Douglas to Carnarvon
Vancouver Island
20th Septr 1866
My Lord
1. In my communication of the 14th Instt I attempted to give your Lordship some idea of the painfully depressed state of the Colonies of Vancouver Island and British Columbia: to point out some causes of that depression, and to suggest measures of relief. I will now according to promise, continue the subject,trustingManuscript image trusting that my remarks may not be unacceptable to Her Majesty's Government.
2. The alarming depreciation of property and depopulation at Victoria, alluded to in my last letter are occasioned less by commercial reverses, than by distrust of the future of the Colony. Though union with British Columbia is much desired, there is no wish to sacrifice the free port; each one clings to that institution as the life and soul of the place. Union, it is feared, will deprive the Colony of itscommercialManuscript image commercial freedom and Victoria cease to be a Free port. Rumours to that effect have been in circulation for months past. In that case, many are preparing to leave the country, and in the mean time, large sums are withdrawn from circulation; building and all works of improvement are suspended, and persons of every class are leaving the Colony for want of employment.
The Union Bill as laid before Parliament, appears to be a mere permissive Act, and contains nothing that expressly warrants these alarmingreportsManuscript image reports, and for many reasons, I sincerely trust that they will have no realization in fact. It is however very desirable to put an end to this painful uncertainty and suspense; to many—a question of competence or poverty. A simple announcement, to the effect, that Her Majestys Government, will protect the interest of Vancouver Island and leave it in the enjoyment of the commercial system, which has produced so many satisfactory results, would remove every doubt, on the subject, and immediatelyproduceManuscript image produce a salutary change.
3. There is an intense and very general interest exhibited by the public here, in regard to this question.
There was always a firm belief in the stability and permanence of Free Trade and it was under such impressions that nine tenths of the present inhabitants were induced to settle and embark their fortunes in Vancouver Island. Her Majesty's Government is, they suppose, pledged to that policy, and bound in good faith, to redeem that pledge.
4. Permit me inexplanationManuscript image explanation to revert briefly to the past.
Your Lordship from being connected with the Administration of the Colonies in 1858, will probably recollect, that in concerting measures for the Government of Vancouver Island, it was determined to establish a Free port at Victoria, as a convenient distributing point for British goods, to the rapidly improving countries and Islands in the Pacific, and that the same policy of Free trade, should apply to all the coasts and harbours of Vancouver Island, and to the ships of all nations, entering orleavingManuscript image leaving or landing goods thereat, and that goods should not be subject to the payment of duties.
5. There were many substantial reasons for adopting that, as the policy best adapted to the interests of the Colony. In the first place it was evident from the general aspect of the country, abounding in Rock and Mountain, that it could only be partially tilled, or rendered available for pasturage; that the arable surface in the best districts bore a very small proportion to the unimprovable area; and that the clearing of bush and heavy woodlands, was at best a slowandManuscript image and costly work.
Secondly. There was no available market within reach for Farm or Dairy produce; the terrritories of the United States being virtually closed to these exports by an almost prohibitive Tariff, and their own over-abundant resources.
Thirdly. The country, as thus seen, having few attractive features, the Colony could not derive much support, from the early growth of agricultural settlements.
Fourthly. Its open and accessible coasts, affording unlimited facilities, for shipping and landing merchandize, made it very improbable, that an IncomecouldManuscript image could be raised from Customs, without the aid of an efficient and expensive preventive service, the cost of which might really absorb the entire amount of Revenue collected.
9. It was thence inferred that if treated in the usual manner of Colonies, Vancouver Island would remain in poverty, without an Income to defray the expense of its administration, and become a charge upon the Imperial Exchequer.
10. For these conclusive reasons, it was resolved to foster and make Trade the chief dependence of the Colony. Trade it was believed would bring population, create a home market; and build up a commercial settlement capable ofyieldingManuscript image yielding an Income adequate to the wants of the Colony.
11. Free Trade was thus, almost from necessity, recognized as a fundamental policy, and it fulfilled every promise. Victoria became a centre of Trade and population, a place of wealth and importance; consuming more than all the food grown in the colony. Settlements were slowly spreading into the outlying Districts; the country defrayed the whole cost of its administration without the smallest aid from Imperial funds, and acquired a capacity of taxation, beyond what any other policy could have developed.
12. The fiscal arrangements of the Government were all framedinManuscript image in accordance with the ruling policy. The taxation was raised principally from four sources, direct taxes on property, Liquor Licenses, Trade Licenses and Harbour Dues, at an average cost of collection not exceeding two and one half per cent.
In the seven years beginning with 1859 and ending with 1865 the revenue increased from 41,884 dollars in the former year to 184,596 dollars in the latter year, including about 20,000 dollars accruing yearly from Land Sales.
About four fifths of the whole Revenue, is derived from the city and District of Victoria the purely Agricultural Districts, owing to their poverty, and the low assessmentofManuscript image of country Lands, contributing a very small portion of the public Income.
13. It will be seen from the foregoing remarks, that the people of Vancouver Island had good grounds for believing in the permanence of a policy maintained for so many years, with the approval of Her Majestys Government and which made Vancouver Island wealthy and self dependent.
I feel assurred without knowing the intentions of Her Majesty's Government, that from a principle of justice, they will strongly oppose, any rash or arbitrary interference with the great material interests of the Colony, the effect of which, might be to derange its industrial pursuits, and to plunge thousands, now living in comfort, into poverty and distress. Such a resultwouldManuscript image would be deplored as a public calamity; and in the circumstances, uncalled for and gratuitous, as the Colony wants nothing, asks for nothing, but to be left alone, to work out its own destinies, in its own way. It now defrays all the expenses of its administration, and with economy and good management, will soon pay off all its very moderate liabilities. No sufficient reason, would therefore be alleged, for interference with its internal regulations, and least of all for the total overthrow of its domestic and commercial policy.
14. Instead of that course I would suggest and strongly urge the continuance of the commercial policy which now exists: that Victoria be again formally proclaimed, without delay a Free port, for the ships andcommerceManuscript image commerce of all Nations: and that Goods, of every kind, will enter Duty free. In that case instead of a revenue derived from Customs the taxation would, as heretofore, be raised mainly from real estate and licenses. I would also suggest that the Governor be instructed, to maintain that, as a fundamental policy, through his over-ruling influence in the Legislative Council. The Colony would thus have a sound commercial system and full security for its stability and permanence.
On another point also I would venture to make a suggestion, which is in fact, but a repetition of Her Majesty's instructions. I mean the necessity of confining the expenditure of the Colony, within the limits of the Revenue andmaintainingManuscript image maintaining its establishments on the most economical scale.
From a Statement of the Revenue and Expenditure of Vancouver Island from the year 1859 to 1865 inclusive which is herewith transmitted your Lordship will observe a wide deviation from the safe rule laid down in these instructions.
15. These measures and the immediate disallowance of the British Columbia "Customs Amendment Ordinance 1865" recommended in my letter of the 14th September—would be hailed with satisfaction by the people of both Colonies, and will I firmly believe bring a return of prosperity.
If unfortunately it should be otherwise, Her Majesty'sGovernmentManuscript image Government will not be open to reproach and will at least have the consolation of knowing that every thing in their power was done to avert impending ruin.
I have the honor to be
My Lord
Your most obedient
and humble Servant
James Douglas

The Right Honble
Lord Carnarvon
Secretary of State for the Colonies
&c &c &c
Minutes by CO staff
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Mr Elliot
Sir James Douglas's letter of the 14h Sep of which this is a continuation is not in the Dept. This relates to the free Port question, and strongly recommends the continuance of the present system.
VJ 10 Novr
I think it was settled that if Victoria did not remain a free Port, it should be able to have a Warehousing System.
As to the [ner?] disposal of this letter, I suppose that with reference to despatch of 16 Novr, the Govr should be requested to inform Sir J. Douglas that this has been received.
TFE 23/11
Documents enclosed with the main document (not transcribed)
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Statistical table for Vancouver Island showing the Revenue and Expenditure for the years 1859 through 1865, as per despatch.
Other documents included in the file
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Draft reply, Carnarvon to Officer Administering the Government, No. 5, 10 January 1867.