THE BROGDEN CONTRACT.

New Zealand Mail, Issue 40, 28 October 1871, Page 7

THE BROGDEN CONTRACT.

THE TREASURER’S STATEMENT. We publish in exlenso the statement made by Mr Yogel in the House of Representatives, on the subject of the contracts entered into with Messrs Brogden and Sons. Mr YOGEL, on the House going into eommittee, said : I must ask the indulgence of the committee whilst I briefly review the circumstances under which tli9 contracts with Messrs Brogden and Sons were entered into. It will be within the recollection of many hon members, that the original proposals of the Government last session embraced, speaking generally, an expenditure which, including land grants and guarantees, was calculated to represent ten millions sterling, and to be extended over ten or fifteen years. Those proposals included a loan of six millions sterling After the proposals had been submitted to the House, the Government, at the instance of a large number of members on each side of the House, reduced the amount to be obtained by ban to four millions sterling. At the same time, it was stated that the Government did not propose to alter their policy of constructing, daring a series of years, railways throughout the country. Instead of the railways to be constructed being fixed by the House last session, and the Government proceeding with the construction of them as might be found desirable, the Government consented to a further modification of their policy, to the effect that the House should year by year decide what railways Bhould be constructed, It was, however, distinctly stated to the House that those modifications did not alter the general plan and scope of the policy ; and it must have been within the knowledge of hon members that, such being the case, the reduction in the amount to be borrowed really meant throwing a larger charge upon the systems of payment by guarantee and by land grant. I cannot recollect that much opposition to the guarantee system was expressed last session ; on the contrary, I am of opinion that it obtained large favor, only a very few members taking exception to it. The Railways Act, 1870, gave authority to construct

certain specified lines, by means of the guarantee system, general conditions being set forth in the act, and the estimated cost of the railways authorised being nearly half a million sterling. Acting within the authority given by that act; an agreement has been made with Messrs Brogden and Sons, which comprises two alternative contracts, the Governor having power to accept either or both ; bst one must be accepted. It will be sufficient to say, as to the power of the Government to enter into such an agreement, that the smaller of the contracts substantially carries out the authority given by the Railways Act; and I am of opinion that it will not bo necessary to ask for further legislative sanction in respect to that smaller, or No. 2, contract. Indeed, the Government are advised by the contractors that they do not consider that further legislative power need be sought, so far as No. 2 is concerned. It is possible that, in one or two points, amendment of the act may be desirable ; but substantially No. 2 contract is sufficiently within the authority of the act to make it un--necessary that special ratification of that contract should be asked for. Now, as to the circumstances which led to the arrangement with Messrs. Brogden and Sons. The Government were at first in negotiation with a gentleman who came to the colony expressly to endeavor to secure the construction of railways under the guarantee system. I refer to Captain Audley Coote. It is necessary to say merely, that those negotiations fell through, and that it was nipt considered desirable there should bo an attempt to revive them in London. Therefore, at a period not far distant from the commencement of the present session, the Government had not been able to arrange for carrying out the wish of the Assembly that railways should be constructed under the guarantee system. Under those circumstances, it became necessary to learn what could be done in London with that object. When I arrived in London, I found that the Commis-. sioners, during their stay, had been for some time in negotiation with Messrs. Brogden and Sons respecting the Nelson and Cobden railway. But the Commissioners, up to the time when they left England, were not in possession of the railway policy as finally decided by the House; and the position in which I found matters in London was this : —Messrs. Brogden and Sons proposed to send out a surveying and engineering staff to examine certain suggested lines of railway, 'under the belief that the expense of so doing would be borne by the colony; and that when the required information had been obtained, the firm would be able to make offers respecting the construction of the railways. I was spoken to respecting the contemplated step; and I at once said that, judging from the decisions of the Assembly last session, it would not be within the intention of that body that the Government should pay for such an examination as Messrs. Brogden proposed to make —that in fact, it seemed to me to be the unanimous desire of the Legislature that the planning, surveying, and engineering of the railways should be done by a staff expressly provided by the Government, and not by commission. Besides, it seemed to me that the proposed course would necessarily eventuate in a long suspension of actual operations, because constant references home from the colony would be unavoidable ; and that there would be no possibilityof knowing when anythingpractical would result from such an arrangement. Therefore, I told Messrs. Brogden that if it were possible to enter into arrangements within the authority of the Railways Act, I should prefer that course to the one they proposed; but I added that I did not wish to fetter their discretion as to sending out a staff. So, negotiations, which continued during the whole of my stay in London, were commenced ; and the result was, the agreement now under consideration. I wish hon members to recollect that had we not made some such arrangement as that into which we have entered, we should have met the House this session without being better prepared than we were at the close of last session to give information as to the possibility of getting railways constructed under the guarantee system —because, to have met the House with only vague information as to what might be possible under given circumstances, would have been of little, if any, use. It is only when the details of any such arrangements can be looked into, that their meaning can be understood. Evidently, if arrangements were to be made in London, it would be impossible to base them upon specific railways to be constructed along defined routes—there was no course open but that of taking as a basis the condition that the railways to be constructed, and everything relating to their construction, should be decided by the Governor, and that there should be a stated limit to the contractors’ profits. I am of opinion that any railway arrangements would be wanting in those features which are essential where a new country is to be opened up, unless those arrangements provided for leaving large powers to the Government to fix the sites of stations, and to order deviations from time to time, in accordance with the larger knowledge gained by the country as to its railway requirements. When thd discussion with Messrs Brogden was gone into, it became evident that it would be no good to enter into a contract unless a large forfeiture in case ot non-performance was provided for. But I had no power on behalf of the Government to agree to a condition of forfeiture. I had, however, the power—and it was the only thing I could offer to Messrs Brogden by way of inducement to become liable to a penalty of considerable amount —to undertake that one of two arrangements should be accepted by the colony, I taking care, of course, that one of them should be substantially within the authority given to the Government by the Railways Act. Such were the bases of the agreement:— Two contracts to be prepared; the contractors’ profits to be by eaoh limited to 5 per cent upon estimated cost of labor and material;

the contractors to give security, to the amount of £25,000 for the performance of one or both of the contracts, as might be decided by the Government; and I, on behalf of the Government, undertaking, to the extent.of such power as X had —it being Bet forth in the agreement that I had but a ceriain amount of power—that one or both should be accepted by the Assembly and be executed by the Governor. In each contract it is provided that the Governor shall cause to be prepared all necessary plans, sections, and specifications; that all works shall be executed under the control of the Government engineer; and that the Government nhall fix the Bites of stations and the course of each railway, and shall have power to direct deviations from time to time. All these very large powers are in most cases left in the bands of those who accept the guarantee. Instead of the contractors being able to make the 15 or 20 per cent of profit, which is supposed to be ordinarily required, the profits of the contractors are, as I have said, by eaeh contract limited to five per cent upon the actual expenditure for material and labor. If the computations of cost cannot be agreed to between the engineer of the Government and the representative of the contractors, that five per cent profit is the basis upon which arbitration is to proceed. Determining the nature of the arbitration was a nice and difficult question, and it received a great deal of consideration. I will now briefly indicate some of the leading features of each of the contracts; but it is beyond my power, in a speech of reasonable length, to give such a description of the contacts as shall free lion members from the necessity of themselves studying the documents. I am told that outside the House it is the fashion to talk glibly about the contracts, but that it is not the fashion to read them or at all to understand their provisions. Contract No. 1 provides that the contractors shall receive a subvention of one-third the cost of a railway in cash, that payment being on account of, or towards, their ultimate purchase ; while upon the other two-thirds of the cost there is to be paid a guarantee of per cent. In addition, the contractors are to receive three million acres of land. These terms apply to the construction of railways amounting in the whole to the total value of four millions sterling. Thus, if the contractors are able to issue at par the bonds or securities they find it necessary to put upon the English market, then they may realise, as outside profit, five per cent on their actual expenditure for material and labor, and, in addition, all they can get out of the land. As to the land, it was not by any means assumed that it was to be of the value which many of those who have been good enough to calculate the contractors’profits, have been pleased to put upon it. In fact, it was clearly understood that, as part of the three million acres, the Government should have the discretion of giving the two million acres proposed to be given to Messrs Brogden and Sons when the negotiations for the Nelson railway were going on ; and that the only obligation upon the Government should be, that one-fifth of the whole quantity of land should be fit for settlement. If the contractors should not be able to place the securities at par, then the amount of any discount would have to come out of the five per cent profit and the sum realised for the land. The calculations as to the profits to be made by the contractors which I have seen in several newspapers are impudently false. I refer particularly to a calculation which has been published in several papers, and which the Opposition journals have joined in declaring to be very accurate. The opposition journals have seized upon this contract question as one which it is desirable to convert into a party question ; but I will not believe that such is the intention of the Opposition within the House. The pretended calculation to which I have referred begins with a statement to this effect:—“ It is not at all likely that Messrs Brodgen and Sons would entertain the idea of constructing railways in New Zealand for less than twenty per cent profit.” So twenty per cent is put down to start with. Then a fictitious value is put upon the land—£2 per acre all round, I think it is ; and it is assumed that the five per cent profit upon the actual expenditure is to be added. Thus, beginning with an assumption that 20 per cent profit will be required, these calculators end by showing, as they pretend to suppose, that almost 100 per cent will be made. That is the kind of rubbish upon which it is attempted by some newspapers to found a party opposition to an arrangement which has nothing to do with party—except that the arrangement has resulted from an endeavor to carry out the wish of all parties in the House last session, as embodied in the Railways Act. It is provided by No. 1 contract, that the Government shall be bound to purchase the railways at the end of forty years, paying for them in cash ; the subvention of one-third the Co9t, already mentioned, standing as part payment, and the purchase price being the actual cost to the contractors, less allowance for deterioration through wear and tear or warn repairs. The Government also have this advantage:—At any time within the forty years, they can purchase all the railways, or any one or more of them, by giving a year’s notice of their intention to do so ; so that they can either allow the lines to average one against the other or can purchase only such as are proved to be payable, or which, for special reasons, it may be necessary should become the property of the colony. It is hardly possible to exaggerate the value and importance of a clause of this kind. I now come to the smaller, or No. 2, contract—which, undoubtedly, is the more favorable to the colony. This contract provides for a guarantee of per cent upon the cost of the railways—that cost being decided, as in the other case, on the ascertained actual outlay for material and labor, with the fire per cent

as contractors’ profits added. The railways are to be leased to the contractors for ninetynine years at a nominal rental, after which they become the property of the colony. At any time within twenty years from the completion of a railway, the Government are to be at liberty to purchase it at cost price, less allowance for deterioration through wear and tear and want of repairs. - Beyond all question, this contract—as a contract for guarantee —is exceedingly favorable to the colony. The contractors, I may say, deem that neither of the contracts will leave to them the rate of profit they have a right to expect, as a return for their enterprise, industry, and experience ; and it is the general opinion of those who really understand such matters, so as to be able to give an opinion worthy of being regarded, that this No. 2 contract is very favorable indeed for the colony—much more favorable than we have the right to suppose we should again be able to obtain. I am not, however, prepared to say that this contract will involve a less cost than would be the case if we could throughout construct the railways for cash payments, or that the cost will even be so small as would be secured in the latter case. On the other hand, I must ask the committee to recollect that, in this comparison between cash-payment and guarantee cost, 'I am taking into consideration the very favorable terms upon which money may now.be raised. Remembering that the amount which has been raised was but the first instalment of a large loan —remembering also the great industry which some colonists displayed in circulating in Great Britain reports disparaging to the credit of the colony —the money raised was obtained upon terms which must be considered very favorable to the colony. I am of opinion that with the present astonishing cheapness of money, and looking at the high price of all colonial securities, it is quite possible that the next instalment of our loan may be more favorably negotiated; but it is only fair to recollect that a vast variety of circumstances may lead to a totally different result. We cnnnot, for instance, expect that the present cheapness, of money will continue; and, therefor in saying that terms of cash payment would be better for us than those of the guarantee under No. 2 contract, we must not forget that what is meant is that cash payments with money at the rate it could now be obtained, would be more advantageous for us. Nor must we forget that it is possible the contractors, putting their securities upon the market at a fortunate time, might obtain better terms than the colony would in raising the necessary funds. I do not wish, however, to withdraw the expression of my opinion that, upon the whole, cash payments would be the cheapest means of constructing our railways. As affording a means of judging of the contracts with Messrs Brogden and Sons, I wish to make a few remarks respecting the Indian contracts. There are provisions in those contracts which would be simply inadmissible in the case of New Zealand. In India, a company selects its own lines of railway, and is not restricted as to cost. I understand that provision to mean, not only that the company chooses the lines of railway it will construct, but has the power of fixing the sites of stations, and of deciding very many other points of importance, which, in this case, the Governox* is empowered to fix and decide. The only condition in the nature of a restriction uppn cost, in the case of India, is that the Government or the Indian comppany, must approve of the contracts. The Indian Government can purchase a railway only at the end of a pei’iod of twenty-five or of fifty years, when they have to pay the full value, as shown by the average market price of the Company s stock or shares during the last preceding three years. But a company has the right to require the Government to purchase a railway at any time after completion, on giving three months’ notice ; and the Government must then repay the total amount of the capital. expended. The Indian Government cannot, without payin" comuensation, direct deviations or alterations to be made during the construction of a railway. In our case, the capital, cannot accumulate to a greater extent than is necessary for meeting current payments, so that the interest to be paid by the Government is upon only such an amount as is really necessary for the continuous prosecution of the works ; but n the case of the Indian contracts, interest ha 3 to be paid upon such an amount of capital as the Company may be pleased to pay in ; and in the letter of Mr Dennistoun Wood, which is in the hands of hon members, it is stated that in one instance, where a railway was to cost £500,000, over £250,000 was paid in, and interest upon it commenced before the contract had been signed. I must add to what I have said respecting cash payments and the state of the money market, that I think our recent experience has established that such money as New Zealand may from time to time require for reproductive works, may be obtained, at a fair rate of interest. Further demands may affect our present position ; and it is quite right they should do so. Purchasers of first loans always buy to sell at a premium to investors ; and it must be expected that the price realised for a new instalment will be less than the price of existing stock : but taking all contingencies into consideration, I think we may rely that we shall from time to time be able to obtain the money we require for reproductive woi’ks, at a fair rate relatively to the price of other colonial securities. There is one element which may —but which I most sincerely trust will not —affect the value of our securities : I mean, of course, native disturbances and consequent large expenditure. In the absence of any such disturbing element—and supposing that our public works are carried on with reasonable moderation and discretion —T think we may consider that the means we require to give effect to our policy will be procurable. A great objection has been raised to the No. 1 contract, because of the large extent of land

to be given to the contractors. In dealing with party organisations, much moderation cannot be expected ; but I shall refuse to believe, until the contrary is shown, that the attempts outside the House to make a party cry out of these contracts, and especially as regards the land proposed to be given under No 1 contract, will be endorsed by the Opposition within the House. For it. may fairly be said that the Government last session l’eceived instructions from the House that land grants should constituted portion of the payments for railways, and that a v«ry large proportion of the railways should be constructed uuder the guai’antee principle. I admit that we have found that we v cannot, upon either of those principles, get railways constructed as cheaply as we anticipated, and the Government do not seek to bind the House by the decisions come to last session ; but I do say that it is unreasonable to make it a ground of complaint that the Government have endeavored to give effect to the wishes of the Assembly. As to the large land grant, I have to say that Messrs Brogden and Sons do not appear to value it as highly as some of those who have been making absurdly wild calculations as to pi’esumed profits, appear to think they ought. I am not prepared to decide whether the contractors ax-e too moderate in their estimate ot the value of (he land; but they are prepared to give up the land-grant portion of the contract. Mr James Brogden, one of the contractors, arrived by the last mail from England ; and a few days after bis arrival, he gave to the Government a m.emox-andmn, in which there are sketched certain alterations in the contracts to which his firm are prepared to agree. The proposals made are without prejudice. I will read the document to the committee, but not with a view of asking that it shall be accepted as it stands. The proposals are really made as a basis for further negotiations—not, as I understand, as conveying absolute terms either as to amount, to be expended or contractoi's’ profits. The document shows cleai’ly that the contractors do not set so high a value upon the land as it has been supposed they should, and therefore I read it to the committee. It is written by the legal adviser to the contractors, Mr Travers, and is signed by him, on their behalf : Memorandum for Miuistei’s in relation to Messrs Bx-ogden’s contracts, submitted

without prejudice. As to contract No. 2. —1. Messrs Brogden consider that, it is within the power of the Goveimment to make any modifications which they may desire in contract No. 2, without the necessity of intervention on the part of the Legislature. 2. That, until their suggestion hereinafter contained in regard to contract No. 1 have been decided upon by the Govexmmenb and Legislature, they ought nob to be required to make any suggestions or propositions as to modifying contract No 2.—3 That, in the meantime, contract' No. 2 should be treated as having been executed by the Governor.

As to contract No. 1. —When the Messrs Brogden entered iixto this contract, with the Hon Mr Yogel, they did so in the firm belief and expectation that it would be adopted by the colony to the full extent of the outlay referred to in it, and according to the principles and spirit involved in it. They assume that, subject to such modifications as may be foixnd materially advantageous, the Government are earnest in their desii’e to carry it out accordingly, and the following suggestions are made upon the distinct understanding that, if agreed to by Ministers, this contract will be submitted to the considei-ation of the Legislature with all the weight of Goveimment approval:— Suggestions.—l. The contract may be modified or altered in two distinct ways, as follows : —lst alternative : Goveimment to give a direct guarantee of the principal and interest on the bonds or coupons to be issued by the contractors for the money raised for the works. Thei-ate of pi’ofitto be increased from five to eight per cent. The emigi-ation scheme to be abandoned. As a consideration for the foregoing alterations, the contractoi’s will surrender all claim to the lands to be allotted to them under the present contract. 2nd alternative : Government to employ the Messrs. Brogden in the construction of railways and other large public woi’ks of a permanent natu'i’e to the extent of (say) nob less than £4,000,000, spread over a period not exceeding ten years, paying them in cash the cost of such work when completed, with a profit of £lO per cent, on such cost as shown by accounts to be rendered, with an advance of £9O per cent, monthly by way of progress payments on the l’esidunry cei’tificate. The conti’act No. 1 to be completely abandoned. Messi’s. Brogden point out the following as special advantages which the colony would derive from the adoption of the latter course : —l. They would be prepared to take over and employ, so far as would be necessai’y for the works, the whole of the efficient staff of the General Goveimment in connection with the depai’tment of public works. 2. They would, for their own sakes, be pi’epared to establish factories in New Zealand for the manufacture and supply of all such plant and rolling-stock, &c., as could be advantageously and economically manufactured in this colony. The collateral advantages to the policy for such a course cannot, it is submitted, be over-estimated. By the adoption, moreover, of this proposition, the Government would have an assui’ance that the whole of the works of any magnitude to be undertaken for them would be prosecuted and contracted upon one comprehensive plan. The Government, are not going to recommend the acceptance of either of the stated alternatives ; nor do the Government l’ecognise that there is anything like even an implied pledge that they are not at liberty to accept only the No. 2 conti’act if such be the wish of the Houso. As to the general question of the construction of railways, the Government admit, of course, that it is of the utmost im-

portance railways should be constructed as cheaply as possible; but we must not expect to secure railways without those who construct them seeux’ing fair profit; and if we go the length of being unduly parsimonious in the mattei’, we shall not be adopting the policy generally pursued by other countries. It is an almost understood thing —I am speaking of other countries possessing at least, as great resources as New Zealand —that sacrifices should be made in order to secure railways, rather than to expect that the constructors of railways will make saei’ifices for the benefit of the country in which they are to be employed. In the money article of the London “ Times,” there recently appealed, on the authority of the “Philadelphia Ledger,” the statement that “ the United States on the Ist of January next, will have not less than 50,000 miles of railway in operation, and will be extending them at tlx 3 rate of more than 5000 miles per annum. ‘ This probably exceeds the annual construction of raih’oads in all (he rest of the world !’ ” We may take useful hints from the United States as i"egards opeuing up country, though it would be folly to suppose we can follow the example of that great country as regards the very lavish paymonts and grants made for railways. I have read the extract to show that elsewhere, when country has to be made available, the construction of railways is not considered so hazardous an experiment as some people in New Zealand seem to consider it. One may certainly say that if in a country where laud is almost boundless, and the already-settled districts present so many and so great inducexnents to enterprise, it is not considered hazardous to spend most freely for the construction of l’aihvays through wildernesses, so as to open up land—then, in a colony like ours, in which, within a time one might almost fix, it will be necessary for the whole country to be opened up and to be more or less peopled, it becomes not only a fair matter of enterprise, but a duty as a matter of prudence, to extend means of communication in almost every direction. I fear that the character for costliness which railways acquired during their earlier days in Europe, has caused many persons to conclude that any system of railways must even in these days necessarily be too costly to be contemplated by the settlers in a colony like New Zealand. I shall now ask the committee to consider the question between the two contracts with Messrs Brogden and the opposition to those contracts. The true foi’ceorvalueof an opposition is not to be guaged by its loudness of tone or its apparent fervor in action. Many hon members will know that by means of a very small organisation skilfully handled, a seemingly great effect may be produced. The storm —in a tea-pot, it may be called—against these contracts originated in Canterbury, and was urged on by a very fervid opponent of the Government. It may safely be said that a great majority of those who have taken part in the agitation do not. at all understand what they have opposed. Men who call themselves friends of the Opposition within this House, have striven to effect a strong party organisation in opposition to the contracts. Small contractors and labouring men have been induced to join in it by very gross misstatements addressed to their passions, prejudices, and intei-ests. Those classes have been told, that the question of their future was wholly bound up with the question of the contracts. Not only small contractors and laboring men, but those who supply those classes, have been told that their interests are most intimately concerned in the settlement of the contract question: that, as a necessity to self-preser-vation, they must join the opposing agitators. I repeat that the leading statements that have been made by opponents outside the House, are grossly mendacious, both as regards the contractors’ profits and the way in which the contracts will affect the available labor of the colony. I consider that Messrs Brogden and Sons are quite as likely as small contractors to employ such local labor as is really available —that it will be their interest to do so, as being cheaper than to import labor. Those who are employed by lax;ge contractors have a guarantee in most cases —or in all cases, probably—that engagements made with them will be faithfully carried out. There are inanj special advantages derivable from the construction of railways under large contracts with responsible contractors. Amongst other advantages, the following maybe mentioned : It is possible to secure a oneness of principle in the different lines : the contractors can afford to bring into the counti’y appliances such as small contractors assux’edly could not afford, and, especially, they are able, and likely, to establish here large workshops and factories: they have more, and most important, available resources, through experienced managers and men, and the command of all necessary plant: they can make more rapid, because continuous, progress with works: they can arrange to push on those portions of a line which should be pushed so as to secure the greatest advantage from carriage of materials over completed parts; while, under small contractors, portions of the works may be rapidly completed, and yet remain practically useless until some of the least advanced parts have been finished. All these advantages must tend to economise construction, in the benefits of which the country will share. I say nothing as to the advantage of railways when completed being under one management; because if lines are to be constructed in short sections, by small contractors, the principle must be that of cash payments, so that the management, after completion and payment, must devolve upon the Government. There seems to be an idea floating in the minds of many persons, that anybody is fitted to become a railway contractor—-that it is a business not requiring special skill and knowledge; and, therefore, that for the colony to* resolve to construct railways will mean a general invitation to speculative people to become contractors, whether they have the necessary knowledge of the business or not. But if it is to

be understood that the only requisite for securing a contract is to be the sending in of a tender for an amount lower than that of any other tenderer, we shall assuredly find, before we have finished our railways, that their cost has grown to be enormous. Moreover, if the idea which has gained certain support for the Opposition out of doors is to be realised, and the railways are to bo constructed by the existing available labor in the colony, then, to the effect of greatly increasing the cost will have to be added the other effect that the labor market will be disorganised, and'all the ordinary industries of tho colony comparatively paralysed. I shall be as glad as any one can be to find that, by means of the public works we propose, any present surplus labor within the colony obtains employment, and I am far from desiring that preference should be given to new-comers ; but if a monopoly is to be given to the labor now in the colony, and the price of labor is thus to be artificially raised, it will be nothing short of madness on the part of the colony to enter upon the construction of the proposed works. Still further, if we are to be tied down to the small contract system —giving one man a contract for laying sleepers along a short section, and another a contract for laying the rails along that section —having a contractor for the ditching on each side of a line, separate contractors for each bridge, and for every small embankment —the government will be brought into such direct personal contact with so large a number of residents, that the electoral independence of the colony will certainly be affected, and most injurious political disorganisation may ensue. I wish not to be understood to say that in some parts of the colony a system of small contracts may not be desirable. Ido not wish to say that such a system has not worked well in Canterbury —indeed, as the contracts for railways which have been let in that province since the last session have been let with tbs understanding that the works shall be taken over by the General Government when funds are available, I should be very sorry to imply that there has been any want of prudence in the arrangements made. On the contrary, I believe that the contracts in Canterbury promise to prove economical and satisfactory ; but that which may suit for portions of the railways in Canterbury, and which may have the effect of bringing forward some of those engaged, so that they may be able and fitted to undertake larger contracts, would, if adopted as a principle throughout the country for the proposed extensive works, be inevitably attended by innumerable evils. Especially would such be the case in this island, for reasons which must be so obvious that it cannot be necessary further to refer to them. Another point is of material interest, in considering the question of small versus large contracts. If the construction of a line is divided between a {number of small contractors, it is in the power of any one of them, by litigation, or through misfortune or incapacity, practically to shut up the whole line, and so to involve great delay and expense. In Victoria, where, in the first instance, alternative tenders were invited —for the construction of the whole length of each of two lines, or for sections only —the result was that, although a large number of tenders were sent in, the contracts were given for the complete construction of each line; and recently, when tenders for fresh works were invited, I observed from the advertisements that nothing was said as to alternative tenders. Hon members must be able to supply for themselves many arguments against the small contractor system. If any one of us wants to buy largely of any given article, he goes to a wholesale dealer, not to a small shopkeeper; and so with large works, those who employ men of means, knowledge and experience, find that the works are done cheaper than they could be by small contractors, or, which amounts to the same thing, are better done for an equal price. I trust that I have avoided saying a word identifying any member of this House with any organisation outside the House for the purpose of opposing the Government through or by means of the contracts with Messrs Brogden and Sons. lam sure I have desired scrupulously to abstain from even implying that anyone within the House has instigated that outside opposition. Before Mr Brogden arrived in New Zealand, or the contracts had been entered into, there was a clamour that large contractors should be secured for the construction of our railways. Not very long ago, an hon member whom I see opposite me, and many members on this side of the House, thought that when Messrs Brogden came to the country there would simultaneously be great prosperity. The members for the Nelson province used to give us to understand that the fate of that province depended upon Mes>rs Brogden coming out to the colony for the purpose of constructing railways. lam of opinion that when the question of the contracts is fairly brought before laboring men, they will say that they would much prefer to work under contractors possessed of means, and who thoroughly know tbeir business, to being left to the tender mercies of persons without means and without practical knowledge. As to small contractors who are fit for the work, I have to say that there is nothing in the fact of a large contract to prevent subcontracts being let ; indeed, I suppose sub-contracts to be a matter of necessity. The difference will be that, instead of working for the Government, sub-contractors will be working for large contractors, and will have the advantage of extensive appliances, such as it would be impossible for the Government to place at the command of small contractors. Now, as to the course which the Government intend to ask the committee to adopt. We do not identify any members of this House with the absurd opposition outside —absurd, because based upon absolute ignorance of that which is opposed ; but, still, we have had abundant means of knowing that a large majority of members are opposed to the No. 1 contract. In obedience to a generally expres-

sed wish, the Government—some time before Mr Brogden arrived—determined that they would not ask for a larger authority for the construction of railways under the guarantee system, than to the amount of half a million sterling. Therefore, as a matter of good faith, we shall now ask the committee to agree to a resolution that No. 1 contract shall not be accepted ; and we shall not propose to enter into negotiations for any modifications based upon the principle of that contract. As one of the contracts must be accepted, such a resolution, if adopted, will obviously leave No. 2 to be accepted. We shall not ask the committee to sanction the acceptance of No. 2, because so to do would be practically to say that the Legislature is at liberty to reject both contracts—which we do not admit. If the committee negatives the proposal that No. 1 be not accepted, the Government will understand that the committee thinks it desirable there should be negotiations, upon the basis of No 1, for a contract not necessarily for so large an amount of expenditure. On the other hand, if the committee assents to the resolution I am about to propose, it will leave the Government to accept No. 2; but we shall not understand that we are precluded from further negotiations, with a view to making that contract in some respects perhaps more acceptable to the Legislature, and if such negotiations go on, we shall lay them before the House, if we can possibly do so. I believe the contract would be more acceptable if, instead of retaining in it the arbitration clause, there was substituted for it an agreement as to the price of railways to be constructed. We shall be prepared and glad to negotiate upon the basis of No 2 contract; and we shall listen with great interest to any suggestions made in a friendly spirit, as to the modifications to be sought, it being clearly understood, as a preliminary, that one or other of the contracts is to be accepted. We are willing, as a Government, to take our stand not only upon having acted within the powers entrusted to us, but also that we have acted with discretion and judgment. Had these contracts not been entered into, we should have simply had to come before the House with an admission that we were in no better position than we were last year, to decide upon the policy of constructing railways upon guarantees. Now, the House has the whole matter before it; and it can, if it so desires, withdraw from the policy it affirmed during last session, and which went further in the direction of payment by guarantees and by land-grants, than the Government originally intended. I hope that nothing I have said as to the outside agitation will at all load lion members to suppose that I desire to lay down as a principle that it is not perfectly legitimate to agitate outside the House upon any public question ; and to bring such pressure to bear upon the counsels of this House as may be consistent with a free and full expression of public opinion. But all such expressions of public opinion depend, or ought to depend, for their influence upon the facts that they are based upon knowledge and urged with intelligence. Expressions of opinion founded in ignorance, cannot have influence with any enlightened legislature. I feel a great deal of sympathy wilk those who have been misled in this matter. Working men, not having time to study these contracts thoroughly, have taken as true the false statements that have been made to them; and acting under the belief that the contracts would do them the gravest wrong, have come forward to oppose them. But I feel that were we to yield to a clamor of this kind, and to say that the construction of the proposed railways should be a monopoly in favor of resident labor within the colony, we should bo doing that which would entail upon the colony many and great evils, in addition to the immensely increased cost of the railways, which would assuredly result. The Government are very far from desiring that Messrs Brogden and Sons should have a monoply. In fact, the second clause in each of the contracts distinctly provides that the Governor shall be at liberty to entrust to persons other than Messrs Brogden and Sons the construction of railways and the supply of necessary plant, &o. I insisted upon the insertion of that clause, with a view to break up any possible tendency to a monopoly in favor of Messrs Brogden and Sons. In conclusion, I appeal to hon members not to mix party considerations with the discussion of this question. But for the agitation to which I have referred, I am convinced that the feeling throughout the country would be one of great gratification that the Government had persuaded enterprising men,, of large means and wide experience, to give us the benefit of their position, their knowledge, and their practical ability. I appeal to hon members, laying aside everything like party or personal feeling, to deal fairly with these gentlemen who, relying upon the reputation of New Zealand for fair dealing, and upon some know" ledge of the resources of the country that are waiting development, have come amongst us to enter upon business that will be greatly beneficial to us, and to some extent to throw in their lot with us. I move, “ That this committee, having before it the contracts entered into with Messrs Brogden and Sons, either one of which, or both, the Governor, by the terms of the agreement, is empowered to ratify, recommends that No. 1 be nob accepted.” If hon members desire to prolong the debate beyond to-night, the Government will not object to such a course ; but we are very anxious j to find that the invitation to deal with the ’ question in an unprejudiced spirit is responded to ; and in that case we shall give gi’eat attention to any recommendations as to the direction in which modifications of No 2 contract shall bo sought for.