The union of the colony of Vancouver Island and the colony of British Columbia occurred on July 20, 1866. The colonies were merged into one colony, known as the Colony of British Columbia. The merger was done in order to improve the administration of the colonies and to reduce costs.

Before the union, the colony of Vancouver Island and the colony of British Columbia were two separate and distinct British colonies. Vancouver Island was established in 1849 as a fur trading post, and was officially designated a British colony in 1851. It was governed by the Hudson's Bay Company until 1866. British Columbia, on the other hand, was established as a separate colony in 1858, following the discovery of gold in the Fraser River. It was created to assert British sovereignty in the region and to attract settlers. Both colonies were facing economic difficulties, so in 1866 the British government decided to merge the two colonies to improve their administration and reduce costs.

There were several reasons why the colonies of Vancouver Island and British Columbia were facing economic difficulties before their union in 1866. One of the main reasons was that neither colony had a significant population or a diversified economy. Vancouver Island was primarily a fur trading post and had a small population, while British Columbia's economy was based mainly on the gold rush, and the population was mostly composed of gold miners. Additionally, both colonies were isolated from the rest of the world and had limited access to markets. This made it difficult for them to develop their economies and generate revenue. Another reason was that the colonies faced financial difficulties due to high administrative costs. The separate administration of the two colonies was expensive and inefficient, leading to significant financial deficits. Finally, the difficulties of these colonies were worsened by the lack of interest of British people to immigrate to these colonies.

When the colony of Vancouver Island and the colony of British Columbia were united in 1866, the government structure was also combined. A new governor was appointed to oversee the united colony, and a legislative assembly was established with members elected from both Vancouver Island and British Columbia. The governor had the power to veto any legislation passed by the assembly, but the colony also had a nominated legislative council which acted as an upper house of the legislature.

The executive branch of the government was headed by the governor, who was responsible for the administration of the colony and the implementation of laws passed by the legislature. The governor was assisted by a colonial secretary, who served as the chief administrative officer of the colony. The judicial system of the united colony was based on the British legal system and included a Supreme Court, as well as lower courts. Overall, the government of the united colony of Vancouver Island and British Columbia was modeled after the government of a British colony, with a governor as the head of the executive branch, a legislative assembly and a nominated legislative council as the legislative branch, and a judiciary as the judicial branch.

After the union, the colony of British Columbia lasted for five years till it joined Confederation of Canada in 1871. The union of the two colonies in 1866 was intended to address these issues by improving the administration and reducing costs, which would in turn help to stimulate economic growth and development.