D.— No. 5.

. I have also received your Despatch, No. 67, of the sth of May, forwarding copy of a Memorandum on the subject of the address, which had been drawn up by your Responsible Advisers. I shall cause a copy of this Memorandum to be sent to Lord Chichester, whose name I find first appended to the address. I have, &c, Governor Sir George Grey, K.C.8.,&c, &c. &c. Edward Cardwell. No. 42. Sib, — Downing Street, 15th August, 18G4. I enclose a copy of the Act passed during the last Session of Parliament to enable the Lords of the Treasury to guarantee a Loan of One Million Pounds for the service of New Zealand. I also enclose a Parliamentary Paper, in which is printed the correspondence which preceded the passing of that Act, and from -which, taken in connection with the Act itself, you will collect the conditions on which the proj>osed guarantee may be given. Those conditions are contained or referred to in the 2nd section of the Act. The articles of that section, numbered 1, 2, and 3, require no explanation. It is only necessary that the provisions there sot forth should be exactly made by the G-eneral Assembly in a new Loan Act. But under the concluding clause of this section it will be necessary for you to furnish a certificate that the General Assembly " have adopted such proposals as shall have been made to them by authority of any of Her Majesty's Principal Secretaries of State respecting the repayment of any monies due to the Imperial Treasury from the Treasury of the Colony, and for the payments to be made from the Colonial Revenue, as well for the support of Her Majesty's Troops employed in the yaid Colony, as for the benefit of the native inhabitants thereof." It therefore rests with me, first to authorize you to make to the General Assembly certain proposals on these heads, and next to instruct you under what circumstances, and in what form, you areto certify that these proposals have been adopted. The proposals which were within the knowledge of Parliament, when it sanctioned the proposed Guarantee, were those contained in the correspondence which closes the Parliamentary Paper to which I have alluded. I should wish you therefore to lay before the New Zealand Assembly the letter, of" the 2nd of June, addressed by my direction to Mr. Hamilton, by Sir F. Eogers, with the enclosures numbered 1, 2, and 3, and with Mr. Peel's answer of the Bth of June, informing the Assembly that the proposals which you are authorized to submit for their adoption, in pursuance of the Imperial Act, as to the repayment of Imperial advances, the Military Contribution, and the appropriation for' Native purposes, are those contained in the letter addressed by Sir P. Eogers to Mr. Reader Wood on the 26th of May, and accepted by that gentleman —so far as he had authority to accept them—in his answer of 28th May, 1864. These being the proposals of Her Majesty's Government, you are at liberty to certify that they have been adopted by the General Assembly, when the provision respecting the repayment of Imperial Advances shall have been enacted in the new Colonial Loan Act, and when the conditions respecting the Military Contribution and payment to Native purposes shall have been embodied in Resolutions of the Assembly, and the necessary appropriations for the year 1860 shall have been made by an Act of the Assembly reciting those resolutions. The certificate itself should not enter into any details, but should be so worded that any lender may at once perceive that it satisfies the conditions of the Act of Parliament, and enables the Lords of the Treasury to guarantee the repayment of his money. I annex the form which I should wish you to adopt. I have, &c., Governor Sir George Grey, X.C.8., <fee, &c, &C. Edward Cardwell. Enclosure 1 to No. 42. Copy of a LETTER from the Right Hon. F. Peel, M.P., to Sir F. Rogers, Bart. Sir, — Treasury Chambers, June 8, 1864. I am commanded by the Lords Commissioners of Her Majesty's Treasury to acknowledge the receipt of jour letter, dated 2nd instant, on the subject of the proposal to submit to Parliament a Bill for guaranteeing a loan of £1,000,000 to the Colony of New Zealand, and I am to request you to state to Mr. Secretary Cardwell that their Lordships have given their best attention to his views, as expressed in your letter. Their Lordships consider that any demand for the guarantee from this country on behalf of a loan to be contracted for a Colony ought to be scrutinised with jealousy, and ought, except under some rareand peculiar combination of circumstances, to be declined. My Lords are prepared to admit that such a combination of circumstances may be justly said to exist in the present instance. The strength of the case appears to depend upon the united force of several causes ; such, for example as, the extreme pressure upon the Colony, the interest of the native races in the question, the opening afforded for securing the immediate repayment of a large debt due to the British Exchequer, and, most of all, the opportunity which this loan presents for securing a great improvement in the future arrangements as to charge for the military defence of the Colony. With respect to the sufficiency of the New Zealand revenue to bear, prospectively and regularly, the charge of interest and sinking fund, my Lords rely entirely on the judgment of Mr. Secretary Cardwell, from which, however, they do not find in the case, so far as it is before them, any reason to dissent. My Lords perceive with pleasure that the arrangements now proposed will be open to reconsideration after a reasonable time ; and they hope that it will be clearly understood by the Colonial authorities that it will rest entirely with her Majesty's Government to judge at what period they should be further modified, with a view similar to that which has dictated the present change.

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DESPATCHES FROM EIGHT HON. E. CAEDWELL, M.P.