'While the accumulated deficits of the three years {146} ending with 1868-69 have amounted to 5-3/4 millions, the cash balances in our Indian treasuries have fallen from 13,770,000 pounds at the close of 1865-66 to 10,360,000 pounds at the close of 1868-69, and, notwithstanding our recent loan of 2,400,000 pounds, are at this moment lower than they have been at this season for many years. During the same period our debt has been increased by 6-1/2 millions, of which not more than 3 millions have been spent on reproductive works.[4] Your Grace has reminded us that successive Secretaries of State have enjoined us so to frame our estimates as to show a probable surplus of from half a million to a million sterling. We entirely agree with your Grace in acknowledging the soundness of this policy. We have no doubt that, excluding charges for Extraordinary Works provided for by loan, our expenditure in time of peace ought to be so adjusted to our income as to leave an annual surplus of not less than one million. The necessary conclusion to which we are thus led is, that nothing short of a permanent improvement in the balance now subsisting between our annual income and expenditure of at least three millions sterling will suffice to place our finances in a really satisfactory condition. How, by reducing our expenditure and increasing our income, we can best obtain such a result, is the problem that we have now to solve. 'We are satisfied that there is only one course {147} which we can properly follow. We must no longer continue to make good the deficit of each succeeding year by adding to the public debt. And we must determine, whatever be the difficulty of the task, that there shall henceforth be no room for doubt that, in time of peace, our income will always be in excess of our ordinary expenditure.' [Footnote 4: Par. 71 of Despatch to Secretary of State No. 240, dated 20th Sept. 1869.] I have mentioned the immediate measures by which Lord Mayo endeavoured to stay the impending deficit. But he felt that such measures strained the whole mechanism of the Government; that to stop public works on a sudden involved waste of material, while the increase of taxation during the current year disclosed in a most undesirable manner the shortcomings of our system, and might prove a cause of perilous discontent among the Indian people. 'We have played our last card,' he once said in conversation, 'and we have nothing left in our hands to fall back upon, except to devise measures which will prevent the recurrence of a similar crisis hereafter.' He accordingly resolved to find a permanent remedy, by removing the causes of the financial misfortunes in past years.