IMAGE EVALUATION TEST TARGET (MT-3) 1.0 lit m ■ 2.2 I.I us IM 11:25 IHU 11,6 11^ I '/a VM >> Photographic Sciences Corporalion n WIST MAIN STMtT wnsTn,N.v. usio (7U) t72-4903 CIHM/ICMH Microfiche Series. CIHIVI/iCMH Collection de microfiches. Canadian Institute for Historical Microreproductions / Institut Canadian de microreproductions historiques Tvchnieal and Bibliographic Notaa/Notas tachniquaa at bibliographiquaa Tlul to Tha Inatituta haa attamptad to obtain tha baat orioinal copy availabia for filming. Faaturaa of thia copy which may ba bibiiographically unique, which may aitar any of tha imagaa in tha raproduction. or which may aignificantiy changa tha uaual mathod of filming, ara chackad balow. □ Colourad covara/ Couvartura da coulaur I I Covara damagad/ Couvartura andommagAa □ Covara raatorad and/or laminatad/ Couvartura raataurAa at/ou pallicuiia □ Covar titia miaaing/ La titra da couvartura manqua rn Colourad mapa/ D □ D D Cartaa giographiquaa w* coulaur Colourad ink (i.a. othar than biua or black)/ Encra da coulaur (i.a. autra qua blauo ou ncira) I — I Colourad plataa and/or illuatrationa/ Planchaa at/ou illuatrationa an coulaur Bound with othar matarial/ Rali* ava« d'autraa documanta Tight binding may cauaa shadowa or diatortion along intarior margin/ La r9 liura tarrAa paut cauaar da I'ombra ou da la diatoraion la long da la marga intiriaura Blank laavaa addad during raatoration may appaar within tha taxt. Whanavar poaaibla. thaaa hava baan omittad from filming/ 11 aa paut qua cartainaa pagaa blanchaa ajoutiaa lora d'una raatauration apparaiaaant dana la taxta, mala, lorsqua cala Atait poaaibla, caa pagaa n'ont paa *t* fiimAaa. Additional commanta:/ Commantairaa supplAmantairaa: L'Inatitut a microfilmA la maillaur axamplaira qu'il iui a M poaaibla da aa procurer. Laa details da cat axamplaira qui aont paut-Atra uniquaa du point da vua bibliographiqua. qui pauvant modif iar una imaga raproduita. ou qui pauvant axigar una modification dana la mA^hoda normala da filmaga aont IndiquAa cl-daaaoua. rn Colourad pagaa/ Pagaa da coulaur Pagaa damagad/ Pagaa andommagtea Pagaa raatorad and/oi Pagaa raataur4aa at/ou palliculiaa nn Pagaa damagad/ r~^ Pagaa raatorad and/or laminatad/ Th« poi ofl filn Ori bai tha aior oth firai aior ori n Pagaa diacolourad. ttainad or foxad/ Pagaa dAcolortaa, tachatiaa ou piqutea Pagaa datachad/ Pagaa ditachias 0Showthrough/ Tranaparanca D D Quality of print variaa/ Qualiti inigala da I'impraaaion Includaa aupplamantary matarial/ Comprand du material auppKmantaira Tha ahal TIN whi Map diff4 antii bagi right raqu mati I — I Only adition availabia/ Saula Mition diaponibia Pagaa wholly or partially obacurad by errata alipa. tiaauas. ate. hava baan rafllmad to anaura tha baat poaaibla imaga/ Laa pagaa totalamant ou partiallamant obacurciaa par un fauillat d'arrata. una pelura, ate. ont 4ti filmiaa A nouvaau da fapon A obtanir la maiilaura imaga poaaibla. Thia itam is filmed .nt the reduction ratio checked below/ Ce document est film^ au taux da rMuction indiquA ci-dai 10X 14X 18X 22X 26X XX / 12X 16X 20X 24X 28X 32X re l«tails M du nodifier ir una ilmag* Tha copy filmad hara haa baan raproducad thanka to tha ganaroaity of: Univtriity of Swl M tchew a n Saikatoon Tha imagaa appaaring hara ara tha baat quality poaaibia eonaidaring tha condition and lagibiiity of tha original copy and in kaaping with tha filming contract apacif ieations. Original copiaa in printad papar covara ara filmad baginning with tha front covar and anding on tha laat paga with a printad or illuatratad impraa- aion, or tha back covar whan appropriata. All othar original copiaa ara filmad baginning on tha firat paga with a printad or illuatratad Impraa- aion, and anding on tha laat paga with a prlntac] or illuatratad impraaaion. BS L'axamplaira fiimA fut raproduit grica k la ginAroait* da: Univanity of Saslcatchawan SMkatoon Laa imagaa auivantaa ont ttS raproduitas avac la piua grand aoin, cpmpta tanu da la condition at da la nattat* da l'axamplaira fiim«. at an conformity avac iaa conditiona du contrat da filmaga. Laa axamplairaa originaux dont la couvartura 90 papiar aat ImprimAa aont filmAa an commandant par la pramiar plat at m tarminant aoit par la darnlAra paga qui comporta una amprainta d'impraaaion ou d'illuatration. aoit par la sacond plat, aalon la caa. Toua iaa autraa axamplairaa originaux aont fllmia an commandant par la pramlAra paga qui comporta una amprainta d'impraaaion ou d'illuatration at an tarminant par la darniira paga qui comporta una talia amprainta. Tha laat racordad frama on aach microficha ahali contain tha aymbol — ^ (moaning "CON- TINUED"), or tha aymbol y (maaning "END"), whichavar appliaa. Un daa aymboiaa auivanta apparattra aur la darnlAre imaga da chaqua microficha, aalon la caa: la tymbola >-^> aignifia "A SUIVRE", la aymbola y aignifia "FIN '. Mapa. plataa. charta, ate, may ba filmad at diffarant raduction ratioa. Thoaa too iarga to ba antiraly includad in ona axpoaura ara filmad baginning in tha uppar laft hand corner, iaft to right and top to bottom, aa many framaa aa raquirad. Tha following diagrama illuatrata tha mathod: Laa cartaa, pianchaa, tabiaaux, ate, pauvant Atra fiimAa A daa taux da reduction diff Grants. Loraqua la document aat trop grand pour Atre raproduit an un aaul clichA, ii aat film* A partir da I'angla aupAriaur gaucha, da gaucha A droita, at da haut an baa, an pranant la nombre d'imagaa nicaaaaira. Laa diagrammaa auivanta iiluatront la mAthoda. irrata to paiure. n A I 32X 1 2 3 1 2 3 ' 4 5 6 CANADA RAILWAY LOAN ACT (1867). W. HE RETURN to an AddreM of the Honourable The Houie of Commoni, dated 36 April tSyo •,—J'or, " COPY of any Despatch or Despatches from the Colonial Office to the Governor General of Canada containing the Opinion or Opinions of the Law Officers of the Crown respecting the Inrestment of Money raised under the Authority of the Canada Railway Loan Act (1867)." Colonial Office,! 17 May 1870. / W. MONSELL. {Mr. Monk.) Ordered, by The House of Commons, tn be Printed, 1 8 May 1 870. 244. [ m ] SCHEDULE. DESPATCHES FROM THE GOVERNOR. No. in SeriM. Date and Number. SUBJICT. Page. 80 Mny 1860 (No. sa.) 90 June 1860 (No 67.) 34 Jane 1860 (No. 70.) 38 October 1800 (No. lis.) 80 October 1860 (No. 117.) S3 Dec. 1800 • (No. 163.) Telegram (Re- ceived 30 April 1870). 21 April 1870 - (No. 70.) Trangmita an approved Mioute of the Privv Council of the 20th May 1860, and alto a Memorandum by the Minister of Finance with reference to the measures adopted by the Cana- dian Government to provide temporary investment of the' money raised under the Iraperial guarantee, until it shall b«. required for actual outUy ------- Forwards a Minute, dated 18th June 1800, adopted by the Privy Council of Canada, deprecating the construction which has been placed on their action, as well as objecting to the opi- nions expressed, and the instructions given in the premises by Her Majesty's Government Advertintr to the Minute of the 37th August 1868, encloses Cor- respondence respectini; the Intercolonial Loan, and Minutes of Council of the SOth May and 1 8th June. These docn- ments furnish, on the part of the Privy Council of Canada, replies to the queries, as to what extent, and in what way, the loan had been employed, and contain the observation which Mr. Rose and his colleagues offer as the eiplanationii of the course they have pursuea - • . . . Transmits Minute of the Privy Council of 13ih August 1800, enclosing Minute of the Treasury Board, dated Uth August, on the subject of the Intercolonial Railway Loan - - . Forwards a Minute of the Privy Council of Canada, dated 9nd October 1860, respecting the investment of the Intercolonial Railway Money -.-----.- Explains how the delay in forwarding the Minute of Council of lath August occurred - Ha.« requested Sir F. Hinck's to give a correct version of his remarks, and the Ministers to furnish a statemeut of the pre- sent position of Intercolonial Railway Loan Funds With reference (c Earl Granville's telegram of the 18th April, encloses a statement, furnished by Sir Francis Hincks, respect- ing the investment of the loan 10 11 IS 17 18 18 DESPATCHES FROM THE SECRETARY OF STATE. 1 June 1860 (No. 07.) 244' Requests to be informed to what extent, and in what way, the loan has been employed under the aiitliority of the Minute of 27th August, and instructs the Governor to reiuso his con- currence in any mode of dealing with the money remaining in the hands of the Government other than that of invest- ment property so called. Would be glad to receive from Mr. Rose any observations respecting the Minute of 27th August, \rb ch he may consider calculated to remove the strong objec- lioi'ns which at first sight attach to it • No. ia Seriet. Date and Number 8 July 1800 (Nu. 119.) SO Not. 1860 (No. 216.) 15 Jan. 1870 (No. IS.) 10 April 1870 (No. 09.) [ iv ] SuDJBCT. Acknowledge! Despatch, No. 67, of 3nili .lune, in relation to Lord GraiiTllla'f Despatch, No. U7, of |g| Juno, rclutin;; to tlio diipowil of munej'^ railed under Imperiul Guarantee. Rcquoats >Jir John V 7 to asiure liii Adviicn that liii Lordahip never had any intention lo call in qucition the finnnoia! integrity of the Dominion of Canada, itiU leia the |)er»unal hunuur of Mr. Rote and hit colleoguea. Endoaef tiro opinioni of ihi Laur Officem of tho Crown, luught and (liven with no untriciidly Icvlin;: towards the Cnnodinn lioyernmcnt, and exprcuea an opinion aa to the propriety of placinj; ihu money in tho gliape of a distinct fund •-......-. Acknowledges Despatch, No. 113, of the 38th October, en- olosini^ a Minute of the Privy Council, of 13th August, on the Bubjcct of the Intercoloniul Railway Loan. This being a aubject of much interest to the Imperial Government, his Lordship would have been ghd to have received the Minute at an earlier date ........ Willi reference to the delay in frrwarding iho Minute of the 13th August, states that Sir J. Young's Despatch, No. lOa, of the S2nd Df-cember, furnishes a full and complete ex. phuiation of the delay • - ..... Forwards copy of Telegraphio Despatch sent to Sir John Young on the 18th April: — '* Early explanation requested of Statement by Minister of Finance in Budget Speech; that Law Officcis' opinion as to Railway Loan will not be followed" Page. 31 33 33 34 Co I Mir Gov gnai CORRESPONDENCE BETAVEEN THE COLONIAL OFFICE AND SIR JOHN ROSE, k.c.m.o. No. in Series. From whom. Subject. Page 1 Colonial Oiiice, As it is proposed shortly to lay before Pnrlianirnt certain 10 May 1870. Papers relating lothc investment of the Intcrculonia! Rail* way Loan, Lord Grnnvillu would he glad to lie furnished with any statement wiih regard to tlio actnal expenditure and profrrcss of tlii! Railway works, and of the oliligationH Bi^suiiu'd up to the present time, which Sir John Rose, from his intimate knowledge of the subjcet, may bo able to supply 24 3 Sir John Rose, Forwards a statement of the progress of the Intercoloniul 13 May 1870. Railway, of the expenditure 011 it, uiid the obligations assumed up to the , resent time, in compliiince with tho letter of Sir Frederic Rogers of the lOtb May 34 Hon Cana Impe quire ment! there forth Th Conin that I Railw and w 1807; order 1 niiiv 24 [ ' 1 COPY of uny Dbbpatgu or Dbspatohis from the Colonial Office to the Governor General of Canada, containing the Opinion or Opinions of the Law Opficbrb of the Crown respecting the Investment of Money raised under the Authority of the Canada Railway Loan Act (1867). Despatches from the Governor. (No. 56.) No. 1. — No. I. Copy of a DESPATCH from Governor General the Right Honourable Sir John Goranor Ganenl Vouna, Bart., a.c.B., to The Earl Granville, K.o. Sir John Young, Btrt, o.c.B., to Ottawa, Canada, 30 May 1869. ^l^Xiier* My Lord, (Received, U June 1869.) I HAVB the honour to enclose, for your Lordship's information, an approved Minute of the Privy Council, relative to the measures adopted by the Canadian Government to provide temporary investment for the money raised under Imperial guarantee for the construction of the Intercolonial Railway. I have, &c. (signed) John Young. Enclosure in No. 1. Copy of a REroRT of a Committee of the Honourable the Privy Council of Canada, approved by His Excellency the Governor General on the 29th May 1869. TnB Committee have had under consideration the annexed Memorandum from the Honourable the Minister of Finance, havint; reference to tlie measures adopted by the Canadian Government to provide temporary investment for the money raised under the Imperial guarantee for the construction of the Intercolonial R.iiUvay, until it should be re- quired for actual outlay, and tliey respectrully report their entire concurrence in the state- ments made and the views expressed in the saia Memorandum; and advise that a copy thereof be transmitted b}' yuur Cxc-ellency to the Ri<;ht Honourable the Secretary of State for the Colonies, for the information of Her Majesty's Government. Certified, W. A. Hinsworth, Assistant Clerk, Privy Council. Enol. in No. 1. 124 Sub- Enclosure in No. 1. Thk Minister of Finance has had his attention called o an inquiry in the House of Sub-Encl.inNn, 1. Commons, whether the Governor General has approved of a " Recommendation of C >uncil, that money raised under the Imperial if with all pnirticaiile •peed." The Government felt it to ho their duty to carry out thin provision of the constilutioii witli all poHiiibie dili|fenoc, A i{reiit [xirtion of the route had been so far nurveyed in f4inner yiarH that it wbk believed it could be placed under contract in the courte of lant MUiniuer or autumn. ■J. It wai, however, necessary, before doin.' thin, to pinco the loan ; and the Finance MniiKiei, in the courne of Iiii4 negotiations with the Iinpcriul Government in Julv \eH6, ihiiiiiated that he would only raii«o oiie-hdf the authorised amount until ihe pro}>rc8« of the wurkt made it neceaaary to provide the remainder. 3. In the course of iie)rotiiitiuti.s with the fiiMiicial a^entH, Men'irs. Baring and Olyii, the Finance Miiimter endeavoured to ponlpone the jMiyinunti* on the loan to as remote a day as possible ; but it was thought thai it would inilitatc a^ainitt the aiiccess of the operation if the Inst instalments were deftii red beyond April 1869, or if the privilege of payin;; by aiitici- pation were not accorded to the subscriberi. 4. When the loan was contracted for, a coniiderable number of the subscribers availed themselves of this option, and a larue amount of money was paid in by anticipation. As interest on the entire loan ot two millions (thret-fonrtns bearing four per cent., and one-fourth liearini; five per cent.) be);an in July Dioti, and was payable by Canada from that day, it became the ubvious duly of the Govcniuient so to pLce the money received as that an undue loss of interest might be avoided. 6. The Minister of Finance accordin^jly requesteil Messrs. nnrin;; and Glyn, the financial agents, to endeavour to do so at the be^i rates Ihey ronld, " compatilde with perfect security and immediate convertibility;" but these pentleiiien infnrniud the Government that in the present state of the money niaiket, and coiiNi'.tcnily with tliese conditions, they could not obtain a hit;her rate of inleiest than (>ne per ixiit. per annum. Had they been able to huvc pineed the deposits iit any reasonable rate, the Goveriiinent would have been relieved from the necessity of seeking other means of temporarily employ- ing the instalments. 6. Under the circumstances mentioned, the Government had, hotvever, to consider what other means, on the like conditions of imniediatu convertibility and perfect security, were open to them as a temporary investment. 7. The Government of Canada was, at that time, about issuing; securities lo provide for certain engagements of the Dominion which it was desirable to fund or otherwise meet ; and It was con8ievcii in nunibi r, I(t'2 miles in length, und the cost is estimated at 6,OUO,OOU dollars. On these sections operations are being actively pro- secuted, and the contraclois are entitled to payment us the works proceed. 0. The engineers have been cnntinnalfy enguu'fd in locating the remaining sections, and these will be placed under contract as rapidly as possible. On one portion of the route a railway had been alreadv built by :i private company, about .10 miles in length. The pro- priety of acquiring this line, and makiii'j; it a imrtion of the Intercolonial, was always con- templated as a possibility, and if tlie negotiations having that object in view, whicli bei;an some time ago, are concluded, it will involve an .mmediale large cash outlay, in addition to the payment of the current works, o.it of the Int'.'i'colonial Fund. lu. It will thus be seen that tin^ most energetic steps were taken from the outset to acceleiate the progress of the works, und tliat tiic (ioveinuient are not open to the suspicion ot havintitn(le and good faith, the obligations entailed upon them by the Act of Uiii'Oi, with relereiice to the Intcicolonial Railway. II. It may be asked why i'"( loan could lint have been postpuned for some mouths, or a less uniouiit issued, iiiasmucli u:. it now iippciirs that the whole of the money will not be spent lor some time? To this nupiiry thi re are obvious and conclusive answers. The Goveiiimriit could enter into im contracts, nor nei^oiiate lor the aKiuisition of any interme- diate porlidii ol the line, until they saw thai the money w.is availubie. A considerable sum had aciii.illy lieen spent on surveys, xc. &c., by anticipation. Tin? money market was then unusually lavounible, and it might have lieeii a nio-l si'rious mailer, in a pecuniiiry piiinl of view , to the Dominion, if the loan had lioi n ('eferred until a cniiditioii of things arose which might have entailed on Canada the payment lor :»,» year- of a hiulier rate of interest. The financial :i(;rnts of the Government coiihiilrrt'd tlic time unusually o|>portune. Ilcr Majesty's (juvcrnment ivero in full possession of all the circumstances, and gave their umiualiiieJ Sei to CANADA RAILWAY LOAN ACT (1807). 3 unqualitied vjnient to tlio oprration on the ternii und to the extent In which it was carried out. 12. Thp (lovernmfnt of Ganiida hnd thererore, iimler thcue rirci)m«tance«, tn deal with the alteriiiilive, oC nllowini; the Inr^e di>|ioiitH to rnninin niiprndiMtive and rntail a \om of ahoui 3riO,ou() dollaiH u year; or of plnciii); tlirin temporarily, and in u wity thiit would he availulile us ilie money una required tor HCtuul outliiy. It wan not unnnturnlly to he Hoppnsi'd, tliat if tlie Imperinl Goverinneiit hud lufficicDt contidunce in Cuiiudu, to g;uDrantfe or piKhirxe her IximU, that ciiiiAdence aUo extended to truHiini: her with the ontluy of the nioni^y on the work for which it lind been niined; a work which WHS declnri'd to be eviiuntiul to the connolidutinn of the Union of Briti»h North Aoierico, iind u condition of the niiHRnt thereto, of Nova Scoiia iind New Hrnntwick ; and one to the completion of which the good faith und interest of every Province of the Dominion were pledu;ed. If the Iniporiiil Government had conveyed the intimation that Caniida could not be rntrugtcd with the money for the |)roDecution of its own work«, or hitd sought to impose rt'iitriction* on itK outlay, which would necesturily have preauppoaeil ihat distruHt, tlio Finance Minister believes it would hiive been the unanimous opinion of the peo|>lo of Canada, that the guarantee of Her Majesty's Government to the loan, however liiuhly they nii^'ht hiive prized the gmntrng of it, and however advantiigeouii it might have been, oui^jit not to have been accepted on such a condition. 13. The meaning of the inquiry made in the Mouse of Commons plainly is, that, under the pressure of financial necessity, Canada used the Iniercolonial money ; if indeed the inquiry he not meant to convey ihe ini|>utxition that Canada raised the loan prematurely with that object. The Mimtiterof Finance behevcs it to be his duty to repel an inHinua'ion which would be alike unworthy of the G racter fnr good faith and straightforward integrity which the people of every Province of the Domnnon have justly earned, and for the maintenance of which they have ever held the representatives in wnoni they place confidence to a strict observance. 14. 1 1 is only necessary to a^ 'ert to the financial condition ol' Canada at the time, to prove how irreconcileablc with the actual facts such a supposition is. It is true that there was a certain amount of floating liability due by the Dominion, but only to its fiscal agents in London ; its bankers in Canada, and a small amount to one of the Provinces of the Dominion. This liability, so far from being pressing, wa« one whicli the public creditor would have too gladly allowed to remain, but the Government thought it proper to make provision for its gradual fundin<;, partly out of deposits in the Government savings banks; partly out of deposits required from insurance companies, under ihe law, and by other equally certain mean.i. Had tiiey been disposed to place a loan for the purpose on the marKet, ii could have been successl'idly accomplished wiihont any dilKuulty ; for the only loan issued since the Union (except the Intercolonial) was promptly taken up in Canada ; the six per cent, stock being now readily saleable and in continued demand nt a premium of eight to nine per cent. ; and the Government has been compelled to decline repeated applications for further issues. A certain amount of bonded debt also fell due last autumn, for which ample provision had been made, but the great bulk of the holders expressed in advance their wish either to renew it or convert it into the Dominion Stock already mentioned ; an otier which the Government thought it proper in the public interest to decline. 16. It is unnecessary to say more to prove how unfounded any imputation is th>sity had any part whatever in inducini; the arrangements with releience to the temporary investment of the Intercolonial money, or to show that the Govtrinnent was influenced solely by the one single consideration of finding a temporary investment for it, un the condition of perfect security and immediate convertibility, by which a heavy loss of interest might be avoiiled. Ill carrying this out, the Governmcni took unwonted and exceptional precautions in order that by no possibility uhntover might there be any doubt that the money borrowed would be as sale and as immediately available as ii would have been were it deposited at call in the Dank of England. 10. Some of these precautions are indicated in iieneral terms in the Order in Council, approved ol by his Excellency tiie Governor General in August last, a copy of which, with Ihe accompanying report of ihe Minister of Finance, it is presumed, was transmitted to the Secretary ot State for the Colonies by his Excellency. The Minister of Finance is not aware that any exception has ever been taken to the arrangements so made. 17. It is proper briefly to recapitulate the means immediately and prospectively av.iilable to the Government of Canada for the purposes above mentioni'd. n. The Government have a cosh balance in the hands of their bankers of upwards of 2,750,000 dollars, a portion of which they are now endeavouring, though so far unsuc- cessfully, to place on special deposit at interest. b. They have a further special deposit with their bankers, at 4 per cent, interest, of 1,600,000 doUa B. 244- ■ A a c. They PAPERS RELA'llNQ TO THE No. 2. Go*(>rnnr General Sir John Younp, Ban., O.C.D., to EarlGranTillo.x.a. 30 June i86g. • Page ai. Usring sihI Ulyn worth thout e. They h«r< in tli« handa of M«Mra. Hiring and Olyn an amount •■tiroatad by tha laai advicta at a.Ooo.uuo dollara. 4, Thry have India Ikxida in tha handa of M« 7ftO,ooo dollara, t. They have preff>renlial aecuritiei, of undoubted value, payable in I, 3, :i and 4 yaarit from Jununry laxt, with inter*it, of Ihti Urmt Weatern HailwMy Company of OinaJa, amountin); to 3,750,000 dollara. f. Thvv have lecript* Ironi the Poat Office Savinga Hank, which ainoe their entab- liuintpnt nave averaged about 50,000 dollara per month, and wliicb in the courae nf the next year are e>iimat«d (beyond the uaab in band) at fl00,00U dollara. g. They have depoaita by iiiauraiior vompaoiea of conaola, atock*, and bondx, about to be converted inio caah within two yeari, of 1,500,000 dollara. h. They have purcbaaed bondi, in anticipation ot the requirementa of the Inter* colonial Sinking Fund, lo about 370,000 dollura. I. They have provided, over and above the Ibregoing nieana, apecial credita with the banker* and Anancinl agenta of the Onvemment for (he eipraaii purpoae ol meeting any poaaible call on Intercolonial account, to wit, with Meaara. Dariiiu; and Glyn, 1,350,000 dollura. The Dank of Montreal, 3,500,ouo dollars. 18. It will thua be auen that the itnteroent of havint; applied the money ruiaed under the Canada Loan Act, 1B67, in piiynient of the general deuts of the Dominion in contra- vention of that Act, ia without a aliodow of foundation. The credit of the Dominion of Cunada ttanda too well to render the recoune to iiny indirect or unworthy nieana for the payment of her debtt ncceMary, and Mho prizoit bur reputation for good faith too htuhly to reoort to tbfnt. Canada haa but to otfur hor own aecuritiea to her own people, or on the London money market, aa iihu may think most for her advantage, to find whatt- ver nieana are needed for the maintenance of the public credit, or for the prooecution of enterpriaea which her people think can he prudentlv and iidvun- tageou»ly undertaken. And while her obliiration to complete the Intercolonial llailway will be lulfilled to the letter, 8he clainie the right of making auch aubaidiary urrangenmntu, whether in regard to the loan or the work« themtelveR, oa her own inti^reata may recpiire. 18. Her Majetty'a Ooverninent bus hitherto extended a most generous confidenco to Cunada in connection with all the antecedent negotiation* on tbia subject, and Hbe lion no reaton to belif ve that in future that coiiAdence will be ubrulged. This feeling induced the Miniater ot Finance to recommend lo hi* Excellency the jiropriety of making the extra- ordinary and unwunted proviaiona alri.'ody referred to; provisions which under ordinary cir- cumalancca need nor have been made, and it now im|)ela him to aiibinit these observatinna for your Excellency's consideration, in order llmt Her Majesty's Oovernment may liavc the means of justifying the confidence which in this matter as in nil others they have invuriubly reposed in the good tuith of the inhabitants of British North Aniericn. It IS the duty of Canada to see that the unuunt of the loan i.s f litlifully expended on a work in which Her Majesty's (jovcrnmeat and the D.) My Lord, (Answeied, No. I.'O, H July IHno, |i. Jl.) I HAVE the honour to acknowledge the receipt of your Lnrdiiliip's Dcspiiteh of the 1st June insliint, No. 97,* and to trnnsiiiit, in nffrence thereto, a .Minute ndojited by the Privy Council of Canada, deprecatinur the construction wliicli has been placed on their uctinn, as well as ol>jfctiii<{ to the opinions expressed and the iDsliuctions given in the premises by ller Majesty's Govenimeiit. I have, kc. (signed) John Voung. I F"' nil IIIKJ IllJI frc of it w tliux stiu< roil 1 n.iii aiiKi 'oin Loan inasn route Tl pus. (if 24 CANADA RAILWAY LOAN ACT (1867). dby iltout ind4 nyof Butah- of tlie about Inlcr- riih the nMttng >d under I cantra- e to «ny hiT own ml for her credit, or id advun- ,ilw*y will iigeinent'i :e ■ MiNurK ol the^Quecn'it Privy Council fur Can»dn, adopted 18 June IVOtt. Enol. la No. i. Miiy it pli'iife Your Kxcelliiicy, Tub I'rivy CoiuumI Iwvl- Imd uiitier connideratioii thu OeH|mtcl> of the Secrotary of Stiita fur ihf CiiliiiiirH, under (iiitv of llm l!>t Juii*!, mi tlio Huhject of the Intercolonial RaiiwHy Lull, which wim referred lo theni liy your Excellency, mid have now the honour to rejiort ■■ fi'lliMMi: — 1 Ik Sroptnry of Sinie winhc* tn Icnrn from your F.xrellency to what ixteiit tliii liouii hat bt'in riii|ilciyetiiiciit)i, pro|ierly so cnlliil ; uiul he desiieH to receive fioiii the Minixter of Fii ttiice any (ili«erva(ioiiK lerpeitiii^ the Minute in queition which he may connider r:i!cu- leteil to remove llie Rtronp: obicclioiig which in the opinion of the Secreiary of State al fint mpht atliicli to it. Yiiur K\cellei'cy'N Advinero, while they will mo*t reiidily afford the uiiiplefit information oil the i>iihjei't of the Loan, uiiil lerptcliiiK the manner in which it Iium been dealt with, would desire nt the outnet to nay that they xre all equally reDponaibIn with the Miniater of Fiiiiiiicc liii' the iinanut nieiitH, n" well IuucIhiik th>' Loan tin for the 8ubMV(|U) nt pinploynieiit ul uiiy piii't of the nione\>>; that they partieiiiuled in ri'roiiiniendiiiL' to your Kxielleiay'M |Jrl'd^('e^llo^ the coiime which waN taken witli reference to it, and they cannot recoumgc the priiiriple oi perniMlin): one ol your AdviiieiB to b" charged with n tpeciul niea!|i!>ich now under review wii> virilten without a full co<;nizunce of all the cireuini-liiiu ei« coiiiicnted with the proposed possible teni|M)iary investment of a portion of the niMicy, It ni^iv iiot bi' unadvisnliie, however, a<;Bin to call attention to the fact, that the Inter- coloniiil l.ouii Act provided ihui Caiiadii.iind not ihe Imperial Qovernment, should rai>e the l.oi'n ; tliiit the duty ot deterininin<; the mode in which the rond Klioiild be constructed ili\oiv(d wholly on Canada ; tliiit she liux accordingly provided, with the sanction ol the liiipiiiul (ioxenin Mit, iliut the work sliiill be doiir by u (.'ommission appointed by Canada, (iikI r(h| oiiKibIc only to the Government mid Pnrlliimeiit of Canada. It is lurther lequired that Caiindn shall proviile for the raisin.d Loan of 1842, which was Mised not by Camilla liut by the Imperial Gnveriinicnt itself, and inaii:i^>.'d b;, it; whereas in the present case, the Iiiiperiiil Purliament would appear lo have jinrposelv dissociated Her Majesty's Government from all connection either vith the work itself, the raising of the loan, or the maiiuueinent of the fund. So implicit indued »ould the coiifidince in Canada appear to have been, that it was provided that the sinkinu fund iiiiuht lie invested in the securities ol the Doiuiiiion, thus practicalli accepting the credit of Canada as the sole security, not only for the coii- struciion of the work, but for the ultimate repayment of tlie money. The iieuiiiiaii'ins aticiidiiig ilie Loan in July last were conducted obviously in the spirit of this leiiislution. Her .Majesty's Covernnieiil wisiied only to reserve their appioval of li.e route lietiire endnrsinu the bonds. It was thoiiuht pru|iei, however, that the pinposed terms of the Loan should, in the niiiuiest particulars, be conimnincated to Her Majesty's (lovernniei.t, exhiliitiiiir tlie aiiioiiiit piopused to be raised, the uiude and time ol |>nyiiig the instalments, and even the form of lioiids lo be issued. It was at that time perfectly apparent thai the moiety of the Loan which was tlieii raised would nut all be lequireu for a considerable interval ol tiii.e, inasmuch as the sanction of Her .M.ijesty's Government hud only tiien been given to ilie route; until which sanction no contracts could be entered into, or outlay incurred. The Privy Council would invite nltentioii to the fact that althoutjh cveiy detail was in possession of Her Majci-iy'B Government, no objection whatever was ir . to the terms so 244. A3 piropoaed; PAPERS RKLATING TO THE h' proposed ; it was not stiggested that the Loan was premature or needleg>ly large, nor did they oil !;iiy ocjnsiuP express any wish wimtever to luirticipute in controlling or r.iitnat^ing the appioprin'.ion of the moneys in the interval. That duty had lieyond ail quisiion been delegated to Canada alo-,e. If llcr Majesty'!* Government had evinced a confidence in Canada more limited thnn i*tti!'nn."rn: had reposed, or, by scckinp; to interpose a joint control, had exhibited a distrust either of the credit of ('anada or of its ^ood liiith in expendinir from Loans uiid from other sources, go into the ordinary cas'' balances in the hands of the bankers and fiscal agents of the Dominion, out of which nil calls are met, and it cannot therefore be said, in strictness, that any portion of such balances has been specifically used for one purpose or another. In former statements it has been assumed that the Intercolonial money would be available for the payment of a certain part of the debt since redeemed without reducing; the ordinary bank balances at all. In the statement now transmitted to your Excrllency, the Inter- colonial payments are included in the bank balances, and these balances are regarded an available for the Intercolonial Fund so guaranteed. Keeping this explanation in view., it will be perceived, that after dedneting the expendi- ture on the road since Confederation, the Iirini Bonds and oilier investments, and the cash balances, at no time since the Loan was eontracted has the amount raised ol, the Imperial guarantee been really drawn upon ; and it was <,:ily during the first lew weeks, when the proceeds of th'i Loan, as paid in to the fise ' agents more than covered tlie amount by which they were in advance to Canada, and liclur^' the instrui'tions for other investments could be cani'>d r _,^ tliat this has even apparently been the case. If, ai for'nerly stated, certain redemptions of the Public Debt were considered as being made ont of a portion of the Int'-tcolonial payments, the Bunk hrd.inees liecame corres- pondingly larger than if these redemptions had been met out of ordinary funds. But if a close examination is nadc into the state of tiie bunking aecounts, the very important liict is disclosed that the ordii>ary Hank •lalanccs, wliiliy iriespcetive of that p'lrtion of the Interco- lonial money raised on tiie Imperial gnarantce, have at every date (except during a portion of the qimrterending 30th September iHtlB, when there was a small dillerence of ;):j!t,oil() dollars, or tW,fl57/. sterling) been morf than niliyuntf t> meet the rniemplloiis anil all other payments whatever, irithont usinr dealing lopt. nreservfd , energetic temporary li Ulster of tageous to cb, though ird against ke it more yiug unpro- ^s available, Treasury. a btatement 1 guaranteed , go into the oiuiniiin, out ly jjortion of 1 be available the ordinary y, the Inter- e re^^arled us the expcndi- , and Ih*" ens'* . the Imperial elcs, wlit-n the ount by which leiits could be icred as being lecanii! curres- nils. Uiit if a riportaut fact is of tlif Intcrco- iiriiig ;i portion iMice'^ol' Ui3l>,00(> IS iind nil ot-h'^"' nowj. In other iited sum, liad at )eri;il'j;uaranto(!; , no put iif 'be ilaced by lurtber ey permitted the M'wise have done, ^mciit were more ercolouial money nspnctor General, September Hl'iS, the the payment, on ilic ;^nuranteed Intercolonial Loan, after deducting a portion only of tha expenuitiu'c on the work, amounted to .-..-- ^•2,027,773 while the funds on h.'iid were ...---- 2,588,059 In the (jUiiitcr ended 31st December lilU8, '.he payments had amounted to- 6,408,523 while the f-.iids on hand and invested, were ..... 5,4li7,(i88 In the quartet' ending 3tst March 18(iU, the payments had amounted to- - .• - - 6,488,165 while the funds on hand were ....... 6,»72.881 And up to the Ktth June iiL> measures contemplated in the Minute ul August last, were pr.>mpti'd not with the object of orovidin:; for any temporary necessities of Canada, but solely as a means of avoiding the loss of interest which would otherwise have arisen. Ample arrangements hud been made previous to floating ihe Loan for meeting the accruing engagements of Canada. These arrangements vi'ere actually countermanded, the maturity of other loans was anticipated, and payments made in advance, when the possible expediency of finding employment for a portion of the Intercolonial instalments forced itself upon the consideration of the Canadian Government. As lo the means ]jroMded for making such portion of the Loan as might have been or may be used, instantly available, it is perhaps even less necessary again to enumerate them in view of the facts disclosed in the reports of the Audito;* General and the Deputy Receiver General. The work of ihe Intercolonial Railway is admitted to be one for the benefit of the empire at hirgc, as well us of Canada, and it is certain that for many years it will be a heavy charge on the Canadian Treasury. The Government of Canada btlieve they would have been greatly wanting in theif duty had tiit'y not soujiht to avail themselves of every proper means ol making the burden, in the Wily of interest, as light to the Dominion as possibleduring the progress of construction, espevially at the present moment, when ihe consolidation of Britisii inieresis in North America by the union of new [irovinces and the ncquisiiion and government of new territories create an exceptional strain on the resources ot tiie comitry. Had they wantonly allowed the money to remain unemployed without making an etiurt to invest it temporarily on the conditions of peiftct security and instant convertibility, or declined to consider it as an avril.iblc reserve, they believe they would have exposed themselves to the just censure of the Parliuiuent, to wliic'h alone they are responsible for the management and prosecn. tion of the work, and to which they must look for the means of meeting the Loan ; and tliey cannot believe that it either was, or is the deliberate wish of tlie Imperial Government to have subjected them to any sucli loss. As the matter now stands, it has been shcwi> above that the Government has at all times had available cash to the lull extent of the uninvested portiim of the proceeds of the Loan; but a very considerable reserve must always be kept in the hands of the bankers in Canada, and agents in London ; and if instead of placing all the moneys received in one account, a se|>arute account had been kept of the proceeds of the Intercolonial Loan, the eft'ect would have been, thai, to this extent, the Dominion would have been paying the agents five per cent, on their advances, whilst they were allowini; one per cent, on the special deposit. There would have been a similar Ioks .-,t ir'^Tiest with the bankers in Can.ida ; a loss which the Government did not feel itself justified in incurring for the sake of a nominal separation of the accounts. No otlM;r investment is either so available at a like rate of interest as the securities of Canada, nor is there any in which the Government of Canada felt it conld with such entire conlidunce place a portion of the surplus funds at its dis|iosal. For every fartliinu not otherwise invested, Exciieqiier Bills were delivered to the Receiver General, and held by him specially for the Intercolonial Fn id under an Order of Council. The Exchequer Bills were held in case the other iheans irovided should by any possibility be inadeqnati', over and above the cash balances in the i.ands of our hankers and liscal agents, which were always available to the full extent of the Loan. They are receivable in payment of duties of customs and excise, amounting to about 12,000,000 dollars per annum, and it is, therefore, beyond all question that the amount would be forthcoming, even from that suurci- alone, to raeei any sums needed to replace the Intercolonial Loan. In truth, the entire revenues of the Domi'Mon were pledged by anticipation to meet any part of the Intercolonial Loan which might be temporarily used. Your ICxcelleuey's Advisers think they may not unreasonably suggest whether tin; soli- citude evincoil by Her .Majesty's Government respecting the custody of the nioiiev may not have Its origin in the extreme (jrecautions taken by the Canadian Goveniuieiit, and in the arrangements they made to provide for a inncli larger amount ul that Loan than it has been in their power to invest, with a due rei;ard to the conditions of perfect set^uritv and immediate convertibility. They now challenge the fullest invesligition into the sudicieiicy of the provision they have made lor the instant availability of the moneys to the I'reasury, for the purjiose uf being expended on the works. While your Excellency's Advisers thus assert the right, and believe it to have been their 244. A 4 unquestionable 8 PAPERS RELATING TO THE nnquertiomble duty to h«vr dralt with the funds in tlie mnnner they have done, end to e much |;reeter extent than it has been practicable for them to do, they would be unwillini; that any JMue of an unsatisfactory nature ^hollld arise between them and Her Mnjesty's Government. If the right of coiitrollinerted by Her Majesty's Government before the Ijoan was issued, your Kxcellency's Advig*:rs have already indicated what their duty would hove been; but now that the securities have been actually issued, and that obligations of good fuith on the part of both Governments hb to this instalment of the Loan make the issue irrevociible, and when the amount cannot be returnt'd to the public, grave difficulties arise, and they will await the judgment of Her Majesty's Government on the facts now communicaied to timni, before submitting any recoinmendation to your Excellency on the subject. Meanwhile they cannot, with a proper regard to the responsibilities of their position, recede from the assertion of what they believe to he their undoubted right and nounden duty, of continuing to control und manage the Loan to the exclusion of all other autliority, however much they may regret that the necessity of making such an assertion is ni>w for the time lorced upon them. In conclusion, your Excellency's Advisers feel that ii is no light thing at the outset of the new career on which Canada is entering, that any Kuspicion should attach to its reputation ibi financiul integrity und upright deulmg; and ihey cannot but express their deep regret, that in a matter wliich in their judgment admits of no possible question, und of which they beheve ■ either the tight nor propriety is open to ('oiitroversy, expression!! should have been publicly used, havinu a tendi-nuy to throw doubt on the scrupulous exactitude of the Govern- ment in its financial dealings. They do not doubt that, on due consideration, Her Majesty's Government will frankly recognise that Canada has the undoubted right to control fliid manage the lund in question; that considitriitioiis of whut is due to her ements have been made nr proposed with reference to it, which are open ev»n to criticism ; and that (he opinions expressed and instructions given to your Excellency under a misconception ol the facts will be recalled. (signed) fFm. H. Lee, Clerk of Privy Council. Statbmbnt, No. l— Of the Intercolonial Railway Account Thb proceeds of the International Loan w< nt into the Generul Cash Balances in the hands of the financial agents in London and in Canada; but by Order in Council a special account was to be kept, without distinguishing the proceeds of the 1,600,000/. of the Guaranteed Loan from the &00,000 /. raised for the same credited with the proceeds of the loan as received, and debited with the chargCH incidental to the negotiation, 'iiid with the expenditure on the works. Certain securities were lo be held as an investment, and certain special receipts, apart from ordinary revenue, viz., the ileposits in Government Snvings Banks, the deposits under the liiw by Insurance Companies, and the repuyuients of the original loan to the Great Western Railway Company, were to be further invested as they came in. Any balance of the special account not covered by such investments was to be invested in Exchequer Bills, liearin&r five per cent, interest, and receivable lor nil public dues. A statement is made out monthly of the account, including Interest accrued, and the isivesttnent lo Exchequer Bills is revised monthly, either by the cancelling of those already issued , or by a i'urther i^sue, as the state of the account may require. The Intercolonial Loan Account and the correspimding investment stood as fillows on 1st June 1860, since which date instructions have leen sent to the financial agents in London to purchase a fiirtlier amount of 00,000/. of Cinadiun securities; and a further investment of 500,0ii0 (ii4«e,l8» 17 l>099,64l 88 6,408,S38 79 6,se8,100 67 80,U00 00 8,488,166 67 1,280,682 13 015,480 e,488,166 09 67 7,403,684 40/)00 70 00 7,368,664 70 and his colleagues unite in offering a8 the explanation of the course they have pursued. In compliance with your Lordship's wish to team from me to what extent, and in what way, the loan has been employed under the Minute of the 27th of August, I can only say that the statements, 1 and 2, appended to the Minute of the 18th instant, are derived from distinct and independent sources, and seem to furnish the required information. Statemont No. 1 shows in what way the total (guaranteed and unguaranteed) Intercolonial Loan has been invested ; and it will be seen that in addition to the special securities set apart by the Order in Council of August last, Exchequer Bills, amounting to 7,627,900 dollars, are held for account of the total loan. These Exchequer Bills, of which I enclose a form, bein^ receivable in payment of all public dues, would seem to form a security of as high a character as it. is possible to procure, and to be readily convertible into cash, irrespective of any reliance on the Bank Credits. As to the extent of the application of the guaranteed Loan for the purpose of defraying the general debts of the Dominion, it appears, by Statement 2, that the receipts of the Dominion from other sources (and wholly irrespective uf its ordinary revenues) have been sufficient to defray all these debts, without relying on the guaranteed portion of the loan at all (except by about 2,000/. sterling); and against tliis 2,000/., besides the onlinary cash balances in hiind, a credit of 260,000/. was iit any moment available in London, and twice as mueh more in Montreal. I have, &c. (signed) John Young. !y interest, leaving Himissioners since ninary work pre- iBtJuljr. ieiver General. |>ector General. Enclosure in No. 3. CORRESPONDENCE respecting the Intebcolonial Railway Loan, &c (Lud before Parliament by Command of His Excellency the Governor General.) This Correspondence will be found printed in House of Commons Paper, No. 272—1. of 1869. Enel. in No. 3. John Young, lune 1869. e 1 St instant, ;h of August raised under lilway, to the ion. iclosed, viz., Minutes of nish, on the what extent, le Minute of ch Mr, Rose and iSfiy, page 1. '9, P«ge 5. (No. 112.) — No 4. - Copy of DESPATCH from Governor the Right Honourable Sir John Youny, Bart., O.C.B., to The Earl Granville, k.o. Government House, Ottawa, Canada, 28 October 1869. (llcceived, 11 November 1860.) My Lord, (Answered, No. S16, 30 November 1860, p. 33.) With reference to previous correspondence I have the honour to transmit ti copy of a Minute of the Privy Council on the subject of the Intercolonial Rail- way Loan. I have, &c. (signed) John Young. No. 4. Governor Sir J. YounfT, Bt., O.C.B., to Earl Oranville, K.o. 38 Oatober I869. 244. B a ia PAPERS RELATING TO THE End. in No. 4. Enclosure in No. 4. MiNCTB of the Treaaury Board ol' the 11th Augu«t 1869, on the Intercolonial Railway Loan, and the Minute uf the Hoiiuuiable the Frivy Cuuiicii tliereun, of 12th August 1869. Copt of a Minute of the Honourable the Privy Council, adopted in Committee on the 12th August IBUU. The Committee of Council have given their tittentive consideration to the annexed Memorandum, dated llth August insiani, from the Honourable the Board of Treasury to whom was referred the Despatch ol the Right Honourable Her Majesty's Secretiiry of State for the Color' -<, N<>. 120, dated 8th July 1869, communicaling to your Excellency the opinion of the i.aw Officers of the Crown m England, and the views of Her Majesty's Government on the suliject of the temporary investment of a portion of the moneys raised under the Imperial Guarantee for the construction of the Intercolonial Railway. The Committee entirely concur in the opinion expressed by the Treasury fioard in their snid Memoranilum, and advise that a copy of that Memorundum and of the present Report be transmitted by your Excellency to Earl Granville, as embodying the views entertained by the Canadian Government on the important subject to which tlicy refer. Minute of the Treasury Board, adopted llth August 1809. Mav it please your Excellency, The Treasury Board have had under ronsideratinn the Despatch of Earl Granville of the 8th July 1869, on the subject of the Intrrcolonial Railway Loan, transmitted to the Privy Council by his Excellency the Governor General, and referred to the Board (lor its consider- ation and leport. The Board have to express their satisfaction at the declaration nf his Lordship, that it was nut the intention of Her Maje'ty's Goveriiinent to call In question the financial intesrity and upright dealing of the Dominion of Canada with reference to the em- {iloyment of tho^e moneys. His Lordship transmits copies of two opinions of the Law Officers of the Crown whicli, in his judgment, lead to the conclusion that the Canada Loan Aet of the Imperial Parlia- ment, in using tlic word "appropriate," required that the money should be kept or invested as H distint-t fund applicable to the c^mstruction of the road, and t'> no other purpose. The conclusion ariived at by the Law Officers wouW. appear to be threefold : 1st. That it was not the intention of the Imperial Act that the money should be invested at all, but thai it should be set apart or appropriated. 2nd. That the only sort of investment within its provisions would be one, the rate of which does'not fluctuate, but uhich is convertillied with ; that Act is executed ; its force is spent, and it a|)pears to the Hoard that rercrenct' must now be had to the Canadian .Act, and the financial system which obtains in Canada for direction as to the proper custody and disposition of the money raised. Her Majesty's Government having once accepted ihat Act as sufficient, the Canadian Government is bound by its terms, and it is its duty, temporarily, to administer the money in the same way as other moneys at its ilisiiosal, having due regard to its ultimate ex- penditure on the work. The Canadian Act rontemjilated the ordinary action of the constitutional power of Par- liament to lie from time to time exercised in iijipropriating the jiublic mon«y under its control. The construction of the railway; the contracts and jmyinents were lelt to the control, and are within the jurisdictiun of the Canadian Parliament, without any other limit '!H«- Intercolomai, ouiicil tliereon, of iiinittee on the to the annexed i of Treasury to y's Secretiiry of your Excellency Her Mnje'ty's e moneys raised vav. ' fio»rd ill their present Report !W8 entertained 'lanville of the d to I he Privy ir its consider- aratioii of his I question the ice to the em- >o\vn which, peiial Parlia- 3t or invested urpose. 1 be invested the rate of ption of the Ijc tt useful , and have, >lely on the e Canadian or custody e shall not iiada, pro- . and ex- Treasury, uti'd ; its Canadian r custody Canadian e money iniite ex- <>r Pnr- inder its t to the ny other limit CANADA RAILWAY LOAN ACT (1867). 13 limit or restiiciion on the part of the Imperial Government than the general power of the Crown to disallow ite Acts. It is not contended that the Act of the Canadian Parliament has not been complied with by the Governnient in dealing with the loan, or that the ordi- naiy mode of adininisterin); trust moneys by ihat Government has been departed from. The Board do not think it necessary, in discussim.' an objection which m now limited to a ])nint of technical construction, lo dwell further on this view, which appear.t to them so well founded, that the measure of discretion which the Ooverniiient may exercise in the niann^tment of the fund, is to be looked for in the terms of the Canadian, and not of the Inipiriul Act of Parliumeni. 'file Board deem it respectful, however, briefly lo advert, teriatim, to the three points thiy have noted us embraced in the opinions which accompanied Earl Granville's Despatch. First. That there should be an appropriation in specie kept distinct and apart. If this view is the true one it would tippear to be equally objectionable to place the money for safe keeping into tiie lianils of the agenU of the Government, or to deposit it in any bank whatever. It would merge, in either case, into the genernl mass of deposits ; would nut be "set aside " or •' kept upart," but would be invested by them, on their discre- tion and lesponsibility, with Ltlier moneys in their hands. The merging of the loan by the Government wiih the other moneys in its hands, cannot surely be more objectionable than ihe merging of it with the ordiimry money of any bank into which it might be placed. The only mode of complying literally with the Act, as sought to be cimstrued by the law officers, would appear to be to place uway the identical money received from the lenders ill packages, to keep these physicully separate during the entire period of construction, and to pay away the same money to the persons employed in the prosecution of the work. Anything Kss would fail 10 curry out, literally, the view of the law officers as to the com- plete setting aside and separation of the loan from other moneys, which is, in their opinion, implied by the word appropriate. It can hardly be supposed, however, thiit the Imperial Parliament had any such opera- tion in view. If it had not, then the ket'pin<; of distinct accounts, and the expenditure, with due promptitude of an equal amount to that raised, on the road, would seem to be a siitisfactory iind rational compliance with the provisions of the Act. 'llio public revenue is the produce of loans and taxes, and is not distinguishable in respect of its origin. That revenue or fund has been increased by the amount of the railway loan ; the construction of the work is being proceeded with. Parliament haH authorised the " payment" of the requisite amount out of that general fund to meet the outlay. The Board cannot regard the appropriation by Parliament as a direction to deal with it in specie, but only as an nuthoiity to tnc proper offi^'er to pay out of the general fund for the specific object for which the appropriation is made. Second. — But the Law Officers would appear to admit that there may be some sort of an investment into which the loan could properly be placed, viz., one "the rate of which does not fluctuate, and which is convertible at any moment without loss." If this be granted, it is a sufficient answer to say that the Board consider the securities which have been set apart as of that character. If, in the realisation of these securities, there would be any loss, that loss would not fall on the Intercolonial Fund, but on the general revenue of Canada. It would seem as if the Law Officers of the Crown considered that any loss in the value of the securities would be charged to the Intercolonial Fund, and diminish it by so much; and that the Government of ('anada was not under the obligation of making the loss good. The Board cannot take so restricted a view of the responsibility of the Canadian Govern- ment. On the contrary, they believe that the duty of managing the fund devolved on them, and thtU it carries with it tlie corresponding obligation of making it i>ood against loss and dis- aster of every kind, and of expending the total sum raised on the work, no matter what intermediate diminution from failuies, depreciation or other losses, may take place. The Canadian Government know that the securities set apart are convertible at any moment before the money is required, with certainly no loss whatever to the fund, and probably no loss even to the Government. Ifiird.— The Law Officers consider that the temporary application of the loan to the reduction of the debt of Canada is not an appropriation of the money. The Boai-d cannot hut take exception to the form in which the operation is made to appear by the expression which the Law Officers, in their first opinion, maile use of, viz., " paying off' with the Railway Loan Canadian Provincial debts," inasmuch as there was really an investment in the Exchequer Bills of the Dominion of the Intercolonial money to the extent to which it was applied in reduction of debt. For the payment of these Exchequer Bills the whole revenues of the Dominion are pledged by anticipation. The Law Officers admit that the money may he invested in some form, and that there may be a class of investment within the provisions of the Imperial Act. They add, that the securities of the Government of Canada may be a useful investment of the money raised, but do nut seem to be an appropriation of it. If it be admitted that the loan may lawfully be invested at all, and that securities, which are immediately convertible and not of a fluctuating nature, would be an investment vyithiii the provisions of the Act, the only other question would seem to be, who is to judge ■.:44. B 3 whether PAPERS RELATING TO THF whether those conditioim have been »«iUfi<(l. Her Miijei«ty'» Ooveriimout, or tha Govern- ment of the Dominion, on whom the revpontibiliiy of makiii|; good any loaie» that may triie, rest* ? The Board fail to cce why, if an inveitmeiit in iiecuritiei of the rhiiraoter ileocribed by the Law Officera would lie within the jjrovidion* of the Imiieriiil Act, iin iiiyestmerit in the •ecuritiei of Canada, which, in the upiniun ol its Oovi rnnient fulfil, and which it has never been alleged do not fulfil, the coiiditiona which the Law Olficers lay down, ahould not l)e equally within its provitiiong. Earl Granville, in the conclusion nf his Despatch, expre>seii the hope, that the Canadian Government, even if they do not concur in the views lie Iihh been led to entnrtiiin, will acquiesce in the propriety of iivoidiiig all occasion of ravil, by placint; the money in the shape of a distinct fund applicable in its entirety, and iil any nunient, to the object lor which it i* destined. The Treusury Oonrd, while sensible (if the courteous terms in whi<-h his Lirdsliip ex- presnes tliii liope, and in which he declares his lull conviction in the power of the Canadian Government to replxce at any time the sums whi<'li have been employed by it, hi lieve that Her Majesty's Government would not desire to su^^est tlie adoption of any cnurse which, on due cono'idcration, might be shown to involve an abnegatinn, on the part <>f die Cana- dian Govt'rnment, of their constitutional resijonsibility, or which would inflict unnecessarily a heavy loss on the Canadian Exchequer. The Board fail to see, after the fullest consideration of nil the argument! th:it have been used, that, in dealing with the money, Canada has exceeded its constitutional right, or that the Government have done anything which was not their liounden duty ; and they equally fail to see that tliere has been any technical departure from the wording of the litw. The case hiiH been put as if a permanent aii|ilieatioii of a portion of the loan to another purpose had taken place, or been contemplated, instead of, as is the fart, thai Canada wished to Crocure some temporary return for moneys which she could not at the time, by any possi- ility, employ lor the purposes nf the work; and wliich, if not placed on security, would have been unproductive, ami thereby liiive subjected her people to serious loss. The ability of Canada to replace the amount at any moment is now acknowledged by Her Majesty s Government; the mo^t rapid prosecution of the work cracticubli- is unquestioned, but it is yet asked that the money may not be used in the interval at all ; th'it it may be set aside and kept intact without any regard to the questions of productiveness; that this loss of inlercst must be incurred, althonnh nn opportunity of inventing a portion productively has offered, a d although the character of the investmi-nt is admittedly und"ul)ti.-d ! ! If, at the tiiue the loan was <'oiitractt'd, the Government of Canada tould have idaced ihe amount with their bankers at a reasonable raie of interest, they would undoubtedly liave done so, and made other arrangements respecting the maturing debt, fliey were, how- ever, compelled to avail tlieiiiselves of the only safe investment which offered, their own bonds, which they were about issuing, and they desoe to call Lord Granville's attention to the fact that they did, by Order in Council, at that time create a distinct fund for the loan, and set the securities in which that fund was invested aside, to be applied when realised to the object tor which the loan was destined. As those securities inuture, or can be advantageously placed, the cash will, in like manner, be set aside us u distinct fund. While ready to give every consideration to any su<:gt8tion on the part of Pier Majesty's Government, ihe adoption of which may not be at variance with the duty which the Govern- ment of Canada bt lieve is imposed upon them of managing this fund, subject only to their constitutional responsibility towards the Parliament and people of Canada, the Board would desire to call his Lordship's attention to the aspect of the c;ise which is now pre- sented, and to the fact which is shown in the previous Minute of Council, that ever >ince the money was raised, there lias, except during a very brief interval and by a very insignificant uniount, been a larger sum on call at their bankers than the total amount of the guaranteed loan. They would also remind his Loidship that the Government have special credits beyond tliis, amountiu:: to 7Su,00u/. steiling, which are practically so much money on call with their bankers, available iit any moment for the purposes of the work, while securities of the most undoubted character, on which tliey coula obtain further advances or dispose of at any mc.ment, have been set apart to meet the drafts on ibis loan. Tliey would lurther call his attention to Statement Number I, attached to the Minutes of Council of the 18th of June last, by which it will be seen that a special account is kept in the books ot the Canaxian Treasury for this loan. The Government have already made full provision to meet the outlay on the work to the extent of the loan, and the amount stands in the books of the Treasury ns a separate fund, distinguished from the accounts for all other works. They cannot but believe that these arranuenients already made tullv carry out the hope expreiised by his Lordship that the amount raised should be placed to a distinct fund, available at aiiv moment to tlie object for which it is destined. It is unnecessary to say iW it has been, and is, the anxious wish of the Canadian Goveinnient to fulfil with implicit exactitude, and in the largest sense, both the letter and the spiiit of all their undertakings towards Her Majesty's Government, connected with tiiis loan. The Board arc therefore unwillinu to believe, in view of the fuller explanations now given, that Earl Granville will fail to recognise in the measures which were adopted at the outset for placing this fund beyond ilie reach of any possible loss, not only a practical evidence evic hisi Iroti Goi obH |overii> may Hi by I in the J ne»er |iot l)e CANADA RAILWAY LOAN ACT (1867). 15 evidence of this deMra, but a latinfactory compliance with the law. They feel sMured that hit Lordihip will acknowledue it to be their duty to iul>ject to the above exception. The balances at the credit of this pruposed account will bear interest at the rate of 3i per cent, per unimm. I am, 8tr. The Honourable John Uogo, (signed) £. II, King, Minister of Finance. Jeor >ir. Ottawa, 11 Angast I8i]0. In rt'|ily to your letter of the Otii instant, I beg to say that, thouuh I regret that you are not prcpareil to accept a transfer of a farther aniuunt from the pieiient large current balances now in depusit with the bank, the Cioveinment, alter due cunsideratinn, is prepared to ossent to thi! modified terms suggested by you in tluit letter, with this qualitication, that wc w'i»h tu have the o|)tion ol niaintaining and rei eiving interest on the bahinces proposed to be placed to the credit of the Intercolonial Uailway Fund ; in other words, to depusit from time to time tn its credit, from our current balances, amounts equal to the ex|icn- dilarc on account of that fund, if the state of thoi'e working balances will permit. As you cannot acquiesce in my piupusal tu transler a farther amount li'oin the current balanced, to the cicdit uf the special account, I bug you will be good enough to remit, on the most favourable terms in your power, and at iistarlyaday as may be, the sunt of 100,000 /. sterling to Messrs. Baring Drotlieis & Co., lur account uf the Guverunieiit, advising me, in due course, of details. I am, &Q., E. H. King, l''sq.. Manager, (signed) Juhn Rose, Bank of Montreal, Montreal. Minister of Finance. (No. 1(13.) — No. 6. Copy of DESPATCH from Governor the Right Honourable Sir John '^ouny, Bart., Q.c.ii., to The Earl Cirauville, k.o. Government House, Ottawa, 22 December 18G9. (Received, fi January 1870.) My Lord, (Answered, No. 12, 15 Junuury 1870, page 23.) With reference to your Lordship's Despatch of 30th November (^No. 216*), acknowledging the receipt of my Despatch, No. 1 12,t of the 28th October last, enclosing a copy of the Minute of Council, dated the 1 1th August, on the sub- ject of the Intercolonial Railway Loan, and observing that you would have been glad to have received the Minute at an earlier date, — I have the honour to state, in explanation, that though the Minute bears date as having passed the Council on the I2tli August, it did not receive my assent until the 2nd October. The delay occurred in this way : I had left Quebec for the Maritime Provinces before the 12th August, and the Minute did uoi 244. C reach No. G. llight Hon. Sir John Young, Bart., 'i.c.u., to Earl Granville, k.u. ■li December 1869. * Page i3. T Page 11. 1 i8 PAPERS RBLA'ltNO '1*0 TH1& wnch me .mlU my arrival in Halifax iome wwkt later. Wlun It clltl n-nch me 1 wait in doubt wiiether it would provi- in rxact conlormlty witit your Lord khlp'it InMfuitlonH, ami I hild it over, Mr. Roae having left Ottawa, until I coul«l i)»rw.nally fonJer with the Premier. He waa Indiapowd durinn ilie few dnvn I puBHed in (Mtawa between my tour in the Maritime Provincei and that wliith I had engaged to miike in OnUirio. So that, after all, my douht^ hud to be resolved by correspondence, which they accordingly were ; and on the vfnd October I returned the Minute, approvecl, from Nianara, where I wu» iit ihe time. On my return to Ottawa I iranemitted the Minute ■« soi.n as I ruieived the authenticated copy from the I lerk of the Privy Council. The delay was therefore occa»lt>nid, in the first instance, by my nbhcnce Irom the seat of Oovernineiit at so great a distance as Halifax ; and secondly, by my anxiety not to give my approval to any disposition of tl>e funds In question until I could be fully assured ihat it was In conformity with your Lordship's initructions. 1 have, &c. (signed) John Young. No. 7. Kight Hon. Sir JohnYoung, Bart., O.C.B., to Earl nrsuTille, s.o. — No. 7. - Copi of TELEGHAM from Governor the Hight Honourable Sir John Young, Bart., O.C.B., to The Earl tirunvilU, k u. (lieivirid, SU April 1h7u.) I HAVK requested Sir F. llintkn to give me n coriect version of his remnrks, and the Mini»t«rs to furnish for your information a stotenient of jiresent posi- tion of Intercolonial Railway Loan Funds, Ottawa. No. 8. UoYi'mor Sir J. Young, Bt., o.c.B , to Earl GranTill«, K.O. II April 1870. * Page 84 - No. 8. - (No. 79.) Coi'\ of u DESPATCH ironi (lOvtriKir the Rijjht llonounilili! Sir J«/(» Young, Burt., o.f.D., to Tht« Eurl Granville, k.o. G;ivemnient House. Ottawa, •21 April 1870. My Lord, (Rceoi»cd, a May 1870.) With refirencc to your Lonl^hij/s telegram of thu I8th instant* — " Early oxplanaiidn iiM|uirtd of statement by .Minister of Finance in budget speech, that l.nw OHiciTs' opinion as to railway loan will not be followid.'' I liavu the honour to enclose a ^tutemt nt fumisliid to me by Sir Francis Him'k.0. From this paper it appears, that of the unexpended balancu of tlu- Impirial (iunranteed Loan lor the Intercolonial Railway, amounting to 6,733,703 dollars 76 cents., there arc lying on deposit in thu Bank of Montreal, 4,700,784 dollars. In India bonds in London . . • 681,:)33 Making 5,481,117 Paragraph 2 of an instruction to tlic Montreal Bank, dated 2nd October 1860, t Pojfc 15. a copy of which was sent in my Despatch, No. 117,t 30th October 1800, states, with regard to the first of the above items, " There deems to be placed to a special account, to be called Intercolonial Railway Construction Account, and to be drawn on solely for the purpose of the railway, according to the progress uf the works ; the amounts at the credit of the account to bear 3i per cent, interest until the entire sum is exhausted." Further, there is in deposit at call in the chartered banks a sum of 1,814,760 CANADA RAILWAY LOAN ACT (IMI). »9 1,814,760 (lullart 90 cwiti, more than covorinu the urn Jt|)ondo*,; that, he had olllred i.xplanati<»nB wideh were aecepted as B.iti(tfact.Hv at the TreaHiiry. I was not inlomu'd of tlieir huviug been offend, nor of their result, and eoimidered myself still bound by your Ijord-hiji'H inMiuetiiam ynu to reply to Earl EbcI, in No. 8. Uriiii>illu'« tele};ruiii, reqaevting an explanation of xnaie reniarkH made by nie in the Home of C 'Minionii on tlic 7th iniil., in my B|)et'ch on tlie Budget, to the effect ihat the o|iiMion of the L'.iw Officeia of the Crown, bk to the ilinpositionorihe Inteicolnnial Railway Loan, had been diiiregiiiiled, I liave the honour to report tliat, after consulting oevernl newopapers, I find such a iliitcrepancy in the reports, that I think it will be more xatisfuctory that I nhould explain snlmtontiiilly what p.iHRcii on the iiceasion referred to. Before doinjj so, I may observe that all the trunSHCtions connected with the inttfrcnlonial Riiilway Loan of-ciirred before I became n Meinl>er of tlie Uovomnienl, I hnd veniured to hope tliHt, as no intima- tion lo the contrary had been );iven to ihc Canadian Government, the Minute of lh>' Treasury Board of the 11th Aui;UHt 18fl0, approved liy the Privy Council Minute of the 30th of that month, had been det-meil HRtii>factory by Her Maiesty s Government ; and when the Oppo- sition Mcmberit renewed, during the present Session of P.irliament. the attack nn the poliey o( the G"vernment reuardin<; the Intenoloniid Loan which they had eoiniiienced during the previous Se'-Hion, I considered it my duly to maintain and defend that policy. The subject had not in any way been referred to by ine in my speech on ihe 7tli inst., bringing (orwurd the limlget, but at a later hour of the evening the Opposition de ided explanations on the subject of the Intercolooial Loan, and especially as to whether there bud been a complianee with tlie opinions of tlie Ciown Law Officers. To this but one answer could have been given, \iz., that it had not been found pnisible to act in accordance witli those opinions, bat that, as no reply l>ail been received to the Minute of the Canadian (iovernmeni pointing ual the impracticability of aetingin accordance with the opinions of the Clown Law OfiicerK, we hod a right to aKSume that the Imperial Government were satisfied with our expl nations, and that we had made no eliango in our arrangements. On reference to the Canadian TreHHury Minute of the lith August 1H69, to the Despatches of Earl Granville, 'iml tu the opinions of the Law OHicers, it will, I think, be apporent not only thai it would be im|iOssilile to give effect to those opinions, but that Earl Granville has not instructed your Excellency lo lulopt any measiirps with u view of trying to do so. The Lnw Otliccr^ declare: " We think that it was not the intention of the Im|>erial Legislature that ilic money should be iiiveste'l at all ; it whs to be appropriated or set aside." Again, " Tiie only sort of investment within the pruvisioni* of the Imperial Act would he, we think, an investment {if any such txhti or can be coiieeivtd), the value of which does not fiuctuate, and which is convertible at any moment without loss." The Law Officers weie evidently of opinion that no sinh invpstnienl, as in their opinion was alone within the provisions ol the Imperial Act, whs to be Ibund, or could be C' nceivcd ; but they failed to give any intimation as to what, ii; ihf Ir opinion, would be a legal disposal of the money. The Treasury Minute has, in my opinion, shown conclusively that it would be quite impossible to act on the opinion ol the Law Officers. liut I submit that Eail Granville has not instructed your Excelleney to attempt to give effect to that opinion. His Lordship, in his Despatch of 8ih ,luly 1800, points out i your Excellency that " the first of those opinions more than ht'ars out the conclusion at whic I had arrived,'* and which was communicated to your Excellency in his Lordship's pn vioiis Despatch of the 1st June, which was, "to refuse yonr concurrence, in any mode, i dealing with the money lemainin); in the hands of Government, other than that of invest- ment properly so called." In *.he Despatch of nth July, his Lordship hoped that the Canadian Oovernnu nt would avoid all occasion of cavil, " by placing the money in the /^^^/^y (/;-^ shape of a distinct fund, applicable in its entirety, and at any moment, to the object for '****'•* •^^•'i which it is di stined." 244. C 2 I submit 20 PAPERS RELATING TO THE I submit tliat there ii a very wide difference between the instructions of Earl Granville, and the opinion of the Crown Law Officers. £i«rl Granville distinctly recognises the pro- priety of investing the money, provided it can be mnde applicable at any moment to the object for which it is destined. The Law GAicers declare that it was not tue intention of the Imperial Legislnture that the money should be invested at all, and that no investment would come within the provisions of the Act, unless one which does not fluctuate, and which is conveitible at any moment without loss. I do not find, in nny of the Despatches, a sug- gestion as to the kind of investment which, in the opinion of Earl Granville, would meet the requirements of the Act. It i* riear that the securities w'lich have been always held to be the best in England, and in which trust funds of all *iiiids aro habitually iit''<^8t.ed, would not satisfy the require- ments of the Law ORict-rs ; and 1 submit that the CanaUi.:- Government has, from ihe first, literally complied with the requirements of Eurl Granville. There has always been "a distinct fund, applicable in its entirety, and at any moment, to the object for which it is destined." Earl Granville has never prescribed any particular mode of investment ; and I own that I fail to comprehend how the IraperinI Goveinmcni cun object to a mere temporary invest- ment in Canadian Secuntiex, when they have sanctioned the investment of the sinking fund in similar securities. I believe tiiat the objection originally taken to the transaction vas founded on misconception, Ii was assumed that the money had been employed in paying off a debt of the Dominion, and thitt no special fund lind been created. The rial facts were tliusu : the Dominion had a flouting debt ot the time, which there would not have been the slightest difficulty in funding, but considerable sums were likely to be paid into the Can.idinn Treasury at a compiiratively early period, which rendernd it undesirable to issue debentures at a long date. The Canadian Parliament had agreed to issue stock nt par to insurance companies, to be held as a special deposit for the security of pulicy-liolders, and it was known that there would be an earlydumaiid forsuch stock. There was likewise a largo debt due to the Government by the Great Western Railway Company, which, by agreement, was to be paid otTat an early period, and which was in the shape of negotiable bonds. It was, therefore, deemed more expedient to issue Exchequer Bills, which, being re- ceivable for ali debts due to Government, were equivalent to gold, instead of iie», '''. loan, payable at a distant period. All these arrawgements would have been made without reference to the Intercolonial money. When it became necessary to invest that money tem- porarily, these Exchequer Bills were considered the most eligible mode of investing the money, and the correctnes of Sir John Rose's anticipations has been proved by ihe fact, that upwards of 4,000,000 dollars of these Exchequer Bills have been already paid otf. It is no doubt true, that the money invested in the Exchequer Bills was used for paying oflT a floating debt of the Dominion, which would otherwise have been paid ofl* with the money which was subsequently used to redeem the Exchequer Bills. In the absence of all informa- tion Hs to what are t)ic views of Her Majesty's Government as to the kind of investment that they consider admissible, I am unable to judge whether Earl Granville would be satii- iied witii the present position of the Intercolonial account, but I have no doubt that your Excellency would wish me to state exactly how it ntands. The proceeds of the Imperial Guaranteed Loan, as stated in the Minute of 18th Juii? 1809, were 7,403,654.70 Dollars. Expended on works to this date ..... 1,000,801 „ 5,73a,7«3.70 DoUan. To meet this there is at interest in the Bank of Montreal, on the condition that it is to be drawn fur as required (or the Intercolonial Railway ... 4,700,784 Dollars, India Bonds in Loudon - • . . - . • 681,333 „ 6,481,117 £)()//(i«. There is in deposit nt call in the chartered banks n sum of ^1,814,700.00, and the Im* perial Guaranteed Bonds (300,000 /. sterlins;), for the purchase of the Iludeon's Bay Territory, have not yet been negotiated, although the full amount has been deposited. The expendi- ture oil the works will, tor some time to come, be met out of the money at the credit of the Government with the chartered banks, not bearing interest. I may observe that a poition of the special deposit in the Bank of Montreal consists of tiie Great Western Railway bonds, which the bank made nn advance on to the full umouii'. Sir John Hose having been of opinion that it was more desirable to have that sum at call in the bank than in bonds of n railway company, I trust that the foregoing explanntion will supply your Excellency with the information which you require. 20 April 1070. F, IJinchs, Minister of Finance. fl Granville, h tile pro- |i''nt to the Intention of I invegtment 1 and which 11)68, a lUg- foulU meet I England, Ihc require- \m the first, been " a iriiich it is own that lary invest- 1>e sinking kransaciion I Dominion, hiih there e Ukely to endered it u^'reed to It; security i:k. There Company, J shape of ')eing re- ''♦•infi' '•. le without oney tem- ?sting the ' I he fact, Ed off. It rinsi off a lie money I informa- ivestment I be stttit - that your Imptrial Do/lars. hllart, '■ \i to be oUars, » 'liars. the Im- srritory, xpendi- t of the portion bonds, Ijeen of iiisof fl raation r.ce. CANADA RAILWAY LOAN ACT (186/). Despatches from the Secretary of State. 31 (No. 97.) — No. 1. — Copy of DESPATCH from The Earl Granville, k.q., to Governor the Right Honourable Sir John Vouny, Bart., o.c.B. Sir, Downing-street, 1 June 18C9. The Treasurer of tlie Dominion lias recently transmitted to this Department a paper presented to the Canadian Parliament, containing, among other docu- ments, a Minute of the Privj' Couicil, aj proved by the Governor General on the 27th of August last.* It would appear that under that Minute money raised under Imperial guarantee for *h'z construction of the Intercolonial Rail- way was to be temporarily applied to the purpose of defraying the general debts of the Dominion. This mode of employing a loan guaranteed by the Parliament of this country for a specific purpose appears to Her Majesty's Government not to be justifiable. I wish, therefore, to learn from you to what extent and in what way the loan has been employed under authority of that Minute, and I have to instruct you to refuse your concurrence in any mode of dealing with the money remaining in the hands of Government other than that of investment properly so called. I should also wisir to receive from Mr. Rose any observations respecting the Minute of 27th Au^just which he may consider calculated to remove the strong objections which at first sight attach to it. I have, &c. (signed) Granville. Ko. 1. Earl Or«nTille,K.o. , to Governor the Right Hon. Sir John Young, Bart., a.c.B. 1 June i86g. • Vide HouM of Commons Paper, No, aya— I. of 17 June 1869, page 18. — No. 2. — (^"•^•'^•^ No. 2. Copy of DESPATCH from The Earl Granville, k.c, to Governor the Right EarlGranvillcK.o., Honourable Sir John Young, Br.rt, g.c.b. to Governor the " Right Hon. Sir Sir, Downing-street, 8 July 1869. J°h» Young, Bart., I HAVE to acknowledge your Despatch, No. 67,t of 20th June, transmitting a sj'ul'y 1869. Minute adopted by the Privy Council of Canada ia relation to my Despatch, + Page 4. No. 97, t of 1st June, relating to the disposal of moneys raised under Imperial * Above. Guarantee for the construction of the Intercolonial Railway. I desire, first, to explain that in requesting you to submit this question to Mr. Rose for his observations, my only object was to obtain information from that member of your Government who was presumably most compc » ent to give it, and not, as your Ministers appear to suppose, to fasten on Mr. Rose any special or personal responsibility. You will assure your Advisers that I have never had any inteiitiou to question the financial integrity and upright dealing of the Dominion of C still less the personal honour of Mr. Rose and his colleagues. I have been led to the conclusion that the spirit, if not the letter, of the Canada Loan Act (30 Vict. cap. 16, Imperial) required that all money raised under it should not only be expended on the construction of the Intercolonial Railway, but " appropriated " to that purpose ; that is, that it should be kept or invested as a distinct fund applicable to that construction, and to no other purpose I enclose copies of two opinions of the Law Officers of the Crown, sought and 4*^0^^ given I can assure you, with no aulriendly feeling towards the Canadian Government, nor any wish to impose on them any obligation beyond what is implied in the terms of the arrangement as sanctioned by Parliament. 244. c 3 You ^Uin Canada, a» PAPERS RELATING TO THE You will observe that the first of these opinions more thar bears out the conclusion at which 1 had arrived, and that this opinion is not altered by the Minute of your Privy Council whicli I at once referred to thoin. I have full confidence in the power of the Canadian Government to rei)lace at any time the sums which have been so employed, under a belief that there could be no doubt as to the propriety of that course. The opinions of tlie Law Officers and the Treasury, whom I have consulted, show that that belief is not well founded. With these opinions before them, your Advisers will, I urn sure, see that my Despatch was not written hastily or witiiout necessity. And even if they do not concur in tiie views which I am led to entertain, 1 hope they will acquiesce in the propriety of avoiding all occasion for cavil by placing the money in the shape of a distinct fund applicable, in its entirety, and at any moment, to the object tor which it is destined. I have, &c. (signed) GrutivHk. End. I, io No. t. Enclosure 1, in No. 2. My Lord, Temple, 28 June 1869. We are honoured with your commands signified in Sir Frederic Rogers' letter of the 17th instant, stating — 1. That he was directed by your Lordship to request that we would favour your Lord- ship with our opinion ujion the following ease. 2. That by the Imperial Act, 30 & 31 Vict. c. 16, the Commissioners of Her Majesty's Treasury were empowered to guarantee payment of interest at a rate not exceeding 4 per cent, per annum, on any principal money not exceeding 3,000,000 /. sterling, to be raised by way of loan by tno Government of Canada for the purpose of the construction of a railway connecting Quebec and Halifax. 3. That by the 3rtl section of tlie Act, this guarantee was not to be given until certain provisions had been embodied in nn Act of the Parliainont of Canada, and that he was directed to call our attention to the firiit of thc!; impracticable, is completed and working, it will be admitted that the operations have been prosecuted with remarkable celerity and vigour. Having thus detailed the facts as far as they are accessible here, with refer- ence to the progress of th«? work, it may be considered superfluous to prolong this communication, but as his Lordship has ret^uested me to furnish any other information which my knowledge of the subject may supply, 1 would briefly say that I think a perus
  • vision of the Imperial Act which directs an " appropriation " of the money. It is contended that this wording requires a setting aside in specie of the identical money received, and will not warrant any intermediate use of it what- ever. Whether such an interpretation of the law be critically accurate or not, I fail to discover in what way it would be practically possible to carry it out, ex- cept by a course of dealing exceptionally invented for this cose, and utterly at varinnce with the system of monetary affairs throughout the commercial world. This point is noticed at length in the Minute of the Treasury Board of Canada of the 11th August 18G9, and need not be enlarged upon here. The system of payment by cheques and through clearing houses, of deposit- ing money with bankers, the use which it is notorious bankers invariably make of their deposits, must all be set aside if the critical interpretation contended for is to be given to this wording of the Act. 244. It 38 PAPERS: -CANADA RAILWAY LOAN ACT (1807). It is snid 'hnt the money could only bo Invested, if nt all, in securities which do not fluctuate. But Consols fluetunte ; even the precious metnls themselves fluctuate ; and coidd it be supposed to l)e tlie intention of Parliament to require this lonn to be kejit wholly apart in specie, and tniproductivc diirin'; the interval before its disbursenient lor tlie purpose it was re !> 5 5' ej 5 _ f ^ 2. 3 > T^ ,^ -.1 tf V. o " I 2 ■*> O n — re a =- a " rt 2 * S. 3 o o ST s I. o 5 3 5. 3 P -. -. o S- 5- f « <"( re ► > 5 > > o H on ,,.5^ -- ^ i ■ i* .t <:■■/