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Deductions from the New Factors in the Naval Situation.

13. The Treasury Committee stated that "if the dangers by which our commerce "and industry are threatened were as great as they appear to the advocates of such "schemes, or if the remedy provided by a National Guarantee in any form were "complete, it might perhaps be worth while to face the enormous administrative "difficulties involved in the adoption of a scheme.

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14. Are the dangers to which British shipping will be exposed in a future war 80 much greater in 1912 than in 1908 as to justify the reversal of the Treasury Committee's conclusions and the adoption of some form of National Guarantee, assuming that a satisfactory scheme can be found?

15. The representatives of the Admiralty deduce from the new factors enumerated above the main deduction that in a future war with Germany considerably more British ships will be captured than was likely to have occurred if war had broken out under the conditions postulated in 1908. They believe that the number of such captures is likely to be very considerable, though there are no data on which to base even an approximate estimate of what ratio to the total volume of British shipping these captures are likely to hear. On this point no amount of enquiry or calculation can throw the smallest light.

16. Neither are there any data for estimating the period over which losses are likely to occur. If the enemy fleet can be induced to try conclusions with the British fleet at an early stage of the war, it is hoped that his sea power will be crushed, after which it will be possible to spare ships for concerted movements against the enemy's commerce destroyers. If, on the other hand, no decisive engagement occurs for a long period, months may elapse before an adequate force can be detached for this purpose from the main operations. All that can be forecasted as reasonably probable is, that the period immediately following the outbreak of war is likely to be most critical. A certain proportion of the merchant vessels at sea at this period may be covered by mutual war insurance schemes, such as that of the North of England Protecting and Indemnity Association (Appendix V to the Report and Proceedings of this Sub- Committee*), but this scheme only applies over the period elapsing between the outbreak of war and the arrival of the ship at some British or neutral port and, while there, for thirty days after her arrival.

17. What the Admiralty apprehend is, not that captures will be so numerous as seriously to diminish the volume of British shipping afloat, but rather that they will be sufficient in number to raise the insurance of war risks to a high level, and possibly altogether to close the market for war risks, which is always a limited one. Conse. quently, shipowners will have to charge freights, and the shippers will have to charge prices sufficient either to compensate them for the high insurance premiums or to recoup them for the risk of an uninsured voyage, otherwise the ships will not put to sea. Indeed, in anticipation of these contingencies several of the largest ship-owning companies have already issued orders to their officers to the effect that immediately on the outbreak of war they are to proceed to the nearest neutral port and lay up.

The only inducement to shipowners and shippers to carry on the import trade of the country will be the existence of high prices in the United Kingdom, and there will be very little inducement to carry on export trade at all.

18. In addition to the actual rise in prices due to high insurance premiums and high freights, the Admiralty anticipate à panic rise in prices due to apprehension that supplies may cease altogether.

19. They therefore advocate that at the outset of a war the Government should issue a proclamation announcing that they are prepared to afford protection to British shipping, except in certain scheduled routes, and that in cases where they fail to make good their undertaking they will reimburse the owners of captured property.

20. The Admiralty wish to place on record their opinion that some such scheme is indispensable to supplement their arrangements for the protection of oversea commerce

• Printed separately.

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