Colonial Despatches

I am directed by the Court of Directors of this Bank in London to call the attention of His Excellency the Governor to the present large indebtedness of the Government of British Columbia to the Bank, and to request that a large reduction of the amount due may be made without delay.

The Directors direct me to express their desire to afford every reasonable facility to the Government and I feel convinced that a sufficient earnest of this desire has been evinced in all the past dealings of the Bank with Government, and therefore I feelassured assured that it will not be considered from this communication that the Bank has become in any degree unwilling to aid Government to the best of its ability consistent with its own interest.

I have however to inform you that unless the amount due from Government to the Bank is reduced to the sum of Fifty thousand Dollars on or before the 30th June next interest on the whole amount due from time to time will be charged at the rate of one and a half per cent per month from 31st Ultimo until the entire debt is liquidated.

I wrote to you on the 8th instant in reference to the indebtedness of the Government of British Columbia to this Bank and asking for a reduction of the amount due without delay; but am as yet without any reply from you on the subject. In again calling the attention of His Excellency the Governor to this matter I would express my suprise and regret that Government should have adopted a policy in regard to the Bank which I respectfully submit to be most unfriendly in every way and which is at the same time of no assistance to themselves.

I cannot conceive that any other motive than that of mistrust of the Bank's intentions can have prompted the position that Government have taken towards us, and I am at a loss to understand why such position has been assumed as I cannot recognize in any of the dealings of the Bank with the Government the least ground for suspicion of our motives.

I would explain in continuance of thissubject subject that for the past eighteen months applications have been constantly made for a deduction of the debt of the Government to the Bank and that from time to time Government have been told positively that further advances would not be permitted.

In October last the Officer then administering the Government arranged with me for an advance up to One hundred and twenty thousand dollars until the close of 1866, when it was promised that fresh arrangements should be entered into with a view to reduction. In January 1867 the account was not undergoing the looked for reduction and I therefore deemed it necessary to bring the matters under the notice of the Colonial Secretary who explained the utter inability of Government to make any reduction until the close of the March quarter from the paucity of Revenue receipts during the winter months and it was then arranged that Government should continue the use of their account paying in all their receipts, and drawing only for pressing requirements until the twenty eighth of March, when a further new arrangement in regard to the account should be come to, and a good reduction made from the Revenue that would probably be received during the spring. Accordingly at 26th March I wrote to Mr Birch (semi-officially), reminding him that at the twenty eighth instant the arrangement made in January would expire, and pointing out that the Balance due by Government to the Bank at that date must not be overdrawn, and at the same time asking that the reduction promised as likely to be made at this season be effected. I intimated also that pending arrangement in regard to the Government debt the Bank would be pleased to receive the monies of Government and to allow the same to be operated upon as occasion should require only reserving that the Balance due by Government at the twenty eighth of March should not be increased. This last communication (although semi-official) appears to have led the Government to adopt the hostile policy towards the Bank referred to above, for although it is clearly pointed out that the Bank is desirous to continue its friendly relations with Government, yet it has become notorious that all the Revenue is being paid into the Treasury and paid out again in Cash, Governmentthereby thereby entirely ignoring us as their Bankers.

I have received no reply to my communication of the twenty sixth of March above referred to and the cessation of Government transactions with the Bank has been carried out without any intimation to me of such intention.

I would most respectfully submit that the treatment that the Bank has had to submit to in this matter is most discouraging and entirely lacks recognition on the part of the Government of the uniform and solid assistance ever rendered by us.

The Balance due by Government according to the last returns of the Bank at New Westminster is One hundred and nine thousand one hundred and eighty dollars and sixty one cents and having regard to the position assumed by Government above referred to, I would state that until satisfactory arrangements shall have been concluded in respect of Government debt, any monies in my hands on account of Government from time to time will be held as against the amount due.

I have received your letter of 5th (8th) April on the subject of the Government account with the Bank of British Columbia.

You state that the Directors of the Bank express their desire to afford every reasonable facility to the Government, and this desire has been evinced on all past dealings with the Government. You conclude your communication with the information that unless the present overdraft is reduced by $50,000 within six weeks the exorbitant rate of 18 per Cent per annum will be charged by the Bank on the overdrawn account.

In reviewing the Government transactions with the Bank, the Governor is unable to perceive that amount of facility and accommodation accorded to the Government which you represent; similar accommodation His Excellency is led to believe would have been afforded by other establishments. No one can be better informed than yourself of the present depressed state of the Commercial interests, and the stagnation of all sources of Revenue for 4 months pending the Union of the Colonies. During that period the current expenses necessary for carrying on the Government doubtless increased the overdraft but even under these exceptional circumstances the overdraft was not so large as in 1864 and again in 1865.

Although at the commencement of thepresent present year it was mutually understood that fresh arrangements would be entered into at the end of the quarter it was not contemplated by the Government that the short notice of only two hours would be given of any fresh arrangement on the part of the Bank authorities.

In the previous arrangement you entered into at the commencement of the present year you agreed to allow the debt of $126,000 to stand for a time as a limit of the overdraft, merely receiving and issuing the Public money as it was collected. To meet as far as possible your views on this matter instructions were issued to make the Salaries of the Civil servants payable quarterly instead of monthly as heretofore, and at the time that the first quarterly payment became due you informed me for the first time within two hours of the closing of the Bank, in the evening prior to the day on which the payment of salaries were due, that no further advances would be allowed beyond the overdraft at that date. The overdraft on that date beingsome some $20,000 less than at the commencement of the quarter. This sudden action on your part, leaving it impossible for the Government to make other arrangements caused much hardship and inconvenience to the Public Servants of the Colony who depended upon their official incomes, which would have been received regularly had the Revenues of the Colony been paid into the Treasury since the commencement of the year, instead of being placed in the Bank; an arrangement which at your own urgent request was not adopted.

This proceeding on the part of the Bank at this critical period of the Colony cannot be viewed in the light "of a desire to afford every reasonable facility to" the Government.

Since the receipt of your letter the Revenue collected has been placed in the Treasury to guard against any further sudden action on your part preventing the required remittance to meet the Interest on the Loans. The bills for the amount have now been obtained and I am directed to request that you will inform me for what length of time you will allow the present overdraft to continue as the limit, if the daily revenue is paid intothe the Bank as heretofore.

As regards the proposed intention of charging 1 & 1/2 per Cent on the Government Overdraft after the 1st June I am to refer you to the arrangement made with the Manager of the Bank at the commencement of the Government transactions with the Establisht it was then decided that all overdrafts should be charged at the rate of 1 percent.

I have the honor to acknowledge receipt of your letter of 7th inst., and referring thereto I am somewhat suprised that no notice is taken of my letter to you of 22nd ulto., but as the receipt of the said letter is not acknowledged, I fear that it may have failed to reach its destination and as it bears direct reference to the subject under discussion I accordingly enclose a copy thereof.

I presume that in acknowledging receipt of my letter as of the 5th April that date is inserted by error, as my letter is dated 8th April and I would point out that I do not stipulate that the overdraft be reduced by Fifty thousand Dollars within six weeks, but that the indebtedness of Government be reduced to Fifty thousand Dollars or under by the 30th June, a period of twelve weeks from the date of my letter.

Regarding the facilities and accommodation rendered by the Bank to Government, and which you remark that His Excellency fails to perceive in reviewing the past transactions of the Bank with the Government, I would merely quote two instances in which the Bank evidenced its desire to aid Government in an extrordinary degree. First the assistance rendered by the Bank to Government through the Crown Agentsin in London, when in January 1865 the Bank granted a Loan of £24,000 (as alluded to in my letter to you of April 6th 1865) at the Bank of England rate of Interest, thereby saving Government from a severe sacrifice, as otherwise they would have been forced to place the Colony's Bonds on the Market for sale at a most unpropitious time. Second the facility afforded in advancing and distributing Government funds at the time of the Chilcoatin expedition.

I would again remind you that constant applications have been made during the past two years for a reduction of the Government debt so that the stagnation of Revenue during the four months preceeding the union of the Colonies can scarcely be said to have affected the Government in such regard to any great degree.

As regards the arrangement made at the commencement of the present year the 28th March was distinctly stated by yourself as the date for its expiration, and it was fully understood that the balance due at that date by the Government should not be overdrawn, but that rather a deduction should be made, and I am accordingly at a loss to understand how Government should have contemplated receiving a notice on the subject at all.

I fail to recognize in what manner my views were likely to be met by the payment of the Civil Servants' Salaries quarterly, instead of monthly, as upon your own shewing it would have been impossible for Government to have paid the Salaries monthly if they had so desired, thus at 31st January the Bank account stood $126,137 51/100 leaving no margin for Salaries and at 28th February the account was $119,205 50/100 again prohibiting payment of Salaries, and in reference to your remark that on the evening prior to the day on which the quarterly payment became due, I informed you for the first time that no further advance would be permitted, I would respectfully submit that my information on that subject was quite uncalled for, having regard to strict rules of business, as the 28th March had been expressly mentioned by yourself as the date for the termination of the arrangement before mentioned.

The overdraft on 28th March was $112,937 04/100 and at the commencement of the quarter was $121,168 28/100 and therefore was not $20,000 less than at the commencement of the quarter as you state.

I regret the hardship and inconvenience occasioned to the public servants by the nonpayment of salaries, but I cannot see how the position would have been materially altered had the expiration of the arrangement been postponed until after the close of the month, as in any case the Bank would not have honored a cheque for an amount sufficient to pay the Salaries for the quarter. I would add that so far as instructions for the payment of salaries quarterly, having been issued to meet my views (admitting that the Bank would authorize a sufficient advance at the close of the quarter to meet the demand in that respect), such a course would have been antagonistic to the true interests of the Bank as we should thereby lose Interest on the sum otherwise to be drawn monthly by Government, without any corresponding advantage.

I cannot understand why it should be considered necessary to guard against any further action on the part of the Bank, by paying current Revenue receipts into the Treasury as I submit that the Bank has ever acted in good faith towards Government, and that the Guarantee of the Bank as expressed in my letter that any moneys paid in by Government should be held entirely at their disposal, should be recognised as ample.

In regard to the increased rate of Interest to be charged from 31st March unless the required reduction is made in the Government debt, I have only to confirm the contents of my letter of 8th ulto., the terms of which are expressly dictated by instructions from the Court of Directors. So far as the arrangements made at the commencement of the Government transactions with the Bank is concerned, I would remark that an overdraft was agreed upon only until the first issue of Government Bonds should have been sold, and that subsequent indebtedness has been the subject of other arrangements.

I would also remind you that as an ordinary matter of business the Bank is quite justified in making the increased charge, as in default of payment a Creditor has certainly the privilege of naming his terms, and I assure you that the Bank would much rather receive payment of the debt, than subject the Government to the increased rate of Interest.

In making the above remarks I have been urged partly to do so in justification of the Banks action, and to prevent mistakeas to as to motives, as well as to correct several errors in your letter which appear to have arisen from lack of reference.

I would respectfully state that the Bank will be glad to receive the daily Revenue of Government and allow the same to be withdrawn from time to time, as long as Government is pleased to avail itself of the facility, and I would beg you to receive the assurance that the funds so paid into the Bank will at all times be held absolutely at the Governments disposal, but in reply to your inquiry as to the length of time that the present overdraft may continue, I beg to state that as the Directors have especially requested that it be at once reduced to $50,000, I have to ask that Government make arrangements to comply with such desire with the least possible delay.