No. 4, Financial
23rd January 1866
Sir,
1. In continuation of my Despatch No 57, dated 18th July 1865,
With Mr Elliot in connection with a Despatch 70/9813 respectg the Crown Fund Accounts.
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 theserviceManuscript image 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 taxofManuscript image 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).
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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 whichdayManuscript image 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 contributedtoManuscript image 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 £22,000forManuscript image 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 despitehighManuscript image 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.
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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. MeantimetheManuscript image 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 andsinkingManuscript image 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 encloseforManuscript image 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 notsetManuscript image 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 derivethisManuscript image 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 thevariousManuscript image 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 alsoasManuscript image 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 oftheManuscript image 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'sClerkManuscript image 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 SecretaryisManuscript image 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 MagistrateatManuscript image 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 forSuperintendentManuscript image 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 twoschoolmastersManuscript image 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 undertheManuscript image 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 useofManuscript image 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.TheManuscript image 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 reducingtheManuscript image 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 tomeetManuscript image 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 suchsavingManuscript image 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 broughtintoManuscript image 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,toManuscript image 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 whichhasManuscript image 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,takingManuscript image 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 theaggregateManuscript image aggregate, the people may fairly be congratulated upon the lightness of the taxes imposed upon them.
I have the honor to be,
Sir,
Your most obedient servant
A.E. Kennedy
Governor
Minutes by CO staff
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See minute 12 Apl with 3765.
Documents enclosed with the main document (not transcribed)
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Kennedy to Legislative Assembly, 16 May 1865, advising that the Colony was overdrawn with the Bank of British North America in the amount of $39,794.
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Kennedy to Legislative Assembly, 29 June 1865, discussing the unsatisfactory state of the harbour improvement works and suggesting that the steam tug be sold.
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Printed copy of Estimates of Revenue and Expenditure for 1866 submitted to the Legislative Assembly, including an address from the governor, dated 20 December 1865.
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"Statement compiled from Newspaper reports showing mode of dealing with Estimates of Expenditure pursued by Legislative Assembly," listing the proposed votes and the decision of the Legislative Assembly thereupon.
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Report of board of officers commenting on the financial condition of the colony, including an account of the savings to be effected under the Estimates for 1865, dated 4 August 1865, signed by W.A.G. Young, Colonial Secretary, Alexander Watson, Treasurer, Henry Wakeford, Auditor, Charles G. Wylly, Assessor.
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Newspaper clippings, British Colonist and Chronicle, 17 January 1866, reporting the debate to decide whether the Legislative Assembly had the right to initiate money bills.
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Newspaper clippings, British Colonist 13, 16, 18, 20 and 23 January, Chronicle 13, 16, 18, 20 and 23 January, Daily Evening Post 22 January 1866, reporting the debates over the Estimates for 1866 and the various amendments made by the Legislative Assembly (eight pages).
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Newspaper clipping, The Government Gazette, 19 September 1865, providing statistical information on taxes and dues levied in Vancouver Island, based on the colonial accounts for 1864, signed by Henry Wakeford, Auditor.
Kennedy, Arthur to Cardwell, Edward 23 January 1866, CO 305:28, no. 3025, 14. 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/V66004.html.

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