THE BROGDEN CONTRACT.

Wellington Independent, Volume XXVI, Issue 3330, 27 October 1871, Page 2

THE BROGDEN CONTRACT.

THE TREASURER'S STATEMEr-T. Aocording to promise, we publish inexlmso tho statement made by Mr Yogel in the House of Representatives, on the subjec. of the contracts entered into with Messrs Bncden and Sons. Mr YOGEL, on tho House going in;o " committee, said : I must aßk the indulgence of the committee whilst I briefly review th« circumstances under which tha 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 propasals had been submitted to the House, the Government, at the instance of a large number of members on each side of tho 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, during a series of years, railways throughout the country. Instead of the railways to be constructed being fixed by the HduSTTS9tr> session, and the Government proceeding with^ the construction of them as might be founor desirable, the Government consented to a further modification of their policy, to the effect that the House Bhould year by year decide what railways should be constructed, I It was, however, distinctly stated to the House that those modifications did not alter the general plan and scope of the policy ; and it mußfc 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 muoh 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 speoified lines, by means of the guarantee system, general conditions being set forth in the aot, and the estimated cost of the railways authorised being nearly half a million sterling. Acting within the authority givon by that actj an agreement has been made with Messrs Brogden and Sons, which comprises two alternative contracts, the Governor having power to accept either or both ; but 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 fo ask for further legislative sanction in respect to that smaller, or No. 2, contract. Indeed, the Government are advised by the contractors tbat 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 unnecessary that special ratification of that contract should be asked for. Now, as to the circumstances which led to tho 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 socure 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 njpt considered desirable there should be 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 objecii When I arrived in London, I found that the Commissioners, during their 6tay, 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 aa finally decided by the Uouse; and the position in -whioh I found matters in London was this : — Messrs. Brogden and Sons proposed to send out a surveying and engineering staff to examine certain suggested Tines 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 j 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 auoh 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 railway* should be done by a stuff expressly provided by the Government, aud 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 j and that there would be no possibilityof knowing when anything practical 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 j but I added that I did not wish to fetter their discretion as to sending out a staff. So, negotiations, which continued during tho 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 Buch arrangement as that into which we have entered, we should havo met the House this session without being better prepared than wo were at the close of last session to give information as to the possibility of getting railways constructed under the guarantoeHsystom — because, to have met tho 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 bo 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 whioh 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 tho oountry aa to its railway requirements. When the discussion with Messrs Brogden was gone into, it became evident that it would be no good to enter into a contraot unless a large fonjgiture in oaso ot non-performance was provideuMgr. But I had no power on behalf of the Govern- "^ ment to agree to a condition of forfeiture. I , had, however, the power — and ife was the only thing I could offer to Messrs Brogden by way of inducement to become liabh 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 Railwaya Act. Such were the bases of the agreement:— Two contraotsto be prepared j the contractors* profits to be by each limited to 5 per cent upon estimated cost of labor and material ; the contractors to give seourity, to the

amount of £25,000 for the performance of ono or both of the contracts, as might be decided by the Government ; and I, on behalf of the Government, undertaking, to the extent of suoh power as I had — it being set forth in the agreement that I had but a certain amount of power — that one or both should be accepted by the Assembly aud be executed by the Governor. In each contraot it is provided that the Governor shall cause to be prepared all necessary plans, sections, and specifications j that all works shall be executed under the control of the Government engineer; and that the Government shall fix the sites of stations and the course of each railway, and shall have powor to direct deviations from time to time. All theso very large powers are in most cases left in the hands of those who accept the guarantee. Inßtead 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 tho contractors are, as I have said, by each 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 K consideration. I will now briefly indicate jPaome of the leading features of each of the contracts; t?«t it is beyond my powor, in a epeech of reasonable length, to give such a description of the contracts as shall free hon members from the necessity of themselves studying the documents. lam 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 tho cost there is to be paid a guarantee of 5i 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. Ab to the land, it was not by any moans assumed that it- was to be of the value which many of those who have been good enough to caloulate 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 havo the discretion of giving the two million acres proposed to be given to Meßsr6 Brogden and Sons when tho negotiations for the Nelson railway were going on j 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 whioh 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 psrty question ; but I will not believe tbat 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 jb 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 bo bound to purchase the railways at the end of forty years, paying for them in cosh j the subvention of one-third the cost, already mentioned, Branding as part payment, and the purchase price being the actual cost to the contractors, lees allowance for deterioration through wear and tear or want of 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 ono 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 80. 2, contract — which, undoubtedly, is the iiore favorable to the colony, This contract provides for a guarantee of 5£ 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 five per cent as contractors' profits added. The railways are to be leased to the contractors for ninetynine years at a nominal rental, after whicli they become tho property of the colony. At any time within twenty years from tho completion of a railway, the Government are to be at liberty to purchase it at cost price, leBB 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 tho general opinion of those who really understand such matters, so es to be able to give an opinion worthy of I being regarded, that this No. 2 contract is rery favorable indeed for the colony — much more favorable than we have the right to suppose we should again be able to obtain. lam not, however, prepared to say that this contract will involve a lees cost than would be the case if we could throughout construct the railways for cash payments, or that tho cost will even bo BO small as would be secured in the latter caße. On the other hand, I must ask tho 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 largo loan — remembering also tho great industry which some colonists displayed in circulating in Great Britain reports disparaging to the credit of the colony — the money raj^d was obtained upon terms which must be Sonßidered very favorable to the colony. lam of opinion that with the present astonishing cheapness of money, and looking at tho high price of all colonial securities, itis quitepossiblo that the next instalment of our loan may be more favorably negotiated ; hut it is only fair to recollect that a vast variety of circumstances may lead to a totally different result. Wo ennnot, for instance, expect that the present cheapness, of money will continue; and, therefor in saying that terms of cash payment would be better for ub 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 moro advantageous for us. Nor must; we forget that ifc 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. Ido not wish, however, to withdraw the expression of my opinion that, upon tho whole, cash payments would be the cheapept 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 tho 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 moan, 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 Governor is empowered to fix and decide. The only condition in the nature of a restriction upon 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 tho end of a period 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 throe 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 tho capital expended. The Indian Government cannot, without paying compensation, 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, bo that the interest to be paid by the Government is upon only such an amount as is really necessary for the continuous prosecution of tho works ; but n the oase of the Indian contracts, interest has to be paid upon such an amount of capital as tho 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 tho state of tho 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 bo 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 bo loss than the price of existing stock : but taking all contingencies into consideration, I think we may rely that weshall from time to time be able to obtain the money we require for reproductive works, 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 ex penditure. 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 bo 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 way fairly be said that the Government last session received instructions from the House that land grants should constitute a portion of the payments for railways, and that a very large proportion of the railways should bo constructed under tho guarantee principle. I admit that we have found that we cannot, upon either of thoie 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 presumed profits, appear to think they ought. I am not prepared to decide whether tho contractors are too moderate in their estimate of the value of the 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 his arrival, he gave to the Go- ■ vernment a memorandum, in which there aro sketched certain alterations in the contracts to which his firm are prepared to agree. The proposula made are without prejudice. I wdl read the document to tho committee, but not with a view of asking that it shall bo 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 bo expended or contractors' profits. The document shows clearly that the contractors do not 9et so high a value upon the land as it has been supposed they should, and therefore I read it to tho committee. It is written by the legal adviser to the contractors, Mr Travers, and is signed by him, on their behalf.— Memorandum for Ministers in relation to Messrs Brogden's contracts, submitted without prejudice. As to contract No. 2. — 1. Messrs Brogden consider that it is within tho power of the Government 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 Government and Legislature, they ought not to bo required to make any suggestions or propositions as to modifying contract No 2. — 3. That, in the meantime, contraot No. 2 should be treated as having been executed by the Governor. As to contract No. 1. — When tho Messrs j Brogden entered into this contract with the I 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 tho 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 found materially advantageous, tho Government are earnest in their desiro to carry it out accordingly, and tho following suggestions aro made upon the distinct understanding that, if agreed to by Ministers, this contract will bo submitted to the consideration of tho Legislature with all tho weight of Government approval : — Suggestions. — 1. The contract may be modified or altered in two distinct ways, as follows : — lst alternative : Government to givo a direct guarantee of tho principal and interest on the bonds or coupons to be issued by tho contractors for tho money raised for the works. The rate of profit to be increased from five to eight per cent. The emigration scheme to be abandoned. As a consideration for the foregoing alterations, tho contractors 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 works of a permanent nature to tho extent of (say) no!; loss than £4,000,000, spread over a period not exceeding ton years, paying them in cash the cost of such work when completed, with a profit of £10 per cent, on euch cost as shown by accounts to bo rendered, with an advance of £90 per cent, monthly by way of progress

paymentß on the residuary certificate. The contract No. 1 to be completely abandoned. Messrs. Brogden point out the following ac special advantages which the colony would derive from the adoption of the latter course : —1. They would be prepared to take over and employ, 60 far as would be necessary for tho works, the whole of the efficient Btaff of the General Government in connection with the department of public works. 2. They would, for their own sakes, be prepared to establish factories in New Zealand for the ma nufacturo and supply of all such plant, and rolling-stock, &c, us could bo advantageously and economically manufactured in this colony. The collateral advantages to the policy for Buch a course oannot, ifc is submitted, be over-estimated. By the adoption, moreover, of this proposition, the Government would have an assurance that the whole of the works of any magnitude to bo 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 recognise that thore is anything like even an implied pledge that they are not at liberty to accept only tho No. 2 contract if Buch bo tho wish of the Houso. As to the geueral question of the construction of railways, the Government admit, of course, that it is of the utmost importance railways should be constructed as cheaply as possible ; but we must not expect to secure railways without those who construct them securing fair profit ; and if we go the length of being unduly parsimonious in the matter, wo shall not be adopting tho policy generally pursued by other countries. It is an almost underotood thing — I am speaking of other countries possessing at least as great resources as New Zealand — that sacrifices Bhould be made in order to secure railways, rather than to expect that tho constructors of railways will make sacrifices for the benefit of the country in which they are to be employed. In the money article of tho London "Times," there recently appeared, 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 ths rate of more than 5000 miles per annum. ' This probably exceeds the annunl construction of railroads in all tho rest of the j world ! ' " We may take useful hints from the United States as regards opening up country, though it would be folly to suppose we can , follow the example of that great country as regards the very lavish payments and grants made for railways. I have read tho extract to J show that elsewhere, when country has to be | made available, the construction of railways is not conaidered ao hazardous an experiment as some people in New Zealand seem to con- | sider it. One may certainly say that if in a country where land is almost boundless, and the already settled districts present co many and so great inducements to enterprise, it is not considered huzurdoua to spend most freely for the construction of railways 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, ifc 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 costlinesß which railways acquired during their earlier days in Europe, has caused many persons to conclude that any system of railways must even iv those days necessarily bo too costly to be contemplated by the settlers in a colony like New Zealand. I shall now ask the committee to j consider the question between the two contracts with Messrs Brogden and the opposition to those contracts. Thetrue forceorvalueofan 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 organ sation skilfully handled, a seemingly great effect may be produced. The Btorm — 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 Baid 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 effeot 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 interests. Thoße claßßes 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 affeot the available labor of the colony. I consider that Messrs Brogden and dons are quite as likely as small contractors to employ auoh local labor as ib really available — that it will be their interest to do so, as being cheapor than to import labor. Those who are employed by largo contractors have a guarantee in moat cases — or in all cases, probably — that engagements made with them will be faithfully carried out. There are manj 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 country appliances such as small contractors assuredly could not afford, and, especially, they are able, and likely, to establish here large workshops and factories: they have more, and moßt important, available resources, through experienced managers and men, and the command of all necessary plant : they can make moro rapid, bccau3o continuous, progress with works: they can arrange to push on thoso portions of a line which should bo pushed co as to secure the greatest advantage from carriage of materials over completed parts ; while, under Bmall contractors, portions of the works may bo rapidly completed, and yet remain practically useless until some of the least advanced parts havo been finished. All theso advantages must tend to economise construction, in the benefits of which the country will share. I aay nothing as to the advantago of railways when completed being under ono management; because if linos are to bo constructed in short sections, by small contractors, the principle must be that of cash paymonts, so that tho management, after completion and payment, must devolve upon tho Government. There seems to be an idea floating in tho minds of many porsons, 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 becomo contractors, whether they have tho necessary knowledge of the business or not. But if ifc is to be understood that tho only requisite for securing a contract is to be tho 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 tho idea which has gained certain support for the Opposition out of doors is to be realised, and the railways aro to be constructed by the existing available labor in the colony, then, to the effect of greatly increasing the cost will havo to bo added the other effect that tho labor market will be disorganised, and all tho ordinary industries of the colony comparatively paralysed, I shall be as glad as any one can be to find that, by meanß of the public works wo propose, any present surplus labor within the colony obtains omployment, 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, ifc 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 aro to be tied down to the small contract systom— 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 — tho Government will bo brought into such direct personal contact with so largo a number of residents, that the electoral independence of tho colony will certainly be affected, and most injurious political disorganisation may ensue. I wish not to bo 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 whicli have been let in that province since the last session have be^n let with ths understanding that the works shall be taken over by tho 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 tho contrary, I believe that the contracts in Canterbury promise to prove economical and satisfactory ; but that which may suit for portions of tho 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, wonld, if adopted as a principle throughout tho country for the proposed extensive works, bo inevitably attended by innumerable evils. Especially would such be the case in this island, for reasons which must be so obvions that ifc cannot be necessary further to refer to them. Another point is of material interest, in considering tho 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 re.-ult was that, although a largo number of tenders were sent in, the contracts wore 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 ua 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 prico. 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 outaide opposition. Before Mr Brogden arrived in New Zealand, or the contracts had been entered into, there was a clamour that largo contractors should be secured for the construction of our railways. Not rery 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 ua to understand that the fate of that; province depended upon Messrs 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 moans, and who thoroughly know their business, to boing 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 faot of a large contract to prevent Bubcontracts 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 tho advantage of extensive appliances, such as it would be impossible for the Government to place at the command of small contractors. Now, as fco 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 tho No. 1 contract. In obedience to a generally expressed wish, the Government — some time before Mr Brogden arrived — determined that they would not ask fur a larger authority for the construction of railways under tho guarantee system, than to tho 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 bo 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. Wo 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 lommittee thinks it desirable there should be negotiations, upon the basis of No 1, for a contract not necessarily for so largo an amount of expenditure. On tho other hand, if the committee assents to the resolution I am about to propo&e, ifc will leave the Government to accept No. 2 ; but we shall not understand that we aro precluded from further negotiations, with a view to making that contract in some respects perhaps more acceptable to tho Legislature, aud if such negotiations go on, we shall lay them before the House, if we can possibly do so. I beliovo tho contract would bo more acceptable if, instead of retaining in ifc the arbitration clause, there was substituted for it an agreement as fco the price of railways to bo constructed. Wo 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 Bpirit, as to tho 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 wo have acted with discretion and judgment. Had these contracts not been entered into, we Bhould havo Bimply had to come before tho House with an admission that wo wero in no better position than wo were last year, to decide upon the policy of constructing railways upon guarantees. Now, the House haß tho 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 havo said as to the outside agitation will at all load hon members to suppose that I desire to lay down as a principle that itis not perfectly legitimate to agitate outßide the House upon auy public question ; and to bring such pressure to bear upon the counsels of this House as may bo consistent with a free and full expression of public opinion. But all such expressions of public opinion depend, or ought to depend, for their influenoe upon the facta that they are baaed 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 with those who hare

been mialod in this mafctor. Working mem not having time to study these contracts thoroughly, have taken aa true the false statements that havo been made to them ; and acting under tho belief that the contracts would do them the gravest wrong, havo come forward to oppose them. But I feel that were wo 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 tho colony, wo should bo doing that which would entail upon the colony many and great evils, in addition to tho immensely increased cost of the railways, whicli 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 bo at liberty to entrust to persons other than Messrs Brogden and Sons the construction of railways and the supply of necessary plant, &c. 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. Iv 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 ono of great gratification that the Government had persuaded enterprising men, of large means and wide experience, to give us the benefit of their position, fchcir knowledge, and their practical ability. I appeal to hon members, laying aside everything like party or personal feeling, to deal fairly with theso gentlemen who, relying upon the reputation of New Zealand for fair dealing, aud upon some know ledge of tho resources of tho country that are waiting development, have come amongst us to enter upon businees 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 ifc the contracts entered into with Messrs Brogden and Sons, either one of which, or both, the Governor, by the terms of tho agreement, is empowered to ra fcify, recommends that No. 1 be not 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 to find tbat the invitation to deal with the question in an unprejudiced spirit is responded to ; and in that case wo shall give great attention to any recommendations as to the direction in which modificationa of No 2 contract shall be sought for.