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11. The subject of a Steam Postal Service has engaged much of the attention of the Government, and every possible attempt has been made, but hitherto without success, to establish an efficient InterProvincial Service, and also to connect New Zealand with the Australian Service by way of Suez. Mainly from the absence of suitable steam-vessels in these seas, no tenders have however been received which the Government would feel justified in accepting ; the subsidies demanded being much in excess both of the amount appropriated by the Legislature, and of what the Colony could afford for such a service. You are however aware that an agent of the Royal Mail Company has visited this Colony and Australia for the purpose of negociating for a Steam Service between Southampton and Sydney, via Panama and New Zealand. As that route would be infinitely more advantageous to New Zealand than the one by Suez, the proposal was warmly taken up in the Colony, the Chambers of Commerce at at Auckland and Wellington and several Members of the Legislature having strongly urged that New Zealand should contribute its utmost to the scheme. The Government therefore accredited Mr. Dillon Bell to the Government of New South Wales to confer upon the necessary conditions, and the negotiations on this subject were most ably conducted by that gentleman, and the conditions ■ determined upon which the line was to be established, subject to ratification by the Royal Mail Company, and the Legislatures of New South Wales and New Zealand. I transmit copies of the correspondence on the subject, and have to request that you will give every assistance in your power in furtherance of this object. 12. The proposal of Capt. Gibbs could not, without the sanction of the Legislature, be accepted; partly because the amount asked exceeded that at the disposal of the Government ; and partly that, pending the result of the uncertainty as to the arrangements which might be made, either by the Imperial or Australian Governments for extending the Suez line to New Zealand, no contract could be entered into for another Steam Service to Australia which might have the effect of burdening this Colony to an extent much beyond its resources. In so far however as Capt. Gibbs , proposal related to an Inter-Provincial Service, it would be advantageous to the Colony. No contract for that Service has yet been entered into; but Capt. Millton, late of the " Zingari," having recently communicated with the Government on this subject, an offer has been made to him to maintain for two years an Inter-Provin-cial Steam Service. No reply has been yet received from him ; and even if he should accept the terms offered, it is worthy of consideration by the Company represented by Capt. Gibbs, whether they might not make preparations so as to enable them to commence an Inter-Provincial Service at the end of two years, receiving a subsidy of about £9,000 per annum for two boats, or £5000 for one vessel. Should it become evident that no advantageous contract can be made with Capt. Millton, or others ; or should the Panama line be established, full communications will be made to Capt. Gibbs with reference to the maintenance of the necessary Inter-Provincial Service. 13. It may be obseved, in connexion with this subject, that the discovery of extensive and profitable Gold-fields in the Province of Nelson, where some thousands of people are now employed, and the consequent intercourse between all parts of the Colony which has thereby been created, has much enhanced the profits which steamers would realize from the passenger traffic ; and already the two small steam-vessels belonging to Nelson and Wellington are most profitably employed in the Passenger trade to the Gold Fields. 14. Most of the Provinces having requested that the English Mails should be placed in separate boxes for each Province ; instead of, as at present, in boxes for Auckland and Wellington only; communications to this effect, of which I enclose a copy, have been sent to the Secretary of State for the Colonies and the Postmaster General, and you should urge upon them the transmission of the Mails in the manner requested. 15. You are aware that the Government, pursuant to a Resolution of the House of Representatives has offered rewards for the discovery of a mode of rendering the New Zealand Flax a profitable article of export ; copies are enclosed of the terms on which these rewards are offered, and of a Letter addressed by me to the Secretary of the Society of Arts in London, accompanying specimens of Flax forwarded lately by the " Kenilworth." As the publication of these rewards has already attracted attention in England, it is desirable, should you have the means of doing so, that you should give any information which may be desired, so as to fulfil the wishes of the Legislature in this respect. 16. I have to request that the plate for 6d. postage stamps, which you were instructed to procure may be forwarded as soon possible, if not already sent, as they are much required. 17. I trust that no opportunity of carrying out your instructions in reference to the erection of Lighthouses in this Colony will be omitted by you, as it is essential to the public interests that the means of erecting Lighthouses should keep pace with the rapidly increasing Commerce of the Colony. 18. I have to express the warmest thanks of the Government for the aid which the Colony has derived from your exertions in its behalf, and for the kindness with which you have undertaken the execution of the various services which it has imposed upon you ; of the successful accomplishment of which I trust that we may soon be informed. I have &c, (Signed) E. W. Stafford. The Honorable H. Sewell, &c, &c, &c. [memorandum.] November 7th, 1857. His Excellency is advised to request that the sum of £300,000 may be raised at once, for discharging the claims of the New Zealand Company, and in furtherance of the other purposes of the New