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21. The service which Her Majesty's Government and the colonies desire is one which neither the Eastern Telegraph Company nor any other private enterprise is prepared to undertake on terms which can be considered in comparison with the terms upon which it can be provided by the associated Governments. It is a public service as much as the carriage of parcels, the provision of life insurance, the building of light railways or of ships of war, and Her Majesty's Government cannot find any reason why in the one case a private enterprise with which the Government work may compete should be considered entitled to compensation and not in the others. 22. I am to remind you, moreover, that by the time the existing subsidies to the Eastern Extension Company expire it will have received in direct payments from the Governments of Australasia a sum of nearly one million sterling, which must be sufficient to have covered a large part of the capital outlay incurred in opening communication with that country, so that it can have little cause for complaint if it is now exposed to competition. 23. If the competition arose from another private company, there would obviously be no claim for compensation, and Mr. Chamberlain is unable to see why, so long as the project is conducted on commercial principles, fair competition by the State should give rise to a claim for compensation which would not be suggested for a moment if the competitor were a private person or company, however wealthy or influential. 24. The competition in so far as it may arise will, your Lordship admits, be confined to a very limited part of the vast area served by the lines of the Eastern and Eastern Extension Companies, and it has already been pointed out that the Pacific project will derive a considerable part of its traffic from sources at present undeveloped, and Mr. Chamberlain is satisfied that with that new business and the large increase due to the reduction of rates there will be ample and remunerative work for both routes ; and that, while the public will undoubtedly receive a substantial benefit from the improvement and cheapening of communication, the companies will be relieved to a considerable extent from the heavy drafts which they now consider it prudent to make upon their revenue for the purpose of adding to the capital value of their enterprise. I am, &c, The Marquess of Tweeddale. Selborne.

Enclosure 2 in No. 57. The Marquis of Tweeddale to the Under-Secretary of State for the Colonies. Eastern Telegraph Company (Limited) and Eastern Extension, Australasia, and China Telegraph Company (Limited), Winchester House, 50, Old Broad Street, My Lord,— London, E.C., 19th July, 1899. I have the honour to acknowledge the receipt of Your Lordship's letter of the 10th instant, replying to a letter which I addressed to the Prime Minister on the 17th May last submitting the objections entertained by the Eastern and Eastern Extension Telegraph Companies to the proposals in relation to the " all-British Pacific-cable project " contained in the recently published correspondence between the Colonial Department and the High Commissioner for Canada and the Agents-General for the Australasian Colonies. 2. These objections are in no sense new, as the Chancellor of the Exchequer seemed to think when he received the deputation from the companies on the 29th ultimo, and. stated that their novelty put the companies out of Court. They were all, in substance, stated by myself in evidence before the Pacific Cable Committee in November, 1896; and until the publication of the Colonial Department's letter to the High Commissioner and Agents-General of the 28th April last [Enclosure in No. 42, F.-8, 1899], which therefore preceded the publication of the report by several days, I had no reason to suppose that Her Majesty's Government would so gravely depart from the course heretofore pursued, and thus disregard the opinions expressed by successive PostmastersGeneral and the evidence given by the permanent officials of the Postal Department. The delay in publishing the report of the Pacific Cable Committee until the 4th May of the present year (nearly two years and a half after it was signed) confirmed my impression that Her Majesty's Government attached more weight to the evidence laid before the Committee than to the recommendations of the Committee, since it was a foregone conclusion that the Committee would be in favour of the scheme —seeing that four out of the six members were avowed advocates of it. As, however, our objections appear to have been forgotten, and are now treated as new, it is necessary that I should reply to Your Lordship's letter in some detail. 3. In reply to the first five paragraphs of it, I must observe that I have never suggested " that there is any rule or formula of universal and permanent application limiting the functions of the State in regard to services of public utility " ; nor did I, in my letter to Lord Salisbury, question the right of the Imperial Government to make any arrangements required in the interests of the Empire, whatever effect such arrangements might have upon private enterprise—assuming always that due compensation were made ; but I must still maintain that the grounds upon which the proposals of the Colonial Department are based appear to be a departure from the principles hitherto acted upon by Her Majesty's Government, and that the reasons by which that departure has been sought to be justified appear wholly inadequate. 4. The limited facilities granted by the Government in life assurance, annuities, and savingsbanks —chiefly for the promotion of thrift amongst the working-classes—referred to in the 6th paragraph of Your Lordship's letter, appear to me to have but little bearing on the present question. The carriage and distribution of parcels have been initiated by the Post Office under agreements satisfactory to the railway companies ; but the case of the inland telegraphs and cable communications with the Continent of Europe, referred to in the same paragraph, is precisely analogous to that of the companies. 5. Both the Chancellor of the Exchequer and the Colonial Secretary seem to have forgotten the fact that the inland telegraphs and cable communications with the Continent of Europe were

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