D—No. 4

She has little freight and scarcely any passengers, and with such prospects I do not see how I can conscientiously recommed our directors to put a larger and more costly vessel on so unremunerative a line. The Claud Hamilton is launched, and is, I hear, in all respects a first class vessel. Boilers for Prince Alfred finished some time ago and will come out in new steamer. The Secretary writes me that the Board are quite prepared to send another new ship, if there is any guarantee for her employment or ths continuance of our contract intact for ten years certain at least. The decision rests entirely with the Government in New Zetland which I trust, will by their assurance on this point, enable me to carry out the service in the manner I desire to do. But it would place me in a very false position, if at my request new first-class steamers are sent out and should then not be required. Would it be out of order, or too much to ask, that the Company in London might have a letter from Government conveying some intimation of their intentions, conditional or otherwise? There have been so many changes, in the r >utes and departures, from the terms of the contract since its commencement, all of which were injurous to the Company's interests, that it appears to me only an act of justice that we should have, not only some security for the future, but liberal arrangements. At present, owing to the boats subsidized to run in opposition to the Company's on the coast, and the unremunerative Auckland line, at least the whole of the New Zealand share of the subsidy will be absorbed by the latter and the Nelson line, unless better supported than appearances lead us to suppose, will be equally a losing one. If tlie Inter-provincial boat pays her way with the opposition of tvvo smaller and less expensive boats, it is as much as we can expect. Therefore, if the service is to be carried out in its integrity, it is of the greatest importance that no uncertainty should hang over the future. I sincerely hope we may have the advantage of your co-operation in this matter, and thus no delay would take place in having such a fleet as would assure the Government of the Postal service being maintained in a respectable manner and on which they could depend and the public be fully satisfied. I have, &c, John Vine Hall, General Manager I.R.M.C. The Hon. the Postmaster-General, New Zealand.

No. 7. POSTMASTER-GENERAL, NEW ZEALAND, TO CAPTAIN VINE HALI. General Post Office-, Auckland, 28th May, 1862. Sir,— I have the honor to acknowledge your letter of the 15th inst., reporting the departure of the Lord Ashley for this pjrt from Sydney, commenting on the prospects of the service, and requesting an assurance from the Government of an extension of the present contract for ten years at least. I have in the first place to express a hope that a few more trips between Sydney and Auckland will so establish the service as to attract to your vessels both freight and passengers. The Government regret that the commencement of the service should be so unpromising; but as from the beginning of the contract it must always have been apparent to the Company that this route was open for adoption for the carriage of the New Zealand mails, and as the large subsidy of £14,000 per annum is in fact given to maintain the single boat employed upon it, the Government cannot consider that there is any cause whatever for complaint or dissatisfaction on the part of the Company, and they cannot hold out any hope of special consideration on account of the traffic returns being below those which were customary on the Sydney and Nelson line. But the Government are prepared to recognize fully the desirability of having a perfect understanding with the Company prior to the lapse of the contract by efflux of time. To give a general promise that the duration of the contract will be extended, is not, in my opinion, the best way to arrive at this understanding. It would be obviously idle to do so when the contract provides for the employment of four boats only, and fixes terms of subsidy and penalty suitable to that number of vessels and the mileage which they are appointed to run. It may be the case that the Company will undertake to supply the colony with means of steam communication on a far more extended scale. It seems to me therefore that the most satisfactory course to adopt will be to make the question of a fresh contract from and after the termination of the existing one a matter of seperate negotiation, and it may not be too early to open this subject with the Company at once. I shall therefore be glad to be informed either from yourself or from the Directors of the Company whether they will be prepared to tender for the services of another term of years and what amount of mileage they will undertake to perform per annum. I shall feel obliged if you will submit this letter to the Chairman and Directors of the InterColonial Royal Mail Company. I have, &c, Crosbie Ward, The General Manager, I.R.M. Company, Sydney.

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STEAM POSTAL SERVICE.