§ The administration of the Navy cannot be satisfactory unless the approximate wastage or depreciation is so ascertained, as to afford reliable data upon which to predicate the extent of shipbuilding requisite in each year to maintain the Fleet at its present authorized strength. The advantages of such a knowledge, and of basing a continuous naval policy thereon, are manifest.
§ One obstacle to securing economical results from the dockyards has been the spasmodic action in regard to the extent of new work. The Controller of the Navy, as a great employer of labour, has, in consequence, been unable satisfactorily to regulate the employment of men and the distribution of work to the different trades. If the extent of tonnage to be laid down at each yard from year to year were known with any degree of accuracy, the necessary men of the several trades connected with shipbuilding could be employed, and the vessels could be commenced, in such rotation, and at such intervals, as would permit the men of a certain trade to move from ship to ship, as their particular description of work was completed.
§ The Table in the Appendix to the Navy Estimates which gives the cost and date of completion of each vessel affords a basis upon which to calculate the approximate annual percentage of depreciation on the value of the Fleet arising from decay or supersession, the latter being a most important factor.
* Load displacement,
† Includes "Hearty" (1,300 tons), "Jackal" (750 tons), and "Bann" (250 tons).
§ It must be kept clearly in mind that this Table is drawn up so as to indicate the year of COMPLETION of each ship, and her cost is placed under that year, and is not distributed under the years in which the expenditure, as it progressed, was provided. This arrangement is necessary for the purpose of arriving at a proper conclusion, because a vessel cannot, as a rule, be regarded as subject to depreciation until she is complete for service. In calculating the depreciation, and the period for which it ought to be charged, regard must also be had to the value remaining in the vessel after the expiry of the given number of years of her probable life. Whenever a vessel is sold, her realized value should, therefore, be credited to Navy Votes in aid of new construction, in order to carry out the principle here advocated.
§ Subject to the foregoing considerations, the following is a reasonable scale upon which to fix the annual depreciation for the different classes of vessels which form the Fleet, and to provide the minimum sum which should be invested annually in the production of new tonnage, viz.:—
- 1. On armoured, protected, and partially-protected iron or steel vessels, for twenty-two years from date of completion, 4 per cent.
- 2. On corvettes, sloops, torpedo-cruisers, gun-vessels, gun-boats, troop-ships, and other vessels, for fifteen years, 6 per cent.
- 3. On torpedo-boats, steam launches, &c, for eleven years, 9 per cent.
- 4. On small vessels, tugs, and yard craft, for eighteen years, 5 per cent.
- 5. On guard, receiving, training, and harbour vessels, for twenty-two years, 4 per cent.
§ An element in determining the amount upon which depreciation ought to be calculated is the normal standard of strength at which the Navy is to be maintained. The leading feature adopted in the following Table is the special programme decided upon by Lord Northbrook in 1884, as sanctioned by Parliament, and his ordinary programme for the year 1885–86. These were framed on the proposition that the Navy was then much below the requisite strength, having regard to the protection of British interests. Therefore, in ascertaining the capital cost of the Fleet on the 31st March, 1887, all the vessels completing, which were commenced by Lord Northbrook, are regarded, so far as depreciation for replacement is concerned, as if finished on that day. The "Nile" and "Trafalgar" are, however, excluded, as their completion is somewhat remote, and the expenditure upon them may be viewed as a part of the ordinary charges for shipbuilding required in subsequent years. These propositions appear the more reasonable as no new vessels were laid down in 1886–87, thus assisting more clearly to draw a line between expenditure to make up prior deficiencies, and that necessary to maintain the agreed standard of efficiency.567
§ Following the foregoing line of argument, and applying it to the cost of the Fleet, the following approximate results are obtained:—
|1. Armoured, protected, and partially protected iron or steel ships—|
|At present on strength of the Navy, at first cost||19,417,000|
|Add cost of new ships not yet completed—|
|Expenditure to March 31, 1887 (probable actual)||6,240,000|
|Remaining to complete (estimated)||2,248,000|
|Cost of ships completed prior to 1865–66||378,000|
|*Estimated value of gun-mountings, & c, included in above figures||1,300,000|
|Net total capital cost of armoured, & c, ships necessary to maintain the Fleet at normal strength||26,227,000|
|Proposed annual depreciation for replacement, say at 4 per cent. per annum on £26,227,000||1,049,000|
|2. Corvettes, sloops, torpedo-cruisers, gun-vessels, gun-boats, troop-ships, and oilier vessels—|
|At present on strength of the Navy. at first cost||7,386,000|
|Add cost of new ships not yet completed—|
|Expenditure to March 31, 1887 (probable actual)||587, 000|
|Remaining to complete (estimated)||443,000|
|Cost of ships completed prior to 1872–73||1,572,000|
|*Estimated value of gun-mountings, &c, included in above figures||200,000|
|Net total capital cost of corvettes, & c, necessary to maintain the Fleet at its authorized strength||6,644,000|
|Proposed annual depreciation for replacement, say at 6 per cent. per annum on £6,644,000||399,000|
|3.Torpedo boats, steam launches, & c.—|
|At present on strength of Navy, at estimated first cost||1,500,000|
§ *Gun-mountings, & c., are excluded from the above calculations, as provision has only of late years been taken for the greater part of them in the Navy Estimates, and is voted separately. If the cost is in future included in the cost of the ship, depreciation should be calculated thereon at the same rate as on the ship.569
|Proposed annual depreciation for replacement, say at 9 per cent, per annum on £1,500,000||135,000|
|4. Small vessels, dockyard tugs, tanks, &c—|
|At present in the Service, at first cost||448,000|
|Deduct cost of vessels completed prior to 1869–70||202,000|
|Net total capital cost of small vessels, tugs, &c, necessary to be maintained||246,000|
|Proposed annual depreciation for replacement, say at 5 per annum on £210,000||12,000|
|5. Receiving, training, guard, and harbour ships, &c.—|
|At present in the Service, at first cost||3,270,000|
|Deduct cost of vessels built prior to 1865–66||2,963,000|
|Net total capital cost of vessels built since 1865–66||307,000|
|Proposed annual depreciation for replacement, say at 4 per cent, per annum on £ 307,000||12,000|
|6. First cost of ships completed since the commencement of the periods referred to for the several classes, which are at present laid up as obsolete, or for sale,* also of ships completed within those periods (excluding the older typos of armour-clads of wooden construction), which have been sold, lost, or otherwise disposed of||4,359,000|
|Proposed annual depreciation for replacement as if these ships still formed part of the strength of the Navy, say at an average of 4½ per cent, per annum on £4,359,000||196,000|
|GRAND TOTAL (ANNUAL DEPRECIATION FOR REPLACEMENT BY NEW CONSTRUCTION)||1,803,000|
§ That this estimate of £1,803,000 as the minimum amount of now construction (exclusive of gun-mounting and special fittings) required to moot the annual depreciation or wastage of the Navy is fair and reasonable is confirmed by an examination of the data given in the Appendix before referred to.
§ The aggregate expenditure on vessels added to the Navy from 1865–66, and upon those now in course of construction in completion of Lord Northbrook's programme, on which £1,186,000 remains to be expended, is £39,119,100, or an average of £1,778,000 per annum expended on new construction. This is exclusive of the cost of gun-mountings, &c, and of all expenditure upon the "Nile" and "Trafalgar," winch, although included in Lord Northbrook's programme, have, for reasons already explained, been omitted from the preceding calculations.
§ In many of the years preceding the adoption of Lord Northbrook's special programme in 1884, the rate of construction was much below this average; consequently, provision to moot these deficits has mainly fallen upon the Estimates of the three succeeding years.†
The Estimates for 1887–88 include the sum of £997,000 to be expended on account of the special programme undertaken, as already stated, to place the Fleet in a normal condition of strength, leaving a balance to be met in future years of £217,000. These sums will be thrown upon the taxpayer in excess of the amounts they would have been called upon to bear had previous Administra-
*Of the vessels built during the period of this Return, a number have already been sold, lost, or laid aside as obsolete, not being worth the cost of alteration to suit modern requirements in regard to speed, armament, &c. In order, however, that the Depreciation Fund may be adequate to maintain the normal strength of the Navy, the amounts expended on construction of such vessel must also carry a depreciation for the period sot out in these Tables, even if, owing to exceptional circumstances, the vessels have been prematurely removed from the list.
† See page 5,
tions provided year by year all that was needed. The contemplated expenditure upon new vessels (including the "Nile" and "Trafalgar," but excluding £396,000 for gun-mountings, &c), beyond the sum of £997,000, amounts to £l,665,000, or £138,000 less than the annual requirement to meet wastage, as already explained.
§ Considerations such as these prompted me last year to propose in Parliament that a certain portion of this exceptional expenditure should he converted into a terminable annuity, and spread over a period of years to afford some immediate relief to the taxpayer. The suggestion was not favourably received, the arguments directed against it being that during peace the income of each individual year must bear its own burden of expenditure. If this contention be sound, that no year is to be relieved of any portion of the expenditure properly debited against it, then Parliament, by enactment or otherwise, should insure the reverse of that proposition, that no year is to escape its fair annual share of the depreciation fund necessary to keep our Navy efficient. If this depreciation and wastage fund be fixed at the figure which, on the most careful analysis, is found to be by actuarial calculation necessary, and legally forms part of the annual charge upon the Exchequer, it would not be possible, hereafter, for the national capital invested in war ships to be deliberately reduced by a misappropriation or abandonment of the annual expenditure necessary to replenish it. A continuous and economical and efficient shipbuilding policy would be possible, and the waste and discredit, occasioned by periodical scares, would be avoided.