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was the opinion of Her Majesty's Government that these advantages might properly be estimated at 20,0001. a-year, and that the colony was bound to discharge that obligation, and able, if necessary, to bear increased taxation for the purpose.

7. Her Majesty's Government have never wavered in their determination to enforce that debt, or given the colony any reason to suppose that they would shrink from enforcing it. They are, however, quite aware that various causes, among which is the establishment of the mint, have concurred in producing a depressed condition of the public revenue, which requires some present relief.

8. I am very unwilling to adopt one of the means of reducing expenditure which you have pointed out, that of postponing the completion of public works, important to the sanitary state of the island; and although you have been authorized to close the mint and break up the establishment, it cannot be expected that this step will afford any considerable relief to the revenue during the present year.

9. With regard to the military contribution, I have to inform you that Her Majesty's Government whilst adhering to the principle and to the amount, which the colony ought to pay, are willing to forego for the time the immediate payment of the arrears now due, and will allow those arrears and the military contribution for 1868 to be spread over that and the four ensuing years, charging, however, 4 per cent. interest on the amounts unpaid.

10. I transmit to you a copy of a letter from the Lords Commissioners of the Treasury with an accompanying memorandum, which will show you that the sums to be paid by the colony under this arrangement, in those five years respectively, will be---

1868

1869

1870

1871

1872

£

10,665

30,305

29,945

29,585

29,225

or should your Government prefer it Her Majesty's Government are ready to receive payment at the rate of 9,9451. per annum, in quarterly payments, to be paid instead of the usual military contribution of 1868, and in addition to the military contribution of the four following years-that is to say, in 1868, 9,9457., and in 1869 and three following years, 29,9451. per annum.

11. The Lords Commissioners in sanctioning the estimates as revised have called my attention to the large increase in the expenditure for establishments, and have expressed a hope, in which I fully concur, that you will feel it your duty to resist to the utmost that may consist with an efficient discharge of the public service, the strong tendency to expansion possessed by this class of expenditure.

12. I have now to convey to you the sanction of Her Majesty's Government to the revised estimates enclosed in your despatch of the 11th September last, and Her Majesty's confirmation of Ordinance No. 14 of 1867.

13. I have also to approve of the expenditure of 7,500 dollars authorized by you on account of the damage caused by the typhoon.

14. In conclusion, I cannot but express a hope that the community may shortly recover from those reverses from which they are suffering, and I must instruct you to impress upon your Council that it is their bounden duty to restore the colony at once to a sound financial state by promptly reducing the expenditure within the revenue, and providing such taxation as may be requisite to discharge the present expenses and liabilities. I consider that the remedy should be sought as I have thus indicated rather by a reduction of expenditure than by the imposition of fresh taxes; but under any circumstances I can hold out no hopes to them that they will be relieved at the expense of this country.

I have, &c.,

BUCKINGHAM AND CHANDOS.

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