mated that he would be quite prepared to appoint a Commission as suggested by the Governments of Canada, Victoria, New South Wales, New Zealand and Queensland.

You will also find enclosed a copy of an official communication, dated 11th instant, from the

Colonial Office upon the subject.

In reference to the Fast Atlantic Service, Mr. Chamberlain said that Her Majesty's Government recognised its importance and were prepared to comply with the request to aid the undertaking by a substantial subsidy; and when I pressed him upon the point of the amount, said that if necessary, the £75,000 asked from the Imperial Government for ten years might be relied upon. He added that it would be absolutely necessary under these altered conditions that new tenders should be called for. When I drew his attention to the fact that a precedent had been established by Mr. Goschen, as Chancellor of the Exchequer, who, in granting a subsidy to the Canadian Pacific Railway Company at the request of the Canadian Government, had not considered it necessary that tenders should be asked, he replied that that was an entirely different case, and that the grant of a subsidy to a great corporation like the Canadian Pacific Railway Company, so vitally interested in and necessary to the success of the undertaking, took the question out of the usual category altogether. He also intimated that if this application were of the same character it would not be necessary to invite tenders. Finding that he was fixed upon this point I did not think it judicious to press it further.

In reply to my inquiry as to the mode of invit

ing tenders, Mr. Chamberlain agreed with me in the opinion that the character of the service would be clearly stated, and tenderers invited to state the amount of subsidy for which they would be willing to undertake it, Canada and Her Majesty's Government providing the subsidy in relative proportions of £150,000 and £75,000.

Mr. Huddart was, of course, greatly disappointed when I told him of the conclusion at which Mr. Chamberlain had arrived in reference to inviting new tenders. I pointed out to him, however, that he would be in a position to secure the co-operation of capitalists and shipbuilding firms upon the basis of a subsidy of £225,000 per annum, and that I had no reason to think that for a service based upon the standard of the Teutonic and Majestic anyone was likely to underbid him.

I may mention that Mr. Chamberlain stated that while Her Majesty's Government would be quite satisfied with vessels of equal speed to the Teutonic and Majestic, any proposals for ships of less speed would not be considered.

Yesterday I met accidentally Mr. Benham, the able and trusted representative of the Barrow Naval Construction Company, who built the steamers now running between Vancouver and China and Japan. I had previously introduced Mr. Huddart to Mr. Benham, in order that he might secure the co-operation of that firm. I told Mr. Benham confidentially that Her Majesty's Government had decided to give, if necessary, £75,000 per annum to secure the Fast Atlantic Service, and asked him if he would be ready to co-operate with Mr. Huddart on that basis.

Mr. Benham told me he would consult with his firm, but that he felt confident they had come to the conclusion that no subsidy would render the Fast Atlantic Service a complete success unless the Canadian Pacific Railway Company were identified with it in the closest and most effective manner; that were that the case, he felt sure they would be ready to join and give the heartiest possible co-operation in every way to carry out the service. Mr. Benham has gone to Barrow-inFurness for the purpose of confidentially consulting his firm, and has promised to let me know the best they can do.

While it is necessary to secure a speed quite equal to that of the Teutonic and Majestic, Mr. Benham does not think it will be requisite that the vessels should have the cargo-carrying capacity so great, as they would be mainly useful in carrying mails and passengers at great speed, besides having ample provision for cold-storage for fish, meat, dairy products, poultry, fruit, etc.

I will communicate to you immediately any information I obtain on Mr. Benham's return on this subject.

Deeply impressed with the necessity of obtaining the effective co-operation of the Canadian Pacific Railway Company, for the purpose of inspiring the confidence of capitalists as to its success, and the obvious advantage of having a through service from here to China and Japan by one company, I cabled you, after seeing Mr. Benham, as follows:

"Confidential. Long interview with Colonial Minister last night. Imperial Government will

support Fast Atlantic Service to extent £75,000, vessels similar Teutonic, but will require Canadian Government invite new tenders. Agents-General and self meet Colonial Minister Tuesday re cable. Have no doubt Government will support proposal and appoint Commission at once arrange details.. Pending declaration policy of Imperial Government, think it inadvisable show Fleming's letter October 11th Agents-General. Will advise you result meeting. Shall I come out consult you about these matters? Think could render you material assistDo not make contents of this message public until further advised."

ance.

I received, a short time ago, a letter from Mr. Parmelee, covering copy of one from Mr. Sandford Fleming in regard to the cable, and asking me to communicate it to the Agents-General. I took the responsibility of withholding it until after the meeting between the Colonial Minister and the Agents-General, as I felt sure that the new proposals for the division of the financial responsibility between the Imperial Government and the Colonies would have a very disturbing effect, without doing any good. The Agents-General have no power to do anything effective in the question of this kind, except as advised by their respective Governments, and a division of opinion which probably would have arisen among them would have militated against the action which we have all been authorised to ask for from the Imperial Government in the appointment of a Commission.

I have, as you know, always resisted Mr. Fleming's proposals to have the bulk of the cost of a Pacific cable thrown upon the colonies, as I have

never entertained a doubt that, whenever Canada and the Australasian Colonies agreed to make a substantial contribution towards the construction of the cable, Her Majesty's Government would be prepared to assume a very large amount of direct responsibility; and the proposal now made by Mr. Fleming that they should only grant a loan sufficient to cover the excess of expenditure by the Fanning Island route over that of the Neckar Island route, and that the interest on that loan should be charged on the surplus earnings, would probably fall far short of the assistance which the Imperial Government will be prepared to grant.

Of course, if the Government do not agree with me in this matter I will at once place Mr. Fleming's letter before the Agents-General, although, as I have stated before, I do not see how that can in any way advance the object in view.

I need not add how greatly I am gratified that our long-continued exertions have secured SO favourable a result in reference to both these important questions, and I felt it my duty, under the circumstances, to communicate to you my readiness to go out to confer with you in regard to them, in the belief that I might be able to assist your deliberations, and that we might confidently anticipate the complete success of our efforts.

I need not assure you that I have given the most loyal support possible to Mr. Huddart since I was instructed to do so by your predecessor and yourself, and regret that anything should occur to interfere with his interests; but, of course, the