Auckland 5 Decr. 1863. Sir, We have the honor to acknowledge the receipt of your letter of the 27 ult. in reply to proposals made by us for an adjustment of the Wellington debt. The first of these proposals being rejected it is unnecessary to refer to it further than to observe that I am not aware that any of the representatives of Hawkes Bay had previously agreed to the payment of any fixed sum on this account. Respecting the second proposal stating your willingness to adhere to the rule of apportionment of interest and sinking fund laid down in the 15 clause of the New Provinces Act 1858 conditionally that such rule is to operate from the date of separation, the permanent debt being taken at £104,000. The only sums raised or recognised by us as forming the liabilities of both Provinces up to the date of separation in Novr. 58 are as follows Gladstone & Coy. £32,800.0.0 Union Bank 36,853.13.11 Old debentures 6,475.0.0 total £76,128.13.11. Desirous of avoiding all reference to the past history of these loans the apposition manifested by the inhabitants of Hawkes Bay to such debts being contracted, the fact that none of the sums raised were expended in that district and the manifest injustice of being charged with more than a proportionate share of the debts incurred up to the date of separation will I trust induce you to reconsider the question of the amount assumed by you as forming the permanent debt, this preliminary being arranged, we should then be in a position to decide as to which of the two proposals now open could be adopted by us as a means of bringing this question to a final settlement. [In handwriting of McLean.]