No. 71
17th May 1870
My Lord,
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.AnManuscript image 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 objectionthatManuscript image 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 percentManuscript image 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 thanunderManuscript image 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 percentManuscript image 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 floatingdebt,Manuscript image 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 overdrawnBankManuscript image 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 annualcontributionManuscript image 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 HundredThousandManuscript image 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 holdersbeforeManuscript image 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, overtwentyManuscript image 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.
Manuscript image
? also the chance of being repaid at par by an [illegible] [drawings?] debentures [illegible] market value [illegible] at a discount.
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 befinanciallyManuscript image 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 fromanyManuscript image 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 ColonialSecuritiesManuscript image 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.
I have the honor to be,
My Lord,
Your most obedient
humble Servant
A. Musgrave
Minutes by CO staff
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Mr Herbert
I suppose you would like to know in this instance what Mr Julyan has to say on the Governor's criticisms on his scheme for readjusting the Public Debts of B. Columbia.
CC 27/6
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Yes. Request his observations, sending copy of despatch—& enclosure.
At once.
RGWH June 27/70
Other documents included in the file
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Herbert to P. Julyan, Treasury, 29 June 1870, forwarding copy of the despatch and enclosure for observations.
Musgrave, Anthony to Leveson-Gower, Granville George 17 May 1870, CO 60:38, no. 6780, 495. 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/B70071.html.

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