D—No. 3a

of the measure, which the Treasury minute of 1861 had in view, was the saving effected in each case by the Colony paying a share of a single service for all the Colonies, instead of having a separate and complete service of its own. The Memorandum proceeds to state that, assuming the change to be desired by the other Colonies, the Colony of New Zealand will acquiesce in the arrangement for the readjustment of the rate of contribution by the several Colonies, but only on condition first, that the same principle of contribution shall be followed in every subsequent apportionment of the subsidy; and secondly, that the Colony shall not be required to pay anything beyond its contribution to the main line, calculated accordiim to the first scheme, from the establishment of the branch service from Sydney to the present time, and henceforth, according to the increased rate proposed in the minute ot April 1861. Their Lordship's cannot agree to these cnnditions. Power has been reserved to each of the Colonies, if unwilling to abide by any future decision of this Board, to withdraw altogether from a participation in the scheme, and their Lordship's cannot allow of any special proviso being made in regard to New Zealand, I am, however, to state with respect to the question raised whether the postal service between Sydney and New Zealand, under the contract of 1858, should not be treated as a part of the general scheme proposed by their Lordships Minute of 1855, that, when Mr. Sewell, who in 1857 represented the Colony of New Zealand in this matter, proposed a scheme for an inter-colonial and inter-provincial service, the first being that from Sydney to New Zealand, and the second a subsidiary service between the ports of New Zealand, his proposal was assented to on the distinct understanding that the sum of £12,000, afterwards raised to £14,000, represented the entire cost of the inter-colonial service, which was to come under the terms of the Minute of 1855, and be shared between the Imperial and Colonial Governments. It was subsequently determined, for reasons stated at the time, that no claim could be made on any of the Australian Colonies on this account, and the whole subsidy of £14,000 has consequently been provided out of Imperial funds. It was settled, at the same time, that, in aid of this expense, the sea postage of 4d. per half ounce on all inter-colonial letters between Australia and New Zealand should be credited to the Imperial Post Office revenue, and their Lordship's cannot, under these circumstances, see any reason for modifying that decision. In connexion with this subject, an opinion is expressed in the Memorandum that fourpence out of a total rate of sixpence is an excessive amount to be regarded as sea postage; but as to this, lam to observe that the rate of fourpence is far from being remunerative, and that, if the amount left for the Colonial inland service is not considered sufficient, the total rate might, on a proposal to that effect by the Government of New Zealand, be increased, leaving the portion of the rate to be appropriated as sea postage untouched. The Colonial Government further say that they cannot reasonably be called upon to pay any portion of the subsidy for the main line for a period prior to the establishment of the branch service. In reply to this statement, their Lordships would observe that the Imperial Government is certainly not liable to this expense, as it did not undertake to establish branch lines. It did establish the main line from England to Australia, and if there was any delay in adding the branch services, the fault lay not with the Home Government but with the Colonial Governments. New Zealand enjoyed, from the first, a considerable advantage from the main line, and if this advantage was not as complete as it might bave been, the New Zealand Government should prefer a claim not on the Imperial Government, but on the other Australian Colonies. In conclusion, I am to state thai their Lirdships adhere in every respect to the decision already communicated to the Government of New Zealand, and must require the remittance without further delay, of the amounts due, as well on account of the subsidy paid for the main line as of ths postage collected orr letters between New Zealand and Australia, and I am to request that this reply to the representatives of the New Zealand Government may be communicated to the Governor of that Colony, and that he may be called upon to state distinctly whether the Colony accedes to those demands, or withdraws from the main contract altogether, and that he may be informed that, until such statement be received, the Colony will be charged with its share of the expense, as if those terms had obtained its concurrence. I am, &c, F. Peel. Sir F. Rogers, Bait., &c, &c, &c.

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FURTHER PAPERS RKLATIVE TO STEAM POSTAL SERVICE.