Peel to Rogers (Permanent Under-Secretary)
Treasury Chambers
28 February 1862
I am directed by the Lords Commissioners of Her Majesty's Treasury to acquaint you, for the information of the Duke of Newcastle, that they have deferred their reply to your letter of the 28 Ultimo, on the subject of the proposed Loan of £100,000 to be raised on the security of the Colonial Revenue of British Columbia; until They had before Them the EstimatesofManuscript image of Revenue and Expenditure for the year 1862.
The general question of those Estimates, and of the amount to be granted by Parliament in and of the Colonial Revenue, having been dealt with in a separate communication My Lords request that you will submit to His Grace the following observations upon the proposed arrangements for raising a Loan.
They would observe that,Manuscript image by Their letter of 7 January 1861, They intimated, that They would require satisfactory information in regard to the ability of the Colonial Revenue to bear the charge for the Loan, together with all other legitimate Colonial charges before They could consider Themselves justified in assenting to the measure.
The latest and best information on this subject may be gathered from the Estimates for 1862, as submitted by the Governor in his Despatch No 74 of 30th November 1861,AccordingManuscript image According to these Estimates it would appear, that the whole of the Local Revenue has been appropriated to meet the cost of the Civil Establishments and the cost of works in progress, on which latter subject His Grace has called for more definite information.
It has, in addition, been determined by Her Majesty's Government that one half of the expenses of the Detachment of Royal Engineers for the year 1862 shall be borne by the Colonial Revenue, and that the sum owed by the Colony fortheManuscript image the specie, sent in 1860, shall also be repaid this year, and the Governor has been instructed to curtail the charges proposed by him to be defrayed from that Revenue, in order to meet these services.
It has also been considered expedient that the Imperial Government should be relieved as soon as possible of the Colonial Expenses of the Royal Engineers,
There are no distinctly ascertainable colonial expenses. This is a mere [observation and?] or a misleading one.
and also, that prompt arrangements should be made for the repayment by the Governor of thelargeManuscript image large advances he has unduly obtained from Imperial funds in excess of the grants of Parliament.
Under these circumstances My Lords are doubtful whether the Colonial Government should be authorized to raise Money on the security of the Local Revenue, while that Revenue is still receiving aid from Parliament, and while no provision has been made in respect of the above additional charges.
They are therefore ofopinionManuscript image opinion that the raising of the proposed Loan should be deferred, until such time as the state of the Local Revenue shall be such as will enable it better to bear the charge for the Interest and Redemption of the Loan.
My Lords would, further, observe that, before any steps can be taken for raising any portion of the Loan in the country, the Proclamation that has been issued by the Governor will require amendment in respecttoManuscript image to provision being made for the redemption of the Principal sum borrowed, by a Sinking Fund, or otherwise, and for giving it a priority, over all demands upon the Revenue, the terms of the Proclamation, as now issued, giving the ordinary expenditure of the Colony the preference over the Loan.
The Proclamation will also require amendment in regard to the arrangments for raising the money through the Agents General forManuscript image Crown Colonies.
My Lords will communicate further with His Grace on the subject of the requisite amendments, but, in the mean time, They are of opinion that the Governor should be informed that any immediate proceedings for raising the Loan must be suspended.
I am Sir
Your obedient Servant
F. Peel
Minutes by CO staff
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VJ 28 Feby
Mr Fortescue
As the Mail goes to-morrow (I was misinformed when I thought it was to go to-day) I have at once prepared a draft for consideration.
TFE 28 Feby
Duke of Newcastle
This seems right but in telling the Try. that these instructions have been sent out, I wd. remind them, in reference to one par. of their letter, that if B.C. pays one half of the whole charge on acct. of the R. Engineers, this Colony, wh. has scarcely been four years in existence, will have been required to contribute more towards her military expenditure than has been obtained from almost any other dependency of the Crown.
CF 28
I agree.
N 1-3
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The Loan
Mr Fortescue
In a despatch No 70 dated the 15th of Novr 1861, Governor Douglas sent home a Proclamation, authorizing the raising of a Loan on the security of the Colony not to exceed £100,000 in all. The contemplated Loan, it is material to observe, was divided into two parts, one of £20,000 to be raised in the Colony, and one of £80,000 to be raised in England. On the 28th of February the Treasury objected to the plan, and as the Mail went on the next day, the Governor was at once directed to suspend any proceedings for borrowing the money.
This has gained time for further inquiry and reflection, and the result renders it desirable to submit to you and the Duke of Newcastle a recapitulation of the facts of the case.
OnManuscript image
On the 28th of August 1860, the Governor made out a striking case for the necessity of Roads, and of borrowing money for their construction. The prosperity of the Colony depends wholly on the Mines; some of these are 500 miles from the Coast; great efforts are made in Oregon to gain the trade, and unless these be counteracted by furnishing good communications within the Colony, the Revenues may suffer to an extent which cannot be foreseen. As yet the opening of Roads has been attended by an increase of the Public Income which could not have been expected otherwise. On these grounds the Governor proposed a Loan of £50,000, affirming that with the exception of Military Charges, the Revenue of the Colony was more than equal to it's expenditure.
I confess that at first sight I doubted about the proposal, but ever since seeing the subsequentMinutesManuscript image Minutes, I have thought that I was wrong. The Governor's despatch made a strong impression on you. It also attracted the particular attention of the Duke of Newcastle: His Grace recorded his opinion that to this Colony the making of Roads was of vital importance, and he directed the proposed measure to be recommended accordingly to the Treasury [marginal note: Col. Off to Treasy 27 Decr 1860].
The Treasury considered more information desirable [marginal note: Treasy to Col. Off. 7 Jany 1861]. This information, after a reference to the Colony, was furnished by the Governor in a despatch No 45 of the 7th of Augt 1861, and in others therein referred to.
In a subsequent despatch of the 24th of October 1861, the Governor, in the concluding paragraphs reverted to the importance of making roads, and said, with an apology and an explanation of the great urgency of the case, that he contemplated raising a Loan on the spot of from £15,000 to £20,000. His argumentsareManuscript image are powerful and will deserve perusal in case of need. This was recommended to the Treasury for approval [marginal note: Col. Off. to Treasy 27 Decr 1861].
At last arrived, in No 70 of the 15th of Novr 1861, the expected Proclamation to authorize a Loan. But it authorized a Maximum of £100,000 instead of £50,000; and, as remarked at the outset of this paper, £20,000 was to be raised on the spot, and £80,000 in England. In fact the provision for the local Loan of £20,000 is doubtless the execution of the intention reported in the previous despatch of the 24th of October. The Duke of Newcastle intimated to the Treasury that as £100,000 was only to be a Maximum, His Grace was disposed to assent to the Proclamation, with an announcement to the Governor that the money should not be raised faster than the growing improvement of the finances might show to be consistent with securityforManuscript image for the debt and provision for current services [marginal note: Col. Off. to Treasy 28 Jany 1862].
The Treasury, however, have once more demurred [marginal note: Treasy to Col. Off. 27 Feb 1862]. Our letter, it may be observed in passing, showed the progressive improvement in the Revenue from the Accounts (i.e. the actual facts) for 1860 and 1861; the Treasury prefer the Governor's Estimates for 1862, and from these they conclude that the Local Revenue is fully appropriated already, whilst the Colony remains dependent on Imperial aid. But this view, it seems to me, admits of correction by closer observation. It is true that the Governor's Statements are so drawn up as to make it appear that the Colonial Revenue is wholly employed; but the fact is that out of an estimated Revenue of £90,030, no more than £58,281 is required for ordinary charges of Government, and that the balance of £31,749 is to be applied to Public Works in default of other demands.TheManuscript image The Governor's plan appears to be (and it is unobjectionable) after providing for all other wants of the Government, to devote the surplus, whatever it may be, to Public Works. He has but to be instructed to use any of that Surplus in another mode, and the expenditure on Works can be curtailed accordingly. Again it can hardly be said correctly, having regard to general Colonial usage, that British Columbia is dependent on Parliamentary aid for it's ordinary current services. With the single exception of the Governor's salary (which is to be removed from the Estimates next year, and which is granted by Parliament to a great number of Colonies considered independent in their circumstances) not any grant is to be made this year to British Columbia for any current service except one moiety of thetotalManuscript image total expense of the Royal Engineers. But this is the Garrison of the Colony: and in most new Settlements, as well as in a large proportion of all the British Colonies, the entire Military expenditure is defrayed by the Mother Country. British Columbia will not be doing less in this respect, but more, than most other Colonies.
Such being the real state of the facts, what is to be done next seems to require the consideration of yourself and the Duke of Newcastle. The questions are, first as to the local Loan of £20000, and 2ndly the power to raise a further Loan in this Country.
The first Loan has probably been raised on the spot by this time, if the money could be procurred. I own that there appear to me to be strong reasons, in case the terms have not been extravagant, for it's sanction. So far back as in a despatch from hence of the1stManuscript image 1st of March 1861, the Governor was told that his plan was viewed very favorably, provided that he could supply certain information. This information he has supplied, and believes it (on grounds which seem to me reasonable) to be sufficient. The value of time must be considered. More than a year and a half has elapsed since the Governor wrote his despatch of August 1860 which convinced the Secretary of State—and indeed the Treasury itself—of the necessity of a speedy provision for the construction of roads but the Treasury wanted further information, and now that it has come, they call for more. At this rate there will be no end of correspondence with a place which is one of the most inaccessible of British Possessions. Nor is real help to be expected from the Governor: in the past he has furnished hisinformation;Manuscript image information; the future must be judged of by the light of experience and on general considerations which ought to be at least as well understood at home as by the Governor of British Columbia. Whilst we are writing, American speculators are acting; and it would be a serious responsibility if by mistrust and a craving for more certainty than is attainable in human affairs, the Home Authorities should find that the progress of the Colony was crippled, and possibly foreign channels opened for it's supplies.
On the whole, therefore, I think that you will probably conclude that the Treasury should at all events be recommended to concur in a Loan of as much as £20,000.
But the money will be of no use unless faithfully and judiciously applied. I shouldthereforeManuscript image therefore impress it upon the Governor that he must transmit proper and clear accounts of it's expenditure; that he must also furnish a description of the proposed roads, including their length, and send reports from time to time of the progress made; and as the only motive for the Loan is the demand for internal communications, I should tell him that upon the extent to which this want is efficiently supplied must depend the justification of his measures. The intention to say all this would of course be notified in the letter to the Treasury.
Next as to the subject of a further Loan at home. £20,000 is enough for one year, but the question is of the power to borrow, and I think you will be of opinion that to take in a single law power for as much as is contemplated is better than a succession of Laws for a series of petty Loans. TheformerManuscript image former course is fairer by Capitalists, as showing our general plans. Now the principle of borrowing money being adopted, it seems pretty clear that nothing less than £50,000 in all will be effectual for the great distances to be traversed in British Columbia. The following will supply you with some of the financial elements of the question. Supposing that £20,000 has been borrowed in the Colony at even so high a rate as 8 per cent, Interest will be £1600 per annum; and a sinking fund to pay off the debt in 20 years (i.e. 5 per cent) would be 1000 per annum; total £2600. Again £30,000 borrowed in England at 6 per cent would cost 1800 per annum, and sinking fund, at same rate as above £1500, total £3,200. The total of both would be £5,800, or say in round numbers £6000 per annum. But we have seen that even with the Revenue estimated for 1862, (& we must hope that it will be improving) there appears tobeManuscript image be a Surplus beyond current local services of £31,000, so that after deducting the £11,000 we intend the Colony to pay towards the Royal Engineers, there will remain a surplus of £20,000 available for Public Works or for interest on Loans raised for Public Works.
These are the considerations on which you will have to judge whether the Treasury should not be asked, not merely to agree to a Loan of £20,000, but to an amount of as much as £50,000 in all.
It will remain to request them to supply their promised suggestions of amendments in detail. I should not be surprised if they were content with a much smaller rate of Sinking fund than 5 per cent, which I have only inserted above that you might see the worst.
I am extremely sorry that you and the Duke should be troubled with so long a paper. But thereadinessManuscript image readiness of the present Treasury to assume the control of Colonial Affairs, and their great confidence in their own opinions whenever they are in opposition to those of persons more immediately conversant with the Colonies, entails much labor upon us all. For a quiet life and in a selfish point of view, one might be glad to acquiesce in silence, but when one sees them falling into serious errors from the very natural incompleteness of their knowledge of subjects which form the business of another Department of State, it becomes a matter of conscience to endeavour to save them from insisting on mistakes which may injure the public interest. Hence arises the necessity of correspondence between the two Offices, and of discussions, which consume a great deal of time that might otherwise be more profitably employed.
TFE 24 March
Duke of Newcastle
Mr Elliot's Minute brings this questionManuscript image very clearly before you. I quite agree with him that the Treasury make too much of the "aid" which they represent the Colony to be "still receiving from Parlmt," considering that that aid is now reduced to one half of the whole cost of the Royal Engineers, and that the Governor's Salary is to appear this year on our Estimate for the last time. On the other hand, they remind us that the Colony has to pay for the Specie sent out in 1860, and to repay the amounts overdrawn by the Govr. Upon the whole, considering the very considerable amount of Revenue wh. may be counted on over and above the ordinary charges of the Colonial Govt, I agree with Mr Elliot that we may recommend the Try. to sanctionManuscript image the issue of Debentures up to £50,000 in all, under the powers of the Loan Act.
CF 24
The provoking & reprehensible conduct of the Governor in overdrawing to the large amount lately stated by the Treasury unavoidably complicates all our financial correspondence with the Treasury & justifies to some extent their reluctance to entrust him with the power of raising loans and carry out money transactions for developing the resources of the Colony.
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I agree however in the views expressed in Mr Elliot's Minute, and delay in a Colony where gold is sending it a-head so rapidly is dangerous. I am quite prepared to write to the Treasury as proposed.
N 26
Other documents included in the file
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Draft reply, Newcastle to Douglas, No. 107, 1 March 1862, informing Douglas of the Treasury's decision and warning him that, although on this important subject I shall have to address you further, he must not take any additional proceedings for borrowing money.
Minutes by CO staff
Submitted without previous Minute, because the Mail is on the eve of going.
TFE 28/2
Other documents included in the file
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Draft, Colonial Office to Peel, 22 April 1862, discussing in detail the proposed loan for British Columbia.
Peel, Frederick to Rogers, Frederic 28 February 1862, CO 60:14, no. 2118, 179. The Colonial Despatches of Vancouver Island and British Columbia 1846-1871, Edition 2.2, ed. James Hendrickson and the Colonial Despatches project. Victoria, B.C.: University of Victoria. https://bcgenesis.uvic.ca/B625TE08.html.

Last modified: 2020-12-02 13:40:34 -0800 (Wed, 02 Dec 2020) (SVN revision: 5008)