CAB38-23 — Page 125

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MR. CHURCHILL pointed out that the Navy could not protect the ships if they did not start. The fear of the Admiralty was that they would not face the risk of capture. They did not dispute the probability of the safe arrival of most of them if they attempted the voyage. In default of being insured, the only incentive to them to do so was the prospect of high prices.

MR. RUNCIMAN said that that was not a new fact. It was considered both by the Royal Commission of 1905 and by Mr. Austen Chamberlain's Committee. In this matter of insurance the Treasury was far more deeply concerned than was any other Department. Whatever its merits or demerits, it would be a leap in the dark financially. As such it was a matter of policy, and therefore he submitted a question for the Cabinet. On examination he was confident that that body would be driven to the same conclusions as were Mr. Austen Chamberlain's Committee. The opportunities for plundering the Treasury under any system of National Insurance were immense. Foreign vessels would be transferred to the British register to share in it, and foreign cargoes to British ownership, and no safeguards could be devised to prevent it.

MR. CHURCHILL said that the first responsibility of Government was to secure the food supply of the nation. Without that, the successful prosecution of war was impossible.

THE PRIME MINISTER pointed out that, whether paid in the shape of an indemnity for loss or in the form of higher food prices, the same people would pay.

MR. MCKENNA considered that, in the event of necessity, it would be far cheaper for the State to buy food-stuffs and to distribute them to the necessitous than to subsidize shipowners.

THE PRIME MINISTER said that he had listened to the contents of Sir Owen Philipps's letter and circular with astonishment, but, as Mr. Runciman had pointed out, it was not this class of vessel which carried on the bulk of the trade of the country.

MR. CHURCHILL said that of course, if Mr. Runciman's contention was correct, that tramp steamers would continue to trade, the matter was disposed of. The Admiralty had not enquired what their views were, but they knew that at least some of the cargo lines-for example, the Clan Line-held similar views to those expressed by the Royal Mail. He hoped that the Committee would not reject the proposals in the Report, which in no way committed them to acceptance of the principle.

MR. RUNCIMAN said that all shipowners would certainly say that they would lay up their vessels on the outbreak of war if they thought that they could obtain a national guarantee by so doing. If they did do so in the event, war freights would very soon bring their vessels out again.

MR. CHURCHILL said that the contention of the Admiralty was that war freights meant high prices, and that high prices would react unfavourably upon the successful conduct of the war. That a national guarantee would only cost the nation, as a whole, the actual losses by capture, whereas the rise in prices which the nation would have to pay would represent the cost of insurance and freight at panic rates. Even if fraud were practised to the extent which some people anticipated, the losses which the State would have to pay could hardly exceed 5 or 6 per cent.

MR. MCKENNA said that surely it was not contemplated that the captures would amount to anything like that proportion.

MR. CHURCHILL said that a German liner in the South Atlantic, which received orders by wireless telegraph, might place herself on the Cape route, and effect a good many captures before she was herself destroyed.

MR. RUNCIMAN asked how she would dispose of her passengers.

MR. MCKENNA pointed out how rarely vessels sighted one another on the Cape route.

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