CUNARD (INSURANCE) AGREEMENT BILL. (Hansard, 16 December 1930)

§ THE SECRETARY OF STATE FOR AIR (LORD AMULREE)

My Lords, I beg to move the Second Reading of this Bill. The Cunard Steamship Company propose to build two large steamers to ply between England and America. Each vessel will cost a substantial sum. In regard to the first vessel which it is proposed to construct, it is estimated that it will cost not less than £4,500,000. But before the Cunard Company placed the contract to build those vessels with the shipbuilders they were anxious to ascertain whether the insurance of such large vessels could be effected, and, having sounded the insurance market, a certain doubt was expressed as to whether in the course of the two or three years during which the vessels were under con- 628 struction, and after they had been put upon the high seas, the whole of that sum would be taken up by the market. They thereupon approached the Government to see whether they could assist in effecting the insurance, or any part of it which would not be taken up in the market. The Government have not any power to intervene in a matter of that kind. Accordingly it was found necessary to introduce legislation of the kind now proposed.

It should be clearly understood that the Government are not asked by the company to afford any financial assistance whatever. We know that in other countries, where ships of this kind are being built, very large and valuable assistance is being given to the Shipbuilders and shipowners by the Governments of those countries. On this occasion all that is being asked is to provide for the eventuality of the ordinary insurance of the vessel or vessels not being effected in the market, and that only; so that what is proposed on behalf of the steamship company is really that the Government should undertake to insure against the risk of these particular vessels not being insured in the insurance market.

The especial conditions affecting Transatlantic business have undergone considerable change during recent years, more particularly during the present century, and the time has now come when a special type of large vessels is necessary to cope with the business that it is anticipated will grow upon the Atlantic. It is necessary, therefore, that the voyage should be performed now with the maximum passenger accommodation, and within the minimum of time. Among other changes which have taken place in the Transatlantic trade is a great falling off in the volume of passenger traffic. Four years before the War the average number of persons landed at the various ports in the United States was 1,200,000 a year. During the four years preceding 1930 that average had fallen to about one-half. No doubt that was largely due to the fact of the restriction upon immigration imposed by the United States Government, and partly also to the falling off of trade—the depression in industry and commerce, and similar factors. But the hope is expressed that in due course of time there will be a turn in the curve and an upward movement in the traffic, and it is 629 hoped that thereby the passenger traffic will increase. In that event, it is of vital importance that the shipping of this country should be in a position to take a leading part in the recovery which may then come about.

It is also important to notice that there has been development in the science of shipbuilding and naval architecture, and that the development has reached a point where it is economically possible to use very large and fast ships—not to make a sensational passage, but as a practical business proposition, the point being that in order to have a fast-going ship you must have large accommodation, because a fast ship means extra expense, and that extra expense can only be met by having large accommodation. If the company are able to put upon the high seas two vessels of the description contemplated, the result will be that those two vessels will be able to do the work which is now done by three. It is anticipated that there will be a weekly service from England to America, and at the same time a service from America to England, the proposal being that Southampton should be the port in England and that the voyage should be via Cherbourg to New York.

The first vessels of this new type have been put upon the seas by certain German interests. Those two vessels have a tonnage, in the one case of over 51,000 tons, and in the other of over 49,000 tons. It will be remembered that some time ago these German shipping interests were fortunate enough to receive from the United States a large sum of money, something like £15,000,000, as compensation for the ships belonging to German nationals that had been interned during the War and were afterwards retained by the United States Government. These shipping interests built the large vessels of which I have spoken, and the result is, therefore, that if other maritime nations are not prepared to place on the seas vessels of similar value and of similar type, the trade which ought to go to the new vessels will be lost to those nationals. Hence we find great liners now being constructed, or about to he constructed, in the United States, in France, and in Italy, and we know that State aid on a lavish scale is being afforded, not only for the construction of 630 those vessels, but also for running them, and for insurance.

The Cunard Company do not propose in any way to ask for any subvention for the building or running of those two vessels. The vessel which it is proposed to put in hand on the passing of this Bill will be approximately 73,000 gross tons, about 1,018 feet in length, with a cubic capacity of 7,300,000 cubic feet. As I have said already, the cost will be not less than £4,500,000. The second vessel will be of similar dimensions. The fact that the Cunard Company should have been willing and able to finance the building of these enormous vessels is of itself a high tribute to British shipping enterprise, and especially to the Cunard Company. When the Cunard Company considered the advisability of building these vessels, they sounded the insurance market. No vessels of such magnitude are in existence, and there was therefore a serious doubt expressed in the insurance market whether they could absorb the whole value. In the event of these vessels being built, certainly they are ready to absorb some part of it but, of course, that was not sufficient for the purpose of the company. They required some assurance that the whole would be absorbed. The market being unable to give that assurance the company approached the Government and the Government, therefore, had to consider how far, or whether or not, they should give assent to the Cunard Company's proposal.

Apart from the national importance of the undertaking, the scheme of building these vessels affords a large measure of work for skilled workmen, especially as employment in shipyards is at present in a low state. The gross tonnage, for example, of new vessels begun in the United Kingdom has declined from 499,000 at the end of December, 1929, to 161,000 at the end of September, 1930. Both these vessels would be built in the United Kingdom, and an agreement has been entered into with John Brown and Company, the well-known shipbuilders of Clydebank, to build one of these vessels on the River Clyde. It is estimated that the first vessel, the one in contemplation, will afford direct employment for something like 3,000 men continuously for three years, and that employment in ancillary trades will be found 631 for something like 1,400 or 1,500 work-people for two and a-half years. You will, therefore, have for a period of something like two and a-half to three years about 4,500 workpeople employed continuously. The saving in unemployment benefit brought about by this employment will exceed £250,000 a year. In addition, there will be work connected with the widening and deepening of the River Clyde in order to enable the vessel to pass up and down from the shipyard to sea and back. It will be necessary also to construct a new graving dock at Southampton, and that will bring about further employment.

The proposals of the Bill and the draft agreement have been duly considered, the agreement in particular. My right hon. friend the President of the Board of Trade has been in close touch with, and has acted throughout the negotiations leading to the conclusion of the agreement on the advice of, the Chairman and Deputy-Chairman of Lloyds. Under the draft agreement which appears in the Schedule to the Bill, the Government undertake to provide insurance against construction risks and marine risks, but only in so far as the ordinary insurance market is unable to do so. The company must satisfy the Board of Trade that the maximum amount of insurance obtainable in the market has been placed. From inquiries, it is believed that the market will take up at least £2,000,000, assuming that the cost of the vessel should be £4,500,000; though it is hoped that this sum of £2,000,000 may be exceeded. Two classes of insurance are covered by the agreement. First of all, the construction risks. In regard to those risks, it is proposed that any insurance provided by the Board of Trade shall be paid at the fixed rate of premium of 1½ per cent. for three years plus an additional 2½ per cent. on that rate. If the vessel is not delivered or accepted within three years from the laying of the keel an additional 6d. per cent. per month or part of a month until delivery or acceptance is to be paid.

With regard to the marine risks, the insurance provided by the Board of Trade is to be at a reasonable rate of premium. That is, at rates similar to those fixed by the market for the ship or, failing any being fixed at all, the rates fixed 632 for similar risks. That is to say, assuming that the market takes part of the insurance—I mentioned, for example, a figure of £2,000,000—then the Government, or the Board of Trade, take up the remaining £2,500,000 or the balance of the cost of the ship. The rate which the Board of Trade will charge will be the rate that has been charged in the market for the £2,000,000 taken up by the market. In the event of nothing at all being taken up the rate for similar risks in the market will be charged. In the event of any dispute arising as to what that rate is the matter is to be referred to arbitration. In addition to that there is to be 2½ per cent. charged on the rates so fixed.

Your Lordships will see, therefore, that both in regard to the construction risks and the marine risks there is an extra rate above the agreed rate under the agreement of 2½ per cent. in the case of construction risks and 2½ in addition in the case of marine risks. The object of charging an additional 2½ per cent. of the premium is that the Government shall not in any way compete with the market. That extra sum is calculated to prevent any undue competition in that respect. As I said, these terms have been arranged after consultation with the Chairman and Deputy-Chairman of Lloyds. There are only two other matters to which I might refer. One is that in order, if possible, to keep matters on the usual market basis, the Board of Trade undertake to pay a discount which is generally paid by underwriters to the owners of a vessel. The Board of Trade undertake to pay a similar discount to that. Secondly, the Board of Trade undertake to make an allowance in lieu of the share of brokerage, which in building a vessel of this kind and extent is shared between the broker and the owners or the builder. These, shortly, are the terms of the agreement which are set out in the draft appearing in the Schedule.

The only other observation I have to make is with regard to the second vessel. The same terms and conditions apply to that vessel mutatis mutandis, subject to this, that the keel of the second vessel must be laid down within six years from the signing of the agreement. Shortly, that is the effect of the agreement. This Bill met with a very favourable reception in another place. It passed without a 633 single amendment or a single Division, and I hope that your Lordships will give it similar treatment in this House. I beg to move.