by their present creditors, the Colonial Government could not have any objection to
bringing the question before the Legislature. So that I hope this reasonable proposal
may yet be adopted.

You are aware that last year I preferred, on behalf of the Province, claims against
the General Government to the extent of some £12000. Although the Acting Colonial
Treasurer in his place in the House of Representatives, denied that the Colony owed
the Province anything, I am happy to inform you that a sum of above £7000 has
already been recovered, and that there are other claims, to the amount of £5000, not
yet adjudicated on, but which it is agreed shall be referred to arbitration. And here
I am bound to bear testimony to the very fair spirit in which the Colonial Secretary
has met these claims, and the earnest desire he has evinced to have them equitably
adjusted.

The question of the Patent Slip, which occupied so much of your attention during
the last Session, is still as far from settlement as ever it was. You are aware that in
substitution of the Contract with Messrs. Kennard, another was mutually entered
into with Mr. Owen, by which it seemed to me that a satisfactory solution of the
hitherto surrounding difficulties had been arrived at, and that with your sanction
thereto the work would be immediately commenced. That arrangement you did not
deem it advisable to ratify, and the Contract with Mr. Owen was not therefore carried
into execution. But with a view to secure the rights which Mr. Owen maintained
were created by the Contract entered into with him, he assigned it to Mr. George as
the agent of Messrs. Kennard, and which that gentleman on their behalf accepted.
The Government has lately been informed by Messrs. Kennard that the acceptance
of this assignment by Mr. George on their behalf was entirely beyond his powers.
Under these circumstances it appears to me that the Government can only now allow
the whole question to remain at rest, until Messrs. Kennard propose terms which shall
recommend themselves alike to the Government and the Council. Meanwhile it is a
matter of much regret to me as it must also be to yourselves, that the advantages
proposed to be secured to this port when the Slip Contract was entered into are being lost
to it by the continued unsettled state of this question. I trust, however, that the
Contractors and the Government may yet see it to their mutual interest to agree upon
such modified terms as may recommend themselves to a future session of the Provincial
Council, as a fair compromise of the whole dispute.

Owing to financial difficulties the Government did not see its way to carry out
the contract entered into with Mr. M’Neill, for the erection of the Wanganui Bridge.
For a small payment the contractor consented temporarily to forego commencing the
works, and has not since taken any steps to do so. Under present circumstances I do
not think it is probable that the Government will now call upon the contractor to
complete the contract on its own behalf; but as soon as the present unsettled state of the
district ceases, I think it likely that the Council will be asked to make over the tolls
to a company prepared to undertake the cost of its erection.

With regard to the financial position of the province, I believe that you are
prepared for a far less favorable statement than I shall give.

During the last year no doubt sundry causes have operated to reduce the provincial
revenue very far below the amount at which it was estimated at the last session of
the Provincial Council, and to create temporary financial difficulties.

These causes are, in the first place, the War, which depopulated the finest district
of this Province, and checked that steady but rapid growth of the agricultural districts
of the West Coast, by which the population had been doubled within the last three
years, and which bade fair to continue at the same ratio during the next triennial
period.

Secondly—The non-settlement of the Manawatu Land Question, by which an
incubus of debt is laid upon the Province on account of an entirely unproductive
expenditure of more than £35,000.

Thirdly—The reduction of the Land Revenue, caused directly by the native in-