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Supplement.

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Supplement to Twenty-Second Report.

—No. 16.—

Mr. Stephen to Mr. Trevelyan.

I am directed by Earl Grey to request the attention of the Lords Commissioners of the Treasury to the accompanying letter from the Secretary of the New Zealand Company, together with the draft of the answer which Lord Grey proposes to return. I have to request that the particular attention of their Lordships may be given to the Memorandum appended to the draft letter, and the terms of the Arrangement with the Company which is proposed therein.

The object, of the letter from the Secretary of the Company is to urge on Her Majesty's Government the claims of the Company, on account of certain wrongs alleged to have been done to it by various officers of Her Majesty's Government, both at home and in New Zealand. The subject is one which has for a long time occupied Lord Grey's attention, and the result of his best consideration of it is a conclusion that the Company has established a claim to redress for various acts which have, in Lord Grey's opinion, impeded the Company's enterprise, and rendered its operations unproductive. For page 58 reasons, however, which are fully stated in the draft letter, Lord Grey is of opinion that the interests of the Public will best be promoted by an arrangement which shall, in the first place, have the object of placing the Company in as good a position as it could have attained had it been allowed to pursue its original plans without undue interference; and which, in the event of that attempt proving unsuccessful, shall provide for relieving the Company from its undertaking.

It will be seen from the Company's statement of the present posture of its affairs, that it is indebted to Her Majesty's Government for advances under the Act of last year to the amount of 80,000l. It is further indebted to Private Parties to the extent of 54,000l. for debentures, which must be paid off within the next two years. In addition to this, it is liable to the Settlers at Nelson for an acknowledged liability of about 25,000l., the means of paying which must be forthwith placed at its disposal. To meet these demands, the Company has a power of calling on a portion of its Shareholders for the remainder of their Subscribed Capital to the extent of 100,000l., and it has, in addition, an extent of Land awarded to or purchased by it in New Zealand, of not less than 1,073,583 acres. The proceeds of the latter can of course only be rendered available gradually, by the continuation of the Company's operations; and Lord Grey entirely concurs with the Directors in regarding the Unpaid Capital as a Reserve Fund not to be called for (at least until the Company shall be in a situation of prosperity) except with a view of paying off the debts, and winding up its affairs.

It appears clear, therefore, that if the Company is to be enabled, by the assistance of Her Majesty's Government, to have an opportunity of restoring its affairs, that assistance must go to the extent of an advance of the entire amount requisite for paying off the demands which will press on it, as well as for conducting its colonising operations during that period. It appears to Lord Grey that the experiment could not fairly be tried for a less period than one of three years. During that page 59 period the Company will be called upon to pay the whole of its existing liabilities, except the debt to Her Majesty's Government. The amount of these liabilities, as specified above, is 79,000l. In addition to this, it appears that the Company cannot carry on its colonising operations for three years, unless it can reckon on having at its disposal during that period a sum of 77,000l. These two items give a total of 156,000l.; but as the Company is entitled, under the Act of last session, to an advance of 20,000l. which it has not yet received out of the 100,000l. provided by that Act, the further advance required for the purposes of the present arrangement will be only 136,000l. This sum Lord Grey proposes to advance during each of the three next years, in such portions as may be required for the year. That is, during the first year, 28,000l. in addition to the 20,000l. remaining from the loan of last year; during the second year, 72,000l.; and during the third year, 36,000l.

This is the utmost extent that it is proposed under any circumstances to advance to the Company. It is hardly possible, however, to conceive that such an amount can be expended in conducting the colonising operations of the Company without producing some clear return; and on considering the principle on which the Company's sales of land are conducted, it is not probable, even under unfavorable circumstances, that out of an effective expenditure of 77,000l. less than 48,000l. will be returned to the Company. Such returns it will always be in the power of Her Majesty's Government to apply in reduction of the amount which it may agree to advance; and the powers which it is proposed to vest in the Commissioner will give Her Majesty's Government the most complete control over the expenditure of the Company, and also over the application of any returns produced by its operations.

At the close, therefore, of the three years fixed for the experiment, the Company will be under advances from Her Majesty's Government to the extent of the 100,000l. provided under the Act of last year, and of any portion of the 136,000l. page 60 which may be actually advanced under the present Arrangement. Its whole debt to Her Majesty's Government will then amount at the utmost to 236,000l.

Supposing the Company's operations to be successful, it will at the end of the three years be enabled to continue them without further aid. As, in that contingency, it is proposed that the Company shall continue in possession, not merely of its own property, but of the entire rights of the Crown to the Waste Lands in the Southern part of New Zealand, the experiment will have succeeded in securing to the Company, by means of a temporary advance, full redress for whatever injury it has sustained from the past acts of the Government, and in placing it in a position incomparably more favorable than it could have attained without the proposed Arrangement. It would, therefore, be just that the Company should in such case repay Her Majesty's Government the whole advance, which will have been productive of so much benefit to itself. But as that advance will, after all, have been made as much for the benefit of the Public as of the Company, it would not appear fair that this debt should bear interest. And as it is most desirable that the experiment should end in the Company's being enabled to continue its operations, it does not appear advisable to subject the Company to a heavy fixed charge for interest on so large a debt.

On these grounds, Lord Grey proposes, that in the event of the Company's continuing its operations at the end of three years, it shall be held to be indebted to Her Majesty's Government in the sum of 236,000l., or of any less sum to which the actual advances may amount; that this debt shall not bear interest; but that its speedy and punctual payment, according to the means of the Company, shall be secured by appropriating to the payment of the principal, until the whole shall be discharged, one-fourth of the clear annual profits of the Company.

The proposed Arrangement contemplates also the contingency of the Company's finding itself, at the end of the three page 61 years, unable to continue its operations on its own resources. In such case, it is clear that the experiment of enabling the Company by temporary advance to repair the damage done to it by past proceedings of the Government, will have altogether failed; and it will then not be just to call upon the Company to repay any part of the advances made during that period for the purpose of providing what will have proved to be an utterly inadequate redress for past injuries. It will also then be clear, that the loss sustained by the Company during the suspension of its operations since 1843 has been of a most serious extent. Under such circumstances, Lord Grey sees no course open to Her Majesty's Government, with a due regard to justice, except to remit to the Company the whole of the advances made to it, in order to relieve it from the difficulties in which the acts of the Government will have greatly contributed to place it.

If the proposed Arrangement were to terminate here, the result would be, that in this contingency the Company would remain in possession of about a million of acres of land, with no liabilities worth mentioning, with no funds to apply to its colonising operations, and (from the very nature of the case supposed) with no hope of carrying on such operations to a profit on its present scheme. It is impossible that the result of such a state of things could be anything but most prejudicial to the colonisation of New Zealand. The Shareholders of the Company, deprived of every higher motive in the extinction of all hope of continuing a large System of Colonisation, would have no object but that of replacing their lost capital by selling their land for as much as would reimburse them. They might effect this if they got a price for it of about 4s. an acre; and it can hardly be doubted that, under the circumstances supposed, almost the whole of their land would be brought into the market at such a price, and possibly even at a less one. In the face of such a competition of a vast mass of low-priced land, all sales of Crown Land in any part of New Zealand at the rate of 20s. an acre would be page 62 impossible. Even if any such sales were for a while effected, the Emigrants carried out by the fund accruing from them would go off to the cheap land of the Company. The whole of the plan for the management of the Crown Lands laid down in Lord Grey's Instructions to the Governor would be frustrated, and the Systematic Colonisation of New Zealand postponed until the Company should have disposed of the whole amount of land in its possession.

Impressed with the evils consequent on such a state of things, Lord Grey has had no hesitation in coming to the conclusion that, in the event of the Company's finding itself at the end of three years unable to continue its operations, the only safe course for the Colony is to make provision at once for putting an end to the Company's existence. As the Company will then be avowedly unable to accomplish any of the public objects for which it was incorporated, it will have no right to complain if it is deprived of the great privileges secured to it by its Charter; and if the property granted to it for public objects is resumed on payment of its fair market value, the Shareholders will probably be satisfied with any arrangement that shall give them a fair chance of replacing, without further risk or trouble, their outlay on their public-spirited but unsuccessful enterprise. Lord Grey proposes, therefore, that, in the contingency contemplated, Her Majesty's Government shall take the Company's property at a value now to be fixed, together with all its liabilities. It is necessary to make such a provision with respect to the liabilities of the Company in the event of its ceasing to exist; but it is hardly possible that at that time there could be any onerous liabilities. The present liabilities of the Company will then be entirely discharged, with the exception of a very small balance which may, on a settlement of some disputed accounts, be found due to the Nelson Settlers, over and above the 25,000l. hereby proposed to be provided for that purpose. The only other liabilities to which the Company can then be subject, will be such as may be contracted during the next page 63 three years with the assent of the Government itself, through its Commissioner; and it is hardly conceivable, according to the Company's scheme of colonisation, that such liabilities should be incurred without a fund sufficient to meet them being in the hands of the Company. The assets of the Company, besides its land, will consist of such dead stock as it may then possess in the Colony; and though the amount of such stock will be inconsiderable, it will be a sufficient set-off against the still more inconsiderable amount of its liabilities.

The land to which the Company is now entitled in New Zealand, consists of 1,073,583 acres; and as, during the next three years it is to have the disposal of the whole of the Crown Lands of the Southern Government, it is clear that it could and would carry on its operations during that period without materially diminishing the amount of what may be regarded its Private Property. The land therefore must be taken at its present amount: the Government could not offer less for it than the price at which it originally sold the same land to the Company, namely, 5s. an acre; and this is nearly half the net price which it now demands for its own lands. Lord Grey proposes, therefore, that the Company's whole present property should, in the event contemplated, be taken by Her Majesty's Government at the rate of 5s. an acre. This would comprise more than 24,000 acres, held by the Company in its Settlements, having been actually purchased by it at from 20s. to 30s. an acre, and likely at once to realise an equal price. The advantage thus secured to the Government would fully compensate it for any possible surplus of such liabilities as are mentioned above.

The debt of 268,000l. thus due to the Company would not, however, be a charge upon the Imperial Treasury. As the value of the Company's land must always have been contingent on the general success of the colonisation of New Zealand, the Company cannot reasonably expect that the price should be charged on other than the Crown Lands in New Zealand. On page 64 the other hand, the price thus due for the lands acquired from the Company by the Crown must be a charge on the whole of the Crown Lands of New Zealand. The purchase of the Company's lands is, for the reasons stated above, essential for securing a proper value to the whole of the Crown Lands throughout the entire extent of New Zealand. The cost of a purchase beneficial to the whole estate, must in justice be charged on the whole estate, and if the Crown Lands of New Zealand are worth 5s. an acre, the Crown, as Trustee for the Colonists, will get the full value for its money in the lands to be taken from the Company. It is on these grounds that it is provided in the proposed Arrangement that the principal and interest of the price thus agreed to be paid for the Company's land shall be charged on the whole of the proceeds of the sale of the Crown Lands in New Zealand. It is a necessary part of the present Arrangement that the Crown should remit all claim to interest for the advances made under the Act of last Session. The principle of the present Arrangement being that these advances should be regarded as a set-off against the claim urged by the Company, the interest which would be due on those advances is set off by the counter-claim to interest which the Company would advance in respect of the postponement of its claims.