No. 14, Financial
               
            
            
            
            
               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.
               
2. The 
            
            
               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
               duties
and
 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
               
               54,885
               
               _______
               
               $151,491
               
               Add:  Lumber Duty (to be imposed) . . say . . $5000
               
               Hay Duty (to be imposed). . . . say . .  
3000
               
               8,000
               
               _______
               
               Total Revenue for 
1866 . . . . . . . . . . . . . . . . . . . $159,491
               
               _______
               
               
               Expenditure already voted for 
1866 . . . . . . . . . . . . . $202,063
               
               Revenue as above . . . . . . . . . . . . . . . . . . . . . .  159,491
               
               _______
               
               42,572
               
               Add balance due to Bank of 
24th February 1866  . . . . . . .   73,793
               
               _______
               
               Defecit  . . . . . . . . . . . . . . . . . . . . . . . . . . $116,365
               
               _______
               
               
 
            
            
               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)
in
 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)
 $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 fourth
of
 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 it
is
 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),
               deserving
the
 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,
seven
               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 Revenue
at
 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 and
wages
               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 impolitic
obstacle
               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 be
of
 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 incur
expenditure
 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 have
without
 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,
               Sir,
               Your most obedient Servant
               
A.E. Kennedy
               Governor
               
               Minutes by CO staff
               
                
                  
                  
                     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.
                     
 
                  
                  
                     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
                     
                  
                  
                  N.B.
                  
                  
                  
                     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 2
ndly because, without the
                     perusal of them it is scarcely
possible
 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 the
Estimates
 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, Bridges
and
 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 duties
of
 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 appropriations
out
                     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 in
which
 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 the
Assembly
 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."
                     
 
                  
                  
                     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 what
remains
 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, if
not
 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.
                     
                  
                  
                   
                  
                  
                     Seen.
                     
                  
                  
                   
                  
                  
                     We see here the great evil of allowing money votes to be initiated by
                     independent members of assemblys as formerly in 
Jamaica.
                     
 
                  
                  
                     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 to

 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
                     Governor

 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.
                     
 
                  
                  
                     I should hesitate about any instructions to a Colonial

 Governor not
                     to summon a Parliament, but I forward 
Mr Blackwood's Memorandum for
                     consideration.
                     
 
                  
                  
                     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.
                     
                  
                  
                   
                  
                  
                     A Draft may be prepared for consideration.
                     
                  
                  
                  
                   
            
            
               Documents enclosed with the main document (not transcribed)
               
                
                  
                  
                     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
               
               
                   
                     
                     
                     
                     Minutes by CO staff
                     
                      
                        
                        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—was

 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 more

 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 Parl
t will be passed this Session
                           uniting the two Countries.
                           
 
                        
                        
                         
                        
                        
                           I am aware of no ground for supposing that the Governor is legally
                           bound to convoke a Legislature.  Nor can I imagine any.