Colonial Despatches

I am desired by the Lords Commissioners of Her Majesty's Treasury to acquaint you, for the information of Mr Secretary Cardwell, that Their Lordships have had under Their consideration the British Columbia Ordinance, No 7 of 1864 to authorize a Loan of £100,000, enclosed in Mr Elliot's letter of the 26th Ultimo.

My Lords will not object to the confirmation of this Ordinance, but They request that the following observations may be forwarded to the Governor for the guidance of theColonial Colonial Government in bringing the Ordinance into operation.

My Lords are of opinion with reference to Clauses Nos 1 & 9 that the application of the Money to be borrowed should be confined to the Survey and fresh construction of Roads Bridges & Public Works, & that no part of it should be expended in defraying the ordinary charge of Repair & Maintenance which should in British Columbia, as elsewhere, be provided for out of current revenue.

Their Lordships observe that Clause 12 of the Ordinance empowers the Governor & Council to redeem portionsof of the Loan before the Debentures arrive at Maturity, and to employ for that purpose either current Revenue or the Moneys of the Sinking Fund: and that Clause 13 directs that the amount thereafter payable to the Sinking Fund shall be reduced in the proportion of the Debentures paid off to those remaining outstanding.

Assuming that the Sinking Fund, as created by the Ordinance will suffice for the ultimate liquidation of the whole debt, and that the 2 1/4 per Cent is the amount required to accomplish that object in thirty years, then the payments to the Fund—after a portion of the Loan shall have beenredeemed redeemed by purchase out of the accumulations for the time being of the Sinking Fund—must not be reduced in the same ratio as the Loan itself, otherwise it will not be possible to avoid a deficiency of the Sinking Fund at the end. On the contrary as the principal is reduced by the appropriation of Sinking Fund, the per Centage to be contributed to that Fund in respect to the balance of the Loan should be increased, the limitation of the annual rate to 2 1/4 per Cent provided by Clause 10 being in such a case set aside.

In any future Ordinance that may be passed & that may afford an opportunity of doing so provision should be made for increasing the rate accordingly on the Debentures outstanding.