[Enclosure No. 8.]
G. J. Pennington, Pro Secretary, To James Stephen, Esq.

The Lords Commissioners of Her Majesty’s Treasury have had before them your letters of 13th and 18th instant, and their enclosures, relating to the British subjects resident in New Zealand, and to the establishment of a British consulate in those islands, and have also referred to the provision for defraying the expense of that consulate, which has been inserted in the estimate for consular services for the year 1839-40, now before the House of Commons.

With reference to the proposition brought under the consideration of this Board by your letter of the 13th instant, that, page 746 for the purpose of providing for the government of British subjects resident in or resorting to New Zealand, certain parts thereof should be added as a dependency to the Colony of New South Wales, and that the officer selected to proceed to New Zealand as British Consul should likewise receive an appointment as Lieutenant-Governor of the dependent settlement thus contemplated, and with a view to provide for the maintenance of this officer, and of the other public functionaries whose assistance would be requisite for the due administration of the affairs of this dependency, that His Excellency Sir George Gipps should be instructed to recommend to the Legislative Council of New South Wales the enactment of all necessary laws for raising an adequate revenue in New Zealand; and with reference likewise to the request that this Board will concur in delegating to the Governor of New South Wales a general authority to make all necessary arrangements on the most moderate scale for giving effect to those propositions, on the express condition that the expense shall be defrayed entirely from revenue to be raised in New Zealand; I have it in command from my Lords to request you will state to the Marquis of Normanby that, concurring in opinion with His Lordship as to the necessity of establishing some competent control over British subjects in the New Zealand Islands, they would be prepared upon the contemplated cession in sovereignty to the British Crown of territories within those islands which have been or may be acquired by Her Majesty’s subjects under grants from the different chiefs being obtained; also to concur in the proposed arrangements for the government of the ceded territory, and for raising a revenue to defray the expense of the establishments it would be necessary to maintain for this purpose. But I am to request that you will further observe to Lord Normanby that, adverting to the peculiar circumstances which have attended the location of British subjects within the territory in question, my Lords deem it necessary to suggest that the annexation of any part of that territory to the Government of New South Wales, and the exercise of the powers it is intended to confide to the Governor and Council of New South Wales, or to the officer about to proceed to New Zealand in his capacity of Lieutenant-Governor, or any assumption of authority beyond that attaching to a British consulate, should be strictly contingent upon the indispensable preliminary of the territorial cession having been obtained by amicable negociation with and free concurrence of the native chiefs.