A.—No. Ll

TO THE GOVERNOR OF NEW ZEALAND.

19

passed, and, in exercise of the powers intrusted to him under the Consolidated Loan Act, has raised a very large sum of money. Of course I assume that all money so raised has been or will be applied as directed by the Act, section 7, and to no other purposes. Mr. Fitzherbert can, if he pleases, raise the whole seven millions authorized, and so extinguish all Provincial loans. The Crown Agents for the Colonies have also, under Mr. Fitzherbert's instructions, from time to time issued advertisements notifying the terms on which the holders of Provincial debentures might exchange those debentures for the new consolidated debentures, see sec. 8. The terms offered apj)ear to be on the whole fair, and lam glad to find that they have been largely accepted. I have accepted them myself, and have advised others to do the same. If all the Provincial debenture-holders had accepted or should hereafter accept the offered conversion, the Colonial Government would be bound to pay the interest and sinking fund on the bonds issued in exchange ; but they would not lose a shilling by the transaction, for, as already observed, they will recoup themselves for the money so expended by debiting the Province with the amount. It seems obvious that in that case the Provincial sinking funds already accumulated could by no possibility belong to the General Government. They must be returned to the Provincial Government who provided them; otherwise the Province would be made to pay the sinking fund twice over, first as sinking fund on Provincial debentures, and again as sinking fund on the debentures for which these Provincial debentures had been exchanged. But a certain number of the Provincial debenture-holders have hitherto declined to accept the terms of commutation and exchange offered to them. It was perfectly optional whether they would accept them or not. They may be thankful that the General Government has thought it expedient to enhance the value of their debentures by professing to make them a charge upon the consolidated revenues of the Colony, but they cannot honestly or legally be compelled, against their will, to part with the security they already possess. Tet this is precisely what they are called on to do by " The Public Debts Sinking Funds Act, 1868," against the allowance of which I am now respectfully protesting. The amount of outstanding debentures of the Province of Canterbury, held by those who have not yet assented to the offered exchange, is £121,700, as I learn from a statement made a few days since by the Crown Agents for the Colonies. Up to the Ist of September last I believe not a word was heard of any intention on the part of the Government of New Zealand to attempt to lay hands on the accumulated Provincial sinking funds. But, unfortunately, the Government of New Zealand was in want of money, and on that day the acting Colonial Treasurer, tho Honorable John Hall, made his Financial Statement to the House of Bepresentatives at Wellington, and, taking it for granted that " it " was an evident omission in the Acts of last Session that when tho liability for the repayment of " Provincial loans was undertaken by the Colony, the control of the sinking funds by which that " repayment was to be provided for was not vested in the Colonial Government," proceeded to say, "the " first question to be settled is to whom shall the Provincial sinking funds, as they become freed, be " paid over, and it is, of course, a question for the Legislature to determine. The Government is of " opinion that if the Colony absolutely undertakes the payment of the Provincial debts, it is but " fair and reasonable that the Colony should have use of whatever provision has already been made " towards such payment." This proposition may at first sight appear plausible, but a little examination will demonstrate its fallacy, and inapplicability to facts; and it is literally the only reason I have ever heard or read of for seizing on money in the possession of other people. Mr. Hall avowed that the Government had no intention whatever of appropriating these accrued sinking funds to their original purpose, viz., to the repayment of the debts for which they were provided as security, nor in diminution of the £7,000,000 consolidated debt. One of the resolutions moved at the close of that financial statement was that " £90,000 out of " the proceeds of the accrued sinking funds ' (including that of Canterbury) ' shall be paid to the " Province of Nelson, and £15,000 to that of Wellington." Mr. Hall's general financial proposals were opposed, defeated, and withdrawn ; but in the last nights of a protracted and exhausting session, when half of the members for Canterbury had left Wellington, or were disabled by sickness from attending to their duties, the Public Debts Sinking Funds Bill was introduced into the House of Bepresentatives, and was rushed rapidly through all its stages, sub ailentio, without debate, or reason given for it. I believe that the Boyal Instructions to the Governor of New Zealand require him to transmit to the Colonial Minister at home a statement of the reasons and of the occasions for proposing all laws assented to by the Governor in the name of Her Majesty. I have not, of course, the advantage of knowing, as your Lordship knows, what the statement so transmitted by Governor Sir George Bowen may contain ; I can only deal with the preamble and the clauses, especially clauses 9, 10, 11, 12, 16, and 18 of the Act itself The preamble recites, inter alia, that " whereas it is expedient . . . that the money invested " on account of the respective sinking funds for the security or provision for the due payment of " (Provincial) loans should be proportionately released (!) and placed at the, disposal of the General " Assembly," and the clauses I have mentioned seek to carry into effect this proposal. I wish to use language no stronger than the occasion justifies, but I respectfully submit to your Lordship that this intended legislation is unjust, arbitrary, and unconstitutional. The word expedient may mean anything. As I read it in this connection, and by the light of recent events, it means only that it is desirable the Government of New Zealand should obtain from every possible source as much money as they can get, to be expended as portion of current revenue, and as the Government for the time being may direct, partly in conciliating Provinces dissatisfied with the legislation of 1867, or worse, in inefficient attempts to suppress disastrous outbreaks, brought on by wholesale confiscation of Maori territory, and by land purchases the validity of which is disputed by those who claim to be the Native owners. 1. I submit that the proposition is unjust to the dissentient English debenture-holders. Several of them purchased these debentures in ISSB, on my recommendation. They object to be deprived, without their consent, of the security they already possess in this country, and are not content to receive in lieu