On the 28th of August 1860, the Governor made out a striking case for the necessity of Roads, and of borrowing money for their construction. The prosperity of the Colony depends wholly on the Mines; some of these are 500 miles from the Coast; great efforts are made in Oregon to gain the trade, and unless these be counteracted by furnishing good communications within the Colony, the Revenues may suffer to an extent which cannot be foreseen. As yet the opening of Roads has been attended by an increase of the Public Income which could not have been expected otherwise. On these grounds the Governor proposed a Loan of £50,000, affirming that with the exception of Military Charges, the Revenue of the Colony was more than equal to it's expenditure.

I confess that at first sight I doubted about the proposal, but ever since seeing the subsequentMinutes Minutes, I have thought that I was wrong. The Governor's despatch made a strong impression on you. It also attracted the particular attention of the Duke of Newcastle: His Grace recorded his opinion that to this Colony the making of Roads was of vital importance, and he directed the proposed measure to be recommended accordingly to the Treasury [marginal note: Col. Off to Treasy 27 Decr 1860].

The Treasury considered more information desirable [marginal note: Treasy to Col. Off. 7 Jany 1861]. This information, after a reference to the Colony, was furnished by the Governor in a despatch No 45 of the 7th of Augt 1861, and in others therein referred to.

In a subsequent despatch of the 24th of October 1861, the Governor, in the concluding paragraphs reverted to the importance of making roads, and said, with an apology and an explanation of the great urgency of the case, that he contemplated raising a Loan on the spot of from £15,000 to £20,000. His argumentsare are powerful and will deserve perusal in case of need. This was recommended to the Treasury for approval [marginal note: Col. Off. to Treasy 27 Decr 1861].

At last arrived, in No 70 of the 15th of Novr 1861, the expected Proclamation to authorize a Loan. But it authorized a Maximum of £100,000 instead of £50,000; and, as remarked at the outset of this paper, £20,000 was to be raised on the spot, and £80,000 in England. In fact the provision for the local Loan of £20,000 is doubtless the execution of the intention reported in the previous despatch of the 24th of October. The Duke of Newcastle intimated to the Treasury that as £100,000 was only to be a Maximum, His Grace was disposed to assent to the Proclamation, with an announcement to the Governor that the money should not be raised faster than the growing improvement of the finances might show to be consistent with securityfor for the debt and provision for current services [marginal note: Col. Off. to Treasy 28 Jany 1862].

The Treasury, however, have once more demurred [marginal note: Treasy to Col. Off. 27 Feb 1862]. Our letter, it may be observed in passing, showed the progressive improvement in the Revenue from the Accounts (i.e. the actual facts) for 1860 and 1861; the Treasury prefer the Governor's Estimates for 1862, and from these they conclude that the Local Revenue is fully appropriated already, whilst the Colony remains dependent on Imperial aid. But this view, it seems to me, admits of correction by closer observation. It is true that the Governor's Statements are so drawn up as to make it appear that the Colonial Revenue is wholly employed; but the fact is that out of an estimated Revenue of £90,030, no more than £58,281 is required for ordinary charges of Government, and that the balance of £31,749 is to be applied to Public Works in default of other demands.The The Governor's plan appears to be (and it is unobjectionable) after providing for all other wants of the Government, to devote the surplus, whatever it may be, to Public Works. He has but to be instructed to use any of that Surplus in another mode, and the expenditure on Works can be curtailed accordingly. Again it can hardly be said correctly, having regard to general Colonial usage, that British Columbia is dependent on Parliamentary aid for it's ordinary current services. With the single exception of the Governor's salary (which is to be removed from the Estimates next year, and which is granted by Parliament to a great number of Colonies considered independent in their circumstances) not any grant is to be made this year to British Columbia for any current service except one moiety of thetotal total expense of the Royal Engineers. But this is the Garrison of the Colony: and in most new Settlements, as well as in a large proportion of all the British Colonies, the entire Military expenditure is defrayed by the Mother Country. British Columbia will not be doing less in this respect, but more, than most other Colonies.

Such being the real state of the facts, what is to be done next seems to require the consideration of yourself and the Duke of Newcastle. The questions are, first as to the local Loan of £20000, and 2ndly the power to raise a further Loan in this Country.

The first Loan has probably been raised on the spot by this time, if the money could be procurred. I own that there appear to me to be strong reasons, in case the terms have not been extravagant, for it's sanction. So far back as in a despatch from hence of the1st 1st of March 1861, the Governor was told that his plan was viewed very favorably, provided that he could supply certain information. This information he has supplied, and believes it (on grounds which seem to me reasonable) to be sufficient. The value of time must be considered. More than a year and a half has elapsed since the Governor wrote his despatch of August 1860 which convinced the Secretary of State—and indeed the Treasury itself—of the necessity of a speedy provision for the construction of roads but the Treasury wanted further information, and now that it has come, they call for more. At this rate there will be no end of correspondence with a place which is one of the most inaccessible of British Possessions. Nor is real help to be expected from the Governor: in the past he has furnished hisinformation; information; the future must be judged of by the light of experience and on general considerations which ought to be at least as well understood at home as by the Governor of British Columbia. Whilst we are writing, American speculators are acting; and it would be a serious responsibility if by mistrust and a craving for more certainty than is attainable in human affairs, the Home Authorities should find that the progress of the Colony was crippled, and possibly foreign channels opened for it's supplies.

On the whole, therefore, I think that you will probably conclude that the Treasury should at all events be recommended to concur in a Loan of as much as £20,000.

But the money will be of no use unless faithfully and judiciously applied. I shouldtherefore therefore impress it upon the Governor that he must transmit proper and clear accounts of it's expenditure; that he must also furnish a description of the proposed roads, including their length, and send reports from time to time of the progress made; and as the only motive for the Loan is the demand for internal communications, I should tell him that upon the extent to which this want is efficiently supplied must depend the justification of his measures. The intention to say all this would of course be notified in the letter to the Treasury.

Next as to the subject of a further Loan at home. £20,000 is enough for one year, but the question is of the power to borrow, and I think you will be of opinion that to take in a single law power for as much as is contemplated is better than a succession of Laws for a series of petty Loans. Theformer former course is fairer by Capitalists, as showing our general plans. Now the principle of borrowing money being adopted, it seems pretty clear that nothing less than £50,000 in all will be effectual for the great distances to be traversed in British Columbia. The following will supply you with some of the financial elements of the question. Supposing that £20,000 has been borrowed in the Colony at even so high a rate as 8 per cent, Interest will be £1600 per annum; and a sinking fund to pay off the debt in 20 years (i.e. 5 per cent) would be 1000 per annum; total £2600. Again £30,000 borrowed in England at 6 per cent would cost 1800 per annum, and sinking fund, at same rate as above £1500, total £3,200. The total of both would be £5,800, or say in round numbers £6000 per annum. But we have seen that even with the Revenue estimated for 1862, (& we must hope that it will be improving) there appears tobe be a Surplus beyond current local services of £31,000, so that after deducting the £11,000 we intend the Colony to pay towards the Royal Engineers, there will remain a surplus of £20,000 available for Public Works or for interest on Loans raised for Public Works.

These are the considerations on which you will have to judge whether the Treasury should not be asked, not merely to agree to a Loan of £20,000, but to an amount of as much as £50,000 in all.

It will remain to request them to supply their promised suggestions of amendments in detail. I should not be surprised if they were content with a much smaller rate of Sinking fund than 5 per cent, which I have only inserted above that you might see the worst.

I am extremely sorry that you and the Duke should be troubled with so long a paper. But thereadiness readiness of the present Treasury to assume the control of Colonial Affairs, and their great confidence in their own opinions whenever they are in opposition to those of persons more immediately conversant with the Colonies, entails much labor upon us all. For a quiet life and in a selfish point of view, one might be glad to acquiesce in silence, but when one sees them falling into serious errors from the very natural incompleteness of their knowledge of subjects which form the business of another Department of State, it becomes a matter of conscience to endeavour to save them from insisting on mistakes which may injure the public interest. Hence arises the necessity of correspondence between the two Offices, and of discussions, which consume a great deal of time that might otherwise be more profitably employed.