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in time of war, and that without it there is every probability that prices in the United Kingdom may rise to prohibitive levels, that panic may occur, and that great pressure may be exercised on the Government either to divert ships from the main theatre of war to the trade routes, thereby imperilling the success of the campaign, or even to submit to peace on unfavourable terms.

New Schemes of National Guarantee.

21. The various schemes of National Guarantee examined by the Treasury Committee were so defective in detail that the Committee found it necessary to reject them all. The Sub-Committee felt, therefore, that it would be waste of time to re-examine these schemes.

22. A scheme presenting some new features was, however, brought to their notice by one of their members, Sir H. Llewellyn Smith, who had been a member of Mr. Austen Chamberlain's Committee, and is printed as a Schedule to this Report.

23. The essential feature of Sir H. Llewellyn Smith's proposal is that the State should offer, in return for a fixed, but relatively high, premium (of, say, 10 per cent. per voyage), to insure British vessels and their cargoes during war against all risks, both war and marine, the Admiralty retaining the right to bar any very perillous voyages. The result of such an offer would be that the vast bulk of marine and war insurance would still remain in private hands, since the actual risks, even in war time, are usually much below 10 per cent.; but the offer of the State would effectually prevent rates rising above 10 per cent., a rate not high enough to support such a rise in prices of food or materials of industry as would cause distress to any substantial extent.

24. The Sub-Committee were agreed that Sir H. Llewellyn Smith's scheme, though open to criticism, offers better prospects of success than any of the schemes dealt with in detail in the Report of the Treasury Committee of 1908, and merits detailed examination. The representatives of the Admiralty, while preferring a very much wider scheme on the lines suggested in paragraph 19, are prepared to accept a scheme worked on the basis of Sir H. Llewellyn Smith's project.

Conclusion.

25. The Sub-Committee are of opinion that a case has been made out for a reconsideration of the rejection of National Guarantee by the Treasury Committee of 1908.

The primary consideration on which that rejection was based, namely, that the naval dangers to be apprehended were not sufficiently real to justify the adoption of any system of National Guarantee, does not, in the opinion of the Admiralty, hold good at the present time. It is also doubtful whether the second consideration on which National Guarantee was rejected, namely, that no satisfactory system could be found, also holds good, since Sir Hubert Llewellyn Smith's scheme does, in the opinion of the Sub-Committee, hold out a reasonable prospect of forming the basis of a workable scheme.

26. The members of the Sub-Committee, comprising Cabinet Ministers, Naval Officers, and Civil Servants, whose time is very heavily occupied, do not feel that the Sub-Committee, as al present composed, could devote to the subject the time which an exhaustive examination of Sir H. Llewellyn Smith's scheme and of the Admiralty's scheme, and the claboration of details, would involre.

27. They suggest that, if the Committee of Imperial Defence accepts their view that the subject descrves further consideration, a technical Sub-Committee with a strictly limited reference should be appointed to carry the question a stage further.

28. This Sub-Committee should not reopen the general questions which the existing Sub-Committee has discussed. It should assume for its purposes that the principle of Sir Hubert Llewellyn Smith's scheme is accepted, and should proceed to examine it in

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