The past year has brought about a great improvementmin the aspect of native affairs, and a transition has taken place from a state of hostility to one of comparative peace. It cannot, however, he denied that in those transition stages, a sensitive warlike race like the Maoris, require careful arrived at a similar conclusion. General Grant, in his recently delivered message to Congress, aware from early personal experiences as a professional soldier, and from later experience as a statesman, of the length, the cost, and the cruelty of Indian wars, expressed his anxiety to inaugurate a better system, or rather to extend the old system of treating the Indians, by placing them in reserves. He says :- ''The Quakers are well known as having lived in peace with Indians, while the people of other sects have been engaged with them in quarrels. They oppose war, and deal fairly. The President has consequently given them the management of a few reservations, with most satisfactory results. General Grant holds that any system looking to the extinction of the Indian race is too horrible to be considered. He says no substitute, except in placing all the Indians on large reservations as rapidly as possible, and giving them absolute protection there; and adds that as soon as they should be fitted for it, they should be induced to take these lands severally, and set up territorial governments for themselves.'' To acknowledge the supremacy of British law in cases affecting persons of the European race who might sustain unprovoked attack, or violent outrage at the hands of the natives, should be insisted upon. In theory the whole race come under the designation of British subjects, and it is alledged that no exceptional system or laws should prevail under the same sovereignty. This has all along been a mere theory the only effect of which has been to induce Europeans on the one hand to expect the enforcement of the Queen's writ throughout the country; and on the other of exasperating a large section of the aboriginies who emphatically declars national independence, and deny the right of any foreign power to exercise jurisdiction over them. It is full time that the Government should decide that it is only within certain settled limits where the large majority are of the European race, that English laws can prevail- and that it is not prepared to afford protection to any who may choose to reside beyond the frontiers of territory acquired from the natives. This would dispel the hopes entertained by adventurous speculators, of being compensated for any loss they might incur by establishing themselves in Native districts. It is difficult to define the terms or relations which it may be possible to conclude with the King natives; but any terms that recognise the giving up of offenders guilty of murder, to be dealt with by English law; and the maintenance of order within the districts, even although European settlement is for a time excluded, should be recognised by the Government as a great step in the right direction, and one deserv -ing of liberal consideration towards the King when finally established. It is possible by judicious management to glide into a state of peace without any specific terms. In any settlement the most difficult cases will be the course to pursue with regard to criminals. If it is suspected that the Government determine to punish all past oddenders with severity, it will lead to continuous skirmishes and depredations. The powerful Ngatimaniapoto are holding aloof until they know the fate of the White Cliff Murderers. Titoko-Waru, on the West Coast, is in a similar condition. There are numerous others more or less implicated in crime, who have the sympathies of their friends and relations; and it is extremely difficult to decide what course should be taken with reference to such persons. and firm treatment. Any system that is adopted must be gradually introduced step by step. Previous efforts have failed from doing too much at once. A full recognition of the influence and power of the Chiefs, will be essential to the success of any policy. The application of experimental political theories, begun at one time, and abolished at another, To prolong war for the sake of capturing them is beyond the means of the Colony; to forgive them may appear humiliating; and yet I do not see any other course open beyond proclaiming them as outlaws. To such criminals as Kereopa and Te Kooti, no mercy should be extended; but if it is generally known that the Government confines its military operations to the capture and punishment of these notorious murderers, less apprehension would be felt on the part of those who are at present neutral. In no case should tribes have been in hostility, be placed in a better position than those who have been friendly, or who have taken up arms in support of the Government. I have always been impressed with the great importance of holding periodical meetings with the natives; and of instituting a Council of Chiefs, to be elected by the people, who should represent the feelings and wants of their respective tribes. A measure providing for local self-Government in certain districts, but only in cases where the natives express a spontaneous desire for it, may be found necessary; but it should not be exclusive in its character, but open alike to Europeans and Natives residing in the district, and should be of an empowering nature, to enable by-laws to be framed for the carrying out of Municipal objects, such as Road-making, fencing, etc. The Natives should be authoritatively informed that the Government does not propose to revert to a policy of Confiscation while it is determined to punish the perpetration of Crime and outrage. Sept. 16th. 1870, (Signed) Donald McLean. are most dangerous. The practical questions. for present consideration, are those of peace and war. The latter, with slight intermissions, has prevailed in the North Island, for the last ten years. The consequences have been fatal to its progress and prosperity. The King Territory long remained the centre of dissafection; and crimes have been committed throughout the country, in the name of the King, of which he was not cognisant, and which he even deprecated. A reconciliation with him having taken place, some anxiety still remains on the part of the public, who are easily agitated on questions with which they may be insufficiently acquainted; and it is desirable when the opportunity offers, that some more definite and disticnt arrangement should be concluded with him and his adherents. A policy of non-interference is decidedly the safest. Any meddling with the natives before they are prepared to offer or receive overtures, would be most unwise. Several courses would present themselves to different minds, on the best means of solving the native difficulty; and differences of opinion arise, even among those best skilled in Native affairs, as to the best mode of dealing with the question. One mode suggested by men who have devoted a great deal of thought to the subject, is the definition of districts within which the natives can carry out their own laws and usages. No doubt the tendency of those who are adherents of the King, is much in favour of this view. They exercise an independent jurisdiction within a certain district; they are not subject to the restraints and annoyances of progressive colonization; which, however, we may regard it from our point of view as advantageous to them, they recognise as the extinction of their nationality and independence. A continuation of peace would gradually overcome those strong anti-progressive tendencies, and soften the asperities and prejudices that have been nourished by the excitement of war. To rudely interfere with those prejudices would be most unwise; and if a general desire is exhibited on the part of the King natives to maintain a friendly neutrality within certain definite limits, it would be prudent to gratify their desire in this respect. After two centuries of similar conflicts with the American Indians, the President of the United States has