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their withdrawal, for as against even a foreign agressor, having the command of the sea (by whom alone we could be attacked), the force would be useless.

Likewise, with regard to the financial question, I am of opinion that the calculation as to the colony's ability to meet the demand has been made on an erroneous basis, for were the premiums on land sales to be deducted from the revenues of the years 1860-61 and 62, instead of these revenues showing a surplus, an average deficiency of nearly 12,000l. a-year would be found, and that should it be necessary to raise the money by special tax, I consider that the interests of the colony would seriously suffer, inasmuch as, although we are at present solvent and not overtaxed, yet the expenses of the place are enormous, and we have to compete with Shanghai and other ports in China where the civil government, as well as military protection, is paid for entirely out of Imperial funds. Every additional tax imposed here, therefore, acts simply as a premium on the removal of existing mercantile establishments to the coast, and as a check to the further development of the colony.

(True copy.)

W. H. RENNIE,

for the Colonial Secretary.

The Hon. W. T. Mercer, Esq.,

Colonial Secretary.

I have, &c.,

W. H. RENNIE,

Auditor-General.

Inclosure E.

EXTRACT from the Votes and Proceedings of the Legislative Council of Hong Kong, held on the 5th September 1864.

It was proposed by the Colonial Secretary, and seconded by the Auditor- General That, with a view to prevent Her Majesty's Government being misled by the votes of certain of the official members upon the subject of military contribution, it is desirable that the following resolution be inserted on the minutes :

"Resolved-

"That this Council is of opinion that the maintenance of troops in Hong Kong is not necessary purely for the protection of colonial interests, or the security of the inhabitants, and that the colonial revenues cannot fairly be charged with any contribution towards the Imperial military expenditure in China and Japan.

Question put. "Council divided.

Mr. Whittall.

Mr. Murray.

Mr. Chomley.

"Ayes (8):

The Colonial Treasurer. The Attorney-General. The Colonial Secretary.

The Auditor-General. The Governor.

No.:

The Acting Chief Justice.

Question put and carried by a majority of 8 to 1."

(True Extract.)

L. DI ALMODA CASTRO,

Clerk of Councils.

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