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be prejudiced by the assumption that £85,000 is the proper amount to be assessed to the Australian portion of the contract, or that India's share is fairly assessed under Lord Morley's Award. In other words, the question to be decided is what proportion of the total subsidy of £330,000 the Eastern Colonies may fairly be called upon to pay, and not what is their fair share of the £185,670, which is the balance after deducting £85,000, assumed to be the cost of the Australian section, and £59,330 assessed to India under Lord Morley's Award.
9. It has been further agreed with the Treasury that the result of the arbi- tration shall be applied to the three Colonies as from the beginning of the present contract (1st of February, 1898).
10. It might be objected that the assessment according to annual mileage (see paragraph 23 (Č) of Post Office case) is at variance with the practice of the Postal Union, which provides a fixed maximum transit rate for each group of articles, carried by sea over any distance exceeding 1,500 miles, and that it is particularly hard on the more distant Colonies; but the Secretary of State, on behalf of the Colonies, would not press this objection if this mode of assessment is uniformly applied over the whole service, and if some allowance is made for the extra speed of the Indian section of the service.
11. It is contended that as the tender of, and contract with, the Peninsular and Oriental Company was for the combined Indian and Eastern and Australian Mail Service, and not a sectional tender and contract, whatever principles of apportionment may be adopted should be applied throughout, and not limited to the Indian and Eastern sections. The share of the subsidy payable by the United Kingdom and Australia towards the Australian section has, however, been fixed at £85,000 without any regard to the mileage principle. This sum has been taken because it is the amount paid to the Orient Company for its Australian Service, but it is submitted that the cost of the Australian section should be calculated according to the mileage principle, if that principle is to be applied to the rest of the Service. If this were done the division of the cost of the subsidy into sections would work out as shown in the first five columns of Appendix F.
12. Adopting these revised figures for the cost of the various sections, the liabilities of the United Kingdom and Australia in respect of Australian corres- pondence, if calculated according to the number of letters exchanged, on the principles of Lord Morley's award amount to £113,813 (see Appendix E), instead of £85,000, the amount referred to above.
13. As to this sum of £113,813 it will be seen that the cost of carrying the outward and homeward Australian mails over the Brindisi-Colombo sections works out at £36,010, and over the Colombo-Adelaide section at £77,803, but if the latter amount is deducted from £85,000, the sum assumed by the General Post Office for the whole service to and from Australia, there remains a balance of £7,197 only towards paying the cost of the Brindisi-Colombo sections. Of the deficiency of £28,813 one half falls on the United Kingdom and the other half on India, the Eastern Colonies, and "certain places in respect of which the cost is borne by the United Kingdom.' Appendix F shows the figures for India and the Eastern Colonies corrected by relieving them of the above-mentioned excess charge, viz., India £57,200, Ceylon £2,538, Straits £5,797, and Hongkong £10,973.
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14. Turning now to the question of speed. The average speed of the Peninsular and Oriental service between Brindisi and Bombay is about 14′5 knots, between Aden and Adelaide about 13.7 knots, and between Colombo and Shanghai about 12-6 knots. The Eastern Colonies contend that for a slower service they should not be charged the same rate per mile as India is charged for a service of 14·5 knots. The rate of speed is undoubtedly the chief factor con- sidered by contractors in estimating the cost of different services, and logically it should be equally considered in apportioning the subsidy. It would appear from paragraph 8 (a) of Lord Morley's award that the additional cost of the extra speed on the Bombay line was put forward by the General Post Office as an argument. in favour of imposing a larger share of the subsidy on India, and, similarly, it is fair to argue that the slower speed on the Aden-Shanghai sections entitles the Eastern Colouies to a material reduction on the share of the cost assigned to them in Appendix F.