rate of 12 per cent upon Bills at 30 or 60 days sight received
in payment of its Debentures. Whereas if the case was so very
urgent the Governor might have drawn against the Debentures by Bill
upon the Agents General, at the same time authorizing them to dispose
of the Debentures, and as such Bills would have been at least
equally saleable in the Colony with those of the Chartered Banks,
he would if he had pursued this course have saved the charge of so
heavy a Rate of Interest as 12 per cent. The arrangement therefore
which the Governor has entered into cannot be considered as a
profitable one for the Colony, but it is now too late to interfere with
it, and My Lords therefore have no alternative but to allow it to stand.

As soon as the Act has received confirmation by Her Majesty The
Agents General should be instructed to prepare the Debentures, and
to put themselves in communication with the London Office of the
Chartered Bank of British Columbia with a view to the delivery of
the Debentures according to the arrangement made by the Governor.