HC Deb 29 November 1867 vol 190 cc450-75
MR. HUNT

, in moving that the Contract for the conveyance of Mails between this Country, India, China, and Japan, with the Peninsular and Oriental Steam Navigation Company be approved, said, the last time this question was before the House it was suggested by his hon. and learned Friend the Member for the Tower Hamlets (Mr. Ayrton) that it would be undesirable that the new contract should commence before the House had an opportunity of expressing an opinion upon it: and that opinion being shared by a great many Members, he (Mr. Hunt) undertook, on the part of the Government, to endeavour to make some temporary arrangements which would obviate the necessity for a new contract commencing before the House had expressed its opinion. Within a very short time, how-ever, after the prorogation, Her Majesty's Government determined that it would be right to call Parliament together late in the autumn, or at the beginning of winter, and in consequence of that determination it became no longer necessary for the Government to make such provisional arrangements for the service as had been contemplated. When the tenders advertised for were sent in to the Post Office we found that practically we had only one offer. It will be remembered that the service was advertised for in separate sections. It was proposed that companies or individuals might offer for different lines of service, and might offer for one service one week and for another another week; but it turned out that, with one very small exception, the only tender made was by the Peninsular and Oriental Company. An Italian company offered to perform the service from Brindisi to Alexandria; but there was no offer from anybody else to perform the rest of the service, even if that proposal were accepted. The Government asked for that tender as an alterna- tive arrangement for Marseilles, thinking it quite possible by the time that the tenders came in that they might avail themselves of the Brindisi route; and Her Majesty's Government were advised that before the completion of the term for which they had entered into arrangements with the Peninsular and Oriental Company the Brindisi route might become available. Therefore, in the articles of agreement which had been entered into it was stipulated with the Peninsular and Oriental Company that the Government should have the option of changing the route from Marseilles to Brindisi, the difference in the terms payable to the Company under the altered circumstances being referable to arbitration. The terms asked by the Peninsular and Oriental Company for performing the service were £500,000, and the term named was six years. It was thought, however, that the Company might be willing to abate a portion of their demand, provided the Government entered into an agreement with them for a longer term. As detailed in the Parliamentary Papers, the arrangement with the Company was conducted, on the part of the Post Office, by Mr. Scudamore; the Company submitted their books to him, and he made a Report which the House, no doubt, would recognise as a very able document. After this examination the Company expressed themselves willing to reduce their term from £500,000 to £400,000, provided the period were extended from six to twelve years; but they accompanied the abatement with a proviso that their shareholders should be guaranteed a dividend of 6 per cent upon a certain stated capital: on the other hand, they expressed their readiness to allow the Government to share to the extent of one-fourth in all the profits beyond 8 per cent, which might become divisible. After a greal deal of consideration given to these further terms the Government adopted them—with this condition, to which the Company assented, that the guarantee of 6 per cent should in no case render the Government liable to pay a greater sum than £500,000, the original amount asked. The Company also agreed to a condition desired by the Admiralty, that the Government should have power to buy or charter their vessels in cases of exigency for the public service. Mr. Scudamore's calculations were given in the documents which Lad been published, and, taking into account the history of this Company, he thought it much more likely that the Government would be invited to share in profits than to contribute to make good a deficiency. The Government in the course which they had taken had not been instituting comparisons between different tenders; because, in point of fact, they had no opportunity of making such comparisons, seeing that there was only one offer. They had only to make a comparison between alternative propositions of the same Company, and they were of opinion that the reduction of the terms from £500,000 to £400,000, even though the reduction might be attended with the contingent liability of a 6 per cent guarantee, was well purchased by the addition of six years to the term. Of course, the sum now asked was very considerably in advance of what the Government were paying under the contract approaching its termination. The Government were now paying £230,000, whereas hereafter they would have to pay £400,000, with a possibility of that amount being increased to £500,000. But then it must be remembered that the services of the Company, and the facilities for postal communication with the East, would be very greatly increased. A table included in the correspondence showed the improvement which would be effected in this respect. Calcutta, which now had in the year 24 mails of 34 days and 24 mails of 29 days, would have 52 mails of 29 days; Madras, which now had 48 mails of 30 days, would have 52 mails of 30 days; while Bombay, which now had 24 mails of 24 days, would have 52 mails of 24 days. A comparison of the time to be taken in the voyages was also greatly in favour of the new arrangement. The Company further asked that the contract should include not only those services which were advertised for—namely, from this country to Bombay, and by Galle to China and Japan—but also services between Bombay and Galle, and Bombay and Calcutta. These, however, were services which the Government did not think were required for the public service, and accordingly they objected to them. The Company, however, replied that if these services were struck out of the bargain they should still require the same subsidy without as with them; and under these circumstances the Government thought it better that they should be included, seeing that they entailed no extra payment on the country. The Imperial Government was to pay the Company a sum of £181,470, including additional expenses; the receipts from sea postage were £85,815, so that the loss would be about £96,000, the loss being at present £41,000. The Indian Government would pay £117,000, and receive £62,000 for sea postage, making a loss of £54,000. Calculations had been gone into as to what portion of the loss should be borne by Ceylon and what portion by the Mauritius; but the correspondence on this point had not yet been closed. The Post Office suggested that either contributions should be made by those places or the rate of postage be increased. Considering the increased price of coal, the small profit obtained by the Company from the contract for some time, and the improved service which would be secured under the new contract, the Government thought the terms they had made were not unreasonable; and he therefore hoped that the House would be unanimous in approving the contract.

Motion made, and Question proposed, That the Contract for the Conveyance of Mails between this Country, India, China, and Japan, with the Peninsular and Oriental Steam Navigation Company be approved."—(Mr. Hunt.)

MR. AYRTON

objected very much to the House being called on to consider this contract, the general understanding being that Parliament had been called together at this Session for another and special purpose; and he therefore hoped the House would make an urgent appeal to Her Majesty's Government to re-consider their decision. He dissented entirely from the conclusion come to by the hon. Gentleman. In 1865 he (Mr. Ayrton) gave notice of a Motion for a Select Committee to consider the subject of communication between England and Her Majesty's Eastern dominions and China. In 1866 a Committee presided over by his hon. Friend the Member for London (Mr. Crawford), of whose great commercial experience he had been glad to avail himself, sat and took very important evidence. That Committee recommended that there should be a direct service between England and Bombay, and that the speed in the Mediterranean should be not less than eleven miles an hour, and that between Suez and Bombay not less than ten. The Committee further recommended that there should be a direct independent service between England and China once a fortnight. It likewise intimated that the contract should be for a considerable number of years, terminable at two years' notice. The consideration of that Report fell into the hands of Her Majesty's present Advisers, and to the course taken by them was to be attributed the unfortunate position in which the country now found itself with respect to the postal service. Great changes were being effected in the means of communication between England and the East. The railway through the Brenner Pass had been opened, and a railway had been completed across Mont Cenis; so that there were two lines of railway nearly open, giving every prospect of Brindisi, or perhaps some nearer port, being at no distant day, made the port of departure for packets carrying English mails to Alexandria. On the other side, the railway system in India was being developed so as to improve communication between Calcutta, Bombay, and Madras. These works were in progress when he took the matter up. He did so because he thought it was time to direct the attention of the Post Office to the necessity of re-organizing their system. These were circumstances to justify a re-consideration of the contract. Some persons thought they were beginning too soon in considering the question at the period to which he referred; but from what occurred since it appeared that they had begun too late, for no benefit had been derived from the labours of the Committee. What had brought them into their present pitiable condition? On the 1st of February, 1867, the Government gave notice to the Peninsular and Oriental Company to terminate their contract in twelve months. Now, in business matters commercial men generally matured their plans and completed their arrangements for a new contract before they took steps to put an end to an old one, if a contract was necessary at all. But the Government seemed to have acted on a contrary principle. They had not only given notice to terminate the contract, but to terminate it on the shortest possible notice. At least, they might have given them a longer notice, leaving it to the Company to put them into the embarrassing position they now occupied, should the Company think fit to adopt that course. It was not for the Government to take steps which would leave the Post Office without a mail service if the terms of the Company were not accepted. In March the Government settled the form of the new tender then came some difficulty about the terms, and they had to issue a further notice to correct the first notice; so that it was not till June that they issued the final notice for tenders. It was addressed to the shipowners, shipbuilders, and other men of business, and invited them to send in by the 16th of September tenders for undertaking this gigantic service by the 1st of February following. Now, he would ask the House whether that was a really practical notice to issue? Was it possible in March or June to undertake this gigantic service, and to have ships in the Mediterranean, in the Red Sea, and in China, and complete all the consequential arrangements by so early a date as the 1st of February? It would be necessary to make certain arrangements at Suez and Bombay and the other ports. It was utterly impossible on such short notice to comply with the Government tender, and therefore no other tenders were made. The House must remember what was the state of the money-market when the Government took measures for the renewal of the contract. It was their duty to consider the state of credit and the whole circumstances of the case, and if there had been a man of business at the Treasury he would not have moved till credit had revived and the spirit of enterprize had become active. The result was that on the 1st of February no tenders had been sent in, while the Peninsular and Oriental Company were in a position to say to the Government, "You have wantonly put an end to our contract, and we will not enter into another except upon our own terms." In order to extricate themselves from the difficulty in which they were placed, the Government sent Mr. Scudamore, a gentleman of intelligence connected with the Post Office, to ascertain how much the Government should pay if a contract were made on the conditions which the Company might find it convenient to suggest. Mr. Scudamore certainly displayed great ingenuity in discovering reasons why the Government should accede to everything the Company proposed; but no fault could be found with him on that account, as he was in a most embarrassing position, and no doubt acted in accordance with his instructions. He found great fault, however, with the contract which was entered into under these deplorable circumstances. In the first place, the rate of speed laid down was not what might fairly be expected, considering the progress made of late years in shipbuilding and steam navigation. The whole service from London to Bombay was to oc- cupy 24 days. The arrangement for the line of the Mediterranean—a distance of 1,410 miles—was that 141 hours should be allowed, being at the rate of 10 miles an hour. For the Red Sea section, comprising a distance of 2,972 miles, 313 hours were allowed, being at the rate of 9½ miles an hour. But, then, the House ought to know that the Company were to be allowed the addition of 24 hours to any voyage without incurring any penalty. Therefore, 24 hours were given gratis in each case. If any further delay took place, they were liable to pay at the rate of £50 for every 24 hours; but, on the other hand, if the mails were accelerated they were to receive a premium of £25. Thus, it would be seen that the Company could retard the mails for 24 hours on payment of £50. Now, the Company always alleged that the great obstacle in the way of attaining high speed was the enormous consumption of coal required for that purpose, and consequently if the coal cost £3 per ton, as was stated, it would obviously be a pecuniary gain to the Company to retard the mails.

MR. WEGUELIN

suggested that the Company would have to bear the expense of feeding the passengers during the extra time.

MR. AYRTON

said, that might perhaps be so, but there was nothing about that in the contract. At all events, he maintained that the penalty was small as compared with the cost of coal, and that the Company would be absolute gainers on the balance of the account. Then, the rates of speed prescribed were not in harmony with the development of steam navigation. His hon. Friend the Member for Tavistock (Mr. Samuda) was examined before the Committee to which he had referred, and stated that high speed could not be attained between Bombay and Suez, unless a class of vessels were employed of at least 2,500 tons burden but that suggestion had not been acted upon, and nothing had been done to bring their service up to the standard of intelligence which regulated steam navigation and commercial enter-prize. If they had not been driven into a corner the Government would have been able to get vessels equal to a much higher rate of speed, and then there would have been a chance of accelerating the mails to the extent which the people of India and those in this country who were interested in this matter had hoped to see. If the passage between England and Bombay could have been brought within a period of three weeks it would have had an important effect in expediting correspondence between England and India, and the advantage in the administration of affairs in Bombay would have been enormous. At this very time, while they were stipulating for this low rate of speed, the Government had built for the transport of troops vessels which were capable of achieving fourteen miles an hour in the Red Sea; and it would surely have been wise and prudent to wait the result of that experiment, upon which £1,000,000 had been spent, before committing the country to this contract for a miserable speed of nine and a half miles an hour nominally, but only nine miles an hour actually. The mode of payment for this service, too, quite baffled his comprehension of the principles on which contracts ought to be made. If there was one principle which more than another ought to be kept in view in these arrangements it was that all the risks and responsibilities should be borne by the party undertaking the work; whereas the proposal in this case was that if the profits of the Company exceeded 8 per cent upon a stipulated capital they should give to the country one-fourth; but if the profit was less than 6 per cent, down to 2 per cent, the Government were to make good the whole of the difference. This was very like giving four to one upon what ought to be even betting. Why, if the Company saw that they could only make 5½ or 6 per cent, they might waste money as they pleased, with the perfect consciousness that any amount between 6 per cent and 2 per cent would be made good by the Government, which in this case had not the control over the expenditure which they had in the case of the Indian railways. Practically, the Company were left with £100,000" of the public money to play with. There should have been a plain and simple contract without contingencies of such a character that the Government were only to get one-fourth of the profits, while in effect they were to bear all the losses. He took it for granted that the Secretary to the Treasury had considered the law of the case, and had considered the effect of this partnership between the Government and the Company. Whether the Acts which had been recently passed exempted the Government from the full consequences of the partnership he did not pretend to say, and he assumed that while sharing the profits the Government were not responsible for the losses of this joint stock company. Another objection to the contract was the period for which it was entered into. If the Government were satisfied that they had obtained not only the highest standard of speed, but something almost in advance of what was recognised as the highest point of successful enterprize, he could understand that they would be glad to fix the contract for a considerable period; but when they made a contract which was behind the age, he did not understand why the country should for twelve years to come be prevented from improving the service in any way. When we were told that coal was unprecedentedly high and likely to fall in value, and while the railways in India were undeveloped, to say nothing of Alpine lines and an Italian port, it amounted to a gross dereliction of duty on the part of Government not to have reserved to itself a right to terminate the contract in less than twelve years. He regretted that the Government had entered into this contract, but having agreed to it, he regretted that they had not reserved to themselves, as they might have done, the option of determining it at the end of six years, even though a penalty of £500,000 was attached to its exercise. He had not descended to the criticism of minor details but he thought the objections he had stated would be sufficient to induce the House to concur with him in the feeling of deep regret that they were asked to acquiesce in this deplorable contract.

MR. NORWOOD

said, he quite agreed with the hon. and learned Gentleman that the Government had made an illjudged and unbusiness-like bargain. He had no objection to the Peninsular and Oriental Company retaining their contract, and receiving a liberal sum for their services, and had no fault to find with the officers of the Company for making the best bargain they could, while he deemed it the duty of the Government to protect the taxpayers and the commercial interests of the country. The mail service between this country and its Eastern dependencies consisted of three branches—to India, to China, and to Australia. The first two were terminable at twelve months, the last at two years. Now, he thought that the notices should have been framed in such a form that all the three contracts should have terminated at the same time. The arrangement of the Government had given the Peninsular and Oriental Company entire command of the two most important services, and it would be impossible in the course of another year for any other Company to enter into a fair competition with them for the performance of the third service. The period of the commercial depression last year was a most unfortunate one in which to ask for any competition in this matter. The prudent thing to have done would have been so to arrange that the contracts for the three services should terminate at the same time; but if this contract were entered into, the Peninsular and Oriental Company would acquire such a hold upon the carrying trade of the East, that it would be impossible that any new Company should compete for the Australian service. With regard to the term proposed, twelve years was much too long. The attention now paid to the economical consumption of fuel justified the belief that an important saving would before long be effected in that respect; and it was preposterous to imagine that within so long a term we would not be able to obtain at less cost than at present an increased rate of speed. A speed of ten or eleven knots an hour was perfectly inadequate to the requirements of such a service as this. Then as to the terms of payment, it was to be remembered that the £400,000 a year minimum was not for the entire service; it was only for the services to India and China; so that in the course of another year another sum would be wanted for the Australian service. He objected to the partnership arrangement proposed between the Government and the Company—such a contract was contrary to all business principles. The profits of steamships arose as much from economy and good management as from high rates of freight; and it was known to every mercantile man that the effect of the long enjoyment by this Company of a monopoly had shown itself in a less rigid economy than would have been maintained in their service had they been dependent on ordinary mercantile business. How could they expect the Company to be economical when they had the Government funds to fall back upon? Look at the one-sideness of the arrangement. This country might be called upon to pay 3¾ per cent. to be divided among the shareholders. On the other hand, if the speculation were an extremely good one, and the Company divided 9 per cent, the country would only receive £6,000 a year as their share of profits, and £12,000 if the Company paid 10 per cent. In such a partnership, the Government ought to have representatives in the direction of the Company, but he objected to the partnership altogether. As between individual partners there might be sufficient supervision and control; but what control was to be exercised on the part of the State in this case? The cleverest accountant might have access to every book and every document belonging to a steam packet company, but it would be impossible for him to give an opinion that would be worth having upon the economy of management, unless he went to the outports and examined details there. On the whole, as a business man, he thought the contract injudicious and unbusiness-like. He was not prepared to take any step on this occasion; but if any hon. Member chose to take a hostile step, he certainly should go into the same lobby with him.

MR. SAMUDA

felt that there were many points which had escaped the notice of previous speakers, which the House ought to be put in possession of before coming to any conclusion. It must be admitted that, whatever blame might have attached to the Government, the position in which the House now stood was much better than that in which they found themselves last year. Last year the contest was for the existence of any contract at all in this country, the question being then whether they should allow the contract to pass out of the country, to the ruin of the Company. He readily admitted that he found in this contract two conditions which he would rather have seen altered. He should have been glad to have seen the contract altogether freed from the partnership clause—which in his opinion would not work well—and that an increase in the rate of speed should have been contemplated, if not immediately given. The rate of speed for which the contract provided was a low one. He still held strongly to the opinion he had expressed before the Committee, that there would be no difficulty in increasing the rate of speed on these lines from 10 knots an hour upon the European side and 9½ on the Indian side by at least 1 knot, and possibly 1½ knots an hour. In so important a contract as this, and spreading over so long a period, it would clearly have been wise to introduce a condition giving the public the advantage of an increased speed. But he begged to remind his hon. Friend and the House that one effect of such condition would be to involve a very large additional outlay on the part of the Company. He pointed out in his evidence before the Committee that the increase of speed to 12 knots on the Mediterranean and 11 knots on the Indian side would involve in the item of coal alone an additional expenditure of £40,000 a year; that vessels generally of 2,500 tons burden would have to be provided if that increase of speed were at once demanded; and that the disbursement of capital for vessels which the Company did not now possess would be represented by a sum of between £500,000 and £600,000. But a totally different state of things existed now from what they all believed to exist when he gave his evidence before the Committee. At that time, he believed the Peninsular and Oriental Company was in a flourishing condition and capable of paying a large dividend. It was only then beginning to experience the effects of French competition, and it took him greatly by surprise to hear of the altered position of the Company. There was therefore this mitigating circumstance, which should not be overlooked—that though the Government were driven into a corner by having no one except the Peninsular and Oriental Company to deal with, they knew the position of the Company to have been such that with their present amount of subsidy they were not able to get a return for their capital. There was in this fact, therefore, a fair starting-point for a new arrangement. It had been mentioned in the debate, and he had seen it stated in the public press, that it was proposed to give the Peninsular and Oriental Company a subsidy of £400,000 in lieu of £230,000. But it was a mistake to suppose that the increased subsidy was given for the same service. The £400,000 was given for a much larger amount of service, and the extra mileage alone would be represented by a sum of £80,000, and therefore the true figures would be £320,000 against £230,000, and the difference would really amount to only about £90,000. There was another point also to which he wished to call attention. During the discussion last year, when reference was made to the financial state of the Company, it appeared that the working expenses exactly balanced their receipts, and that there was nothing left in the shape of dividend. But that did not represent the real state to which the Company had been reduced; because, with a laudable desire to make their position as little damaging as they could, in the hope that future years would retrieve it, he was informed that no charge whatever was made for depreciation of stock, which would have been represented by a sum of £75,000 if it had found its way into the account. Therefore, if the same state of things existed next year which did exist in this, out of the £400,000 the Company would have had only £15,000 for dividend for their shareholders. He did not think, then, that either the Government could be said to have been careless in what they had done, or the Company to have taken an unfair advantage. Now, £400,000 was by no means an excessive subsidy for the work that was to be done. It was not excessive whether looked at from the point of view of the probable amount it represented above expenditure, or if considered with reference to mileage. It would represent only about 6s. 1d. per mile that was run, which was a low rate compared with what was paid to other Companies. He quite agreed with those who held that the partnership clause was open to objection, and wherever he had seen it tried it had turned out ill. It was tried in the West India Docks, and there it was found that because the Directors were not allowed to increase their dividend beyond a certain amount they were always incurring some unnecessary expenditure. But more than that, it had this great disadvantage—that it prevented the Government from acquiring useful information which at the end of twelve years might be rendered available with regard to any future contract. It would have the effect of disguising the real state of the Company's profits; he was convinced that the subsidy would not be restricted to £400,000 a year, as argued in the document put forward by Mr. Scudamore, the Post Office examiner, and that the Government must be prepared to pay, if not the whole, at least a very large portion of the additional £100,000 very frequently during the continuance of the contract; why not, then, accept the position at once, agree to the regular payment of a fixed portion of this supplemental sum as a certainty, and obtain in exchange for it an increase of speed—that was the suggestion which he wished to throw out. The public in his opinion had a right to obtain from the Company—not immediately, but at some future time—an increase of speed, and the Government might very well before closing the contract insert a provision that whenever they considered the period had arrived for increasing the speed by 1 knot or 1½ knots an hour they should have the right to demand such increase upon paying the Company a sum which might now be agreed upon by all parties. He would merely add that the rates of speed which he had recommended, and which could only be obtained at greatly increased cost, were exactly those which were suggested by the Committee, and were about what the Companies—who were at present most highly subsidized—were in the habit of going.

MR. THOMAS CAVE

thought there was no fault whatever to be found with the Government for the amount of subsidy agreed upon. The hurricane at St. Thomas was so fresh in the memory of all that they could not overlook the fact that those Companies were exposed to great losses; and therefore it was necessary that they should be not only fairly but liberally remunerated. In concluding the contract for twelve years the Government seemed to have forgotten—and no hon. Gentleman had brought it under the notice of the House—that the American Government had very largely subsidized a system of railways which would bring China and Japan very much nearer England than at present. During the recess he had himself travelled upwards of 500 miles over that line of railway, and thousands of men were now engaged in its completion. The result would be that sooner or later our mails would have to be carried by that route. The saving of seven days in time and all the risks of the sea would weigh with the hon. Gentleman opposite who had charge of the contract. On the ground he had stated he regretted that the contract had been concluded for so long a term. With regard to that contract the Company were allowed to deduct 5 per cent for depreciation of ships and 5 per cent for insurance. Everyone knew that the insurance fund often yielded a large profit; but if it continued to do so that profit, as he interpreted the contract, would be pocketed by the Company, whereas the Government had omitted to provide that if it showed a loss no claim should be made on them. This he regarded as an important omission, for if the Company's losses exceeded 5 per cent the Government would be called on to make them up.

MR. CHILDERS

said, that while he was prepared to criticize the conduct of the Government in concluding the contract in some particulars, he admitted that the Resolution could not but be adopted by the House. In the absence, from indisposition, of the hon. Member for the City (Mr. Crawford), who had wished also to support the adoption of the Resolution, he desired to offer a few remarks on the subject, it having been his duty to examine the wit- nesses who gave evidence before the Committee of 1865, and to assist the hon. Member in the preparation of the Report. That Committee comprised not only representatives of the Government and others who were anxious for economical arrangements, but mercantile men connected with the East, and a representative of the Company which was now about getting a fresh contract, and considerable weight attached, therefore, to the recommendations which they unanimously adopted. After a careful recital of the facts, the Committee thus summed up their recommendations— That, while it has not been expedient hitherto to add to the expense of the postal communication with India, by establishing a more frequent service to Bombay, in addition to the existing services to Madras and Calcutta, yet, having regard to the facilities already afforded by the railways under construction in India, and to the prospect of the early completion of the main lines of communication connecting the port of Bombay with the Presidencies of Calcutta and Madras, the North-West Provinces, and the Punjab, the time has arrived when tenders should be invited for a weekly service to Bombay alone, and the separate postal service between this country and Madras and Calcutta should be discontinued. Then came recommendations as to the speed of future steamers, which he would not repeat. The sixth recommendation was as follows:— That Her Majesty's Government should take into their early consideration the arrangements to be made, in consequence of the proposed separation of the Indian service, for maintaining a fortnightly or half-monthly service to China, and a monthly or four-weekly service to Australia, having regard to any facilities which may be afforded by the monthly service to China now performed by the Messageries Impériales from Marseilles. What was the meaning of the first of these recommendations? That the railways being nearly finished which connected Bombay with Madras and Calcutta, it was desirable to contemplate the relinquishment of the line of steam communication to India by Galle, and to retain only the line with Bombay, and thence across the Peninsula by railway to Calcutta and Madras. The questions he put to Mr. Frederick Hill, the witness examined on the part of the Post Office, tended to show the necessity of establishing this contract only in connection with the completion of the Indian railways. He asked Mr. Hill— Would it not be prudent to postpone any definite contract between the Indian Government and with the Peninsular and Oriental Company for the service to Bombay until they were assured as to the probable passenger service between Bombay and Calcutta?—I think it would be pru- dent to defer entering into any permanent contract—that is to say, for a long series of years; but if the contract were terminable, as our Australian contract is, upon a notice of two years, I do not think that there would be any necessity for delay. When you use the word 'permanent,' would it not be prudent to delay any permanent arrangement for the service between England and Bombay with the Peninsular and Oriental Company, or with any steam-boat company, until there were the means of testing what would be the facilities for passenger traffic from Bombay to Calcutta?—Certainly. And if those facilities should be greater, do not you think that the Peninsular and Oriental, or any other steam-boat company, would be able to tender for much less than what they said some years ago they would tender for for the additional service to Bombay?—No doubt that would be so. The Chairman told Mr. Hill the Committee had it in evidence that the line of communication between Bombay and Calcutta and also between Bombay and Madras would be completed within a reasonably short time, and he (Mr. Childers) thereupon asked Mr. Hill whether, this being so, it would not be well— Not to contract for a fixed sum for a long period until that question is tested?—Not for a long period; but if the contract were terminable upon a couple of years' notice that might be done. The Committee thus had the opinion of Mr. Hill who represented the Post Office, and himself, as representing the Treasury, that no permanent contract ought to be made over a number of years certain until there had been an opportunity of ascertaining the facilities of passenger communication offered by the completion of the railways between Bombay and Calcutta and Madras. Unfortunately, instead of postponing the contract with this view, the Government had, in the teeth of the recommendations of the Committee, and of the opinion of their own officials, called for a tender on the terms of a permanent service to Bombay and Calcutta, without waiting to see whether passengers would take that route or the old route by Galle. The effect has been not only an extravagant mileage service, but the absence of all competition for the contract. A subsidy whether of 3s. or 10s. a mile would not pay a steamboat company unless they got the passenger traffic as well. As long as the Peninsular and Oriental Company had possession of the passenger traffic, it was obvious no other company could tender on the basis of the Government subsidy, and it was clear that no one but the Peninsular and Oriental Company could get the passengers until the railways were open. The Government had thus entered into a contract, not on the basis of a weekly service to Bombay alone, as the Committee recommended, but a contract for twelve years, retaining the unnecessary service, in a postal point of view, from Bombay to Galle, Madras, and Calcutta. In fact, the whole policy recommended by the Committee was passed by in the arrangement made by his hon. Friend. But he should be told that there was no choice in the matter, the Company being the only tenderers for the service. But this was the result of the tenders being called for prematurely. Last Session he called the attention of his hon. Friend to the fact that it was not advisable to give the Peninsular and Oriental Company this early and premature notice, but to give notice under which all their contracts would be determined at the same time. Some of these contracts could be determined after one year's notice, while others required two years; and, considering that the Indian railways were not finished, it was desirable to give a notice not earlier than two years, so that the railways might have some little additional time to complete their communication. But just as with respect to the Indian service they had been too precipitate, so that they had unwisely deferred the notices for the Australian line, no notice had been given with regard to the Australian service, which cost £120,000 a year, and the Government would have to advertise for tenders for that service at a time when the Peninsular and Oriental Company would be in entire possession of the field. He now came to the other question, that of the French Company. His hon. Friend was questioned once or twice on that subject last Session, and he answered that he did not intend to make overtures to the French Government, but that he meant to call on the Messageries Impériales to tender for the service to China. That, he took the liberty to tell his hon. Friend, was very injudicious, for it was impossible for a service which was sometimes half military in its character, to be satisfactorily performed by a foreign company. It was, however, he admitted, the view of the Post Office that this should be done. He (Mr. Childers) asked Mr. Hill before the Committee— You consider that the last course to take would be to give the Messageries an opportunity of tendering for the alternate service?—Yes. You would not exclude, of course, the answer of the French Government, if they would agree to a rate upon letters for the alternate service?—There is no occasion to put that question, because we have it in the convention that we are both bound to carry letters for each other. For the alternate service once in four weeks, instead of once a month?—No. Probably it would be prudent to ask that question before anything was definitely done?—Yes; I think it would. He (Mr. Childers) had thus urged upon the Post Office, who unluckily hankered after a contract with the French Company, whether it would not have been better, before anything was done in the China service, to ask the French Government to make arrangements for alternating a weekly service with ours, as was at present satisfactorily done in the alternate fortnightly service to Brazil and the River Plate. But, although even Mr. Hill thought it desirable to make an arrangement with the French Government, Her Majesty's Government made no overtures to that Government for a year or more. His hon. Friend relied, instead, upon the broken reed of asking the Messageries Impériales to tender; and then, having failed, the present contract was agreed to, instead of that shadowed out and recommended by the Committee, and the country found itself in the position of having to pay for two services instead of one. The Government had, he thought, committed an error of judgment in not adopting the recommendations of the Committee, and the result was that there was no alternative but to adopt the proposal of the Peninsular and Oriental Company, large as was their claim, and connected as it was with the guarantee of a certain dividend. He (Mr. Childers) hoped that such an arrangement would not be made a precedent for future arrangements. There was no doubt a precedent for this in the case of the Dublin mail, but that was an experiment on a small scale, and carried on daily under the eye of the Government. The present agreement stood on a very different footing, and if it were to be made a general rule that the Government were to enter into such speculations of possible loss and profit, the Government would, he feared, make all the loss, and the companies reap all the profit. On those grounds, and on those grounds only, he felt bound to acquiesce in the course taken by his hon. Friend. He thought it was much to be regretted that his hon. Friend did take that course; but he felt it only right to say, after reading carefully the whole of Mr. Scudamore's Report—and he wished to speak as highly as any one could of the merits of that officer, not merely in connection with postal affairs, but in other matters which came before that House, in which his ability and foresight had certainly been of great public advantage—after carefully reading Mr. Scudamore's Report, he did not see that it would have been possible, under the circumstances, to make an arrangement upon better terms than those now made. The Peninsular and Oriental Company had always done their work admirably, and the public would be safe in their hands. At the same time, a contract for twelve years, coupled with that condition as to the possibility of some profit coming to the Government, and also of some loss coming to them, was not such an arrangement as he thought the Treasury ought to have made; and therefore, in assenting to their arrangement, he did so with considerable reluctance.

MR. M'LAREN

said, that the Peninsular and Oriental Company asked £500,000 a year for a contract of six years, and that sum was professedly reduced to £400,000 for a contract extending over twelve years. But if it could be shown, as it easily could be, that the Government would really have to pay £500,000 for the contract extending over twelve years, it was manifest that, instead of having obtained an advantage by the professedly lower rate, which was in reality no lower rate at all, the alleged concession to the public was an injury instead of a benefit. The hon. Member for Tavistock (Mr. Samuda), the only gentleman who had defended the contract with the Company, said their financial condition was such that he should not be surprised if it were found that their available dividend would be reduced to £15,000 a year, even after they got the £400,000 from the public. But unless their dividend exceeded £60,000 a year, the public would have £100,000 more to pay. If the dividend were £60,000 a year that would yield 2¼ per cent, and £100,000, making up the dividend to £160,000, would yield 6 per cent. If the hon. Member for Tavistock were to prove that, instead of £15,000—the dividend he anticipated under certain circumstances—their dividend should even be £60,000, then it followed that the public would have to pay them, besides the £400,000 agreed upon, £100,000 over and above that amount. Therefore, after all the circumlocution and mystification in which the matter was enveloped, the public had to pay the £500,000; and yet they were told that they were to have an advantage from extending the contract to twelve years! Any one who read the papers all through would easily see that the Company, and not the public, would be really benefited by that prolonged term. He thought it would be better for the Treasury to accept the first offer of the Company for the £500,000, and to have no partnership with them, with its illusory chance of a profit. They were going into partnership with the Company under the idea of probably gaining £6,675 a year; and the quid pro quo they were to give for that mere ideal and unsubstantial advantage was that they were to come under a real obligation to pay £100,000. A more objectionable and improvident arrangement he could not imagine, and he must strongly protest against it. The great argument of the Peninsular and Oriental Company against the small sum they were previously allowed was that the French Company were enabled to undersell them. But the effect of the new arrangement with the Peninsular and Oriental Company would be, by doubling their subvention, to enable that Company itself to undersell all the rest of our own shipping interest. In palliation of that improvident arrangement, by which the Company were to receive £500,000 instead of their former £230,000, the hon. Member for Tavistock said they were to sail, at a probable cost of £80,000, 300,000 miles more than they did before, and that they would also have to incur an additional cost of £40,000 for the extra price of coal. But the Government did not want them to run the 300,000 miles more; and even if they did so, in place of giving them £120,000 for these possible increased charges, the Government were giving them £270,000. Nobody could allege a reason for giving away the other £150,000, except that the Government had got into such a fix as to be perfectly helpless, and the Company was able to dictate terms to them. On these grounds he could not agree to the Vote.

MR. HUNT

said, that any stranger coming down to the House and listening to the statements made and the criticisms passed that evening on that contract must at first have imagined that all the hon. Gentlemen who had strongly protested against it were largely engaged in and represented the Indian trade, and were naturally indignant that the arrangements made by the Government for the conveyance of their commercial correspondence would not answer their purpose. But if such a stranger were told that with, as he believed, but one exception, all those who had found fault with the Government did not belong to the great mercantile community in this country which was connected with the Indian trade, he would surely ask where were those Members who were really connected with that trade? The fact was that the hon. Gentlemen most interested in that subject were perfectly content with the arrangement made by the Government; they acquiesced in it, and, instead of coming there to protest, they had gone quietly away to their domestic or other occupations. He regretted that his hon. Friend the Member for the City (Mr. Crawford), who was Chairman of the Committee on this question, was prevented by the state of his health from giving his opinion on the arrangement made by the Government; but he believed that hon. Member would have expressed himself entirely satisfied with it. He did not find fault with the hon. and learned Member for the Tower Hamlets (Mr. Ayrton), the universal critic of the House, for exercising his talents on these occasions, and certainly his remarks that night had been distinguished by his usual acumen. Neither did he complain that the hon. Gentleman opposite (Mr. Childers) should have criticized as severely as he could any arrangement made by the Government which succeeded the one to which he had personally belonged, because that was only the legitimate province of the Opposition, and when he himself changed sides in that House with the hon. Gentleman no doubt he should do the same. But the hon. and learned Member for the Tower Hamlets (Mr. Ayrton) had produced a very long bill of indictment against the Government. But if the Government were in the position of an ordinary delinquent at the bar, they could put in a plea of autre-fois acquis, because nearly all the objections which were now urged against the course taken by the Government had been disposed of in the discussion which had taken place last Session; but as many of them had been again advanced, he felt it to be his duty once more to reply to them. He would, in the first place, then, observe that he looked upon it as being a great disadvantage to the Government that in the original contract—with which they had nothing to do—the period of one year was fixed as that at which notice of its termination should be given. It was, however, contended that they should have given notice some time before—or, at all events, some private notice—that it was the opinion of the Government that the contract ought to be terminated, and that it was likely they would in due course act upon that opinion. Now, that was exactly the course which had been taken. As he had stated in the House last Session, he invited before giving notice the Chairman of the Committee to call upon, him at the Treasury, where the question was discussed between them as to when notice should be given. His hon. Friend on that occasion expressed it to be his opinion that notice ought to be given. That being so, he thought he had disposed of the charge that the Government had not acted in accordance with the views of the Committee; because if its Chairman was not to be regarded as an adequate exponent of those views, he did not know who was. Besides, as his hon. Friend opposite (Mr. Childers) must see, the Government had no choice in the matter, because, after acting on their own responsibility—for he had no wish to throw the slightest responsibility in the matter on the Chairman of the Committee—they had given private notice to the Company that they were likely before long to give formal notice that they would terminate the contract, the representatives of the Company informed them that they could not go on losing money as they were doing, and that if the Government did not give them notice they must give notice to the Government. His hon. Friend, he might add, had read certain extracts from the blue book expressing the views of the Committee; but there were other paragraphs of the Report which would, he thought, be found to place the question in a different light. After the paragraph in their Report which his hon. Friend had first quoted, the Committee went on to say— Yet, having regard to the facilities already afforded by the railways under construction in India, and to the prospect of the early completion of the main lines of communication connecting the port of Bombay with the Presidencies of Calcutta and Madras, the North-West Provinces, and the Punjab, the time has arrived when a tender should be invited for a weekly service to Bombay alone. That paragraph pointed not to the time when the railway should be actually completed, but to the time then present, when there was a prospect of early completion, so that the very words of the Report concurred with the views of the Chairman that notice should be given. [Mr. CHILDERS: The Report says, "Tenders should be invited."] Yes; but how, he should like to know, could tenders be invited before notice had been given of the termination of the existing contract? The Report went on— And that Her Majesty's Government should take into their consideration the arrangements to be made in consequence of the proposed separation of the India and China and the Australian Mails. There was, he would point out, a marked distinction drawn between the giving of notice for the termination of the contract for the India and China and that for the Australian mail. With reference to the former, the words used in the Report were that "the time had arrived when tenders should be invited;" while in the course of the latter the recommendation was "that Her Majesty's Government should take into their early consideration the arrangements to be made." In acting as they had done, therefore, the Government, he must again repeat, proceeded entirely in accordance with the views of the Committee. It appeared, however, that his hon. Friend opposite differed from the Chairman of the Committee, and that being so, he ought, he thought, to have protested against the words used in the Report.

MR. CHILDERS

My hon. Friend gave me a very different impression of the statement which he made from that conveyed by the hon. Gentleman opposite.

MR. HUNT

He did not, as he had said before, seek to throw the slightest responsibility in the matter on the hon. Member for the City of London; indeed, his right hon. Friend the Chancellor of the Exchequer had last Session expressly stated that the Government had no intention of the kind, and he was sure that if his hon. Friend were present he would confirm the accuracy of the statement which he had made. Such, then, as he had described, was the state of the case, so far as giving notice was concerned. But his hon. Friend opposite further contended that the Government ought to have carried out the views of Mr. Frederick Hill. [Mr. CHILDERS: I said they were the views of the Post Office.] The hon. Member for the City of London, however, last Session protested against the Government being influenced by the views of Mr. Frederick Hill, for he declared it to be his opinion that if they were to conduct the postal arrangements of the country under his advice they would be sure to do wrong. Again, it was made an accusation against the Government that they had placed themselves altogether in the hands of the Peninsular and Oriental Company, that they were perfectly helpless, and that they must pay whatever sum that Company might demand. Was that the tone of the discussion which took place last Session? If he were not mistaken, he then heard a great deal about the poor, trodden-down Peninsular and Oriental Company, and of the necessity which there was that the House should come to its rescue, and to preserve it from the ruin which it was threatened with, owing to the policy of the Government. What was the result? Why, that the Company naturally looked upon it as quite clear that the House of Commons was of opinion that they ought to be more liberally remunerated, and that they were entitled to ask for very handsome terms. Now, all he could say with regard to the matter was this, that it was, in his opinion, the duty of the Government to make the best terms they could, while he, at the same time, most readily bore testimony to the great services which the Company in question had rendered to the country during the many years in which they had been engaged in conducting our postal communication with the East. That duty they had discharged in a manner which was highly creditable to them, and he should have been sorry to see the Company break up by reason of the Government not being able to enter into any satisfactory arrangements with them. As to the negotiation with the Messageries Impériales, since they had made no tender and the matter had fallen through, he should merely say that, while his hon. Friend opposite seemed to think that the 6th paragraph in the Report contemplated a service in substitution of ours, the hon. Member for the City of London construed it as meaning a service in addition. But then it was said that the Government had acted foolishly in entering into arrangements for the service to Bombay before the railways were completed. On that point he would read a note appended to the Memorandum sent by the Post Office to the Treasury— The superiority of Bombay as a point of arrival and departure for Indian mails, even before the completion of the railways between Bombay and Calcutta and Bombay and Madras, has been pointed out by the Select Committee on East India Communications (pages v. and vi. of their Report), by Lord Canning, by the Director-General of the Post Office of India in the years 1860–1861 (vide pages 231 to 234, 241 to 244), and by the Director-General of the Post Office of India in 1865 (vide pages 280 to 282 of the Appendix to the Report of that Committee. He was told that even now, with a journey of 200 miles, the mail service by way of Bombay was far superior to that by Calcutta. His hon. Friend had said that it was impossible for any one to tender for the service to Bombay until those lines were open. As the lines were expected to be open in a short time, any enterprising Company might, he thought, make a tender, although the lines were not open. All this part of the case, however, turned on the question, respecting which contradictory testimony was given before the Committee—namely, whether the Great India Peninsula Railway could carry all the passenger traffic, or whether the Peninsular and Oriental Company's steamers would carry any of it; and the officers of the latter Company maintained that when the railway was finished there would still be a great passenger traffic to Calcutta. That was a question which time would determine; but at all events, there was a public advantage in the existence of two routes, as competition tended to keep down the rate of fares. With respect to what had been called the partnership question, he confessed that at first sight a partnership arrangement did not seem desirable—but the alternative was the payment of £500,000. This was not an unlimited partnership, for there was a certain amount beyond which the Government could not be called on to contribute; and as his hon. Friend was obliged to admit, this was not the first occasion when such a partnership was made. There was a partnership of a somewhat similar character in the case of the Holyhead and Kingstown contract. In reply to the objection that there was no security that the Peninsular and Oriental Company would care to raise their dividend above 6 per cent, he thought they might safely rely upon the watchfulness of the shareholders; they were a very numerous body, and having been accustomed to divide 10 per cent, they were not likely to sit down perfectly satisfied with a dividend of 6 per cent, even though it was guaranteed by the Government. Then, again, it was said that the speed prescribed for this service was obsolete, and that it was too slow and behind the age. Now he believed that in the discussions which had taken place in that House, those most interested in the question said that they looked to regularity of service more than to greater speed, and that the telegraph wire would to a great extent displace the Post Office in cases where great despatch was desirable. Nevertheless, the increase of the rate of speed, if it should be deemed desirable, depended solely on a question of money. After what he had stated, he trusted that the House would not think that the Government had shown in this matter such dense stupidity as had been attributed to them, and he hoped that they would be able to come to an unanimous vote on the present occasion.

MR. GRAHAM

said, that as the Secretary to the Treasury had observed that no one connected with the mercantile interests of India had objected to the contract, he, as a person deeply interested in Indian trade, wished to state that the hon. Gentleman was in that respect under a false impression. He, for one, greatly objected to the contract, and to the slowness of the proposed rate of speed; be objected to an arrangement which made the Government a partner in a mercantile Company, and he objected that the contract was made for so long a period as twelve years. He should have preferred to pay the Company at a higher rate for a shorter period.

MR. J. B. SMITH

also objected to the length of the contract. With the prospect of a great extension of railway communication in India, twelve years was much too long a term. He hoped the Government would still endeavour to reduce the term to six years, paying a larger sum to the Company. Unless he got a pledge to that effect he should divide the House.

Question put.

The House divided:—Ayes 55; Noes 13: Majority 42