13.— No. la.

anything for the Colony or the Provinces; and secondly, made applicable to the other Provinces. The inference thus because we should have still left that inconvenient variety of became inevitable that no greater restriction ought to be placed paper upon the market which perplexes the capitalist, and raises on the Province of Southland than that imposed on other PromMs mind that sort of doubt which must always be paid for vinces, and it is accordingly proposed that the public lands of by so much per cent. Southland should not be tied up to a greater extent than 2. Another possible plan was that of a compulsory recall of those of other Provinces affected by the proposed measure. all provincial paper and its exchange for colonial debentures. I 4. There was a fourth plan, which was not overlooked by need hardly say that we did not think it necessary, and there- us in entertaining this question. It was to consolidate the fore did not think it wise, to run the risk of damaging our credit debts, not only of the Provinces, but of the Colony, and by any such shock to the feelings of the creditor which he would include the whole in one large loan ; and there were not have equally conceived it to be, even if we had forced him into wanting many good arguments in favour of such a scheme. a favourable bargain. We rejected it, however, for many reasons which appeared of 3. There remained, therefore, but one other course, and that sufficient weight. First, we could not make such a plan cornwas a voluntary purchase and exchange of proviucial for colonial plete, because a part of the debts of the Colony is guaranteed by securities, and that is the plan which the Government has the Home Government, and therefore could not be called in; adopted. When I say voluntary I mean voluntary on both and secondly, we do not think that this is the time to disturb sides —on the part of the Government as well as of the holder of our operations more than is absolutely necessary. Nor did provincial paper. For whilst on the one hand we hope to be there appear to us to be any sufficient pecuniary advantage to able to offer the holder of provincial debentures such an im- be gained by replacing one form of debenture by another, the proved security as shall induce him to part with them either for security for the two being identical. It seemed not impossible casli or for colonial debentures, on the other hand it is necessary that any small pecuniary advantage anticipated might be more to take care that the Government shall not place itßelf in a than destroyed by the appearance of performing an operation, position which may enable the creditor to force it to accept the object of which might not be very intelligible to the offers which are not as favourable as the Colony has a fair right money-lender. The contingent gain might be but small, the to expect. We propose to raise a loan with a maximum limit, loss from unnecessary tampering with existing securities would but which is to be raised only as required and to the extent re- certainly be appreciable, and therefore we abide by the safe quired for purchasing the provincial paper ; and we propose maxim quiela non movere. that all Buch purchases shall be made in cash or by exchang- I desire to point out that reading the Consolidation of Loans ing colonial for provincial debentures by agents in England or Bill and the Public Revenues Bill together, it will be seen that elsewhere upon the best terms which can bo obtained. But we we offer to the creditors only the consolidated revenues of the do not think that, when the Colony comes forward with the Colony as a security, and we take the current payments of offer to enlarge the security upon which these debts have been interest and sinking fund out of the provincial share of the incurred, it ought to allow the holders to wait an indefinite consolidated revenue. These provincial loans, however, lmve time before availing themselves of the offer. We are not dis- been mostly raised on the security of the land revenue, we posed to allow speculators to wait until the very offer of the have therefore provided that where the provincial share of the Government shall have enhanced the value of their claims, and consolidated fund falls short, the General Government may then to expect to obtain from the Government the higher price immediately come upon the land fund of the particular Province which the operations of the Government itself will have created, which is in default. The creditor, therefore, whilst nominally We therefore propose to limit the time during which holders of having only the security of the consolidated fund, has really provincial paper can come in and avail themselves of our offer ; that of the land fund as well. I think the Provinces generally and after that, to exclude them from all the benefits of the will prefer that the repayments of interest should be taken in proposed consolidation. Three years is the timo to which wo this manner than that the General Government should stop propose to confine these operations, and I tlu'nk we may fairly them out of the land fund in tfie first instance. Financially anticipate that in that time the great bulk, if not the whole, of course it would make no difference ; but there is a strong of the provincial securities will have disappeared from the feeling in favour of having the land fund paid over directly market, and that the financial engagements of the Colony will day by day to the provincial chest, winch we do not wish to be restored to an intelligible basis. disturb, and see no necessity for disturbing. But we have not forgotten that some of the Provinces have I have explained the financial bearings of the measure, but entered into large engagements upon the faith of raising it has political consequences wliich ought not to pass unloans which have not yet been fully negotiated. Wo propose noticed ; and I take the opportunity of recording my opinion to place Buch Provinces in the same position as they would that, should this measure become law, insular separation will have been in had this Act not been passed. It is clearly have become well nigh impracticable. of no use that such Provinces should be allowed to issue Closely connected with the measure for the consolidation debentures, which will immediately afterwards have to be of the provincial loans is the Public Revenues Bill. The two bought in. We therefore propose to raise money under this must be read together, for they are inseparable parts of the Bill to the extent to which any provincial loans are still scheme of financial policy which we propose. I shall endeavour unraised, and to pay over that money to the Province. briefly to state the objects of this measure. First, when wo In distributing the payments amongst the Provinces of propose to undertake the provincial debts as a colonial liability, the interest and sinking fund, we propose to charge against and to recoup the general chest out of Provincial revenues, the each Province the exact sum for which the General Government question is immediately forced upon vs —What does provincial has made itself liable by the extinguishment of its debt, revenue consist of? Are we to rest satisfied with the uncertain That is to say, if we can buy a £100 debenture of Otago for arrangements existing under the Surplus Revenues Act ? The £80, we shall charge against Otago the interest and sinking Government has, as I have before explained, at length come fund on the £80 of debt which the General Government to the conclusion that the system of distributing the surplus has incurred. And we propose to stop out of the provincial revenues requires to bo reconstructed. Again, we are of opinion revenues, every month, one-twelfth part of the annual sum that the whole system under which the accounts of the Colony thus due to us. are kept requires to be simplified, and that the control and Before, however, leaving the subject of Consolidation of the audit of the public moneys requires to be more effective. We provincial loans, I must not omit to explain the provisions of have had forced on us a variety of points, in which the the Bill, as specially affecting the Province of Southland, operation of the Comptroller's Act is inconsistent witli other Whilst preparing this measure, it was impossible not to perceive parts of the financial system, and these are matters which that the principle of the legislation introduced two years ago, must be dealt with in order to avoid the utmost public infor the special relief of Southland, was, by the present measure, convenience. The Committee will therefore perceive that the

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FINANCIAL STATEMENT