No. 14, Financial
1st March 1866
1. Continuing the subject of my Despatch No 10 of the 13th February 1866, I have the honor to enclose for your information newspaper reports of debates in the Legislative Assembly whose proceedings have not as yet been formally communicated to me.
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2. The results of these deliberations appear to be that a majority of the Assembly have agreed to the abolition of the Real Estate Tax and Salaries Tax, to the reduction of Trades and Liquor Licence Duties, and of the import duty upon milch cows, to the imposition of import duties upon lumber and hay, and to the contraction of two loans of $100,000 (£20,681), and £50,000 ($242,500) respectively.
3. Leaving out of the calculation the reduction of liquor licence dutiesandManuscript image and of the import duty on milch cows (which I am not able to estimate but which would probably be an unimportant amount), the following statement shows the financial position of the Colony as apparently contemplated by the Assembly.
Estimated Revenue for 1866 . . . . . . . . . . . . . . . . . $206,376
Deduct: Real Estate Tax (abolition proposed) . . .$50,000
Salary Tax (abolition proposed). . . . . . 2,500
Trades Licence Duties (proposed reduction) 2,385
Add: Lumber Duty (to be imposed) . . say . . $5000
Hay Duty (to be imposed). . . . say . . 3000
Total Revenue for 1866 . . . . . . . . . . . . . . . . . . . $159,491

Expenditure already voted for 1866 . . . . . . . . . . . . . $202,063
Revenue as above . . . . . . . . . . . . . . . . . . . . . . 159,491
Add balance due to Bank of 24th February 1866 . . . . . . . 73,793
Defecit . . . . . . . . . . . . . . . . . . . . . . . . . . $116,365

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4. To meet this deficit of $116,365 (£23,992) the Assembly appear to propose, first, a loan of $100,000 (£20,618) bearing interest at 12 per cent per annum, and, second, a loan of £50,000 ($242,500) bearing interest at 6 per cent per annum and to be paid off by a sinking fund of 4 per cent per annum, and that the first loan should be paid off out of the proceeds of the second.
5. The Colony has already raised a loan of £4000 ($194,000)inManuscript image in respect of which 10 per cent per annum of £4000 ($19,400) are payable for interest and sinking fund. This loan was by statute received and made a charge upon the general Revenue of the Colony. The proceedings of the Assembly now appear to have been that having first resolved to lessen that general Revenue by abolishing and reducing the Real Estate Tax and other Taxes to the amount of nearly $55,000 out of an estimated Revenue of $206,376 (thereby reducing it to$151,491)Manuscript image $151,491), the next resolve to raise additional loans upon (I presume) that diminished security.
6. It is worthy of remark that, irrespective of interest upon the proposed $100,000 loan, the interest and sinking fund of the existing £40,000 loan and the proposed £50,000 loan will amount to £9000 ($43,650) per annum—an amount equal to more than one fifth of the estimated Revenue and to more than one fourthofManuscript image of the Revenue as proposed by the Assembly to be reduced.
7. It cannot be supposed that the measures above detailed will meet the approval of the Legislative Council, and I think you will agree with me in the opinion that the credit of the Colony which must be injuriously affected by such proposals, would in the event of their adoption be utterly destroyed.
8. The ground upon which the Real Estate Tax is sought to be abolished seems to be that itisManuscript image is intended to introduce (at some time or other) a Bill, which, if passed, would make real property throughout the Colony the subject of municipal taxation only, and relieve it from taxation for general colonial purposes. Only one town in the Colony, (Victoria), has yet been incorporated, and in that instance the experiment of municipal government has signally failed, and there is but one other place in the Colony, (Nanaimo), deservingtheManuscript image the name of a town and that containing more than 800 inhabitants who are almost exclusively coal miners and labouring people. Assuming the real property in those two places to be taxed, as proposed, for municipal purposes it would seem that all other real property throughout the Colony could be wholly relieved from taxation.
9. I may here state as a curious coincidence of facts that on the day when the Resolution to abolish the Real Estate Tax was passed,sevenManuscript image seven of the Members of the Assembly who form part of the majority by whom it was carried were collectively in arrear of Real Estate Tax by $892 (£184) which was due on the 8th November 1865 and for the recovery of which, if not soon paid, resort must be had to the process provided by Law.
10. With reference to the reduction of the Trades and Liquor Licence duties, and of the import duty on milch cows, I have only to observe that any reductions of RevenueatManuscript image at this time are much to be deprecated unless imperatively called for.
11. The proposed abolition of the salary tax is however open to strong objection inasmuch as it was imposed last year with the object (which it has fulfilled) of reaching a class of the community which in the absence of indirect taxation might be considered to be wholly untaxed. The tax was an impost of one per cent upon salaries andwagesManuscript image wages above £150 per annum and I think an increase of the rate would obviously under existing circumstances have been more reasonable than the abolition of the tax.
12. The expediency of levying import duties upon lumber and hay is open to much question. Four fifths of the lumber imported into the Colony come from British Columbia, and I cannot but regard the imposition of a duty upon lumber imported thence as an impoliticobstacleManuscript image obstacle in the way of commerce and as a probable cause of irritation and injury to both Colonies.
13. I ought not to omit to state that I believe it to be the intention of the majority of the Assembly to embody in an Appropriation Act such of their finanical Resolutions (those treated of in this Despatch among the number) as from their nature would require to be enacted by all Branches of the Legislature before they would beofManuscript image of any legal force. This course is doubtless contemplated on the supposition that the Legislative Council will prefer to pass an Appropriation Act so incumbered rather than either to modify it or to reject it altogether, inasmuch as by modifying it they would come into collision with the Assembly and by wholly rejecting the Appropriation Bill they would leave the Executive Government without any legal authority to incurexpenditureManuscript image expenditure.
14. It is needless for me to point out how much injury to the credit and interests of the Colony such a position of legislative affairs must necessarily involve. It has been only through the exercise of great forbearance that I have been able to avert a collision between the Executive Government and the Assembly which some of the Members of the majority havewithoutManuscript image without disguise declared it to be their intention to bring about.
15. In conclusion I have only to express my regret that with the view of keeping Her Majesty's Government informed on a subject as yet incomplete, I should feel it my duty to trouble you so frequently and at such length.
I have the honor to be,
Your most obedient Servant
A.E. Kennedy
Minutes by CO staff
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Mr Elliot
Add this Desph to the batch I passed on a few days ago on the subject of V.C.I. finance.
There is but one remark which I have to make, & that is that the members of the V.C.I. Assembly are eminently unfit for their places.
ABd 16 April
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Confl ——- 13 Jan/66 ——- 3033
No 4 ——- 23 " " ——- 3025
Confl ——- 24 " " ——- 3034
No 7 ——- 30 " " ——- 3028
No 9 ——- 8 Feb " ——- 3030
No 10 ——- 13 " " ——- 3246
No 14 ——- 1 March ——- 3765
The Despatches being rather voluminous are placed on Mr Cardwell's table for reference there in case he should desire it.

These despatches disclose a sad state of things at Vancouver Island—A lunatic House of Assembly, and a bankrupt Government. There is clearly no other remedy than annihilation of the Constitution, or mixing the Colony up with British Columbia, which I have always thought would be a hard measure upon that place. I fear it is impossible to save the time of Mr Cardwell by making a satisfactory precis of this mass of papers: firstly because the Governor writes himself in a very summary style, and 2ndly because, without the perusal of them it is scarcelypossibleManuscript image possible to conceive the mischievous absurdity to which persons invested with the senatorial dignity can go.
It appears (p. 4) of desph No 4 of the 23 Jan/66 that the excess of expenditure over income in 1865 was, in round numbers £12,577, the account of the Colony with the Bank of British North America being at that date overdrawn to the extent of £14,226. And there exists a debt of £40,000, contracted in 1862.
In this state of affairs the Estimates of the Revenue and Expenditure of the Colony for 1866 had to be submitted to the Assembly. That Body has rejected and reduced proposed Votes—amalgamated Offices and indicated the Officers for them—increased salaries and voted salaries for Offices not set down in theEstimatesManuscript image Estimates. The Governor is deprived of his Private Secretary—the Colonial Secretary of one Clerk out of two, and of his only messenger. The Harbour Master loses his Boatmen and becomes Post Master. The duties of the Assessor are transferred to the Assistant Surveyor General, whilst the former enjoys a sinecure, a special Act providing him with a permanent salary. The Treasurer's salary is reduced. The Salary of the Auditor is refused and the Colonial Accounts are to be audited by the Clerk of the Assembly gratis. The Surveyor General's salary is disallowed, and the Assistant Surveyor General will, the Governor supposes, have to conduct the duties of the Roads, BridgesandManuscript image and public works, besides the onerous work of Assessor—Secretary to the Light House Board—Assistant Surveyor's clerk and Collector of Taxes. The Registrar General—who holds his Office under special enactment—has had his duties transferred to the Registrar of the Supreme Court. The salary of the Light House Commissioner and Secretary is refused. The Chief Justice and Attorney General are deprived of their clerks. 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 had been relieved by the Governor in consequence of irregularities—the Stipendiary Magistrate at Nanaimo and his clerk are dispensed with, and the dutiesofManuscript image of Harbour Master, which the Magistrate used to discharge, and the collection of dues and taxes at that place are to be performed by the Post Master there.
They have reduced the Police expenses far below what is prudent or even safe—voted half the actual cost for the maintenance of the prisoners and disallowed the cost of a Tower for a fog bell got from England for the benefit of shipping in a dangerous locality, where fog and strong currents prevail.
On the other hand it is proper to notice that they have voted money for education—for the Hospital, and for mail communication with San Francisco. But they do not contemplate meeting their appropriationsoutManuscript image out of incoming revenue but by Loan or Bonds not payable before the expiration of 5 or more years or by issuing Exchequer Bills bearing interest.
An enclosure P. 55 in despatch No 4 contains a very useful analysis of the Votes proposed in the Estimates, and the decision of the Assembly upon them.
And in enclosure P. 9 in despatch No 9 will be seen the temperate and judicious observations of the Governor to the Assembly on some of its retrenching schemes.
These, amongst many more instances, will probably suffice to describe the extraordinary mode inwhichManuscript image which the Assembly are putting their Colonial expenses to rights. They are usurping Executive as well as Legislative functions, and make no effort whatever to revise their systems of taxation, which the Governor has told us might easily be put on a good footing, and be ample for all governmental purposes.
Unfortunately in Vancouver Island the power of initiating money votes is not reserved to the Governor—so the Assembly run wild—and he has no organ in the Assembly to explain his views. How Governor Kennedy manages to get on at all and keep his temper with such a Legislature is surprising. Praise seems due to him for having escaped a collision with theAssemblyManuscript image Assembly, considering the affronts and mortifications he has had to put up with from that Body. Governor Kennedy has done all in his power to introduce economy and make prudent alterations. In 1865 he appointed a Board of Officers to report on the financial condition of the Colony, and found reason to concur in the opinion they reported as to the best means of effecting reductions and reorganizing the public establishments, but pending the decision of H.M's Government on the question of Union he has not attempted any reform. In the changes &c now made by the Assembly Captn Kennedy "concurs in no single instance."
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In his Confidential despatch of the 24 Jany the Governor epitomizes the proceedings narrated more at large in his public despatches, and explains that a dissolution of the present House of Assembly would not have remedied the mischief, as an Election would not have improved the material of the House. The franchise is £12 rental, or a freehold of 20 acres of Land, or of the value of £50. It would also have been imprudent to dissolve a House pledged to adopt any form of Government conceded by Her Majesty on Union with British Columbia.
The question necessarily arises what is to be done under present circumstances? The answer I think is very short. It is to instruct the Governor to use whatremainsManuscript image remains of the unappropriated Crown fund as he may consider most equitable amongst the public Officers who are deprived of or are curtailed in their salaries, but still to keep a balance in hand—to continue to exercise the same good temper and moderation towards the House of Assembly as he has already so signally exhibited—and to inform him that measures are under consideration which, it is hoped, will have the effect of relieving his present very embarrassing position.
It is impossible from the information we possess to say how much the Crown Fund amounts to. It is certainly £4000 a year, ifnotManuscript image not 5 or even £6000—and the charges at present imposed on it are the Governor's salary—£3000 [and] the Colonial Secretary—£600. A sum to the Surveyor Genl proportioned to his services to the Crown, necessary Payments for the administration, maintenance & increase of the Fund.
There will, therefore, remain a very trifling balance to divide amongst the Officers.
ABd 12 Apl/66
TFE 12/4
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FR 16/4
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We see here the great evil of allowing money votes to be initiated by independent members of assemblys as formerly in Jamaica.
WEF 17/4
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Mr Elliot
I think it is worth calling the attention of the Authorities to the fact that the House of Assembly of V. Couver Island expires by efflux of time in the course of this Summer and requesting them to consider whether, adverting to the disorganized state of affairs there—to the disreputable character of the Members—and to the knowledge we generally possess that if a fresh election takes place the new House would be composed of the same class of persons as compose it now, it would not be advisable privately to suggest toManuscript image the Governor that, though the decision must rest entirely with him, who, being on the spot, has the best means of judging, it seems to H.M.G. that it wd be the wisest course for him to abstain, as long as he can do so, from summoning a fresh Assembly.
The duration of the House of Assembly is for 3 years, from the date of its first meeting. Act of 1859.
Under his Commission the Govr is empowered, with the aid of his Ex: Council, to summon Assemblies in such manner as has been already appointed, or prescribed by Lawful Authority. There is nothing that I can see in the Laws of V.C.I. which make it compulsory on the GovernorManuscript image to summon an Assembly. The necessity of obtaining money to carry on the public Service may, as in England, make it essential to have an annual Parliament: but if the Assembly now sitting in V.C.I. shall have provided supplies, and as we have Crown Revenue sufficient to pay the Governor and his Colonial Secy I can not myself see any harm, but probably much advantage from dispensing with any more Assemblies in this place. Supposing that the Union of the 2 Colonies be effected this year the amalgamated Legislature will, it is to be hoped, put matters straight.
ABd 25 April/66
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I should hesitate about any instructions to a ColonialManuscript image Governor not to summon a Parliament, but I forward Mr Blackwood's Memorandum for consideration.
TFE 2 May
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Mr Cardwell
Mr Blackwood tells me that without special instructions the Governor would not summon a new assembly before Oct of this year at soonest.
This gives time for us to pass our Union Bill. I think, considering the past conduct of the Assembly & the probability that next year will start both colonies on a new course, it would be well to suggest by a Confidential Despatch to the Governor to take no steps towards summoning a new Parlt until the fate of our Union Bill be decided.
WEF 3/5
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A Draft may be prepared for consideration.
EC 3
Documents enclosed with the main document (not transcribed)
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Newspaper clippings, British Colonist 15, 16, 20, 21, 22 and 24 February 1866, Chronicle 15, 16, 20, 21, and 22 February 1866, reporting various debates concerning the finances of the colony and the futher proceedings of the Legislative Assembly thereon (seven pages).
Other documents included in the file
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Draft reply, Cardwell to Kennedy, Confidential, 10 May 1866.
Minutes by CO staff
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Sir F. Rogers
Perhaps you will have the goodness to see that I am right in my view of the Law. The first Governor of V.C.I. was Govr Blanshard. He was directed by his Commission and Instructions to summon General Assemblies of Freeholders. He was at the same time left at liberty not to summon such Assemblies, but to carry on the Govt with the advice of his Council only. He (wisely) availed himself of that permission. But his Successor—Govr Douglas—wasManuscript image ordered to call an Assembly together in the terms of his Commission & Instructions. He accordingly did so. An Act—called the Franchise Act—was soon afterwards passed. By the 15 clause the duration of the Assembly was fixed at 3 years. As I have mentioned in my (accompanying) Memo I can see in that Act or in any other, no provision requiring the Govr to summon an Assembly within any stated time after a dissolution or natural death, whereby I conclude that, except for the necessity of obtaining supplies, there is no reason why the Governor should order a fresh election. The supplies for /66 having been secured, as I gather from the Governor's finance despatches, I conceive that affairs will go on much moreManuscript image smoothly at V.C.I. without the Assembly sitting than with that Body. Of course I base my recommendation on the Assumption that an Act of Parlt will be passed this Session uniting the two Countries.
ABd 4 May
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I am aware of no ground for supposing that the Governor is legally bound to convoke a Legislature. Nor can I imagine any.
FR 4/5