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The attention of the British government was now definitely directed to the question of the form of government to be established in the newly acquired colonies. A reference was made to the Lords Commissioners for Trade, and they, in an exhaustive report of June 8, 1763, discussed the situation in each of the colonies. They observed:

It is obvious that the new Government of Canada, thus bounded, will, according to the Reports of Generals Gage, Murray and Burton, contain within it a very great number of French Inhabitants and Settlements, and that the Number of such Inhabitants must greatly exceed, for a very long period of time, that of Your Majesty's British and other Subjects who may attempt Settlements, even supposing the utmost Efforts of Industry on their part either in making new Settlements, by clearing of Lands, or purchasing old ones from the ancient Inhabitants, From which Circumstances, it appears to Us that the Chief Objects of any new Form of Government to be erected in that Country ought to be to secure the ancient Inhabitants in all the Titles, Rights and Privileges granted to them by Treaty, and to increase as much as possible the Number of British and other new Protestant Settlers, which Objects We apprehend will be best obtain'd by the Appointment of a Governor and Council under Your Majesty's immediate Commission & Instructions.

In a later report the Lords of Trade urged that, in the interests of emigration, there should be a public statement of His Majesty's intentions regarding the government of the colonies. With this object in view the commissioners revised their former report by adding the recommendation that the first commissions should authorize the governors to call popular assemblies. Accordingly a proclamation was issued October 7, 1763, declaring that Canada, East and West Florida and Grenada had been erected into separate governments, and outlining the form of government with which each was to be endowed. The boundaries of the Province of Quebec were fixed as: on the north, the River St John; on the west, a line from the head of the River St John through Lake St John to the south end of Lake Nipissing; on the south, a line from the southern extremity of Lake Nipissing to the point where the forty-fifth parallel of latitude intersected the St Lawrence and thence along the forty-fifth parallel to the height of land; on the east, the height of land between the St Lawrence and the Atlantic. Notification was then given that the various governors had been authorized, with the consent of the council, and as soon as circumstances would permit, to call general assemblies 'in such Manner and Form as is used and directed in those Colonies and Provinces in America which are under our immediate Government.' The governors, with the advice of the council and assembly so constituted, were empowered to make laws for the good government of their respective colonies.

What principles shaped Britain's attitude towards Canada? Canada had been acquired because by its conquest a death-blow would be struck at the empire of France. Canada was retained in 1763 because it afforded an excellent field for settlement, and because it was capable of affording a valuable market for British produce. So far as trade was concerned Canada belonged to the same category as the American colonies and received the same treatment. But the differences of race and religion placed Canada in a unique position. The treaty rights of the Canadian subjects demanded recognition. Two principles, then, entered into the settlement of the form of government—the preservation of the rights of the French Canadians, and the establishment of British settlement. To what extent these principles were contradictory was not then evident, nor could this well have been so. The ideal which determined the settlement of the government in 1763 was that of a colony on the banks of the St Lawrence in which ultimately the Protestant religion and British ideas should predominate.