Part 1

AN ABSTRACT OF THE PROCEEDINGS OF THE SELECT COMMITTEE OF THE HOUSE OF COMMONS, APPOINTED SESSION, 1849, TO INQUIRE INTO THE CONTRACT PACKET SERVICE; IN SO FAR AS THE SAME RELATES TO THE PENINSULAR AND ORIENTAL STEAM NAVIGATION COMPANY; WITH AN INTRODUCTORY STATEMENT AND REMARKS.

Presented to the Court of Directors.

ABSTRACTED AND PRINTED FOR THE INFORMATION OF THE PROPRIETORS OF THE COMPANY.

_November, 1849._

As the circumstances connected with the origin and progress of the Peninsular and Oriental Steam Navigation Company, and particularly with its employment in the Contract Mail Packet Service, are but imperfectly known to a great proportion of the present Proprietors; for their better information it has been deemed advisable by the Directors to authorise the printing and circulation of the following Statement and Abstract.

References, it will be found, are occasionally made to parts of the proceedings of the Select Committee of the House of Commons, which have not been printed in this pamphlet, because they would have rendered it too bulky for convenient perusal. But those who may wish to examine these proceedings at length, can procure the Parliamentary Blue Book at Hansard’s offices for the sale of Parliamentary Papers.

AN ABSTRACT,

_&c., &c._

In their last Report, presented to the Proprietors at the general meeting held on the 31st of May last, the Directors stated that a Committee of the House of Commons had been appointed, “to inquire into the Contract Packet Service;” and expressed “their satisfaction that such an inquiry had been instituted, feeling, as they did, that as far as the interests of this Company were concerned, it would have a beneficial tendency, by eliciting facts connected with the origin and progress of the Company, and its employment in the Contract Mail Service, which could not fail to show the important national benefits which it has been the means of realising, and its consequent claim to public support.”

It is no doubt known to some Proprietors of the Company, that for several years past statements have been made, and circulated with untiring pertinacity, to the effect, that the Contracts made by the Government with this Company for the Mail Packet Service had been obtained through undue favouritism, or corrupt jobbing[1]--that fair competition had been denied to other parties,--and that the Company had, in consequence, obtained a much larger remuneration for the Service than ought to have been given, and were deriving enormous profits from it.

Although the Directors were aware that these misstatements had obtained some attention, even in influential quarters, they probably did not consider it was consistent with the eminent position which the Company occupies to take any legal proceedings against, or to enter into any public controversy with, the parties who had been chiefly instrumental in propagating them.

The forbearance of the Directors has led to a highly satisfactory result. The continued propagation of these misstatements at last attracted the attention of a member of the House of Commons so far as to induce that honourable gentleman to move for a Select Committee to inquire into the Contract Packet Service.

Although the Committee was moved for and appointed ostensibly to inquire into the Service generally, its principal object was, as is sufficiently obvious from its proceedings, to investigate the Contracts and transactions of the Peninsular and Oriental Company. And the earlier part of the proceedings of the Committee also show that the honourable mover and Chairman of it, actuated, no doubt, by a sense of public duty, entertained, at first, no very friendly views on the subject in reference to this Company.

The facts elicited in the course of the inquiry, and the glaring self-contradictions exhibited by the principal witness, when brought to the test of an examination before the Committee, as well as the hostile tone adopted by him towards this Company, appear, however, to have satisfied the honourable gentleman that, while induced to believe that he was prosecuting a public object, and undertaking a public duty, he had been made use of, for the mere gratification of private feeling.

And the following two first paragraphs of the Committee’s Report, which was drafted and proposed by the honourable member himself, are a sufficient refutation of the misstatements which led to the inquiry.

1. “That so far as the Committee are able to judge, from the evidence they have taken, it appears that the Mails are conveyed at a less cost by hired packets than by Her Majesty’s vessels.

2. “That some of the existing Contracts have been put up to public tender, and some arranged by private negotiation; and that a very large sum beyond what is received from postage is paid on some of the lines; but, considering that at the time these Contracts were arranged the success of these large undertakings was uncertain, your Committee see no reason to think better terms could have been obtained for the public.”

As the detached and inconsecutive form in which the evidence of the different officers of the Government departments was given to the Committee does not afford a very clear view of the history of the connexion of this Company with the Contract Packet Service--and, in particular, does not show the important public advantages which have been derived from the undertaking of these services by the Company--it is considered expedient, previously to proceeding with the abstract of the Committee’s proceedings, to give a brief consecutive statement of the circumstances under which the various branches of the Contract Packet Service were undertaken by the Company. And first,

No. I.

THE PENINSULAR MAILS.

Previous to the 4th of September, 1837, the arrangements for the Mail Packet communication with the Peninsula were as follows:--

Mails to Lisbon were conveyed by sailing Post-office Packets, which departed from Falmouth for Lisbon every week--wind and weather permitting. Their departures and arrivals were, however, extremely irregular; and it was no very infrequent occurrence for the Lisbon Mail to be three weeks’ old on its arrival at Falmouth, instead of being brought in five days, with an almost mail-coach or railway precision, as is now the case.

The communication with Cadiz and Gibraltar was only once a month by a steam packet.

The originators and original proprietors of the Peninsular Steam Company, who had, for upwards of a year previously to the time above mentioned, been running steam vessels at a considerable loss between London and the principal Peninsular ports, finding themselves in a position to effect a great improvement in the arrangements for transmitting the Mails, applied to the Government of that day on the subject, but were at first coldly received, and their suggestions disregarded. They continued, however, to prosecute their enterprise; and the celerity and regularity with which their steam packets made their passages soon began to attract the attention of the public. The merchants began to complain loudly of the inefficiency of the transmission of the Mails by sailing packets; and it was at last intimated, from an official quarter, to the Managers of the Peninsular steamers, that if they had any plan or proposals to submit for an improvement of the Peninsular Mail Service, the Government was then prepared to receive and consider the same.

In consequence of this intimation, a plan and proposal was drawn up for a weekly transmission of the Mails between Falmouth and Vigo, Oporto, Lisbon, Cadiz, and Gibraltar, by efficient steam packets, and at a cost to the public which should be less than that of the then existing inferior arrangement--namely, sailing packets to and from the Port of Lisbon, and a steam packet, once a month only, to and from Cadiz and Gibraltar.

The plan, after due examination, was considered to embrace advantages to the public far exceeding what the then existing arrangements afforded; and its adoption was consequently intimated to the authors and proposers of it; but, at the same time, they were informed that the execution of it would be put up to public competition.

Accordingly, an advertisement was soon afterwards issued, inviting tenders, from owners of steam vessels, for conveying the Mails between Falmouth and the Peninsula, in conformity with the plan submitted by the Peninsular Company; and the Contract for the Service was competed for against that Company by the proprietors of some steam vessels, who, under the designation of the British and Foreign Steam Navigation Company, had a short time previously commenced running two small steamers to the Peninsula, in opposition to the Peninsular Company’s vessels.

This British and Foreign Company, not being able to satisfy the Admiralty that they had the means of performing the proposed Service, their tender was rejected. Upon which they addressed the Admiralty, and requested that the Contract might be postponed, alleging, that if a month more were given to them, they could provide sufficient vessels. Their request was granted; and, contrary to all previous practice, after the tender of the Peninsular Company had been given in, and the amount of it, in all probability, known to their competitors, the Contract was again advertised, and a month more given for receiving tenders.

The British and Foreign Company again failed to show that they had any adequate means of performing the Service; and a private negotiation was then entered into by the Government, with the Peninsular Company, with a view to reduce the sum required by them. This sum was £30,000 per annum, being about £5,000 less than the estimated annual cost to the public of the sailing packets and steam packet previously employed in conveying the Mails. This sum was ultimately reduced to £29,600,[2] on which terms the Contract was concluded on the 22nd August, 1837, and may be considered to have formed the basis upon which one of the most extensive and successful steam enterprises yet known has been established.

These facts, it is submitted, abundantly show, that so far from any favour being shown, in regard to this Contract, to the originators of this Company, they obtained it in the face of adverse circumstances, and solely because they had, by their own enterprise, placed themselves in a position to effect an important public improvement, combined with a reduction of the public expenditure.

No. II.

_Contract for an accelerated Conveyance of the India and other Mails between England and Malta, and Alexandria._

COMMENCED SEPTEMBER 1ST, 1840.

The efficiency with which the Peninsular Mail Packet Service was performed elicited from the Admiralty repeated testimonials of approbation; and, proving as it did, that that description of service could be more advantageously conducted by private enterprise, under Contract, than by Government vessels and establishments, paved the way for the subsequent extension of Contract Mail communication which took place with the West Indies, North America and the East Indies, China, &c.

Previous to the 1st of September, 1840, the arrangements for transmitting the India Mails to and from Egypt, to meet the East India Company’s steamers plying monthly between Bombay and Suez, were as follows:--

These Malls were forwarded, every fourth Saturday, by the Contract Mail steamers of the Peninsular Company to Gibraltar, and there transferred to an Admiralty steam packet, which carried them to Malta. They were there transferred to another Admiralty packet, which carried them to Alexandria. The homeward Mails were brought in a similar manner.

As the Peninsular packets had to call at Vigo, Oporto, Lisbon, and Cadiz, in their passage to and from Gibraltar, and the Government packets were of inferior power (about 140 horses) and speed, the transmission of the India Mails by this route was very tardy, occupying generally from three weeks to a month in their passage between England and Alexandria.

Imperfect as this mode of transmission was, it probably would have been continued for an indefinite period, had not some circumstances occurred to render an alteration of it imperative.

About the middle of the year 1839, the British Government effected a convention with the French Government, for transmitting letters and despatches to and from India, &c., overland, through France, _viâ_ Marseilles, from whence a British Admiralty packet conveyed them to Malta. From thence this portion of the Mail, and the larger and heavier portion, forwarded by the Peninsular and Admiralty packets, _viâ_ Gibraltar, were carried together to Alexandria by another Admiralty packet.

The portion of the Mails forwarded through France was despatched from the Post-office on the 4th of every month, while the main, or heavier portion, continued to be forwarded from Falmouth, by the Peninsular packets, every fourth Saturday; this arrangement was found, in the course of a few months, to work very awkwardly, inasmuch as the portion of the Mail forwarded, _viâ_ Gibraltar, had become a fortnight or more in advance of that forwarded _viâ_ Marseilles, and had to wait that time at Malta for the arrival of the Marseilles packet.

This irregularity, which every succeeding Mail increased, together with the suspicion that the British despatches, in their transit through France, were not altogether safe from being tampered with, rendered the Government very desirous of establishing a more accelerated means of transmission, _viâ_ Gibraltar, for the main portion of the India Mails and the public despatches.

The Managers of the Peninsular steamers were applied to, to submit a plan for this object. They proposed to establish a line of large and powerful steamers, to run direct from England to Alexandria, and _vice versa_, touching at Gibraltar and Malta only, and, by such an arrangement, to transmit the Mails in a time that should not exceed by more than two to three days that occupied by the overland route through France; and undertook to execute such service, with vessels of 450-horse power, for a sum which should not exceed the cost to the public of the small and inefficient Admiralty packets then employed in the same service.

The plan was examined and adopted by the Government; but, as in the case of the Peninsular Contract, the execution of it was put up to public tender, by advertisement. And, as appears by the evidence of Mr. T. C. Croker, of the Admiralty (see his answer to question No. 2,033), no less than four competitors tendered for the Contract, viz.:--

Willcox and Anderson for £35,200 per annum. J. P. Robinson ” 51,000 ” Macgregor Laird ” 44,000 ” G. M. Jackson ” 37,950 ”

The tender of Messrs. Willcox and Anderson who, as Managers of the Peninsular Company, had furnished the plan, was accepted, _because it was the lowest_. But Mr. Croker in his evidence (see Report) has made a slight error in calculation, in stating the sum at £35,200 per annum. The tender made was as follows:--

For the 1st year of the service £37,000 ” 2nd year ” 35,000 ” 3rd year ” 34,000 ” 4th year ” 33,000 ” 5th year ” 32,000[3] ------- Divided by 5) 171,000 ------- Gives for the annual cost £34,200 =======

Besides this reduced sum, as compared with the demands of the other competitors, the tender of Willcox and Anderson afforded further important advantages to the public, in a reduced rate of passage-money for officers travelling on the public service, conveyance free of Admiralty packages, &c.

The vessels offered by Willcox and Anderson, were the “Oriental,” of 1,600 tons, and 450-horse power, and the “Great Liverpool,” of 1,540 tons, and 464-horse power, (originally destined for the transatlantic line of communication, but which were placed at their disposal by the Managers and Proprietors of that enterprise). They were also bound to provide a subsidiary vessel, of not less than 250-horse power, besides a vessel of 140-horse power, for the Malta and Corfu Service. The estimate made at the Admiralty (see question No. 1411) of the cost of the Government packets which performed the service, and which were superseded by this Contract, was £33,912. But as that estimate did not include any allowance for interest on their first cost, nor for sea risk, nor for depreciation, the following per centages on these accounts must be added to it, in order to present a tolerably correct view of the actual cost to the public of the service so performed.

The four vessels employed could not have cost the public less than £100,000. Upon this sum, therefore, must be calculated--

Interest at 4 per cent. Sea Risk 5 ” Depreciation 5 ” -- 14 per cent. per annum £14,000

Add Admiralty estimate of wages, victuals, coals, and repairs, as above 33,912 ------- Total annual expense of these Packets 47,912

From which deduct proportion of passage-money for the public account, estimated not to exceed 3,000 ------- Net cost of the Service £44,912 =======

It hence appears that this Service, which cost, in the defective state of its arrangements, and as carried on by small vessels of about 140-horse power, £44,912, was undertaken, and has since been satisfactorily performed, under a greatly improved arrangement, by large vessels of 450-horse power, for £34,200, realising a financial saving of about £10,700 per annum to the country.

No. III.

_Contract for conveying Mails between Suez and Aden, Ceylon, Madras, Calcutta, Penang, Singapore, and Hong Kong._

COMMENCED JANUARY 1ST, 1845.

For several years prior to the arrangement of the Contract with this Company, for the accelerated transmission of the India Mails to and from Alexandria, much public solicitude had been manifested for a more comprehensive system of steam communication with India than that which had been established by the Government and the East India Company. That establishment being considered, as, indeed, at its commencement it was professed to be, merely a preliminary and experimental one--intended to pave the way for a more comprehensive scheme, that should embrace all the Presidencies, and not be limited to the port of Bombay only, as the Government and East India Line was,--and which it was expected private enterprise would undertake, after the navigation of the Red Sea, and other important questions connected with such an undertaking, had been tested by the Imperial and Indian Governments.

As a proof of the importance which was attached to this extension of steam communication with British India, the following declarations of eminent persons connected with the Government of that empire may be quoted:--

The late Lord William Bentinck, then Governor-General of India, stated, in a public despatch, that so great were the advantages which it would confer, “that it would be cheaply purchased at any price.” The present Right Honourable President of the India Board, Sir John Cam Hobhouse, who then filed the same post, in speaking in the House of Commons of various ameliorations which the Government he was then connected with had in view for India, in which improved steam communication formed an item, said, that “it was calculated to benefit India to an extent beyond the power of the most ardent imagination to conceive.” And the present Lord Bishop of Calcutta, in a public address at a meeting in that city, said, that “the extension of steam navigation with India would be opening the floodgates of measureless blessings to mankind.”

Various attempts, however, under the sanction of eminent merchants, and other influential parties connected with India, to form a Company and establish the so much-desired scheme having failed, the parties who had been instrumental in establishing the Peninsular Company, and the accelerated conveyance for the India Mails to Alexandria, feeling that they had placed themselves in a position to effect this important national object, resolved to adopt it as a part of their enterprise, which they thenceforth designated “The Peninsular and Oriental Steam Navigation Company.” It was accordingly formed into a joint-stock Company, and a Charter of Incorporation from the Crown was applied for, which, after considerable opposition from other parties, was granted--but subject to the following conditions, namely, “That the Company should open an improved steam communication with India throughout, from England, within two years from the date of the Charter, or it should be null. That all steam vessels to be constructed by the Company of 400-horse power, and upwards, should be so strengthened and otherwise arranged as to carry and fire guns of the largest calibre then used in Her Majesty’s steam vessels of war. That the Government should have a power of inspection, as to their being maintained in good and efficient sea-worthy condition, and that the Company should not sell any of such vessels without giving the pre-emption of purchase to the Government.”

The Company under this Charter having obtained the necessary additional capital, and being joined also by most of the parties who had previously been endeavouring to effect this object under the designation of “The East India Steam Navigation Company,” proceeded, with all practicable speed, to fulfil the conditions, and carry out the object of their Charter of Incorporation.

On the 24th September, 1842, their first vessel destined for the India Sea service, the “Hindostan,” of 1800 tons, and 520-horse power, constructed at Liverpool, at a cost of £88,000, was despatched from Southampton for Calcutta, to open the “Comprehensive” line of communication, by plying between Calcutta, Madras, Ceylon, and Suez.

The commencement of this communication, by so large and powerful a vessel, was looked upon as a public event, and the ship was visited by members of the then Government, Directors of the Honourable East India Company, and many other eminent individuals.

It may here be necessary to advert to a circumstance which has been made the subject of much misrepresentation, and was even attempted, although without success, to be misrepresented to the Parliamentary Committee. (See evidence of Mr. Andrew Henderson in the Report, questions 2200 to 2208, and 2333, and 2334; also, correspondence between the East India Company and the Peninsular and Oriental Steam Navigation Company, in the Appendix, page 224 to 227.)

The circumstance alluded to was this:--The Directors of the East India Company, seeing that the extension of steam communication with India was at last in the hands of parties likely to place it on a practical basis, and desirous to encourage it on public grounds, voluntarily proposed to the Peninsular and Oriental Company to give them a premium of £20,000 per annum, and to continue the same for five years, on certain conditions, which, if the Company should at any time neglect or decline to fulfil, it was at the option of the East India Company to withdraw the premium or grant.

The conditions were:--

1st. That the communication with India beyond the Isthmus of Suez should be opened, and carried on by vessels of not less than 520-horse power, and 1600 tons burthen.

2nd. That a communication between Suez and Calcutta should be established the first year of the grant.