98. The contract provided in brief*:--

  (1) That the contractor should operate and maintain the entire railway system of the Island, approximately 613½ miles, for a period of fifty years from the 1st April, 1898, for a land grant, additional to that granted under the 1893 contract, of 5,000 acres per mile of track. In addition to this grant, the contractor was to receive a grant of 2,500 acres per mile for the operation of that portion of the old Newfoundland Railway from Whitbourne to Tilton, roughly 21¾ miles. The total land grant under the 1893 and 1898 contracts was thus 5,684,525 acres, subject to reduction as indicated below.
  (2) For the purchase by the contractor, at the end of the period of fifty years, of the reversion of the ownership of the whole system in consideration of (a) the reassignment to the Government, from the lands granted to him, of 2,500 acres per mile of railway operated except the Whitbourne-Tilton section, in respect of which 1,250 acres per mile was to be reassigned; (b) a sum of $1,000,000 to be paid by the Contractor to the Government within one year of the execution of the contract. Under these provisions lands amounting to 1,564,687 acres were reassigned to the Government by the Contractor, who was left with a net grant, under the 1893 and 1896 contracts, of approximately 4,120,000 acres.
  (3) That the contractor should re-ballast the railway at his own expense and should receive from the Government an annual subsidy of $42,000 for the carrying of the mails.
  (4) That, in addition to these general concessions, the areas of land near Grand Lake, on which coal had been discovered, should be transferred to Mr. Reid, on condition that he should so work the coal mines as to produce not less than 50,000 tons of coal per annum.
  (5) That for a period of 30 years the contractor should provide and operate eight steamers for various services, one in each of the large bays, one to ply to Labrador in the summer, receiving therefor subsidies from the Government on an agreed scale, amounting approximately to $100,000 per annum.
  (6) That the contractor should purchase from the Government the St. John's Dry Dock for the sum of $325,000.
  (7) That the contractor should assume responsibility for the telegraph lines until 1904, in return for an annual subsidy of $10,000, and after 1904, until the period of 50 years was completed, should maintain them free of charge to the Colony. The contractor also undertook to construct certain new lines at his own expense and, at the option of the Government, to purchase the whole telegraph system for the sum of $125,000.
  (8) That the contractor should provide an electric street railway in St. John's and should pave a portion of the city; and that he should relay the railway to Whitbourne (57 miles), build a branch railway of 7 miles, and erect a new railway station to the westward of St. John's. For these works he was to be paid $450,000.
  (9) That the contractor should not assign or sub-let the contract without the permission of the Government; that the railway should remain as security for the due performance of the contract; and that if the contractor failed in his undertaking his reversionary rights would be forfeit.

Northwest River, Labrador, n.d. Photographer unknown. From the album of photographs furnished to the Newfoundland Royal Commission, August 1933. Courtesy of the Centre for Newfoundland Studies Archives (Coll-207), Memorial University of Newfoundland Library, St. John's, Newfoundland. (42 kb)

  99. To enable the Government to enter into this remarkable covenant, an authorising Bill was introduced into the House of Assembly. The Bill at once became the subject of acute controversy and the Governor, Sir Herbert Murray, appealed for guidance to the Imperial Government. In a telegram dated the 2nd March, 1898, Mr. Joseph Chamberlain, the Secretary of State for the Colonies, drew attention to the objections inherent in such proposals and pointed out that--

  "the future of the Colony will be placed entirely in the hands of the contractor by the railway contract, which appears highly improvident. As there seems no penalty provided for failure to operate the railways, the contract is essentially the sale of a million and a-quarter acres for one million dollars."†

  100. Meanwhile, many petitions against the proposed agreement were addressed to the Secretary of State, of which the most noteworthy was that submitted by Sir Robert Bond and Sir William Horwood on behalf of the Opposition in the House of Assembly, setting out 12 grounds of protest against the Government's action.‡ These petitions were dealt with by Mr. Chamberlain in a despatch to the Governor dated the 23rd March, 1898, of which the full text is here reproduced§:--

  "In my telegram of the 2nd instant I informed you that if your Ministers, after fully considering the objections urged to the proposed contract with Mr. R.G. Reid for the sale and operation of the Government railways and other purposes, still pressed for your signature to that instrument, you would not be constitutionally justified in refusing to follow their advice, as the responsibility for the measure rested entirely with them.
  "2. Whatever the views I may hold as to the propriety of the contract, it is essentially a question of local finance, and as Her Majesty's Government have no responsibility for the finances of self-governing colonies, it would be improper for them to interfere in such a case unless Imperial interests were directly involved.
  "On these constitutional grounds I was unable to advise you to withhold your assent to the Bill confirming the contract.
  "3. I have now received your despatches ..., giving full information as to the terms of the contract, and the grounds upon which your Government have supported it, as well as the reasons for which it was opposed by the Leader and some members of the Opposition.
  "4. I do not propose to enter upon a discussion of the details of the contract, or of the various arguments for and against it, but I cannot refrain from expressing my views as to the serious consequences which may result from this extraordinary measure.
  "5. Under this contract and the earlier one of 1893 for the construction of the railway, practically all the Crown Lands of any value become, with full rights to all minerals, the freehold property of a single individual, the whole of the railways are transferred to him, the telegraphs, the postal service, and the local sea communications, as well as the property in the dock at St. John's. Such an abdication by a Government of some of its most important functions is without parallel.
  "6. The Colony is divested for ever of any control over or power of influencing its own development, and of any direct interest in or direct benefit from that development. It will not even have the guarantee for efficiency and improvement afforded by competition, which would tend to minimise the danger of leaving such services in the hands of private individuals.
  "7. Of the energy and capacity of Mr. Reid, in whose hands the future of the Colony is thus placed, both yourself and your predecessor have always spoken in the highest terms, and his interests in the Colony are already so enormous, that he has every motive to work for and to stimulate its development, but he is already, I believe, advanced in years, and though the contract requires that he shall not assign or sub-let it to any person or corporation without the consent of the Government, the risk of its passing into the hands of persons less capable and possessing less interest in the development of the Colony is by no means remote.
  "8. All this has been fully pointed out to your Ministers and the Legislature, and I can only conclude that they have satisfied themselves that the danger and evils resulting from the corruption which, according to the statement of the Receiver-General, has attended the administration of these services by the Government are more serious than any evils that can result from those services being transferred unreservedly to the hands of a private individual or corporation; and that, in fact, they consider that it beyond the means and capacity of the Colony to provide for the honest and efficient maintenance of these services, and that they must therefore be got rid of at whatever cost.
  "9. That they have acted thus in what they believe to be the best interests of the Colony I have no reason to doubt, but whether or not it is the case, as they allege, that the intolerable burden of the public debt, and the position in which the Colony was left by the contract of 1893, rendered this sacrifice inevitable, the fact that the Colony, after more than forty years of self-government, should have to resort to such a step is greatly to be regretted.
  "10. I have to request that in communicating this despatch to your Ministers you will inform them that it is my wish that it may be published in the 'Gazette'."

  * United Kingdom Parly. Papers, C. 8867, Nos. 3 and 20.
  † United Kingdom Parly. Papers, C. 8867, 1898, No. 8.
  ‡ Ibid., No. 22.
  § Ibid., No. 26.

Image description updated May, 2004.