2. By a letter from tlie Board of Ordnance, of which a copy is enclosed for your information, it would appear that up to the latest date for which there was any account in this country, on the 22nd of December, 18+8, those expenses amounted to £37,843. In the course ot a correspondence which has taken place on the subject with the Lords Commissioners of the Treasury, their Lordships have pointed out that the settlement of Pensioners has been conducted on the expectation that all the charges of iheir location would be defrayed from the Land Fund, or from other colonial resources. Their Lordships are clearly of opinion, therefore, that the heavy amount of charge which would appear to have been incurred for the Pensioners' Dwellings should not be provided for by an increase in the Parliamentary Estimates, but that it must be considered as a debt from the Colony to the Military Chest, and that it will be incumbent on you to endeavour to discharge that debt by economising the use of the vote, and by making the best application in your power of the Local Revenues to the same object. 3. I have to instruct you, therefore, to make every effort to liquidate the claim in this manner. You will hi.ve learned by another despatch from me that Parliament will be requested this year to make provision for the arrear of £21730 in the past Colonial Expenditure, and that a clear sum of £20.000 will be asked tor the services of the current year. With this amount of aid, I trust from the general tenor of your reports, that it will be in your power so to economise your resources as materially to reduce the debt for Pensioners' Dwellings, which service proved far more costly than had been anticipated when the men were sent out. 4. I shall be glad to receive from you, at an early opportunity a comprehensive report on the General Expenditure incurred for settling Pensioners, distinguishing the cost of houses, working pay, and other principal branches of expense ; and I need scarcely say that it would be desirable that this report should also supply any information which you may be able to afford on the benefits which the colony may have experienced from the presence of the Pensioners, and on any additional value which their Settlements may have conferred upon surrounding lands, as well as upon the extent to which they may appear to increase the resources for the defence of the colony and the maintenance of peace and good order. I have the honour, &c., &c., (Signed) Grey. Governor Sir George Grey, K.C.B. &c./ &c. J (Copy.) J .L.F. 1461. Office of Ordnance, 26th December, 1848. Sir, — I have the honour, by command of the Board of Ordnance, to forward herewith a copy of a report, dated 22nd instant, from the Assistant Inspector General of Fortifications, respecting the provision of certain accommodation required for the Pensioner Force in New Zealand, and am to request the same may be laid before Earl Grey for his instructions as to the course this Department is to pursue in this case. I have, &c., &c., (Signed) R. Byham. H. Merivale, Esq., &c., &c.

26th December. 1 tit