No. 9 2543, CO 60/38, p. 82; received 9 March 29th January 1870 My Lord,

I have the honor to forward to Your Lordship the Colonial Estimates for 1870 accompanied by a Report, from the Auditor General, and all the Returns which appear to be required by the Instructions contained in Your DespatchNo No 86, of the 18th August last. I have been obliged to bestow much personal attention and pains upon the preparation of these papers. They would have been forwarded earlier but for the unfortunate accident which still confines me a Prisoner in my bed. They are now I hope nearly as accurate as it is practicable to make them in this Government; but the great distance from Victoria of some Districts prevents Returnsfrom from them being received in time to be included and the Statements are therefore in some respects necessarily only approximate.

2. The Financial position of the Colony is not satisfactory to me. The Revenue appears to have been hitherto almost regularly overestimated for several years, while annual Votes have almost as regularly been exceeded. The result is a balance on the current Bank Account to the Debit of theColony Colony on the 31st December, amounting to $27,348, twenty seven thousand, three hundred and forty-eight dollars, bearing compound Interest at 12 per cent per annum; while there are Loans outstanding, for the most part overdue, and for the liquidation of which no provision has been made, amounting to $291,632, two hundred and ninety one thousand, six hundredand and thirty two dollars more, and of which the greater part bears interest also at twelve per cent—making altogether the sum of $318,980—three hundred and eighteen thousand, nine hundred and eighty dollars, or £65,768, sixty five thousand, seven hundred and sixty eight pounds, which will be found in the Statement of Liabilities under the head of Temporary Loans. I annex a detailedStatement Statement shewing the items of which the total is composed.

3. It is not right that this debt should remain without provision for its repayment. So long as they receive 12 per cent the holders of the Debentures and the Bank of British Columbia may not press for settlement; but they might do so at any time, and in that case the Colony is without the means of meeting its engagements.The The Colonial Securities Company hold more than one third of the Debentures. I have reason to believe that they would take up the whole of this debt at six per cent interest under new arrangements, guaranteeing the issue of the loan at not less than 85 per cent, and probably better terms may be obtained. But even at 85 per cent, if the Loan should be payable in thirty years, the annual provision for interest,sinking sinking fund, and expenses of the loan would not amount to ten per cent and such an arrangement would be far more advantageous to the Colony than the present state of the finances.

4. Under these circumstances I propose to introduce an Ordinance in the Legislative Council to authorize the consolidation of the floating debt. I believe it to be unlikely thatwe we could raise a loan on better terms by advertizing for Tenders in London just now, than may be obtained by private negociation with the Colonial Securities Company, while much time would be consumed by so doing, and the state of affairs on the Continent may tend to raise the price of money in a few months. Unless therefore Your Lordship should forbid my proceeding by Telegraph, Ishall shall assume your permission to make such arrangements as the Council may concur with me in regarding as desirable.

I have the honor to be, My Lord, Your most obedient humble Servant A. Musgrave