Manual of Ship Subsidies | Page 6

Parliamentary investigation was made. The
ultimate result of this inquiry was a radical change in the system. The
management of the ocean mail-service was taken from the Admiralty
and placed wholly in the hands of the Post-Office Department; and at
the expiration of the Cunard Company's extended contract, the service
was thrown open to public competition, as the Parliamentary committee
of 1846 had advised.
Bids were now received from the Cunard, the Inman, the North German
Lloyd, and other lines. The Inman Company had previously offered to
perform the service, and had done so for sea-postage only.[AQ]
Contracts were finally concluded with the three named. The contract
with the Inman Line was for a fortnightly Halifax service, for seven
hundred and fifty pounds the round trip, nineteen thousand five
hundred pounds a year, and a weekly New York service for sea-postage.
That with the Cunard Line was for a weekly service to New York at a
fixed subsidy of eighty thousand pounds. That with the North German
Lloyd was for a weekly service, at the sea-postage. These contracts
were to run for a year only. The Cunard's subsidy, although
considerably less than half the amount that the company had received
the previous ten years, showed a loss to the Government, at sea-postage
rates, of forty-four thousand one hundred and ninety-six pounds, since
the amount actually earned at sea-postage rates was twenty-eight
thousand six hundred and eighty-six pounds.[AR]
When advertisements for tenders were next issued, it was found that the
Cunard and Inman companies had formed a "community of interests,"
with an agreement not to underbid each other. They asked a ten years'
contract on the basis of fifty thousand pounds fixed subsidy for a

weekly service. Instead, they were awarded seven years' contracts: the
Cunard for a semi-weekly service, seventy thousand pounds subsidy;
the Inman, for a weekly service, thirty-five thousand pounds
subsidy.[AR] At the same time contracts were made with the North
German Lloyd and the Hamburg-American lines for a weekly service
for the sea-postage.
The Cunard and Inman grants were sharply criticised, and a
Parliamentary committee was appointed to investigate them. The
committee's report sustained the critics. It observed that "the payments
to be made when compared with those made by the American Post
Office for the homeward mails are widely different, inasmuch as the
American Post Office has hitherto paid only for actual services
rendered at about half the rate of the British Post Office when paying
by the quantity of letters carried." The committee recommended that
these contracts be disapproved, and that the system of fixed subsidies
be abolished. "Under all circumstances," they concluded, "we are of the
opinion that, considering the already large and continually increasing
means of communication with the United States, there is no longer any
necessity for fixed subsidies for a term of years in the case of this
service."[AS] This recommendation, however, was not accepted, and
the contracts were duly ratified.
The report of this Parliamentary committee is significant in the
evidence it indirectly affords, confirming the declaration of
1853,[AT]--that the postal subsidies were not as assumed, payments
solely for services rendered, but in fact were concealed bounties.
In 1871-72, when a renewed effort was made to establish an American
line of American-built ships,[AU] the British subsidies were again
increased. Then, also, was instituted by the Admiralty the naval
subvention system--the payment of annual retainers to certain classes of
merchant steamers, the largest and swiftest, in readiness for quick
conversion into auxiliary naval ships in case of war, and to preclude
their becoming available for the service of any power inimical to
British interests.
At the expiration of the Cunard and Inman seven years' contracts the

postmaster-general applied the principle of payment according to
weight throughout for the carriage of the North American mails. But
preference was given to British ships, these receiving higher rates per
pound than the foreign. In 1887 an arrangement was entered into by
which the Cunard and Oceanic lines were to carry all mails except
specially directed letters, and the pay was reduced.[AV] This method of
payment continued till 1903.
Then another sharp change was made in the subsidy system to meet
another, and most threatening American move. In 1902 was formed by
certain American steamship men, through the assistance of J. Pierpont
Morgan, the "International Mercantile Marine Company," in popular
parlance, the "Morgan Steamship Merger," a "combine" of a large
proportion of the transatlantic steam lines.[AW] Upon this, in response
to a popular clamor, subsidy, and in a large dose, was openly granted to
sustain British supremacy in overseas steam-shipping. To keep the
Cunard Line out of the American merger, and hold it absolutely under
British control and British capitalization, and, furthermore, to aid the
company immediately to build ships capable of equalling if not
surpassing the