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had arranged for advances to any extent that might be required, but its demands having exceeded the amount upon which the bank had calculated, it was unable to meet them, from its not having the requisite funds within the Colony at its disposal. This occasioned a serious embarrassment at once; still, that would soon have passed away if the measures adopted by this Council in its session in March had been sanctioned, but a crushing blow was given by the General Government when it disallowed the Loan Bills. Then it was manifest that the Provincial Government, unaided, would be unable to fulfil its engagements within the proper time, and it became my duty to ascertain, without delay, what course the Colonial Ministry would propose, or agree to, to enable the Provincial Government to meet those engagements, as it had debarred the latter from doing so in the manner which the Provincial Legislature had considered advisable. After having some personal communication with the Colonial Ministry, I found that it would not sanction any further Loan Bills at the present time; it agreed to give temporary assistance for three months, by advancing fifteen thousand pounds (£15,000) in each month during that period, leaving the question of dealing conclusively with the Provincial liabilities, to be determined hereafter—the Land Revenue of the Province to be retained by the General Government until the advances were repaid.

In the meantime, the Provincial Government took steps to reduce the ordinary Expenditure, and the works on the Railways were partially suspended. Those works had been pressed on with great vigour up to the early part of May, the heaviest works on both lines being well advanced, had it been practicable to have pushed them forward since that time with the same energy, I have no doubt that the Oreti Railway would have been open for traffic now. In consequence of the arrangement with the General Government, those works have been resumed, and there is every reason to believe that the Oreti Railway will be open for traffic for a considerable distance in the course of next month.

A detailed statement of the financial position of the Province will be laid before you, but I may briefly state now that the aggregate sum of the liabilities of the Province has not very materially altered since this Council was prorogued; the actual debts on the 30th June, were about thirty thousand pounds (£30,000), and the contingent liabilities, which will fall due in the next three months, or when the Railway and other contracts shall have been completed, amounts to about one hundred and thirty-five thousand pounds (£135,000.) To meet this we have an estimate of the ordinary Revenue, for three months at eight thousand pounds (£8,000), and an advance of forty-five thousand pounds (£45,000) from the General Government, to the repayment of which the Land Revenue for some time to come will be applicable. Besides these liabilities, the Provincial Government has guaranteed the sum of ten thousand pounds (£10,000) advanced by the Bank of New Zealand to the Town Board, as a security for which the Board has assigned to the Government special rates amounting to nearly twelve thousand pounds. There is also a yearly charge on account of the New Zealand loan, 1856, of about one thousand pounds.

The Provincial debts then are the sum of the loans, and the liabilities stated above; the sum of the loans is to be expended in the construction of the Railways, works which will be eminently reproductive. Until after they have been for some time open for traffic, it will be necessary to meet a part of the annual charges on the loans by votes of money from the General Revenue; but few will doubt that after a time—two or three years, it may be—those Railways will yield a surplus Revenue of yearly increasing importance; the burden of annual charges for those loans then may be regarded as one only of a transient character; and the Province has to deal, as its most onerous debt, with the immediate and contingent liabilities; such a debt for a Province, having about half a million of acres of arable land yet unsold; and the gross amount of whose customs Revenue, during the financial year ending June 30, exceeded sixty thousand pounds (£60,000), should not place it in a position of serious difficulty, of any long duration. A temporary embarrassment however has occurred, and from a coincidence of causes which could scarcely have been anticipated.

To the mode then by which we shall effectually meet those liabilities, I have now to draw your earnest attention, and the question involves considerations which are Colonial, rather than merely Provincial. The discussions that have taken place on the subject of Provincial loans have fostered the opinion, that without a colonial guarantee, they will not readily sell in London, an opinion which is now probably correct in the main, although in the first instance the pressure in the money market in London, rather than any distrust in the validity of Provincial securities caused the very slow and limited sale of.