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Date: 1867-02-28
By: Viscount Monck
Citation: Letter from Viscount Monck to John A. Macdonald (28 February 1867), MG26-A, Vol. 51, 20397-20403].
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20397

28 Feby 1867.

L Monck

Private

Feb. 28 67

My dear Macdonald

I should be very glad if you would bring before your colleagues the strong opinion which I entertain on the subject of the unrestricted power of borrowing money which is conferred on the local Governments by the Union Bill as it stands at present.

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I don’t think this provision will have any effect on the passage of the Union Bill.

The injurious effect which I apprehend from it is with reference to the Bill for guaranteeing the cost of the Intercolonial Railway.

It is true that power is only given to each local Legislature to bind the resources, by loan, of its own province; but, as

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the only security for the debt of the united province is the aggregate of the local resources, it is obvious that anything which tends to diminish the solvency of the local Governments will depreciate the value of the debentures of the General Government.

Every thing which reduces the solvency of the principal debtor renders it more likely that his guarantor may be called upon, and

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this is the point of view in which the unlimited power of the local Governments to borrow will probably be placed in the debate on the Guarantee Bill.

I think, with the object of meeting this objection, some restriction ought to be put on this power. One mode of doing it would be to compel the local Governments to borrow through the Central Government. To this there are obvious objections from the undue pressure which such a system

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would enable members from particular provinces to bring upon the Central Executive.

I think, however, the object might be attained by introducing a provision analogous to that which I believe exists in the municipal law of U. Canada, and which compels the municipality when the loan exceeds a certain amount, to appropriate specific taxes for the payment

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of the interest. I think

some provision of this kind might prevent the evil I have pointed out, and I think it is of great importance that no argument from the circumstances of the present case should if it can be avoided be allowed to strengthen the abstract disinclination to guarantees which undoubtedly exists in the House

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of Commons.

Believe me to be,

Yours most truly,

Monck

The Hon.

J.A. Macdonald