"Although little disposed to believe that Her Majesty's Government will not accede to the proposal of co-operation they have made in relation to the opening of communication from Canada to the Pacific, the undersigned have the honour to state, in answer to the letter of Mr. Watkin of the 17th instant, that in their opinion the Government of Canada will grant to a Company organised as proposed in the papers already exchanged, a guarantee of interest, even on one-half of the capital stated in these documents, should the Imperial Government refuse to contribute any portion of this guaranteed sum of interest. "In answer to another demand made in the same letter, the undersigned must state that the guarantee of the Canadian Government of this payment of interest ought to secure the moneys required at the rate of four per cent, and that they will not advise and press with their colleagues a higher rate of interest as the basis of the arrangement. "London, 20 December, 1862. "L. V. SICOTTE, "W. P. ROWLAND. "ED. WATKIN, Esq., London." So much, and so far, for the Pacific affair. But in the Intercolonial discussion there was an undercurrent. The only points left for discussion with the Duke and Mr. Gladstone were the question of survey, which was easily settled, and the question of a sinking fund for the loan to be made on the credit of Great Britain. At first Mr. Gladstone insisted on such a short term of repayment, and therefore so heavy a put-by, that his terms took away the pecuniary value of the guarantee itself: that is to say, that what the Colonies would have annually to pay, would have amounted to more than the annual sum for which they could have borrowed the money themselves. I suggested a longer term, and also, that the interest on the annual put-by, to accumulate, should be altered so as to alleviate the burden. In answer to a letter written with the assistance of Messrs. Howe and Tilley, I received the following from the Duke:-- "CLUMBER, "8 _Decr_. 1862. "MY DEAR SIR, "I am sorry to say your letter confirms the impression I have entertained from my first interview with the Canadian delegates--an impression strengthened by each subsequent meeting--that Mr. Sicotte is a traitor to the cause he has come over to advocate. I am unable to make out whether he is playing false on his own account or by order of his colleagues; but I cannot say I have any reason to associate Mr. Howland with the want of faith in any dealings with me.