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10. As it appeared to us that the war charges on neutrals would be not inconsiderable, and that the offer of a free indemnity would not merely prevent the owner of a British ship from being unduly handicapped in his competition with the neutral, but would actually place him in a better position than he occupies in time of peace, it was natural to prefer a contributory scheme if such could be devised. Several plans of this kind were suggested to us. They are examined at some length in this Report; but the conclusion to which we are forced is that they are none of them practicable, and that, if a National Guarantee is to be given at all, it will be necessary that it should take the form of a free indemnity.

11. This is in itself undesirable, for, as already stated, it gives the guaranteed something more than on any view of the case he is entitled to claim; but this objection is not in itself conclusive. If, however, the whole cost of the losses of ships and cargoes is to be transferred from the shoulders of the owners to those of the tax- payer, it becomes additionally important to form some idea what the extent of this burden would be. Unfortunately no materials exist for such a calculation. The various estimates laid before us started from widely different hypotheses, and differed largely in amount. There is little to guide anyone desirous of making a choice among them, which at best can only be the result of a number of assumptions, any one of which may be disputed. We contine ourselves, therefore, to the statement of our opinion that, though the proportion of losses may be small, the aggregate amount involved might be considerable. Spread over the vast volume of our mercantile marine it might form but a small percentage of the total, and might involve on the average only a moderate rate of insurance; but regarded as a sum which it would be necessary for the Chancellor of the Exchequer to provide from taxes or loans at a time of great financial stress, it would be a very formidable addition to the burdens of the taxpayer and the difficulties of the Treasury. Nor can we admit the validity of the plea urged by some of the witnesses that the total loss to the nation would in any case be the same, and that it would be more fairly distributed through taxation than if left to find its way to consumers through the ordinary channels of trade. It is difficult to apply this argument to the case of imported luxuries, such as diamonds or ostrich feathers; for it is obviously unfair to keep down the price of these for the benefit of the comparatively few wealthy people who purchase them at the expense of the whole body of taxpayers throughout the kingdom. Yet it was generally admitted that no distinction could be made in practice between luxuries and necessities. Both are important to the maintenance of our shipping, as affording freight, and both affect the interests of the labouring population, either as consumers or as workers. But there is another and a stronger objection to the transfer of these liabilities to the State. Shippers and shipowners have full control over their ventures; the taxpayer can at best exert but an indirect and imperfect supervision. Shipowners and merchants may make heavy losses, but they may also expect correspondingly high profits on successful ventures. If the transfer be allowed the losses will fall on the taxpayers at large, but the profits will be retained by individuals. Lastly, the taxpayers who would be thus called upon to make good the losses of individuals concerned in a particular form of trading would themselves be in many cases large sufferers from the same causes; but, as in their case the loss took a different form, they would receive no compensation.

12. To these objections must be added the effect of an indemnity in tending to cause the transfer of goods from foreign to British ownership before instead of after the voyage, thus increasing the amount of British property at risk; the influence which the knowledge of the existence of such an indemnity must almost inevitably exercise upon decisions in the enemy's Prize Courts, by increasing their tendency to condemn and by weakening the inducement to neutral owners to prosecute vigorously their claims for release of their goods when seized in British ships; the difficulty of exercising the necessary Admiralty control over voyages, and its probable bad effect on the initiative and enterprise of masters of vessels; and the serious danger of fraudulent claims, against which the State would be unable adequately to protect itself.

13. No one of these objections is necessarily fatal by itself to the idea of a National Guarantee, but their cumulative effect is formidable. Taken together they outweigh, in our opinion, any possible advantages, limited as we believe these advantages to be, which might be derived from such a proposal.

[1293]

But if any

D

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