AGAINST THE COLON Y.

B.—No. sa.

3

Part I. 12. In order rightly to estimate the Liability of the Colony to the Imperial Treasury, as a matter of account, for Military iind Naval aid rendered in furtherance of the assertion of Her Majesty's supremacy and the suppression of the rebellion, it is necessary cursorily to review the past engagements between the two Governments. It will be seen, by a reference to Mr. Stafford's Ministerial Memorandum of the Bth of September, 1858, that, owing to the increased demands made on the Colony on account of such aid, the Government of New Zealand placed two proposals before the Secretary of State for the Colonies, the hitter of which assumed the following form : —■" That, instead of the Colony being called upon from time to time to meet specific charges, it should contribute for the present towards defraying the expenses of the Military Establishment maintained in it, the sum of five pounds per annum for each man." This prop jsal was submitted on the understanding " that no further demand on account of military expenses should be made on the Colony for five years," and the Colonial Secretary states that if either of these proposed courses be not accepted, and "further demands be made on the Colony, there appears to be no alternative but the withdrawal of the troops ;" even though the result would be most disastrous, annihilating all hope for the civilization of the Natives, injurious in every way to the Colonists themselves, and most embarrassing to Her Majesty's Government. 13. Sir George C. Lewis informs Governor Gore Browne, in his letter of the 12th September, 1860, with reference to the above proposal " that so far as regards all periods prior to the Ist of April, 1858, no other demand will be made on the Colony than for the repayment of the sum expended in constructing the barracks at New Plymouth," and that, " from and after the Ist April, 1858, Her Majesty's Government accepts the proposal made by the Colonial Government of a contribution at the rate of £5 gar annum for the troops engaged in New Zealand ; this expression being understood to include the entire force of officers and men ;" and, further, that in the present measure Her Majesty's Government do not confine their view to barracks, but are willing to'treat the intended subsidy as the general contribution of the Colony towards the expenses of the Queen's forces supplied for its defence. It is suggested in this Despatch that the number of Imperial troops to be charged for annually should be ascertained by striking the average of the whole twelve months. 14. In reply to this communication, the Colonial Secretary, in his Memorandum of the 29th November, 1860, states that Ministers accept the interpretation put on their proposal, as expressed in the last paragraph of the Despatch of the 12th September, 1860, viz., " That the intended u subsidy of £5 per man is to be treated as the general contribution of the Colony towards the expenses of tho Queen's troops supplied for its defence." On one point only was there a difference of opinion, and that related to the expenses connected with the erection of the barracks at .New Plymouth, in 1855 and 1856, —the payment for which Ministers were unable to accede to without the sanction of tho Legislature, to which Mr. Stafford proposed to refer it in the next session. Deference was accordingly made, and a report of the Joint Committee of both Houses of tho Legislature was brought up on tho 27th August, 1861, which recommended the confirmation of the agreement for the contribution of £5 per head, and, under existing circumstances, the admission of the claim on account of the barracks at New Plymouth, though unable to recognize any just liability for the charge. Their report was adopted by the House of Representatives on the 6th September, 1861. 15. In consequence of this agreement, we find the Duke of Newcastle stating, on the 19th of July, 1861, when acknowledging the receipt of Governor Browne's letter of the 22nd December, 1860, in wliich is noted tho acceptance by tho Colonial Government of the £5 per head arrangement, " that, in tho adjustment of accounts the Colony will now be entitled to take credit for any general expenditure of Colonial money on barracks since that date," (viz., Ist April, 1858), " whilst on the other hand it must be debited, as explained in the Despatch to which your Government have signified their assent, with the cost of the barracks at New Plymouth." 16. This arrangement, subject to future re-consideration, was terminated on the 31st of December, 1861, in accordance with the signification of the intention of Her Majesty's Government, conveyed in the Duke of Newcastle's Despatch of the 26th of May, 1862, to the effect that "the agreement so lately entered into by the Colonial Government for the contribution of £5 per man to the cost of the troops stationed in the Colony must also bo fulfilled up to the close of the year 1861." I therefore conclude that from the Ist of April, 1858, to the 31st of December, 1861, the contribution of £5 per man is to be regarded as the Colonial contribution towards the expenses of the Queen's troops supplied for the defence of the Colony. 17. When this agreement was terminated, its place was supplied by another, which, though belonging to a later period of the accounts, will be more properly referred to in this place. The agreement starts from the Ist of January, 1862, and embraces the period intervening between that date and the 31st December, 1864. It may be necessary to review the circumstances under which it originated, though I reserve to a later portion of my report those considerations, which are not matters of mere account, but embrace the larger questions of justice and equity. 18. On the 26th September, 1861, rather more than three months preceding the termination of tho former agreement, your Excellency relieved Colonel Gore Browne in the administration of the Government o f the Colony. There was at that time a lull in the rebellion. It was- then proposed by the Duke of Newcastle, in his Despatch of the 26th of May, 1862, to hand over the conduct of Native affairs to the Colonial Ministers, and, on that account, to reckon as a military contribution from the Colony, from the Ist January, 1862, to the 31st December, 1864, " all sums shewn to be expended in a manner approved by you on Native Government, or other purely Native objects, in excess of £26,000," the amount then paid from the Colonial revenue towards these objects. This responsibility for the conduct of Native affairs, coupled as it was with such overwhelmning liabilities, was declined by the Colony on the 13th September, 1862; but His Grace the Duke of Newcastle intimated, in his Despatch of the 26th February, 1863, that the decision of Her Majesty's Government, expressed in his Despatch of the 26th May, 1862, remained in force. The Legislature, therefore, feeling powerless to resist, gave in their adhesion to the new arrangement, in reliance on the cordial co-operation of the Imperial Government. I have, therefore, been guided by this decision in my examination of the accounts during that period. The expenditure on Native purposes for the three years ending the 31st