D.—No. 1

Deduct —- Estimated savings from P. O. Receipts via Panama, and reduced contribution via Suez, say 17,800 Total probable cost of Steam Services £ 120.000 This might perhaps be reduced by the lower rate at which the Inter-colonial Services would hereafter be taken ; but on the most favourable view, the cost would be considerably over £100,000 per annum. This certainly far exceeds anything hitherto contemplated by the House of Representatives. Tho provision at the end of the 7th Clause of tho Contract is a very objectionable one, precluding as it does the shortening the periods of stay at the various ports in New Zealand, and thus stereotyping the trip from Auckland to Otago for five years to a period of ten days. The 27th Clause, however, is the most objectionable, as giving the Company a monopoly r of the whole subsidized Steam Service of the Colony for five years. The Clause is no doubt so expressed as to be peculiarly open to evasion ; but the intention is clear, and could only be honourablyfulfilled in practice by such a monopoly. This the Government could in no event sanction with their approval. Were the monopoly of the 27th Clause waived, the Inter-provincial Time Tables re-arranged, and the arrangements made so as to allow the Colony of New South Wales the benefit of a four months' course of post by the Panama route (in which event that Colony would no doubt contribute liberally towards the expense,) the Government of New Zealand would be inclined to view the matter favourably. But in its present shape the Government would be assuming a power not belonging to it, as the Executive of the Colony, were it to profess to give the Contract validity by its sanction. (Signed) W. Pox.. No. 69. Auckland, Alarch 29, 1864. Sir, — By last mail I am directed by the Chairman of the I. C. R. Al. Company to submit a proposal to improve the speed of the Panama service for the consideration of the New Zealand Government. The proposal is to make the passage from Panama to AVellington in 28 days instead of 30, and vice versa. To ensure this it would be necessary to increase the horse-power of any vessels subsequent to those now building, and therefore, as the expenses would be greater the I. C. R. Al. Company would require an additional subsidy of £24,000 per annum, and an extension of the date of commencing the service from Ist April, 1865, as at present arranged, to Ist July, 1865. It is thought that by thus shortening the passage, two days will be afforded at Sydney for replies to letters, and that therefore it is to be expected New South Wales would contribute more than to the service as at present arranged. -v, ,;;. i, As my Btay in Auckland is now very limited, I shall feel obliged by an early intimation whether the New Zealand Government is inclined to adopt the proposal or uot. I have, Ac, John A r iNE Hall, General Alanager I. C. R. Al. Company. The Honourable the Postmaster-General, Auckland. No. 70. General Post Office, Auckland, 81st March, 1864. Sir,— , I have the honor to acknowledge the receipt of your letter of the 29th inst., submitting a proposal to improve the speed of the Panama service for the consideration of the New Zealand Government. In reply I have to inform you that whether the Government ratify the Panama contract or not, they could not think of accepting the proposal made by you. I have, Ac, Thomas B. Gillies. John A'ine Hall, Esq., General Alanager I. C. R. M. Company. No. 71. General Post Office, April 29, 1863. My Lords, — After the receipt of your Lordships' letter of the 30th ultimo, I had an application from Mr. Crosbie AVard and Air. E. Hamilton for an interview with me on the subject to which your letter relates, and I postponed replying to you until that interview had taken place.

43

ESTABLISHMENT OF A PANAMA MAIL SEEVICE.