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PUBLIC RECORD OFFICE

C.O.

Reference :-

8855 PUBLIC RECORD OFFICE, LONDON

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authorities the necessity for affording greater facilities than at present exist for the capture of deserters, as advocated in your predecessor's letter of 30th May 1886, No. 256, par. 12.

My Lords desire me to state that they adhere to the proposal to allot a certain number of naval cadetships, as explained in the scheme of 9th September 1835.

Finally, my Lords desire me to inform you that, should these negotiations be brought to a satisfactory conclusion, Her Majesty's Government will, on the earliest opportunity, lay the proposals before Parliament, and press for their acceptance.

I am, &c. (Signed)

Rear-Admiral Henry Fairfax, C.B.,

&c.

&c.

&c.

No. 63.

EVAN MACGregor,

PROPOSED INCREASE OF AUSTRALASIAN SQUADRON.

REMARKS ON DISCUSSION held at the Colonial Office, April 5, 1887. In the previous discussion I had the advantage of hearing the views of the repre- sentatives with regard to the Admiralty proposals for strengthening the squadron in Australasian waters. These views, which were most clearly and temperately expressed, have enabled me to understand thoroughly the opinions held by the various colonies, and to appreciate the difficulties which have hitherto prevented a general agreement.

I desire to make some observations on certain of these opinions, not with a view to further controversy, but because I believe that they will strengthen the case for the scheme of naval defence when it is brought before the colonies.

It was stated that, in its financial aspects, as between the Imperial Government and Australasia, the scheme rested on no basis. This contention, however true, may be easily disposed of. There has never been any attempt to find a financial basis, and the arrangement cannot well be placed in this light. The Australasian Colonies at the conference of 1881 expressed a wish to secure a permanent increase in the squadron in their waters, an increase which the Imperial Government was unable, having regard to its other responsibilities, to provide, and the present proposals of the Admiralty were made with a view to meet the colonial requirements, as far as possible, without throwing a burden on the taxpayers at home, which they would certainly resist. But what financial basis is possible? In any such calculation the home taxpayer would claim credit for a peace naval expenditure, already exceeding an average of 13,000,0001. per annum, and the total peace contribution now asked for from the Australasian Colonies, 122,5971. per annum, would appear trifling in comparison.

But if we ignore the total charge of 13,000,000l. annual Imperial expenditure for naval defence, and regard merely the total expense of the Australasian squadron as increased to the British taxpayer, less the proposed colonial contribution, which, omitting certain incidental charges for depôts, &c., will greatly exceed the amount the colonies are asked to pay, the arrangement must be regarded as a liberal one, having regard to the respective interests of the mother country and of the colonies concerned in the Australasian floating trade. In the above statement no charge is included for interest on the initial cost of the present squadron.

Looking at the total volume of Australasian trade for 1885 (exports and imports), amounting to 115,000,000, we find that of this, roughly speaking, 40 per cent., or 46,000,000, represents intercolonial trade, and 11,000,000. trade with foreign countries, i.., 57,000,0007., or nearly one half, is not with the mother country, which may therefore be said to be directly interested in only about one half of the trade.

Again, dealing with the volume of trade as a whole, it appears from the Victorian "Year Book for 1885-86," that the amount of trade per head of population in Australasia is approximately double the amount per head for the United Kingdom; thus the Australasian colonists, taken individually, are about twice as much interested in the protection of the floating trade as the British taxpayer.

Further, the trade of the Australasian Colonies with the mother country represents a half of their total trade, whereas of the total trade of the United Kingdom it constitutes about one-twelfth.

As regards the ships themselves, it appears, from the Victorian "Year Book," that the total tonnage of colonial ships entered and cleared at Victorian ports is con-

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siderably greater than that of British ships, whereas it seemed to be anggested that the reverse was the case.

And it must further be remembered. that the population and trade of Australia will no doubt increase at a more rapid rate in the next ten years than that of the United Kingdom, so that the advantage of a fixed contribution for ten years will rest with Australia.

On all accounts, therefore, it appeared to us to be desirable to make a simple and clofinite offer to the colonies, rather than seek for an adjustment on a basis which would be either fallacious, or would tend to arouse the susceptibilities of the heavily burdened tax-payers at home. It may be true, as has been stated, that the proposed arrangement rests on no numerical basis; but, from what I have said, it will be evident that the scheme cannot be regarded as illiberal, whether considered in the light of relative interests or relative burdens.

I think it desirable that I should say a few words on the subject of insurance, regarding which there appeared to be some slight misconception.

It was suggested that, as the value of the colonial cargoes would be fully insured, possible war losses would fall mainly upon insurance offices in the mother country, and that the colonies themselves had, therefore, a relatively less interest in the pro- tection of commerce within their waters. The Royal Commission fully considered the question of war insurance, and took the evidence of experts on the subject. They pointed out that the rates of premiums were liable to be raised on mere panic, and that in 1854-56 the mere report of two Russian cruizers having come out of Petro- paulowski caused a rise of 2 per cent. The "Trent" difficulty with America caused a sudden rise of 3 per cent., subsequently increased to 44 per cent. If one or two merchant ships were picked up by an enemy's cruizers, the rates would rise 15 to 20 per cent.

One of the witnesses stated that during the last French war premiums rose to 30 per cent. Many underwriters refuse altogether to take war risks, and the whole business of war insurance is so speculative that large fortunes would be made by underwriters at home, especially were panic rato established, possibly on insufficient grounds. It did not appear to be clear to some of the representatives that war insurance of colonial property means a heavy tax, on colonial producers, a tax which would be increased in proportion to the inability to keep Australasian waters clear of an enemy's cruizers. In other words, the powerful squadron which would be provided under the proposed scheme constitutes a direct guarantee to the Colonies against a serious loss to which they are liable, without any of their harbours being violated. The mere rumour that a hostile cruizer was in Australasian waters, coupled with the knowledge that there was no available force able to intercept her, would raise all Australasian insurance to panic rates.

Some stress seemed to be laid on the fact that the proposed scheme constitutes a new point of departure for the Colonial Governments concerned, and this we fully admit. It should not, however, be forgotten that this policy, if new from a Colonial, is also new from an Imperial, point of view. It has never before been laid down that a squadron of a certain strength should be kept always in certain waters, or removed only in case of extreme urgency. The Imperial Government has now given this undertaking in the case of the Australasian squadron, and we consider that the mere knowledge of the fact will definitely reduce the risks of attempted aggression in Australasian waters.

I desire to draw your attention to the indirect protection afforded to the colonies at the cost of the British taxpayer which did not appear to receive adequate recognition in the course of the previous discussion. The whole question seemed to be handled as if Australasia was in a ring-fence, and, provided that the force maintained within that fence was adequate, all the conditions of defence were fulfilled. A balance sheet appeared to be struck between the Imperial Government and the Australasian Colonies, containing on the side of the former merely the annual cost of the present squadron in Australian waters, viz., 237,000/.,* plus the additional charges incurred under the pro-

* The cost of maintenance of the existing squadron amounts to 237,000/., while that of the full number of the new ships, 5" Archers” and two torpedo vessels, is 152,6381. The existing squadron is more costly for the following reasons: It is necessary that the flagship on the Australian station should be a powerful iron- clad, and H.M.S. “Nelson" has a complement of 593 officers and men; the 3 corvettes have a total number of 618 officers and men; the two gunboats 120, and the two schooners 64, making a total on the station of 1,395 officers and men.

On the other hand, the full complement of the 7 improved vessels is only 897 officers and men. The annual charge for maintenance depends principally on the personnel, and it will be seen from the above figures that the estimates of the cost of maintenance of the existing and of the improved vessels, are very nearly proportionate to their respective total complements.

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