"DOWNING STREET, "20 _Feby_. 1863.

"MY DEAR MR. WATKIN,

"It has not been till to-day that I could have given you any answer respecting the proposed subsidy to the N. W. Transit.

"I think a short verbal communication would be more satisfactory than explanation by letter.

"Can you call here to-morrow about 2.30, or, if more convenient, at Thomas' Hotel--between 11 and 1.

"Yours very sincerely, "NEWCASTLE."

"DOWNING STREET, "27 _March_, 1863.

"MY DEAR SIR,

"I do not on the first blush of your proposal see any great difficulty in agreeing to it,--_if_ indeed the Imperial Government is in absolute possession of the tract of country you speak of.

"I have requested Sir F. Rogers to look into this and see you if you like to call upon him when you come to town.

"I leave London to-morrow morning for, I hope, a fortnight.

"I am, yours sincerely, "NEWCASTLE."

This letter of the 27th March, 1863, was in reply to a letter from me:--

"ROSE HILL, NORTHEN, "_March 27th_, 1863.

"MY LORD DUKE,

"In looking over the maps very carefully prior to sending in the doc.u.ments proposed to be transmitted through your Grace, I find that it is very probable--from the desirability of carrying a telegraph through a wooded country, and avoiding the plains, where buffaloes often move about in square miles of extent--that we may go through the Imperial territory for a more or less considerable distance. It therefore strikes me, that what I have before suggested, as to the desirability of Imperial a.s.sistance, may not be reconciled with Mr. Gladstone's desire to avoid an Imperial contribution of money. I therefore suggest to your Grace, that the Imperial Government should agree to give a grant of land of some reasonable extent, also that portion of the territory lying between the Hudson's Bay territory and British Columbia which belongs to the Crown, provided a telegraphic and road communication pa.s.ses through any portion of that territory.

"If this meets your Grace's views, would it not be better that the fact of the Imperial Government having made this concession should be recited in the preamble of the proposed Bill which we are to send to Canada, and that thus invited to the scheme by a contribution of land, power to purchase or control should be directly given by a clause to the Crown? If your Grace will give me your views upon this at once, I will have the doc.u.ments prepared accordingly, and transmitted without delay.

"'Minesota' has given about two millions of acres in aid of works to extend their rail and water communications in the direction of Red River.

"I have to thank your Grace for sending me Mr. Foley's report, and, also, copy of the Minutes of Council as to the Intercolonial and the western project.

"The territory I allude to is hunted over by the Hudson's Bay Company, and forms, mainly, a portion of what they call the Athabasca district."

It was matter of deep regret to me that the Government of the day would not accept any share of the pecuniary responsibility of adding to the compactness of the Empire, by connecting the two oceans by telegraph and by road. The despatch which I copy--dated Downing Street, 5 March, 1863--distinctly says, in its third paragraph, "Her Majesty's Government are of opinion that they cannot apply to Parliament to sanction any share in the proposed subsidy by this country."

"DOWNING STREET, "5_th March_, 1863.

"SIR,

"I am directed by the Duke of Newcastle to acknowledge the receipt of your letter of the 27th of December, and to express his Grace's regret that so long, though quite unavoidable, a delay should have occurred in replying to it.

"I am now desired to make to you the following communication:--

"Her Majesty's Government are of opinion that they cannot apply to Parliament to sanction any share in the proposed subsidy by this country; and though they take great interest in the project contemplated with so much public spirit by the gentlemen represented by you for carrying a telegraphic and postal communication from the confines of Canada to the Pacific, they do not concur in the opinion of the Canadian delegates that the work is of such special 'Imperial importance' as to induce them to introduce for the first time the principle of subsidizing or guaranteeing telegraphic lines on land.

"Her Majesty's Government are further of opinion that without a submarine Transatlantic telegraph the proposed line in America will be of comparatively small value to the Imperial Government, and that whenever a scheme of the former kind is renewed, it is almost certain that this country must be called upon to bear a much larger charge for it than that which it is now proposed to devolve upon the British Colonies in respect of the land-telegraph and communication.

"As Canada has offered to bear one-half of the proposed guarantee, the Duke of Newcastle is prepared to recommend, and his Grace has no doubt of ready acquiescence, that British Columbia and Vancouver Island shall pay the sum of L10,000 per annum, as their share of L20,000 (being at the rate of L4 per cent, on a capital of L500,000), to commence when the line is in working order.

"It will, however, be necessary, before any proposal is made officially to the Colonies, that the Duke of Newcastle should receive further details. It is requisite that his Grace should be informed what provision will be proposed as to the duration of this subsidy; what conditions as to the right of purchasing the line, and to what authorities that right should belong; and on what terms the whole arrangement may be revised in the event of the Hudson's Bay Company coming to any agreement for the sale of their territory.

"There will doubtless be other provisions which the Colonies will expect.

"I am, Sir, your obedient Servant, "T. F. ELLIOT.

"E. W. WATKIN, Esq."

I close this narrative of the Pacific Transit Scheme with the despatch of the 1st May, 1863, which summarises the proposals made and generally concurred in. These long discussions were not abortive, for they led up to the great question of the buying out of the Hudson's Bay Company, without which neither successful Confederation, nor its child the Canadian Pacific Railway, would have been achieved in this generation.

"DOWNING STREET, "1_st May_, 1863.

"SIR,

"I am directed by the Duke of Newcastle to state that he has had much satisfaction in receiving your letter of the 28th ultimo, enclosing the heads of a proposal for establishing telegraphic and postal communication between Lake Superior and New Westminster, through the agency of the Atlantic and Pacific Transit and Telegraph Company. These proposals call for some observations from his Grace.

"New Westminster is named as the Pacific terminus of the road and telegraph. His Grace takes for granted that if the Imperial Government and that of British Columbia should find on further inquiry that some other point on the coast would supply a more convenient terminus, the Company would be ready to adopt it.

"_Article_ 1.--His Grace sees no objection to the grant of land contemplated in this Article, but the 'rights' stipulated for are so indeterminate that without further explanation they could scarcely be promised in the shape in which they are asked. He antic.i.p.ates, however, no practical difficulty on this head.

"_Nos_. 1 _and_ 2.--The Duke of Newcastle, on the part of British Columbia and Vancouver Island, sees no objection to the maximum rate of guarantee proposed by the Company, provided that the liability of the Colonies is clearly limited to 12,500_l_. per annum. Nor does he think it unfair that the Government guarantee should cover periods of temporary interruption from causes of an exceptional character, and over which the Company has no control.

"But he thinks it indispensable that the Colonies should be sufficiently secured against having to pay, for any lengthened period, an annual sum of 12,500_l_. without receiving the corresponding benefit, that is to say, the benefit of direct telegraphic communication between the seat of government in Canada and the coast of the Pacific.

"It must, therefore, be understood that the commencement of the undertaking must depend on the willingness of the Canadian Government and Legislature to complete telegraphic communication from the seat of government to the point on Lake Superior at which the Company will take it up. Nor could his Grace strongly urge on the Colonies of Vancouver Island and British Columbia the large annual guarantee which this project contemplates, unless there were good reason to expect that the kindred enterprise of connecting Halifax and Montreal by railway would be promptly and vigorously proceeded with. It will also be requisite to secure by formal agreements that the guarantee shall cease, and the grants of land for railway purposes revert to the grantors, in case of the permanent abandonment of the undertaking, of which abandonment some unambiguous test should be prescribed, such as the suspension of through communication for a stated period.

"The Duke of Newcastle does not object to five years as the maximum period for the completion of the undertaking--and he thinks it fair to exclude from that period, or from the period of suspension above mentioned, any time during which any part of the line should be in occupation of a foreign enemy. But injuries from the outbreaks of Indian tribes and other casualties, which are inherent in the nature of the undertaking, must be taken as part of the risks which fall on the conductors of the enterprise, by whose resource and foresight alone they can be averted.

"His Grace apprehends that the Crown land contemplated in Article 3, is the territory lying between the eastern boundary of British Columbia and the territory purporting to be granted to the Hudson Bay Company by their charter. His Grace must clearly explain that Her Majesty's Government do not undertake, in performance of this article of the agreement, to go to the expense of settling any questions of disputed boundary, but only to grant land to which the Crown t.i.tle is clear.

"With regard to the 7th Article, the Duke of Newcastle could not hold out to the Company the prospect of protection by any military or police force in the uninhabited districts through which their line would pa.s.s --but he would consider favourably any proposal for investing the officers of the Company with such magisterial or other powers as might conduce to the preservation of order and the security of the Company's operations.

"With reference to the 9th and concluding Article, the Duke of Newcastle would not willingly undertake the responsible functions proposed to him, but he will agree to do so if by those means he can in any degree facilitate the project, and if he finds that the Colonies concur in the proposal.