The Prince of Wales, it must here be noted, had gone to the front at his own earnest desire six weeks earlier, and had proved himself, according to The Times military correspondent, "one of the keenest and hardest soldiers of the army." He was aide-de-camp to Sir John French; but he had had a varied experience, had visited the trenches, including those occupied by the Indian troops, and had been several times under fire.

Though few details as to the military operations were published, it seemed clear that the Germans would be dislodged only by much larger numbers; and enlistment was supposed to be hampered by the continuance of professional (Association) football. The matches attracted thousands, many of them, doubtless, needed by home industries, but these, it was contended, might have been better employed drilling than looking on; and the players were excellent military material, but were bound by contract to their clubs. Attempts to induce enlistment from among the crowds of spectators in London (Nov. 21) brought only one recruit. An International Football Conference (representing the nations of the United Kingdom) decided at the end of November to drop the "international" matches, but not the cup ties, i.e. the matches determining the competitors for the Association Challenge Cup, decided at the Crystal Palace in the spring. The Scottish delegates, after consulting the War Office, decided to abandon both sets of contests till after the war; but the Council of the Football Association confirmed the decision of the Conference (Dec. 7). Its course was defended, partly because the matches provided recreation for workers who could not be spared, partly in view of the financial needs of the clubs and the players. The Association, it was urged, had done something for recruiting, and had contributed to the various war funds. The formation of a Footballers' Battalion was authorised by the War Office; but the episode provided another argument for the advocates of compulsory service.

The naval element in the war, however, seemed at least as important as the military; and here the signs were promising. It was true that extensive preparations against a raid had been made in the last week of November, though little was said of them in the Press; and also that the Admiralty had notified (Dec. 4) that lighthouses and buoys in the Channel on the east of a line drawn from Selsey Bill to Cape Barfleur, might be altered or withdrawn, and signals in this area changed or discontinued, without notice, and had specified stations where pilots could be obtained for the ports or areas affected—arrangements probably motived by the activity of German submarines off Havre (p. 245); and that the German merchant cruiser Berlin, which had run into Trondhjem short of coal and had been interned there, was believed to have been laying oceanic mines. But these were only temporary inconveniences; and the country was inspirited (Dec. 10) by the news of a great German naval defeat off Port Stanley, Falkland Islands, on December 8. Vice-Admiral Sir F. Sturdee, who had recently been Chief of Staff at the Admiralty, and had been in London at the time of the action off Chile (p. 226), had left Devonport (as afterwards transpired) about November 15, and with a squadron of six cruisers, the Kent, Carnarvon, Cornwall, Glasgow, Bristol and Macedonia, the latter a converted P. and O. liner, and the battle cruisers Inflexible and Invincible, had arrived at Port Stanley (where they met the Canopus) on December 7 to coal, before searching for the German squadron. Next day this squadron approached Port Stanley, intending, it was said, to occupy it as a coaling station. It consisted of the Scharnhorst, Gneisenau, and three small cruisers, the Leipzig, Dresden, and Nürnberg, with a merchant cruiser, the Prinz Eitel Fritz, and two transports. On their approach the Canopus opened fire; the other British ships at once came out, chased the Germans for nearly six hours, and then engaged them. The battle cruisers, assisted by the Carnarvon, concentrated their fire, first on Admiral von Spee's ship, the Scharnhorst, which sank, refusing to cease firing, about 4 P.M.; next on the Gneisenau, which sank two hours afterwards. The German cruisers had meanwhile diverged southwards; but the Glasgow overtook the Leipzig, and, with the Cornwall, sank her, after some hours' fighting, at 9.15 P.M.; the Kent, meanwhile, came up with the Nürnberg, and sank her about 7.30 P.M.; while her crew were being picked up, the Dresden and Prinz Eitel Fritz got away. The Bristol and the Macedonia sank the two transports or supply ships, the Baden and Santa Ysabel, which had gone off to the west. The Dresden was reported shortly afterwards at Punta Arenas, Straits of Magellan, but had not been heard of again by the end of the year. Some 2,000 Germans were lost, and less than a dozen British.

Two days after this news was published, a daring feat was achieved at the mouth of the Dardanelles. The British submarine B 11, Lieut.-Commander Norman Holbrook, dived under five rows of mines, sank the Turkish battleship Messudiyeh, which was guarding a minefield, and returned in safety—a feat which seemed to indicate that the entrance was not quite impregnable. For this feat Lieut.-Commander Holbrook received the V.C.

But now it was the Germans' turn. At 8 A.M. on the morning of December 16 three German warships appeared off Hartlepool, and bombarded it from 8.15 to 8.50, killing seven and wounding fourteen of the Durham Light Infantry who were stationed there, and also killing or wounding many of the civil population, who crowded into the streets. About the same time a battle cruiser and an armoured cruiser bombarded Scarborough, damaging several churches, the Grand Hotel, and many smaller buildings, and, rather later, two ships—probably the same—fired a few shots at Whitby, aiming at the signal station, but damaging the famous ruined Abbey and several buildings, though the casualties here were few. The ships, at any rate off Hartlepool, were attacked by British patrol vessels, and a mist facilitated their escape. Five British seamen were killed, fifteen wounded; the rest of the injured were civilians, including many women and children. At Hartlepool the total of deaths eventually mounted to 119, though a few victims lingered for some weeks; at Scarborough seventeen were killed and about twenty seriously injured; at Whitby two were killed and two injured. People were killed in the streets, while dressing, or at breakfast; and several of the dead were young children.

The raid was hailed with delight in Germany, where it was defended on the ground that the three towns were "fortified places"—which was hardly true even of Hartlepool; but in England it stimulated recruiting, and excited no panic. Probably all the five German battle cruisers were engaged; and, if so, only British battle cruisers could have overtaken them. British opinion was expressed by the First Lord of the Admiralty in a letter of sympathy to the Mayor of Scarborough, pointing out that the effectiveness of British naval pressure was proved by the frenzy of hatred it aroused in the enemy. The letter closed as follows:—

Only a small proportion of the property injured was insured against war risk; but it was announced that the Government would compensate the sufferers.

A few days earlier (Dec. 12) Mr. Balfour, at a recruiting meeting at Bristol, had denounced the German effort at world-dominion as a crime against civilisation, which would not succeed while there was one cartridge or one stout heart left in Great Britain. The superman, if he appeared, might be left to the police; the super-State was absolutely inconsistent with the true notion of a great community of nations. The whole international future of the world, in his judgment, was hanging in the balance.

Such disregard of the ordinary usages of civilised warfare as was evinced by this bombardment tended to strengthen this attitude, and with it the national unity achieved at the outset of the war; and on its achievement Mr. Bonar Law threw fresh light in a speech at an informal meeting of Unionist chairmen and agents of Parliamentary constituencies held at the Hotel Cecil to consider the means of co-operation as to the war and other matters. He stated that on Sunday, August 2, he had sent the following letter to the Prime Minister:—

The Opposition, he claimed, had kept this pledge in letter and spirit; and it was the first time in the history of English Parliamentary government that an Opposition had refrained from harassing Ministers. They had determined to make no criticism which might injure the country; perhaps, indeed, they had not criticised the Government enough. But he preferred this mistake to that of criticising too much. After referring to the patriotic reserve of the Press in publishing news, he said that the country could gain from the war only peace, and security for that peace in the future; and for this they must have a united nation. They could look forward to the future with complete confidence; never before had British soldiers shown such devotion and heroism, and the statements as to the insufficiency of recruiting were entirely unjustified. Great Britain had got, and would get, all the men she needed without resorting to compulsion.

For a short time this unity seemed again in danger through the refusal of a section of Liberals at Swansea to accept the Chancellor of the Duchy of Lancaster (pp. 27, 33, 109) as the successor of Sir D. Brynmor Jones, who had vacated his seat on appointment as Commissioner in Lunacy. A three-cornered contest was expected; but the Chancellor declined the nomination.

The unity of the Empire was not less notable. Gifts and offers of money or local produce had poured in since the war began from the Dominions, Crown Colonies, and Protectorates, for the use of the troops or for the relief funds; and the donors comprised not only the Governments, but local groups or associations, private firms, and the population as a whole. From the Dominions came flour and meat; Rhodesia sent tobacco; Jamaica cigarettes; Montserrat guava jelly; Mauritius sugar; South African farmers fruit and eggs; the Emirs of Nigeria gave 38,000l. which was applied to the military expenditure of the Protectorate; a body of Masai sent bullocks, the Kavirondo chiefs 3,000 goats; Niue, in the Cook Islands, sent 164l. to the Empire Defence Fund and offered 200 men, the chiefs describing their island as "a small child that stands up to help the Kingdom of George V." The Somali chiefs and those of Uganda expressed their strong desire to fight for the King.

While the Empire thus drew together, two notable developments occurred in its foreign relations. The first was the formal change in the legal status of Egypt, which was declared to be—what it had long been in fact—a British Protectorate (Dec. 18). The Khedive Abbas, who had become an open enemy, and was in Constantinople, was deposed; his successor, Prince Kamel Pasha, received the title of Sultan; and a British Resident—Colonel Sir Arthur MacMahon—was appointed with the title of High Commissioner instead of, as formerly, Consul-General.

A more novel change was the despatch of a British envoy to the Vatican in the person of Sir Henry Howard, whose mission was to last till the end of the war. Its exact scope was not stated; but it seemed probable that the Pope, whose attempt to effect a truce at the front for Christmas had been frustrated by the opposition of Russia, intended in due time to offer his mediation; if so, the mission was easily intelligible. But it caused some misgiving, and not only among extreme Protestants; for it might conceivably be interpreted abroad as implying some sort of recognition of the temporal power of the Papacy.

It was commonly felt that one of the conditions of peace, whenever it might come, must be the punishment of the persons responsible for the outrages and breaches of the laws of war committed by German soldiers in Belgium and France. Much evidence of these had been collected and sifted, and on December 16 it was announced that a Committee had been appointed to consider this evidence. It was a very strong one: Viscount Bryce was the Chairman; the other members were Sir Frederick Pollock, Sir Edward Clarke, K.C., Sir Alfred Hopkinson, K.C., Prof. A. L. Fisher, an eminent historian, and Mr. Harold Cox, sometime M.P. for Bath, and editor of the Edinburgh Review.

Meanwhile it was clear that the end of the war could only be hastened by sending more men into the fighting line; and Mr. Bonar Law again spoke at recruiting demonstrations in his constituency of Bootle on December 21. He said that it had been evident for years that Germany was preparing for war with Great Britain as her final objective; because he knew it, he had said (A.R., 1911, p. 262) in the Commons that he did not believe in inevitable wars; if war came, it would be due to the want of human wisdom, and the best and perhaps the sole guarantee of peace was that one country should realise the strength of the other. He had thought that the rapid growth of Russian resources would deter Germany, but she had struck precisely because of its rapidity. Like Napoleon, she had aroused against herself the moral forces of the world. She had not merely ignored these moral forces, but despised them; hence her mistakes. The coast raid had made the British people realise that they were fighting, not a superman, but a wild beast. He eulogised the British Army; no army equal in size to the new Army had ever been raised by voluntary enlistment, nor could it have been so raised anywhere but in Great Britain. We should get all the men we needed, but, if not, compulsion would be demanded by the nation. The Earl of Derby, who also spoke, remarked that Prince Henry of Prussia, one of the heads of the German Navy, knew that Scarborough was defenceless, having visited it in 1912 as a guest.

It was unfortunate that, while so many efforts were being made to stimulate recruiting, the military authorities should have issued a circular implying that soldiers' wives would be under the special supervision of the police. This called forth indignant protests from local authorities and trade unions; but it was explained to mean that the police desired lists of the wives of soldiers, in order to treat them leniently should they be charged with drunkenness. Their increased leisure and their Government allowances tended to increase their temptations to this offence.

A fresh stimulus to patriotic feeling, however, was provided by the group of air raids which marred Christmas peace in this amazing year. On Christmas Eve a British naval airman dropped twelve bombs on an airship shed in Brussels, inflicting, it was hoped, considerable damage on the Parseval airship it was believed to contain. On the same day a German aeroplane attempted to drop a bomb on Dover Castle, but missed its mark by some 400 yards, and, beyond a hole in a bed of cabbages and some broken windows, no damage was done. On Christmas Day another German aeroplane was sighted over Sheerness at 12.35 midday; aided by fog, it went up the Thames as far as Erith, probably to drop bombs on Woolwich Arsenal; but it was chased by three British aeroplanes and fired at by aircraft guns, and an exciting conflict took place within sight of Southend about 1.30; but it escaped, though probably the airman was mortally wounded. Earlier on that day a British raid of considerable significance had been made on Cuxhaven and the German warships lying off that port. Seven naval seaplanes, starting from a point near Heligoland, and escorted by H.M.S. Arethusa and Undaunted, two of the newest light cruisers, and by a destroyer flotilla and several submarines, dropped bombs on the warships and on "points of military significance." The escort was attacked by two Zeppelins and several hostile seaplanes and submarines, but the Zeppelins were easily put to flight, the seaplanes missed the British ships, and the submarines were avoided. None of the other German warships came out; the British ships remained three hours, and re-embarked three of the seven British airmen with their machines, three without them; the seventh, Flight-Commander Hewlett, disabled his machine, which had met with an accident, and was picked up by a Dutch trawler, and allowed some days later to return to England. It was believed that a Zeppelin had been hit, and that the raid, which caused great delight in England, had set up a corresponding degree of disquiet in Germany.

But these exciting episodes had no direct bearing on the fortunes of the war. Its ultimate outcome was likely to depend partly on the cohesive and combative power of the British Empire, partly on the attitude of the greater neutral nations, partly on the economic pressure exercised on Germany by the British Navy, and partly on the ability of Great Britain to adjust her trade to the new conditions imposed by the loss of her best customer and of the sources of supply of the components of many of her manufactured goods. On all these the outlook as the year closed was encouraging. The unity of the Empire had never been more conspicuously manifested, and, as the year closed, it was seen to extend even to the Sudan. Recruiting at home, in spite of the pessimists, was not officially regarded as unsatisfactory, and the difficulties in the equipment of the three (or more) new Armies were apparently being overcome. Meanwhile numbers of men past the military age or unable to enlist for other reasons were serving as special constables or organising themselves into bodies of auxiliary troops. There were signs that Italy and Roumania might soon be fighting on the side of the Allies in order to share in the heritage of the tottering Dual Monarchy; the sympathy of the great mass of the neutral nations was estranged from Germany, and the complaints of British interference with their trade were not regarded as giving ground for apprehending serious friction, even in the case of the American Note (post, For. Hist., Chap. VII.). At home, serious crime had become rare, and the economic outlook was unexpectedly hopeful. The sufferings predicted by Sir Edward Grey (p. 171) had not as yet been experienced; and unemployment, owing to the demands set up by the provision of the new Armies, was far less than it had commonly been in time of peace. It was seriously felt only in the cotton trade, in a few luxury trades, and in some of the fishing ports, owing to the interruption caused by the war and the loss of the German market for herrings. Pauperism in England and Wales had risen rapidly at the outset of the war; it had subsequently declined to a point only a little above the exceptionally low figures of a year earlier; in London it was actually below them. Doubtless this temporary prosperity was mainly due to an essentially unproductive consumption which would bring its own penalties; but it seemed probable that some compensation might be found for war losses in the capture of certain branches of German trade. A movement for the production in Great Britain of goods for which British consumers had hitherto been dependent on German or Austrian industry had been favoured by the Patents and Designs Act, through which British consumers were enabled to ignore the patent rights of alien enemies, and was energetically aided by the Board of Trade, which collected and supplied the fullest possible information as to the means of carrying out the processes, and providing the components, which had hitherto been left to German or Austrian industry alone. Business had begun to adapt itself to the new conditions, and the Stock Exchange was about to reopen. Finally, the Government had carried out a number of daring measures, which had collectively averted a colossal economic disaster. Some of these, notably its huge purchases of sugar and the subsequent prohibition of the importation of that commodity (Oct. 24, p. 243) in order to prevent the sale of the German surplus, were severely criticised by orthodox economists, and set up speculation as to the possibility of a complete change after the war in the financial and commercial policy of Great Britain. But as war measures they were generally received with acquiescence. On all grounds, therefore, the British nation felt itself entitled to look forward to the issue of the struggle with quiet confidence, and to possess its soul in patience until a vigorous offensive should become possible in the spring.

CHAPTER VI.
SCOTLAND AND IRELAND.

I. SCOTLAND.

The history of Scotland during this eventful year was even more interwoven than usual with that of Great Britain in general. The war and the land and suffragist agitation affected the whole country alike, though no general scheme of agrarian reform for Scotland was yet put forth by semi-official Liberalism. The Chancellor of the Exchequer, however, stimulated the controversy by his attacks on the Duke of Sutherland and others (p. 14), and drew from Mr. Munro Ferguson, M.P., the notable declaration (at Inverness, Jan. 3) that if the 250,000l. spent on reclamation by the third Duke of Sutherland had been devoted to afforestation, the land would now be worth millions. The Chancellor also managed to placate the "single taxers" (p. 13), who were strong north of the Tweed. As in England, it was complained that the creation of small holdings did not proceed with sufficient rapidity, and a Bill promoted by unofficial Liberals and designed to improve the machinery of the Act of 1911, which passed its second reading in the Commons on March 13 and got through a Standing Committee, was eventually dropped for want of time. The debate on the Government of Scotland Bill (May 15, p. 104) was notable for the marked difference of opinion among its supporters regarding women's suffrage. The serious deficiency of housing accommodation for the workmen employed by the Government at Rosyth excited severe comment in both Houses and was a factor in the introduction of the first Housing Bill (p. 209). Two minor legal reforms affecting land should perhaps be mentioned: the Entails (Scotland) Act and the Feudal Casualties (Scotland) Act, making highly technical, but important, changes in the Scottish law of real property.

The movement for reunion of the two great Presbyterian Churches made further progress. Early in May the Union Committee of the Established Church issued a draft constitution as a basis for discussion. It consisted of nine articles, and it specifically defined the creed of the Church of Scotland, and declared that that Church adhered to the principles of the Protestant Reformation and of the Westminster Confession of Faith, but reserved the right to modify the expression of the Confession and to interpret the constitution of the Church, subject always to agreement with the Word of God and the fundamental doctrines of the Christian faith. It claimed continuity with the historical Church of Scotland recognised in the Act of Union, and it explicitly declared that the Presbyterian form of Church government was the only form for that Church. It recognised that the nation as a body should render homage to God and promote His Kingdom; but it expressly claimed liberty for the Church in things spiritual. A minority Report, signed by sixteen members out of 100, proposed to define the doctrine of the Church finally and more precisely, and to insist on the principle of Establishment. In the General Assembly, however (May 26), only about half a dozen members opposed the acceptance of the Report of the majority. The United Free Church Assembly, on the other hand, authorised its Committee to continue conference with the Church of Scotland; and an amendment, in effect postulating Disestablishment as a necessary preliminary to the union of the two Churches, was supported by only fifty or sixty members in an assemblage numbering about a thousand. On both sides, therefore, the extremists were diminishing, and the old cries were losing their force.

In February a Report of the Departmental Committee on Sea Fisheries (Cd. 7221) recommended the abolition or modification of the existing Fishery Board, and the development of the fisheries by various means, including the organisation of a Statistical and Intelligence Department, the employment of a chemist to study fish curing and of representatives in foreign markets, instruction in the habits of fishes and the action of fishing gear, and in motor-boat engineering, with a nautical course for boys in elementary schools. It did not favour State loans for fishermen.

The war, as in England, considerably affected the east coast, partly through the apprehension of naval and air raids and the excitement caused by allegations of espionage and aid rendered by alien residents to the enemy (pp. 231, 239), and, more substantially, by the interference with coasting traffic, with the export of coal, with the fisheries, and, most of all, with the trade in cured herrings, through the total closing of the German market and the difficulties of access to those of the other countries of Northern Europe. The embarrassment of the traders was partly relieved by the Courts (Emergency Powers) Act (p. 196). On the moors shooting was all but suspended; and tourists were few. As in England, labour disputes were hastily composed; the coal-owners abandoned their demand for a reduction of 1s. daily in the miners' wages, and the threat of a general stoppage of work was withdrawn. A pending strike of marine engineers was given up, as were also a host of minor conflicts. "Business as usual" was the popular motto, as in England; and recruiting was active. No figures of its progress were available, but the controversy as to the propriety of a continuance of football—of which there were said to be about 10,000 professional players—arose much earlier than in England, and, under the advice of the War Office, the abandonment of matches was much more extensive (p. 247).

Trade and industry were variously affected by the war. On the Clyde a decline in the shipbuilding output was inevitable after the enormous production of 1913, but many orders were in hand, and though there was some slackening of work, there was no unemployment during the seven months of peace. On the outbreak of the war, three yards, those of Messrs. John Brown & Co., William Beardmore & Co., and the Fairfield Engineering & Shipbuilding Company, were entirely devoted to naval work, and several other firms were largely engaged in this likewise. Statistics of it were, of course, unattainable, but employment was abundant; and the output of mercantile shipping for the year was 307 vessels, aggregating 460,258 tons against 370, aggregating 756,975 tons in 1913. The most notable vessels were the geared turbine twin-screw Cunarder Transylvania, 14,300 tons, built by Scott's Shipbuilding & Engineering Company, Greenock; the Anchor liner Tuscania, of similar size and engine construction, built by Alex. Stephen & Son, Linthouse; and the P. and O. liner Kaisar-i-Hind, 11,430 tons, built by Laird & Co., Greenock. As soon as the war began to look more hopeful for the Allies, new orders came, the execution of which would only be delayed by want of men. The east coast yards produced about the same tonnage as in 1913.

Of other trades a brief mention must suffice. The export of coal decreased by about 15 per cent., chiefly through the closing of the German, Austrian and Russian markets by the war. The iron and steel trade, on the other hand, was stimulated through the removal of German competition. The mineral oil trade was greatly upset by loss of markets abroad and diminished consumption by reduction of lighting and interruption of fishing, which was largely carried on by motor boats. The jute trade declined from a height previously unattained to an unusually low level, owing to the war and to restrictions on the export of yarns. The linen trade also fell off greatly. The tweed trade found compensation for the loss of the German and Austrian markets in the demand for khaki cloth for the troops.

II. IRELAND.

The first few weeks of the year saw the decay of the Dublin strike, and the conclusion of the inquiries which were its outcome into the conduct of the police and the conditions of housing in the poorest quarters of the Irish capital. The strike itself practically collapsed on January 19, with the return to work of many dockers and the reopening of the works of the Dublin Tramways Company, which had remained closed for nearly five months. The Commission of Inquiry into the conduct of the police held its first sitting on January 5. As it consisted only of two King's Counsel, its composition was regarded as unsatisfactory by trade unionists alike in Ireland and in Great Britain; and there was an angry scene on January 8, when Mr. Handel Booth, M.P. (Pontefract), who had seen the riot in August, 1913, and was permitted to cross-examine the witnesses, withdrew altogether, after a dispute with the counsel for the police. But the evidence showed that the riots had been organised, and the Commission reported to that effect, exonerating the police force generally, while admitting that some few constables had been guilty of assault and unjustifiable violence. The subject was debated on the Address (p. 30), but the Labour party declined to risk defeating the Government.

The Report of the Housing Inquiry Committee (A.E., 1913, p. 268) proved to be a very severe condemnation of the condition of the Dublin slums and of the conduct of the Corporation, some of whose members owned tenement property. Existing legislation, it declared, was neglected or abused. It condemned both the actual tenement system and the condition of the small houses, and held that every working-class family should be provided with a self-contained dwelling admitting of the separation of the sexes. It estimated that at least 14,000 new houses or dwellings were required, and it recommended, inter alia, State aid for rebuilding.

Such questions had, of course, to be left to be dealt with by a Home Rule Parliament; and this, when the year closed, was practically assured at the termination of the war, though the position of the Ulster Unionist constituencies and the precise extent of the Home Rule area were still undetermined.

The conflict has been so fully described in previous chapters that only a summary of it is needed here. Though the Nationalists ignored Mr. O'Brien's challenge at Cork (p. 6), the tendency to compromise manifested in such suggestions as those of Mr. F. S. Oliver, Sir Horace Plunkett, and many other individual publicists (p. 18), was further emphasised by the King's Speech and the debate on the Address, and found practical expression in the promise of an Amending Bill (March 9). But the Unionist apprehensions aroused through the postponement of any statement of its details, and the expectation that force would ultimately be used to overcome the resistance of Ulster, combined with the misunderstanding of the military measures contemplated by the Government to set up a grave, though temporary, danger. The debate on the second reading of the Home Rule Bill, however, further exhibited the tendency to compromise and the acceptance by the Unionists of some form of Home Rule as inevitable. The fanatics among the Ulster Unionists, too, were warned against expecting aid from Germany (p. 75), a warning, however, afterwards discredited by the conduct of the war by the German Government. The effect of the allegations as to the plot against Ulster, which were renewed in April, was considerably weakened by the gun-running from the Fanny (p. 84), which was followed by further negotiations, or approaches to negotiations, between the Unionist leaders and the Ministry with a view to the partial or total exclusion of Ulster from the operation of the Bill. Agitation, meanwhile, was continued by the Unionists—- perhaps mainly as an element in driving the bargain—and roused a counter-agitation among the Liberal rank and file. Meanwhile the Irish Volunteer force had been growing, and the capture of the control of it by the Nationalist leaders converted it into a new and unexpected obstacle to the projected resistance of the Ulster Volunteers to the realisation of the Home Rule scheme. The Amending Bill (June 23, p. 135) provided for the optional and temporary exclusion of such Ulster counties as might desire to avail themselves of its provisions; but this measure was transformed by the House of Lords so as permanently to exclude the whole of Ulster from the operation of the Home Rule Bill—a solution which admittedly satisfied nobody, and which would certainly have been rejected by the House of Commons. Hence the Conference (p. 158) ascribed, rightly or wrongly, to the intervention of the King; but, after greatly narrowing (it was believed) the margin of difference, it reached a deadlock.

Just at this time Sir Horace Plunkett, well known for his promotion of co-operation in Ireland, and hitherto ranking as a moderate Unionist, published a pamphlet entitled "The Better Way; an Appeal to Ulster not to Desert Ireland," in which he declared that Home Rule was inevitable and even desirable, that it would not mean "Rome Rule," and that the exclusion of Ulster was bad in principle and might probably injure the industry and commerce of the province. Let Ulstermen, he urged, give Home Rule a chance. He restated his scheme for the inclusion of Ulster subject to an option of future withdrawal, and suggested a conference of Irishmen on the Home Rule Bill, and a scheme for combining the two sets of Volunteers in a Territorial Force.

Under other conditions, this plea from so high an authority might have proved very powerful; but its appearance was immediately followed by the failure of the Conference, and the situation was made much worse two days later by the Nationalist gun-running (July 26) and the affray in Dublin between the crowd and the police and troops (p. 162).

The situation was saved, however, by the European crisis. Doubtless the German Government counted on civil strife to paralyse British efforts at resistance to its schemes. But directly war became probable the Amending Bill was postponed; the Opposition leaders assured the Government of their support (p. 249); Mr. Redmond promised that the Nationalist Volunteers would co-operate with those of Ulster in defending Ireland, and assured the Government that it had the Nationalists' full confidence; and the contending political parties, with few exceptions, promptly rallied to the defence of the Kingdom and the Empire. The Nationalist and Unionist leaders alike used all their influence to persuade their followers to join the colours (pp. 216, 229). The Nationalist rank and file were conciliated by the prospect of Home Rule and strengthened in their allegiance by the circumstance that Great Britain was avowedly fighting to protect the small nations, as well as by their traditional sympathy with France; and they were further confirmed in their attitude by the conduct of the Germans in Belgium, especially by the destruction of the great Catholic University of Louvain, with the vast collection of priceless Celtic MSS., which were among the chief sources of early Irish history. The Arms Proclamation was allowed to lapse, and the election contest at Derry, due to the death of Mr. Hogg (L.), which had been regarded with considerable apprehension, was averted by general consent. As in England and Scotland all election contests were avoided, save in one instance, due to a local dispute; in Ulster, as in England, the flow of recruits outran the provision made for them by the War Office, and by about the middle of October the Protestant districts had furnished some 21,000, of which Belfast alone had contributed 7,581 or 305 per 10,000 of the population—the highest proportion of all the towns in the United Kingdom. An Ulster Division appeared in the list of the new Armies at the end of the year.

The vigorous and continued efforts of the Nationalist leaders to promote enlistment were unfortunately opposed by small and virulently hostile bodies of extremists—Sinn Fein (A.R., 1907, p. 266), the Irish Labour party, led by Mr. Larkin, and entirely separate from the Labour party in Great Britain, some of the original promoters of the Irish Volunteer movement (A.R., 1913, p. 267), and other small groups. These bodies published papers, among them Irish Freedom, Sinn Fein, the Irish Volunteer, and the Irish Worker, distributed them and quantities of leaflets gratuitously, posted up seditious placards, sent out emissaries to discourage recruiting, and started or spread a rumour that the Government intended to institute compulsory military service, which caused a considerable emigration of able-bodied men to America in the autumn from certain areas in the West. They attempted a counter-demonstration to the Premier's meeting in Dublin (p. 215); and Sir Roger Casement, an Antrim man and a Liberal Home Ruler, who had honourably served Great Britain as a Consul and had exposed the atrocities on the Putumayo (A.R., 1912, p. 489; 1913, p. 493), was reported in November to have gone to Berlin via the United States, and to have obtained satisfactory assurances from the German Government, particularly with regard to the conduct that might be expected from a German invading force in Ireland. A prominent Irish American even stated that the Kaiser had promised Sir Roger that he would free Ireland if Germany were victorious. Sir Roger had previously tried to dissuade Irishmen from enlisting in the British Army. It was charitably suggested that, if these reports were true, his mental balance had suffered from his arduous and perilous work on the Putumayo. The extremists generally argued that the war was England's affair, that Ireland should be neutral, and that its Nationalists should co-operate with those of India and Egypt to exact favourable terms for themselves from Great Britain after her defeat, and join the Irish Volunteers against the day of reckoning.

It was suspected that this propaganda was supported by German money through Irish-American channels, and its real effect was probably not great. In parts of Ireland the "Sinn Feiners" had to retire from the Volunteer corps; many of the rural labourers who enlisted were found to be physically unfit, and it was stated that the maintenance of the Volunteers was hampered through the enlistment of their drill instructors, and that enlistment was further discouraged by the refusal of the War Office to sanction the presentation of Colours to Irish regiments or to encourage the formation of an Irish Brigade. The Government for some months ignored the seditious papers, taking the view that suppression would only advertise their efforts; but at the end of November their publishers were warned, with satisfactory results. The Labour party, however, held a street demonstration of protest in Dublin (Dec. 6) which only numbered about 600. It was overlooked by a body of the "citizen army" equipped with rifles, and stationed in "Liberty Hall," Mr. Larkin's headquarters; and it was stated that these would have been used against police interference. But the Government wisely took no notice. Mr. Larkin himself was in the United States collecting arms and money for his followers; and Professor Kuno Meyer, the eminent Keltic scholar, who had lived much in Wales and Ireland, and whose former friendships with Keltic students in the United Kingdom were repudiated demonstratively on both sides after the outbreak of war, stated in an interview that an Irish (probably Irish-American) regiment was being formed in Germany. But the whole of this seditious movement was probably of slight significance.

It was suggested that Sir Roger Casement's attitude might partly be due to disappointment at the abandonment of the projected call at Queenstown of the Hamburg-American steamers from Hamburg to Boston, which had been arranged, partly at his instance, early in the year, and was alleged to have been discouraged, for political reasons, by the British Government. More probably the reasons were commercial. The Cunard calls were definitely abandoned on February 28. In November a partial resumption was announced, but it was not kept up.

Legislation for Ireland was scanty, and a Land Purchase Bill was introduced, but withdrawn. A Labourers Act, however, was passed increasing the amount which could be expended under the Act of 1906, and an Intermediate Education Act, improving the position of teachers in the statutory schools and securing them some degree of fixity of tenure. The statistics of crime showed a considerable decline; but there were some cases of cattle-driving during the year.

The Home Rule controversy and the tension in Ulster did not seem appreciably to interfere with Irish industry and trade. It was stated, indeed, in the spring that the banks were restricting their advances to traders in view of a crisis, and that securities were at one time being transferred to London. But pauperism in March was less than in 1913 and much less than in 1910. In Belfast the huge shipbuilding output of 1913 was actually surpassed. Twenty-three vessels were launched aggregating 246,370 tons, as against twenty-four vessels of 131,916 tons in 1913. Messrs. Harland & Wolff's output from their Belfast and Clyde yards together amounted to 182,759 tons, the largest yet achieved in one year by any firm in the world. The six ships they launched at Belfast comprised the White Star liner Britannic of 50,000 tons, and five others, respectively for the Holland-Amerika, Red Star (Belgian), Aberdeen, Pacific Mail, and Royal Mail lines. Messrs. Workman, Clark & Co. built three Ellerman, two Royal Mail, two Shire and two other liners—in all nine vessels of 75,188 tons. At Londonderry four vessels were launched aggregating 12,225 tons. Among other trades, linen, previously depressed by general and local causes, was gravely interfered with by the stoppage through the war of Russian and Belgian material, and, in the case of white linens, by the loss of the German and Austrian markets; but in this trade, as in rope and twine, Government war orders were some compensation for losses in other ways. The minor industries of Belfast were vigorous. Foot-and-mouth disease again interfered occasionally with the cattle traffic to Great Britain.

SUPPLEMENTARY CHAPTER.
Finance and Trade in 1914.

From the observer's point of view the second half of 1914 was the most interesting period through which the City has passed. Other times had seemed difficult when the country was in the midst of labour crises, when foreign politics threatened, and when the prices of securities drifted steadily downwards; but the City has never before had to cope with so vast an upheaval as has been caused by the present conflagration in Europe. The City, at any rate, had not been organised to meet the consequences of the clash of arms, and when the blow fell not a market was unmoved. The machinery and functions of the money market and the banks, the Stock Exchange, Lloyd's and the insurance companies, the Baltic and the shipping lines, the Corn Exchange and the Commercial Sales Rooms had all to be adjusted to meet the unprecedented conditions. Just as the fighting forces had to be mobilised, so had the industrial organisations to be cleared for action, for finance and commerce have been and are destined to play a great part in the mighty struggle. All the British leaders of industry were animated by two objects only: how best to assist the nation to withstand the shock of war, and how to emerge victorious. It will be interesting to consider briefly how the different sections rose to the occasion.

The eventful year opened with money becoming easy and before the end of January the Bank of England minimum rate was 3 per cent. The decline in Bank rate was accompanied by a fall in the open discount market and early in February rates dropped to 1-11/16. Then began a renewal of a demand for gold from the Continent, and the discount rate rose to 2-15/16. In March the position was again easier and with the payments of the dividends in April the rate was as low as 1¾. In May the absorptions by Continental countries were on an abnormally large scale (though their significance was not fully appreciated) and the discount rate rose to 2-15/16 per cent. After the end of the half-year the rate was easier again, but it soon advanced steadily on the reports of strained relations between Austria and Serbia.

On July 28 the fear of war involving this country became definite, and on July 30 the Bank rate was raised from 3 to 4 per cent.; on July 31 it was advanced further to 8 per cent., and on the following day again to 10 per cent. The market discount rates were nominal at from 5¼ to 5½ per cent.

Consultations took place between the Government and financial leaders, and on Sunday, August 2, a proclamation was issued providing that all bills accepted before August 4 should not be payable on their due date but should be deferred for one month. The next day an Act was passed prolonging the Bank Holiday for three more days, and on August 6 a general Moratorium was declared. This extension of the Bank Holiday was considered desirable in order to give the banks and discount houses time to consider their position and to discuss the question of currency. As an emergency measure an issue of Treasury notes in denominations of 1l. and 10s. was offered to the banks up to 20 per cent. of their deposit and current accounts. For these notes interest at Bank rate had to be paid. The first issue was made on August 7, when the banks reopened. On that day large deposits were made by the public and there was little sign of any nervousness. At first the banks took nearly 13,000,000l. in notes, but the bulk of these were soon returned, and by the end of the year the amount held by them had been reduced to only 169,000l. Postal orders, without poundage, were also made legal tender, but were soon withdrawn from circulation. [The arrangement was formally terminated on February 4, 1915.] On August 7 the Bank rate was reduced to 6 per cent. and on the next day to 5 per cent., at which it remained.

The Government announcement respecting the discounting of bills was made on August 13, and a very large business was transacted, but the Chancellor of the Exchequer was able to announce later that of 120,000,000l. which was sent to the Bank of England less than half was likely to remain in "cold storage" at the end of the year. The case of merchants who had money owing to them abroad, all of which during the war would obviously not be paid, was hard, and, in order to avoid disaster, the Government announced a scheme early in November, providing that in approved cases advances not exceeding 50 per cent. of the amounts outstanding should be made to them by means of six months' bills; 75 per cent. of any loss was to be borne by the State and 25 per cent. by the Banks.

On December 4 the Moratorium came to an end.

At the end of the year the stock of gold shown in the Bank return showed a large increase at nearly 70,000,000l. (exclusive of 18,500,000l. earmarked for the Currency Note Reserve), as compared with 35,000,000l. at the end of 1913. A large proportion of the stock at the end of the year represented gold held in financial centres of Britain beyond the seas on account of the Bank, until arrangements could be made to ship it to this country.

A notable development during the peaceful period of the year was a further series of banking amalgamations, including a fusion between the famous houses of Messrs. Coutts & Co. and Messrs. Robarts, Lubbock & Co.

Immediately after the outbreak of war Parliament voted a credit of 100,000,000l. and between August and November 90,000,000l. in bills were issued. These were mostly in six months' bills, and were placed at average rates ranging from 2l. 18s. 6d. to 3l. 15s. 6d. In November the issue of the great War Loan for 350,000,000l. was successfully made, the issue taking the form of stock at 95 per cent., redeemable in 1925-8, and bearing interest at 3½ per cent. The net yield was 323,000,000l., which sum was intended to include the repayment of the Treasury Bills issued. A notable feature of the terms of the War Loan was that the Bank of England undertook to make advances up to the amount of the issue price at 1 per cent. below the current Bank rate.

Early in January, the Stock Exchange indulged in a little "boom," but towards the end of February a reaction set in and from then until the outbreak of war markets were extremely dull. The Ulster crisis, severe depression in South America, and the failure of the Canadian Agency and the firm of Chaplin, Milne, Grenfell & Co. were depressing influences. Throughout July markets were under the cloud of foreign political complications, and on July 24 the Austrian Note to Serbia caused serious alarm and an immense number of selling orders. In the end of July the settlement was completed with no more serious consequences than the failure of nine firms, involving twenty members. On July 31 the Committee, in response to many representations, decided to close the House. Minimum prices for Trustee stocks were fixed by the Committee on September 14, based on the quotations current on July 30, the main object being to prevent undue depression. Arrangements were made in consultation with the Treasury for carrying out the mid-August settlement on November 18, special rules being issued. The Banks, in return for the assistance they had received from Government, undertook to continue loans during the war without extra margin, while other lenders were granted advances up to 60 per cent. from the Bank of England.

Consols, which were quoted at 71-5/8 at the end of 1913, were actually higher on July 27 at 72¼ and at the end of 1914 stood at 68½, this, however, being the Stock Exchange minimum price, and nearly all representative securities showed substantial falls.

On December 23 the announcement was made that the Stock Exchange would reopen on January 4, with stringent provisions designed to prevent sales by the enemy.

One notable development following the outbreak of war was the breakdown of the foreign Exchanges. This meant that while it lasted oversea commerce was paralysed. In New York, owing to the large sales of American securities in Europe, sterling exchange rose at first to the extraordinarily high level of $6, and Sir George Paish was deputed to proceed to the United States to discuss measures to relieve the situation. Cargoes of grain and other produce were not bought, and consequently there was almost a complete cessation of chartering. Gradually the position was righted, and early in September business was being done in a quiet way. From then freights, which had been abnormally low during the summer, began to rise and continued to do so.

The rise was, in the main, due to a lack of tonnage in certain routes. The short supply was caused by the acquisition of many hundreds of vessels by the Government for various purposes; the inability of the German mercantile marine to take any share in the world's carrying trade; and the loss of a certain number of British ships sunk by the enemy's vessels or through striking mines. Towards the end of the year the position was very seriously aggravated by congestion at British and continental ports. The enlistment of large numbers of skilled dock labourers in the Army, the reservation of certain ports and docks for military requirements, and the accommodation necessary for the Government's large purchases of sugar, all combined to make the position difficult. Ships were kept for long periods waiting their turn to discharge, and it was not uncommon for vessels to be in port three or four times as long as usual. These delays undoubtedly detracted somewhat from the extraordinarily high rates which were being secured. The most striking rate was perhaps that of the carriage of grain from Argentina. As compared with a rate of 12s. 6d. per ton quoted just before the war, 50s. was paid by the end of the year, and this figure was far short of the prices that have since been paid. The rate for coal from Newcastle to London which had been as low as 2s. 6d. rose to about 13s. 6d. As some relief for the situation, the Admiralty made arrangements to put a considerable number of enemy steamers which had been detained in this country at the outbreak of war into the coal trade. These vessels, as soon as crews could be found for them, were placed on the market, and did not have any effect in reducing the high rates. A few enemy steamers which had been captured at sea by British warships were sold by auction as prizes. Sums which were considered abnormally high were bid for them, but it is reasoned that while freights continue on the level current at the beginning of this year they should prove satisfactory acquisitions to their owners.

The question of maintaining oversea commerce received the prompt attention of the Government. Many people connected with the shipping industry had fully expected that the outbreak of war would find a large number of fast German cruisers at large and ready to prey upon British commerce. Shipowners had themselves made certain provisions, but only of very limited scope. They had formed certain mutual clubs in which ships were to be insured against war risks only until their arrival in safety in British or neutral ports. This arrangement would obviously not have had the effect of keeping ships at sea and maintaining oversea commerce as in peace times, which, in the Chancellor's opinion, was a vital necessity. The recommendations of the sub-Committee of the Committee of Imperial Defence were therefore put into operation at once. The proposals dealt separately with hulls and with cargoes. The State undertook to accept re-insurances from the clubs on ships up to 80 per cent. of the values, receiving in exchange 80 per cent. of the premiums. At first rates of 1¼ and 2½ per cent. were quoted for the single and double voyages respectively, but these after a few weeks were reduced to 1 and 2 per cent. Similarly a premium for a three months' time policy was reduced from 40s. to 30s. per cent.

The recommendation of the sub-committee respecting cargoes was, briefly, that the State should undertake to insure merchandise in British vessels at premiums which should not be below 1 guinea per cent. and should not rise above 5 guineas per cent. A special office was established at the Cannon Street Hotel and began to transact business on the afternoon of Wednesday, August 5. At first the maximum rate of 5 guineas per cent. was quoted; three days later the rate was reduced to 4 guineas per cent., and it was again reduced within short periods, until on September 1 it stood at 2 guineas per cent. At that level the rate remained until the last day of the year, when it was reduced to 1 guinea per cent.

All this time underwriters and insurance companies had been transacting a very large business at rates which were as a rule below the Government quotation. The Government scheme only applied to cargoes in British vessels, and then only to British vessels which were insured against war risks with associations approved by the Government. The State Office also would not insure vessels which had already left port. A large field was therefore left open to private enterprise, apart from the business which naturally flows to the cheapest market. For several months an enormous business was written on cargo across the Atlantic at only 5s. per cent., which compared with the Government quotation of 1 per cent. Coasting and other short voyages were also written at rates substantially below the Government quotation. It is understood that for the first six months, at any rate, underwriters had no reason to regret their operations in war insurance. Marine casualties were comparatively light and the year for marine underwriters may be regarded as an exceptionally good one.

The magnitude of oversea commerce may in the circumstances be regarded as highly satisfactory. For the twelve months imports showed a decline of 9.2 per cent.; exports of the produce and manufactures of the United Kingdom a fall of 18 per cent.; and re-exports of foreign and colonial merchandise a drop of 12.8 per cent. If the figures of the last five months alone be taken into account the imports declined by 20 per cent., the exports by 41 per cent., and the re-exports by 32.7 per cent. It should be remembered that the export trade was diminished by the embargo placed on many products, and also that the figures do not show the merchandise exported for the use of the Army and Navy. Taking the import and export trade the total values amounted to 1,223,000,000l., a decrease for the year of 180,000,000l.

All the railways of the country were taken over by the Government on the outbreak of war under powers conferred by the Regulation of Forces Act of 1871, the administration being placed in the hands of an executive committee of railway managers with the President of the Board of Trade as chairman. In return for the immensely important services rendered by the companies in conveying troops and stores throughout the country the Government agreed, if the receipts for 1914 were less than those for 1913, to pay such sums as, together with the net receipts, should bring them up to the level of 1913. On the other hand, if the receipts for the first half of 1914 were below those for the corresponding period, the amount to be paid by the Government was to be reduced accordingly.

Prices of foodstuffs, including wheat, generally were advanced considerably at first, but declined when trade settled down into more normal conditions and on the regulation of retail prices by boards representative of the different trades which were appointed by the Government. Towards the end of the year prices again advanced, and in many cases closed at the highest points touched. One of the most interesting of the many measures taken by the Government in financial and commercial spheres was the purchase of sugar to replace the million tons of beet sugar which would normally have been imported from Germany and Austria. Roughly, about 900,000 tons were bought for refining and manufacturing purposes and for direct consumption, and, though the Government plan was criticised on the ground inter alia that high prices were paid, it has been widely recognised that but for the prompt action it would have been difficult to obtain adequate supplies, except from tainted sources. A Royal Commission was appointed to determine the selling prices, and a prohibition was placed on importation of all sugars, in order to prevent supplies reaching here from enemy countries through neutrals and indirect payments in return through similar channels. Evidence that Germany was receiving tea through neutral countries led in November to the prohibition of exports from this country, the action being similar to that previously taken in the case of rubber.

Life assurance companies were deeply affected by the war. As a result of joint deliberations they resolved to make no additional charge for war risks to all their policy-holders who had, as civilians, assured and have joined the Active Forces. For new policies it was at first decided to charge an additional rate of 7l. 7s. per cent. This rate was based on the experience of the South African War, but it proved inadequate for the risks of the Continental fighting. Gradually offices began to raise the extra rate, and by the end of the year some were quoting 12l. 12s. per cent. or even more, or were declining to write the business at all. A suggestion that the Government should assume the war risk did not meet with the approval of the Treasury, since it was considered that the Government was doing all that could be expected of it by increasing the payments to widows and other dependants of those who fell in the war.

The most urgent problem facing life offices was that of the heavy depreciation in their securities. This matter is being dealt with by the offices according to their individual views, but it is interesting to note that permission was given to them by the Board of Trade to show in their certificates the prices current as on December 31, 1913. Immense sums have been written off by the Banks for depreciation, and the policy of persistently feeding the reserves in past years will now stand all the great financial institutions in good stead.

Cuthbert Maughan.