remove existing causes of irritation, and to revive that confidence in the Government which has been so grievously impaired by the proceedings of the late Administration. While on the one hand, there will be no solicitation—no teasing of the Natives to part with a single acre of their lands, yet on the other hand, they well know and feel that in the event of their wishing to sell, they will not be subjected to the vexatious delays hitherto occasioned by the necessity of referring every negotiation to a distant authority—but the terms of purchase arranged, and the boundaries of the Block offered for sale, after due notice, publicly defined and marked out, the purchase will be at once completed.

While I am anxious to avoid raising any undue expectations from the change thus made in the Land Purchase Department, I have reason to believe that no long time will elapse before valuable blocks will be freely offered for sale to the Government.

With respect to the funds by which purchases are to be effected, I am not in a position to state how much of the Land Purchase Loan remains unexpended; but I fear that when the accounts are rendered it will be found that of the £27,000 allotted to this Province, the whole, with the exception of a few thousands, has disappeared, and that some 30 per cent. of the amount has been frittered away in the expenses of the Department. As it is impossible to give even an approximate estimate of the sums that may be required, I shall simply ask you to authorise me, by resolution, in the event of other funds not being available, to raise temporary loans from the banks—an operation which there will be no difficulty in effecting, as the Union has on former occasions made similar advances to a large amount. When I hoped that Mr. McLean might purchase certain blocks, involving heavy payments, I readily consented to place at my disposal whatever amount might be necessary. Such advances, it will be understood, will have to be repaid out of the first proceeds of the sales of the purchased blocks.

You are aware that the two Bills, the one repealing the Clause of the Land Revenue Appropriation Act of 1858, under which one-sixth of your Land Revenue was authorised to be retained by the General Government; the other compelling a refund of the amount so impounded, which were passed by the House of Representatives in 1860, and rejected by the Legislative Council, were again introduced last session, and agreed to by the House of Representatives without a division, but that the Legislative Council again threw them out. It is satisfactory to know that before next session, the Legislative Council will be so far reformed by an addition to its numbers, that it will scarcely be in a position again to defeat the repeated decisions of the House of Representatives on a money bill, with which it has constitutionally no right to interfere.

In the meanwhile the present General Government has advanced to the Province as a nominal loan, the whole amount of the "Reserved Sixths" received up to October last, on the security of a portion of the land in process of reclamation, and I have no doubt they will continue to hand over the accruing sixths as often as we may ask for them, especially as under the change just mentioned in the Land Purchase Department, the onus of providing the funds for land purchases will devolve not upon the General but the Provincial Government.

During the last session of the General Assembly the Representatives of Hawke’s Bay and of this Province, after repeated conferences upon the subject of the apportionment of the Public Debt, agreed to submit the case of their respective provinces to the Auditor General, not as an arbitrator, but with the view of obtaining his opinion as to conditions and principles, by which, in the event of an arbitration being agreed to, the arbitrators should be guided, and upon the understanding that the report should be laid before the Provincial Councils of the two Provinces for their sanction, previous to any further action being taken in the matter. The Auditor General, after hearing the statements of the two parties, and fully considering the whole question, ultimately gave it as his opinion that the permanent debt of the original Province must be taken at the date of separation at £100,000; and that the apportionment should be based on population, rather than territory; and accordingly recommended that Hawke’s Bay should be charged with £25,000 of the £100,000. Your Representatives at once offered either to adopt the Auditor General’s recommendations, provided the same principle of apportionment was applied to the Land Purchase Loans, or to adopt the territorial basis of apportionment for the £100,000, or finally, by way of compromise, to accept the sum of £35,000; but the Hawke’s Bay Representatives did not feel themselves justified in agreeing to any of these three proposals.

It is under these circumstances that, in redemption of a pledge given to the House of Representatives, I shall submit a Bill appointing commissioners, with full powers to adjust the debt with the Hawke’s Bay Government. Without expressing my entire concurrence in the conclusions arrived at by the Auditor General, I yet willingly admit that he has so far cleared the way for a settlement, that I do not apprehend any serious difficulty in satisfactorily arranging this vexed question, if the Hawke’s Bay Government is prepared to enter upon the proposed negotiations in the same spirit as we do.

The shortness of the last Session having precluded the possibility of your examining the claims preferred against this Province by Messrs. Gladstone and Co., in respect of the Ann Wilson’s immigrants, I must again ask you to take the matter into your consideration, with the view of enabling the Government to give a decided and definite answer to Messrs. Gladstone and Co. From the correspondence which has already been published you will perceive that the two questions submitted to Her Majesty’s Commissioners were,—1st. Whether the Provincial Government was at all liable for payment of the passage money of the immigrants by the Ann Wilson? and 2ndly. If liable, whether large deductions ought not to be made on account of the breaches in the Passengers’ Act, and the conduct of the Captain and Surgeon, which have forced the Provincial Government to forego, as far as it is concerned, any attempt to recover the money on the promissory notes of the immigrants. The Commissioners decided that the Government of Wellington could not be compelled to pay for the immigrants by the Ann Wilson, but they nevertheless concluded their report with a recommendation that it should pay the whole amount of the passage money, less the sum of £600 on account of the non-issue of the legal allowance of water. Now as the second question was clearly contingent upon the answer given to the first, which was given in favor of the Government, I have always contended that the commissioners exceeded their powers in even entering upon it—that in short, having decided that the