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SIR ARTHUR WILSON suggested that Sir Hubert Idewellyn Smith's plan might be examined without prejudice to the principle. It would be valuable to have a detailed plan worked out beforehand, in case the pessimists were right and shipowners laid their ships up.

THE PRIME MINISTER said that the Committee would be glad to hear Sir Arthur Wilson's views as to the probable success of attacks on our commerce.

SIR ARTHUR WILSON said that no doubt some of these German ships would attack our commerce, but he did not himself think that their careers should be long.

MR. CHURCHILL said that Sir Arthur Wilson's suggestion went as far as he desired the Committee to go.

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SIR ROBERT CHALMERS said that the terms of reference to the Sub- Committee were "to consider the best method of ensuring the uninterrupted continuance of our oversea commerce in time of war

He was opposed to any system of national insurance for this purpose, because he agreed profoundly with Mr. Austen Chamberlain's Committee in thinking that this was the work of the Navy, and of the Navy alone, and that it was important that nothing should be allowed to obscure this vital portion of its duty. This was no new subject of consideration at the Treasury. It was referred to them by the Foreign Office in 1898. A memorandum of their views at that time was contained in C.I.D. paper 56-B, and he might quote to the Committee the then Chancellor of the Exchequer, Sir Michael Hicks Beach's, minute: “I cannot conceive that such a proposal could commend itself to anyone but a shipowner."

MR. MCKENNA said that he gathered that Sir Hubert Llewellyn Smith's opinion had been changed owing to his acceptance of the view that vessels would be uninsurable. But he did not think that his scheme would meet this difficulty. The ordinary practice of underwriters was to pass on a portion of any risk which they accepted. If the fears expressed that the market for the insurance of war risks would dry up proved correct, it would be because the amount of capital available was insufficient to enable underwriters to pass on a portion of their risks. A solution of this difficulty might be found by the State taking a portion of the risks from the underwriters. The State by declaring that it would insure vessels and cargoes directly at a flat rate of 10 per cent. would merely get those bargains which the underwriters would not touch and a premium would be put upon employing the worst and slowest ships on the most dangerous routes, except those absolutely barred.

cent.

MR. CHURCHILL said that the state of affairs which he foresaw was not a matter of rates of 2 or 3 or 5 or even of 10 per cent. but one of 25 or 50 or 70 per Sir Hubert Llewellyn Smith's scheme would not compete with the ordinary business of the underwriter but would steady the market and prevent rises due to panic. Its object was to keep the market rates in reasonable relation to the true risks.

THE PRIME MINISTER thought that such high rates as had been suggested were outside the bounds of probability while we were in command of the sea.

MR. CHURCHILL said that the market was a narrow one and would be an artificial one. Even when neutral high rate had had to be paid.

THE PRIME MINISTER said that in the list of quotations for vessels and cargoes during the latter half of 1911 the highest rates given was one pound per cent.

MR. RUNCIMAN said that it was possible at the present time to insure vessels going into the war area at half-a-crown per cent.

THE PRIME MINISTER asked why Sir Hubert Llewellyn Smith had fixed the rate at 10 per cent.

SIR HUBERT LLEWELLYN SMITH said that he calculated that rates up to that amount would not raise the price of food-stuffs unduly, while at the same time that rate was high enough to limit the number of risks likely to be brought to the Government, and by that and by the high premium paid greatly to lessen the financial risks. It would also lessen the tendency to over-valuation.

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