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that a further advance may safely be made in the same direction. In view of the financial difficulties which have arisen elsewhere from the reckless sale of the Crown Lands and the use of the proceeds as ordinary Revenue, and bearing in mind the precarious nature of some important items of our present Receipts, I cannot but think that it would be worth while, even at some sacrifice of present advantage, to apportion a larger share of the proceeds to permanent income.

10. This consideration will be kept in view; and if it should be found inadvisable, for the reason above indicated, to further increase the rent fixed in connection with the auction sales, it may perhaps be expedient to attain the same object by giving purchasers the right of commuting the premiums for increased rent, on terms which would be likely to induce its exercise.

EXPENDITURE.

11. Though the total expenditure of the year 1888, $1,992,329, was somewhat smaller than that of 1887, $2,023,002, this was entirely due to a large decrease in "Extraordinary Expenditure" on "Defence" and other permanent works, the aggregate cost of which in 1888 was only $530,870 as against $744,820 in 1887. Ordinary Expenditure however increased from $1,278,181 in 1887 to $1,461,459 in 1888, a result which might be expected from the demands of our rapidly in- creasing population. It is at the same time satisfactory to note that even this increased expenditure was exceeded by Ordinary Revenue to the extent of some $95,000.

12. The decrease in Extraordinary Expenditure is chiefly accounted for by the fact that our Defence Works were approaching completion and cost only $62,115 as against $258,444 in 1887. The Tytam Water-Works moreover cost only $51,150 as against $230,811 in 1887. This great enterprise, (which comprises the confine- ment of some 350 millions of gallons of water by a dam constructed of granite and concrete at a distance of 5 miles from the City of Victoria, and the conveyance of the supply by means of a tunnel 2,450 yards in length, and a cut granite aqueduct for the remaining distance,) was so far completed that the water was let into some of the existing "Mains in October 1888. But as the Distribution Works" which are required in connection with the new supply are not commenced, it has not been possible to obtain any return in Revenue for this improvement in supply, and the large expenditure on the works which up to this date amounts to $1,137,315 is as yet pecuniarily unremunerative.

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13. Not only for this reason, but chiefly because this magnificent supply of water is, and for some time to come must remain, comparatively unavailable, it is unfortunate that provision for "Distribution was not made at an earlier period during the progress of the main works. The delay in this and various other even more needed public works must be chiefly attributed to the undue weakness of the Staff of the Surveyor General's Department. The extraordinary density of the population living for the most part on or under the abrupt slopes of a hill 1,100 to 1,800 feet in height, together with the comparatively recent and very rapidly increasing settlement of Europeans on and in the neighbourhood of the summit, requires from this Department, in the interests of public health and safety, a far closer supervision of Private Works than is ordinarily necessary elsewhere, and im- poses duties which are probably more in number and far heavier in degree than are required for any similar area or population in the world.

14. From various indications it would appear open to question whether for years past the Department referred to has been strong enough in numbers to discharge its duties satisfactorily in a climate which every summer renders unfit for duty a large proportion of out-of-door officers. The health of the able and inde- fatigable Surveyor General, Mr. PRICE, who has just retired from the service, gradually succumbed and eventually broke down completely in the endeavour, naturally but very imperfectly successful, to do the work of several ordinary men; and the Department has consequently now to cope with the arrears and difficulties, resulting from these shortcomings, in addition to the new demands arising from the large increase of population. For the above reasons the reorganisation and strengthening of the Department now under Your Lordship's consideration are- imperatively required, as it is only by that means that we can hope to make energetic progress in the various sanitary and other public works which are already, and are becoming more and more, grievously required. And I refer to the subject in this place in order to show that, notwithstanding the completion of the great