§ MR. SEELYsaid, he rose to call attention to the Correspondence relating to the cost of building the Frederick William and of repairing the Brisk and the Cadmus; and to move for a Select Committee to inquire and report (1st), as to the application of Monies voted by Parliament for the use of the Admiralty; and (2ndly), as to the Accounts of the Department, and more especially as to the method in which they should be prepared for presentation to this House. The hon. Member said it would be in the recollection of the 891 House that at an early period of last year he had called attention to the constitution of the Board of Admiralty, more particularly in relation to the management of the dockyards; and on that occasion he was met by the right hon. Baronet the Member for Droitwich (Sir John Pakington), then First Lord, with the flattest denial that one gentleman could possibly give to another. The expressions he made use of were—
I know no process or mode of construing figures by which the hon. Gentleman can prove that ship (the Frederick William) to have cost £281,000. I have taken pains on this subject, and inquired of those most competent to inform me, and I cannot make out that the Frederick William cost more, including all her fittings, masts, and sails, than £197,000."—[3 Hansard, clxxxv. 609.]The right hon. Baronet did not object to the items of the cost of that ship, but he denied the correctness of his statement. It was scarcely possible for the right hon. Baronet to give that statement a more emphatic denial; and he added—This is a matter for great regret, and the only result will be that the public confidence will be shaken in statements made under such circumstances.He (Mr. Seely) felt this very strongly, and accordingly, on the morning after the debate; he wrote to the right hon. Baronet and asked that the matter might be investigated. The Controller, before his letter reached the Admiralty, had preferred a similar request; and the right hon. Baronet perfectly concurred in the propriety of an investigation. An investigation was entered upon, and towards the close of the Session was completed. The House ordered the Correspondence to be printed, and it was to portions of that Correspondence he now desired to call the attention of the House. The statement to which the right hon. Baronet objected was made by him in July, 1866, and no exception was taken to it at the time. He had repeated it at Lincoln. But subsequently the right hon. Baronet complained that he (Mr. Seely) had selected three cases, whereas the fact was, that the right hon. Baronet had himself made the selection; he (Mr. Seely) having offered more than half a score of vessels, to show the excess of cost in public as compared with private yards. The Controller in his letter of the 10th of July admitted that, accepting his definition of the words "cost, building, and repairs" as correct, he could not take exception to his figures. Therefore, so far as his (Mr. 892 Seely's) own accuracy was concerned, when he defined what he meant by the word "cost" he might fairly leave the matter to the admissions of the Controller. But there were some questions of public interest in this Correspondence. The Controller said that he (Mr. Seely) included in the word "building," as applied to the Frederick William, conversion, maintenance, wear and tear, and repairs, which the Admiralty omitted. The total expenses from 1841 to April 1, 1865—a period of 24 years—were materials and wages, £197,988; indirect charges, £60,613; or £258,601; and to this pensions and interest—items which had to be taken into account in the cost of ships—ought to be added, £25,860—making in all £284,461. But the Controller said that "maintenance" must be included in the cost of the Frederick William; if, therefore, there was an error, it was on the part of the Admiralty in including in the statement the charge for maintenance. What did that amount for maintenance come to? This raised another question—When did the charge for building cease? Now, in the Navy Ships' Account for 1861–2 were the following words:—In order to institute an exact comparison of the cost of ships built in different places, it has been arranged between the Controller of the Navy and the Accountant General that in future (i. e., after April, 1863) the capital account of the cost of every ship shall not be closed until she is fitted for sea and has left the port in commission.Now, the Frederick William was commissioned in June, 1864. Up to that time, therefore, everything spent on that ship must be included, according to this official definition, in the term "building." Now, from June, 1864, to the 1st of April, 1865, there was charged to the Frederick William, materials and wages, £939 16s. 10d., and indirect charges of the Admiralty, £365, making £1,305. Deducting this amount from the cost of the ship, there would remain £257,296, according to the Admiralty's own figures. Deducting £1,305, the cost of maintenance when in commission, with £130 for pensions, interest, &c., from his £284,461, there would remain £283,026 for the cost of the Frederick William. The Admiralty admitted his figures to be correct; for, in order to give the right hon. Gentleman (Mr. Corry) the means of answering him fully and clearly on this occasion, he wrote to him a fortnight ago to say he should be very glad to put before him his statement in support of his Motion. The right hon. Gentleman accepted the offer, the figures 893 had been examined, and were generally shown to be correct. In the Correspondence the Controller objected to the calculation respecting the cost of the repairs of the Brisk, because he (Mr. Seely) had taken two years when that ship was in commission. Striking off these two years, and taking the two years accepted by the Controller, the amount was £38,052, which, added to £3,805 for pensions and interest, made £41,857, or £1,641 less than his statement, while the Cadmus, in the same way, only cost £20 less. His original statement, then, was that these three ships cost—the Frederick William for building, and the Brisk and Cadmus for four years' repairs—£390,989; while it seemed that excluding the £1,405 for maintenance in commission, and the two years' repairs objected to by the Controller, the cost was £390,663, or less by £326. The right hon. Baronet (Sir John Pakington) had given the cost of building the Frederick William at £197,000, the building of the Brisk at £59,703, and that of the Cadmus at £85,705. Now, he admitted that a gentleman might use the term "cost" in any sense, provided only that his hearers understood in what sense; but if it were used without definition it would be in the ordinary sense of the term. Now, the right hon. Baronet must have used it in two different senses, because when he spoke of the Frederick William he excluded £60,000 for indirect charges, but when he spoke of the Brisk and Cadmus he included indirect charges. It appeared as though it were the interest of the Admiralty to make the cost of building the Frederick William as small as possible, because he (Mr. Seely) was contrasting it with the cost of building her in a private yard; while the Admiralty appeared to wish to swell the cost of the Brisk and Cadmus because he was then making a different contrast. He (Mr. Seely) had also stated that the Frederick William might have been built for £134,453, and he would now give the grounds upon which he had made that estimate. He had found that the Admiralty had bought certain vessels at £22 10s. per ton, and he referred to Mr. Eyde's book to ascertain what would be the increase of cost for such a vessel as the Frederick William. He found that it would be £3 3s. 8d. per ton, and adding that to the cost of £22 10s., and allowing £23,000, or £7 6s. 4d. per ton, for the full equipment, sea stores, and engineer's stores, he got £106,953, or 894 £33 per ton. He added to that the engines at the rate of £55 per horse, which gave £27,500, making a total of £134,453. The Controller contended that there had been improvements since the vessels on which he based his data were bought, but the fact was they were built only just before, during 1861 and 1862. The Controller also said that some of the vessels had machinery, and some not; but there was not one of these vessels that had not machinery. He (Mr. Seely) had referred on a former occasion to the expenditure by the Admiralty since 1841 of £170,000 more for anchors than the market price. In the correspondence he found no reply to that assertion. He observed that this was a grave charge against a public Department, and that the Admiralty should clear themselves from it if they could. The right hon. Baronet made no definite reply, but it was intimated to him that there was no market price for anchors. Now, he (Mr. Seely) had brought down the price-lists of no less than thirteen anchor-makers during a series of years, and if the right hon. Baronet liked to look at them they were at his service. The right hon. Baronet continued—The hon. Gentleman told us last year that the Admiralty anchor was almost the worst in existence, and that the result of an inquiry before a Committee was that of eight different descriptions of anchor the Admiralty anchor was found to be the worst except one. The Admiralty anchor to which he then referred was, however, a different one from that now in use, which has been very much altered and very much improved in its construction by the makers Messrs. Brown, Lenox, & Co."—[3 Hansard, clxxxv. 607.]Since that statement was made he had gone down to Woolwich with his hon. Friend the Member for Rye—who was a captain in the Navy, and knew much more about anchors than the right hon. Gentleman—and with two other gentlemen who were competent to give an opinion. They saw anchors that were made previous to 1853, when the Committee in question reported, and anchors made up to 1865, and they came to the conclusion that there was no practical difference between them. The right hon. Baronet complained that he should make—These charges and complaints of extravagance, which excite an outcry from one end of the country to the other, by means of figures which I believe to be entirely erroneous.Now, there were only two modes of putting an end to these complaints. One was by refusing to give any opportunity of ascertaining what was going on by holding back re- 895 turns, and by so publishing accounts as to prevent hon. Members from discovering the truth; and the other was the simpler and wiser course of removing the grounds upon which these complaints were made. He was glad to have done with these personal matters, but they really bore upon the more important part of the Motion he had to make to the House, namely—the appointment of the Select Committee to investigate the accounts of the Department, and especially the manner in which they are prepared, for it appeared that Sir John Pakington had stated that the Frederick William had cost £197,000, the Controller £258,000, and he (Mr. Seely) £281,000; and surely if accounts could reveal such different results to different people they required investigation. Now, it appeared to him that what was required in accounts was that they should be clear, should show all the money that was received, and what was done with it. There were four main accounts connected with the Admiralty—the Navy Estimates, the Navy Savings and Deficiencies, the Manufacturing Account, and the Navy Ships' Account. Now, the Navy Estimates did not tell what amount was required for shipbuilding. They gave a total of wages paid to seamen and marines for 1867–8 of £2,900,952, and a total for victuals and clothing of £1,241,614; but they did not tell how much was wanted for shipbuilding. He defied any hon. Member of that House, he defied the cleverest accountant in London, or even the First Lord of the Admiralty himself, to take any of the past Estimates and point out how much money was required for shipbuilding. Now, the first point which he would submit to a Committee was, whether it was not desirable that the Admiralty should state distinctly how much money they asked for shipbuilding purposes, then it would be seen that items were excluded which ought to have been included in those accounts? Then there was the Savings and Deficiencies Account, which showed the money expended as contradistinguished from the money Vote; then the Manufacturing Account, which gave details of the various articles made; and, lastly, the Navy Ships' Account, which was an account of the expenses incurred on Her Majesty's ships, building, converting, repairing, and fitting during the financial year. In the financial year 1865–6 there were, perhaps, 800 ships building, converting, repairing, and fitting, upon which money had been expended; but in not a 896 single instance was the cost correctly given. The whole expenditure might be divided into three heads—first, wages paid to shipwrights, amounting in 1865–6 to £586,786; secondly, materials, £843,534; and thirdly, indirect charges, £956,216. Now, the wages paid to shipwrights and part of the cost of materials bought were charged correctly; but the cost of materials which were manufactured in the dockyards, such as timber and converted iron, could not, according to the mode in which the Admiralty accounts were kept be correctly given, because they had one rate book price which was made up of the accounts from all the seven dockyards. As an instance of the difference of the cost of the same article in different dockyards, he would just give the cost of three topsail yards. It appeared that in 1863–4 three topsail yards at Portsmouth cost £434; the charged rate price was £150, or too little by £284. At Devonport there were two lower masts charged £63; they only cost £33, so that they were charged £30 too much. And these charges were all lumped together in the several dockyards, and the average price taken. The figures he had given were admitted by the Admiralty to be correct. At Portsmouth in 1862–3 there were three launches built at a cost of £655; they were charged at ships' rate price, £415, or £240 too little; boats fitted cost £1,593; the rate price charged was £799. He held in his hand a whole list of different articles, in which masts cost £377, while the rate price charged was £228; topgallant yards charged £421, while the cost was £632; topsail yards charged £150, the cost being £434, and so on. At Devonport, generally speaking, the cost and the rate-book price were the same. He now came to indirect charges which formed a lump sum of £956,166 in the Estimates of 1867–8. They were altogether incorrectly charged. They were all lumped in the several yards and then charged pro ratâ over the different dockyards—even to the extent of distributing them over the foreign yards. As an example of the ridiculous manner in which the accounts were kept he might state that salaries and expenses abroad were 92½ per cent on wages, while those at home were only 22½ per cent. Abroad, yard and factory wages were £46,773, salaries and expenses £40,379; ships were charged £10,000, as part of the indirect charges, it should be more by £30,000. At home, yard and factory wages were £1,064,635, 897 salaries and expenses £223,141, ships were charged as part of indirect charges £253,000 or £30,000 too much. Then in our yards at home he found that, while at Deptford yard and factory the wages were £47,879, and the salaries, &c., £13,164 or 28 per cent, at Chatham the wages were £182,000, and the salaries, &c., 17½ per cent. Such accounts, he submitted, were perfectly misleading. Sir James Graham, one of the ablest Administrators who had ever sat in that House, when examined before the Royal Commission, used these words—An account misrepresenting values is infinitely more dangerous than no account at all. An imperfect account is, in my humble judgment, infinitely worse than none.And now he (Mr. Seely) came to the Manufacturing accounts, with regard to which he was obliged to refer chiefly to the years 1862–3–4, because, since his hon. Friend the Member for Halifax (Mr. Stansfeld) was taken from the office he had filled so well, the accounts had become very meagre, and what was formerly given in five pages was now compressed into as many lines. There was a great advantage in being able to check the cost of particular articles, and that was illustrated by his being able to point out to the Admiralty some years ago, in consequence of the detailed accounts, that they were in the habit of charging iron in the dockyard in such a manner that that which cost 10s. a cwt. was charged 5s. to one class of forgings and 35s. a cwt. to another. He might be told that in giving those charges in detail considerable expense would be incurred, but he submitted that the Controller must have these charges brought before him, if he were to exercise any check at all over the cost, and then all the additional expense for furnishing the House with details would be the cost of printing, which would be a very proper matter for the consideration of the Committee. Many of the charges in particular shops—such as the wages of the foremen of smitheries, inspector of smiths, and so on—were not charged to those shops, but were lumped together, and formed part of the £956,216 charged for ships building, converting, and repairing, so that it appeared that a portion of the cost of the foremen of smitheries at Portsmouth and Devonport was charged to a ship repaired at Malta. He would next briefly call attention to the many changes which had been made in the mode of preparing the accounts. In 1864, according 898 to the method in which the accounts were placed before the House, the excess of cost over rate book was stated at 2¾ per cent; but a sum of about £800,000 had been charged for articles having no rate book price, and if that sum were deducted the excess would probably amount to 5 per cent. From 1858 to 1861 the wages and materials used upon ships first appeared in the accounts as forming the whole of the Admiralty stated cost of such ships. In 1861–2 an addition was made of about 20 per cent for different and further charges, and in 1864–5 a further addition was made of 20 per cent for other items, so that no less than 40 per cent was added in the course of a few years. The effect of this was, that ships put down in the accounts as costing at one period (in 1858.9 for instance) £1,507,212, would be put down at another period (that is in 1864–5 or 1865.6) as having cost no less than £2,118,213. He came now to the sums which ought to be included in the cost of ships, and here he would remark that Sir James Graham expressed his opinion before the Committee of 1861 that "the account will be imperfect unless every kind of charge which a shipowner would bring to book is carried to account." But how far had the Admiralty acted on that opinion? In the first place not a single shilling was charged to ships in respect of constructors and clerks, whereas private shipbuilders had paid designers, whose salaries were paid by the vessels built by them, Then there were pensions to artificers and clerks, amounting to £176,000 upon an average of the last thirty-five years; and he apprehended that a fair and reasonable charge would be about £127,500, but, notwithstanding this, he believed an attempt would be made on the part of the Admiralty to fix this item at £52,501—a rather odd proceeding—though he was aware that the Government had consulted Mr. Finlaison on the subject, and he had recommended that £50,000 should be charged. Another question which might properly engage the attention of the Committee was whether £44,787 was a sufficient amount to charge for interest upon a total capital in plant and stores of £18,000,000, which, at 3½ per cent, would be £630,000. As to depreciation, 5 per cent, and sometimes 10 per cent was charged in private yards, and though in the Admiralty accounts of last year there was a charge under that head of £78,187—and he acknowledged that it was a step in the right direction—the sum 899 was hardly sufficient. As a proof of the desirability of having the accounts presented in a form not quite so misleading he mentioned that the Duke of Somerset had stated in a pamphlet and in speeches that during the five or six years he was at the Admiralty there had been expended £10,000,000 exclusive of machinery and ships of war, whereas in those years there had actually been expended £14,000,000, the difference being due to the exclusion by the noble Duke of the indirect charges to which he (Mr. Seely) had alluded. Last year the House voted £888,588 for the purpose of new works, machinery, repairs of plant, &c., and the expenditure for new works for the last thirteen years had averaged about £600,000 yearly. A considerable part of this was strictly for shipbuilding and manufacturing plant—therefore it would be seen that the sum charged by the Admiralty to ships for interest and replacement of plant was too little; still this was certainly a step in the right direction. Before he drew attention to the matter, no charge was ever made even for repairs of plant, but the Admiralty now admitted that the actual expenditure for repairs ought to be included in the accounts. Probably there would be a repetition of the old argument—that we must always have our dockyards in an efficient state, in order that they might be useful to us and capable of great extension in time of war; but he wished to point out that during the last nine years we had spent on the average about £440,000 a year in buying ships. That was a proof that our dockyards had not been too extensive for our present wants, for he could hardly believe that the Admiralty would have allowed their plant and their men to remain idle while they were purchasing ships. Then as regards the application of the monies voted by Parliament for the use of the Admiralty, he thought it was a fair question to submit to a Committee, whether it were wise that the Admiralty should pay £29 per ton for gunboats constructed in their own yards when they could purchase them at from £20 to £24 per ton, which would make in one instance a difference of £4,000 in the price. He might mention that Mr. Thompson, of Glasgow, who constructed boats for the Cunard Company, and therefore presumably a very respectable builder, had constructed gunboats at about £25 per ton. There was another point which might be advantageously referred to the consideration of a Select Committee. 900 Some time ago he asked the noble Lord the Secretary to the Admiralty (Lord Henry Lennox) for a Return of the cost of chain cables, and the House granted the Return; but he was subsequently informed by the noble Lord that its publication would be injurious to the public service. Under these circumstances, of course, he gave way and did not press for the Return; but he could not help expressing his belief on the present occasion that the noble Lord had been deceived, and that the contract with Brown, Lenox, and Co., for chain cables, ought to be investigated in the same way as their contracts for anchors. He (Mr. Seely) would now call attention to the articles which the Admiralty sold to friendly Powers, merchant ships, and private individuals. With regard to articles sold to friendly Powers, it appeared that 10 per cent over the rate—that is, the average cost of the raw materials or labour—was charged, and 20 per cent for those sold to private individuals for merchant ships, 10 per cent extra being charged for freight if abroad. The goods so sold during the five years 1861–2 and 1865–6 produced £272,065. Now, the indirect charges on all materials, bought or made, and on labour in ships, was in 1864–5 38¾ per cent, and in 1865–6, according to the Admiralty's own account, 60 per cent. Assuming the percentage between 1861 and 1864 to have been the same as in 1864–5, the actual indirect charges on these articles had been £101,999, whereas the 10 per cent charged to friendly Powers only came to £24,727; so that had all the articles been so disposed of the transactions would give a loss of £77,272. If, on the other hand, they had all been sold to private persons, the 20 per cent charged amounted to £47,205, while the real indirect charges were £92,726, showing a loss of £45,521. Taking the mean between these alternatives, the loss on these transactions had been £61,396, or £12,279 per annum. Now, he had no wish that the Admiralty should make a profit by their transactions, but he did not think that they should sell at a loss of £12,000 a year. These were the main facts which had induced him to ask for a Committee. They certainly had not any regular account for the money that the Admiralty asked for shipbuilding, and the consequence was that they could make the accounts more or less as it pleased them. During the last five or six years there had 901 been three different methods of keeping the accounts, and it was high time that a proper system should be introduced. The Royal Commissioners reported in favour of their being kept so as to show the exact cost of each ship, believing that an emulation in economy would thus be excited between the different dockyards; and the right hon. Baronet opposite (Sir John Pakington), when examined before the Committee of 1861, admitted the justice of that conclusion. Unless the accounts of each dockyard were kept separately, it was impossible to arrive at the exact cost of ships; but if that separation were made it would probably be found expedient to give up or disuse one or two of the yards. Lord Clarence Paget, in his evidence before the Commissioners, stated that superintendents should be informed of the cost of vessels in each yard, and that the Board should promote those who were found to manage economically. If, however, these expenses were lumped together and distributed pro ratâ over all the ships, and if the same course were taken with the greater portion of the materials, the accounts thus "mingled and muddled" were useless, and it was impossible to compare the cost of articles manufactured in our dockyards with that of similar articles manufactured by the private trade. Mr. Walker, the head of the Audit Office, in his evidence last year before the Committee on Public Accounts, admitted that as the store accounts were not examined by that office, the Admiralty might make presents of their stores right and left without any check whatever upon them. Surely this state of things required amendment. How this Motion would be met he did not know. The statements he had made could not be controverted; but the right hon. Gentleman (Mr. Corry) would probably adopt the course usually taken by officials when not disposed to concede what was required, and would urge delay, and promise to make an investigation. There had, however, been too much delay, and he hoped the House would not tolerate any more. The Duke of Somerset, before the Committee of 1861, said—My opinion is that the accounts are not yet perfect; but, in his report, Mr. Anderson states that up to 1830, for 100 years, the accounts had been more imperfect than they had begun to be from that time. From that time the accounts began to improve, and they have gone on improving at different times; so that, although the accounts are far from perfect, I believe that anyone who looks into them now, and looke dinto 902 them in former days, will say that, with all their imperfections, they are better than they have been before.Only three months previously, however, the Royal Commission, of which the Duke was a member, reported that the system of accounts, though elaborate and minute, was not to be relied upon for any practical purpose, and with this opinion he himself (Mr. Seely) fully agreed. There ought to be no difficulty nor any difference of opinion as to the proper way of keeping accounts; and there were hundreds of men in the metropolis, and many doubtless in the House, who could accomplish so simple a task. It might be difficult to manage a large dockyard or a large manufacturing establishment, but there surely was no difficulty in rendering clear accounts.
§ Moved, "That a Select Committee be appointed to inquire and report (1st) as to the application of Monies voted by Parliament for the use of the Admiralty, and (2ndly) as to the Accounts of the Department, and more especially as to the method in which they should be prepared for presentation to this House."—(Mr. Seely.)
MR. CORRYsaid, the hon. Member who had just sat down (Mr. Seely) was reminded last year by his hon. Friend the Member for Halifax (Mr. Stansfeld) that criticism, if it were unjust or exaggerated, lost more than half its value. Now, he (Mr. Corry) must say that he never heard a criticism more unjust or more exaggerated than that in which the hon. Member had indulged, as to the cost of the Frederick William, or anything more unsustainable than his statement as to the cost at which a similar ship could be built in a private yard. He wished to remind the House what the statement of the hon. Member to his constituents was respecting the cost of the Frederick William. He stated in his speech at Lincoln—
The Frederick William cost—adding the items which a private shipbuilder would have to charge—the sum of £281,691, in building. She could have been built for £134,453, so that the loss on that transaction was £147,138."—[Cries of" Shame!" and laughter.]Now, the gentlemen the hon. Member addressed had, probably, very little idea of what ought to be the cost of building a screw line-of-battle ship in a dockyard, or what the coat of the same description of vessel would be in a private yard. But what excited their indignation and merriment, was the statement that work which could have been done for £134,453 in a private yard, should have cost in a dock- 903 yard £281,000. But when the hon. Member (Mr. Seely) made this statement he was absolutely ignorant of the thing he was criticizing. He had no conception of what sort of ship the Frederick William was. He thought she was built originally as a screw vessel; for what did the hon. Gentleman's secretary, Mr. Fellowes, admit in the Papers which had been laid before Parliament? He said that the hon. Member for Lincoln "was not aware she was a converted vessel, nor that she had been from twenty-four to twenty-six years under conversion." The hon. Member was perfectly ignorant of all this, and yet now, when he knew it, he still persisted in the accuracy of his figures. Such a course on the part of an hon. Gentleman who claimed to be so precise in matters of account hardly came within his comprehension. What was the work done to the Frederick William, over and above building her as a screw line-of-battle ship? Was she laid down in 1841 as a two-decker? No such thing, but as a three-decker; and the average cost, as he (Mr. Corry) knew, of building a three-decker in those days was £25,000 more than that of building a two-decker. She was not only laid down as a three-decker, but perfectly completed as such in her hull, with the single exception of her fittings; and on this vessel so built as a three-decker, £84,000 had been expended, as appeared from the figures furnished by the Controller, on which the hon. Member's calculation was based. And yet, although now knowing that this sum had been spent upon her as a three-decker before she was taken in hand for conversion, the hon. Gentleman still said that his figures and comparison were correct, and that the same work would have cost only £134,000 if done by the private trade. The hon. Member dealt with such large figures that he (Mr. Corry) supposed he considered such a trifle as £84,000 to be beneath his notice. In 1850, circumstances had occurred, which justified the Admiralty of the day in not completing the Frederick William as a three-decker. As he was at the Admiralty from 1841 to 1846, he could say of his own knowledge that the Board to which he belonged left behind them four line-of-battle ships in course of conversion into screw vessels. They were shortly afterwards tried with such satisfactory results that the Admiralty in 1850 did well to hesitate before going on with the building of sailing three-deckers. The suspension, therefore, of the comple- 904 tion of the Frederick William, as originally designed, which was one of the things for which the Admiralty of that day had been blamed, was a very proper measure, although her conversion was necessarily attended with a great loss of labour and materials. A whole deck, with the poop and forecastle had to be removed. She was cut down to a two-decker, her form was altered by lengthening her for the screw, which added nearly 200 tons to her burden. She was then finished at a total cost of £197,000, which included fittings and stores of all descriptions, and her maintenance for a considerable period in the Reserve, and yet the hon. Gentleman, who was ignorant of all this when he made his comparison, still asserted that the cost of a ship so treated was to be fairly compared with that of a ship built ab initio—as a screw vessel by the private trade—which he imagined could be done for £134,453. He (Mr. Corry) thought that was not a fair or just criticism. If he had been in the hon. Gentleman's place when he had made such a mistake, he would have written to the Controller of the Navy, and admitted his error. But the hon. Gentleman, while he admitted through his secretary his ignorance of the thing he was criticizing, still thought proper to adhere to his criticism. He said that the capital account of a ship was not closed until she was put into commission; and, therefore, he put down everything from the laying down to putting her into commission, as included in the cost of building the ship. Now, this appeared to him (Mr. Corry) to be a mere quibble. Everyone knew that in the building of a ship, anchors, tanks, sails, masts, yards, rigging, and stores of all descriptions, were not included. Yet, the cost of all these articles, as well as the maintenance of the ship in the Reserve, was added by the hon. Member to the cost of building her, because, according to the technical mode of keeping the Admiralty accounts, the capital account was not closed until the ship was commissioned. But now he would go on to the hon. Gentleman's statement that a ship similar to the Frederick William could be built for £134,000 in a private yard. If he had not the Papers before him, he should wonder how the hon. Gentleman arrived at such a conclusion, because no existing private shipbuilder had ever built a line-of-battle ship, and therefore none could say off-hand at what cost he would 905 undertake to build such a ship. There was a time when line-of-battle ships were built in private yards. During the great war forty line-of-battle ships were built by private shipbuilders, and they were known by the name of the "Forty Thieves" on account of the quantity of money they ran away with. Did the hon. Gentleman suppose that if the Controller of the Navy went to the trade and asked them what they would build a line-of-battle ship for, they would not first ask to see his specifications? They would say "We have never built a line-of-battle ship, and we do not know anything about your scantling, your magazines, your bulkheads, your gun fittings, and other arrangements." And yet the hon. Gentleman jumped to the conclusion that the private trade would build such a ship for £134,000. Now, on what ground did he make that statement? By inference alone. He instanced certain small ships that had cost £22 10s. per ton, and £7 6s. 4d. for equipment. And then he said that Mr. Eyde added an additional cost for line-of-battle ships of £3 3s. 8d., making a total of £33 per ton. The hon. Member's calculation was entirely a question of inference. He omitted to state that even of the ships he had enumerated, the Fenella and Hunter were never completed, and that the other two, the Jasper and the Jaseur, cost an additional £4 3s. per ton each, to complete in the dockyards. He would now state one or two facts to disprove the hon. Gentleman's inferences, and to show that he was wrong in thinking the Frederick William could have been built for the sum mentioned in private yards. First there were two troopships—the Tamar and the Orontes—built in 1861 by contract. The tenders for these ships varied from £21 10s. to £30 2s. per ton. One was built for £26 18s. 4d., and the other for £28 7s. 4d. Additional claims were made by the contractors—in the one case for £13,801, and in the other for £21,855. These claims were not recognized by the Admiralty, because they held the contractors to the terms of their contract, but they believed that the contractors were this money out of pocket. The total for hulls, incomplete and without equipment, would have been £89,483 in the one case, and £101,618 in the other. Including engines—which were purchased by the Admiralty from other contractors—and masts, yards, rigging, and stores, which were supplied by the 906 dockyards, the total cost came in the one case to £130,601, and in the other to £138,693, being, exclusive of various fittings afterwards added in the dockyards, in one case £46 4s. 6d. per ton, and in the other £49 3s. per ton. Yet, although these ships were not vessels of the scantling, and with the fittings of line-of-battle ships, the hon. Member said that a ship like the Frederick William could have been built complete for £41 9s. 8d. There was another case still stronger. The five India troopships were built by contract in 1865. Their tonnage averaged 4,173 tons. The average payment to contractors was £46 14s. per ton. This amount was raised by additional work in the dockyards to £50 6s. per ton. The contractors in this case also declared that they had lost by the transaction; yet the hon. Gentleman said that a screw liner, with scantling and fittings, which were very costly, for heavy guns, could be built for £41 9s. 8d. per ton, which would be the rate for a Frederick William, including engines, at the cost of £134,000. But let it be assumed for a moment that the ship in question could have been built for £134,000. The price of a thing proved nothing. Price must be considered with reference to value. You could buy almost any article at any price; but it did not follow that because a thing was low in price it was therefore cheap, or because it was high in price that it was therefore dear. A philosopher of antiquity said we ought never to predicate happiness of a man until after his death, because, however prosperous the first part of his life might have been, he might afterwards suffer misfortune greater than his former prosperity would compensate. So he would say of a ship, do not predicate anything about her cheapness until you know something of her latter end. It was very important to show that ships which were the cheapest in the first instance were not always very cheap in the end, because the object of the hon. Member was to drive the country into building its ships of war by contract instead of in the dockyards. [Mr. SEELY: I never said any such thing.] The hon. Gentleman observed last year that if the country wished to build its ships in the dockyards let it do so, but let it do it with its eyes open, and know that it cost (he believed he said), 50 per cent more than in a private yard—and he thought that was much the same thing as trying to induce the country to give up building 907 in the dockyards. The subject was not new to him (Mr. Corry). When he was Civil Lord of the Admiralty, in 1843, he wrote a paper, of which he held a copy in his hand, upon the state of the dockyards, which was printed for the use of the Cabinet, and which led to the undertaking of many important works. In that paper he referred to the great loss sustained in consequence of the enormous cost of repairing ships in ordinary. His argument was that the longer a ship remained on the slip, the better, because the more the wood would be seasoned and the longer the ship would last. He referred to 38 line-of-battle ships, of the age of 25 years and upwards, which were then on the sea-going list. Twelve of these belonged to the unfortunate ships once known as "The Forty hieves." The average price of these was £54,500; but these contract-built ships soon began to show signs of decay, and they cost on an average £59,476 in repairs in the first 12 years of their existence; in other words, their repairs in 12 years exceeded their first cost by £4,976, and in 12 years a total of £113,976 was expended on the average upon each of them. On the other hand, the average cost of the dockyard-built ships was £63,131, and the average cost of repairs in from 25 to 30 years was £40,000, making their total average cost in that time £103,131 each. It, there fore, appeared that the dearly built dockyard ships cost on the average £10,000 less in 25 years than the cheaply built contract ships cost in 12 years. The hon. Member would say, "These are references to old times; you must not judge of the present by such antiquated illustrations." Well, between 1859 and 1861, 12 small ships were built by contract at £23 a ton, and the hon. Gentleman, in the paper which he had submitted to him at their interview, contrasted them with six dockyard-built ships, which he estimated to have cost £39 per ton by the addition of his 35 per cent for incidental charges. Of the 12 cheaply-built contract ships five had disappeared altogether, being found too rotten to be repaired, after an average service of five years; one was about to be broken up—
MR. CORRYsaid, he was quoting from a statement which the hon. Member had put into his hands at the interview he had the pleasure of having with him at the 908 Admiralty a few days ago. Of these 12 ships, five were broken up after an average of five years' service, being too rotten to repair, one was now under orders to be broken up from the same cause, and the six survivors, of which the contract price was £9,844 each, had each, on the average, cost £7,200 in repairs. So much as to positive facts in relation to ships built by contract. The whole of the six extravagant dockyard ships built at the same time were still in the service, and the expenditure on them for repairs had been only on the average £3,968 each. It was, however, useful to inquire not only what ships cost to build, but how they broke up, and what was their comparative condition at their last stage. To obtain information on this point he wrote to an eminent ship-breaker in the West of England, who had broken up a great number of Her Majesty's ships, some built in the dockyards and others by contract. The answer to the letter of inquiry was as follows:—
SIR,—In answer to your letter of the 14th instant, we most respectfully beg to inform you, from our experience in breaking up Her Majesty's ships, we have found, as a rule, those built in the dockyards are considerably superior to those built by contract, as in many instances in the contract-built ships we find the timbers defective and very rotten, which we consider arose from the timber being used before it was properly seasoned.The interest on timber kept to season in the dockyards was one of the charges against dockyard-built ships, which the hon. Gentleman (Mr. Seely) adduced as proof of Admiralty extravagance.And as regards the fastenings in the contract-built ships, we found a great many dummies, or short copper bolts only partially driven into the plank, and not through the timbers as they should have been; and even the knee-bolts in some instances were only three or four inches long, which is a very serious thing, and the work generally in the building these ships was of a much rougher class than those built in the dockyard, more especially in the framing.He had a letter from the shipwright officers at Chatham confirmatory of this opinion, derived from the breaking up of contract ships in that yard; but he would not occupy the time of the House by reading it, as greater weight would be attached to what was said by a gentleman wholly independent of the Admiralty. He had no intention of disputing the accuracy of the figures as to the cost of the work executed on the Frederick William, assuming that the hon. Member's principle was correct, but he wholly dissented from 909 that principle; and, indeed, he dissented from the admissions in respect of percentages and other charges made by the Accountant General of the Navy, who, he believed, had since seen his error in making them. The hon. Member wanted to charge interest upon all the plant, buildings, docks, basins machinery, the stock of timber, and every article in store while a ship was in course of building. It was true that a private shipbuilder must do so, because he acted upon the principle of supply and demand, profit and loss, and he must suffer if he provided more docks and slips or kept a larger stock of timber and other articles in store than he required for his immediate purpose. But the Admiralty did not and could not conduct their dockyard affairs upon strictly commercial principles, and they would utterly neglect their first duty if they were to do so. They were obliged to be prepared at all times for the emergency of war, and to maintain the dockyards and the stock of various articles of store, and the establishments, on a corresponding scale of preparation. What would be our position if we had to commence the building of docks and basins when war broke out, and when the additional accommodation required would be indispensable to the maintenance of the efficiency of the fleet? It was absolutely necessary that this accommodation should be provided beforehand; and to charge the interest of their cost on the limited amount of work executed in time of peace would be most unreasonable. They were in the nature of an insurance made for the protection and safety of the country, and it was impossible to deal with them on commercial principles. The Admiralty had charged the sum of £47,000 against the ships in 1864–5, as interest, at 3 per cent, on final productions of the yards, which he thought was not an unreasonable or unfair charge; but he totally denied the right of the hon. Gentleman to calculate those charges on the principle he had adopted. The House should remember that the charges by means of which the hon. Member had made the work in the dockyards appear to be so extravagant were only assumed charges, and that not one shilling of public money had actually been expended on the Frederick William beyond the £197,000 specified in the printed correspondence, although the hon. Member, by one of his methods of calculation, made her to have cost £332,000, which he could only call figures run mad. He would 910 give an illustration to show the absurdity of the principle which the hon. Member had laid down. When he was first appointed to the Admiralty in the year 1841, a frigate of fifty guns—the Worcester, was occupying a slip in Deptford Dockyard. Not having being wanted for immediate service, instead of being launched she was left to season on the slip by way of experiment, and there she remained for the period of about eighteen years. If she had been launched immediately on completion, she would have been sent up the Medway to form part of the Reserve, which it is necessary to maintain in sufficient force to meet the emergency of war, and the process of decay would have commenced from the moment she was put into the water. Calculated at the average rate, if she had been required for service at the end of the eighteen years, she would have required little short of half her first cost, which was about £40,000, to put her in a sea-going condition; but, in consequence of having been left on the slip, instead of being launched, the actual estimate for the repairs she required when launched was only £162. Therefore on that one frigate by that experiment there had been a saving of about £20,000 in hard money, which would otherwise have had to be voted in the Navy Estimates. The example of France was constantly held out to us for imitation, and the system of allowing ships to linger on the stocks, as it was now reproachfully called, was universally adopted in the French Navy in the days of sailing ships. In order to carry out this system, and thus avoid the enormous expense occasioned by the repair of a large reserve of ships afloat, the French increased the number of their building slips from 28 to 111; and their practice was to allow their line-of-battle ships and frigates to remain on the stocks, like the Worcester, completed up to 22–24ths until required for service. The example of the Worcester was an illustration of the saving which was thus effected; but, according to the hon. Member's principle, this was all a mistake, because some imaginary percentages which he would have charged against her on account of plant, buildings, machinery, and other such items during eighteen years, would amount to perhaps more than what had been saved in hard money on the score of repairs. It really appeared to him that this was an absurdity. Again, before the days of armourclad ships, a great number of ships were 911 built at Pembroke because it was the cheapest yard. There were thirteen slips at Pembroke, and on every one of them, in former days, a ship was usually being built; but on visiting that yard last year he found that in consequence of the introduction of iron-clads, and the great labour and expense of building them, instead of all the thirteen slips being occupied, only four of them were in use. Now, according to the hon. Member, the interest on the whole cost of everything connected with the yard, including the nine unoccupied slips, ought to be lumped together and charged to the four ships in course of construction; and he would exclaim, "Look, what fearful extravagance there is going on in Pembroke yard!" But did the hon. Gentleman suppose that any Board of Admiralty would be so destitute of common sense as to abstain from building ships at Pembroke merely because by his peculiar mode of calculation he thought he made out that it was attended with enormous cost, while, in reality, the work was done there cheaper than in any other yard? He thought the illustrations he had given were a proof of the fallacy of the principle on which the hon. Gentleman insisted. The hon. Member had entered into a great number of figures with his usual ability and clearness; but the House would be glad to hear that it was not his intention to follow him through his labyrinth of figures. He would, however, refer to one or two of the hon. Member's assertions. One of them was that in the Navy Estimates there was no statement of what was wanted for shipbuilding purposes. The explanation of that was this—if they looked at the programme of works published with the Navy Estimates they would see there every ship which was about to be built in the dockyards, the amount of work which was to be done on each, and also the number of men who were to be employed. They would likewise see in that programme the list of ships which were to be repaired; but it was impossible to fix beforehand the number of men and the amount of work required, as some of the ships had not returned home from foreign service at the time when the programme was being made out, and the repairs wanted, with the consequent amount of work required, were therefore unknown. The programme, however, always stated the number of men who were to be set aside for repairs. With respect to contract-built ships, the Admiralty purposely abstained from stating the amount 912 estimated to be spent upon them, and for the obvious reason that if they put down a certain sum for particular ships there would be very little chance of many of the tenders being under that sum. Then, the hon. Gentleman said they did not charge enough in their accounts for pensions, and differed on that point from Mr. Finlaison, a high authority in such matters. The hon. Member took the amount of the pensions now payable, and he included those given to artificers who were building ships forty or fifty years ago, making out a total of £127,000. Mr. Finlaison reckoned this item at 7 per cent on the wages, and placed it at £52,000. For himself, he (Mr. Corry) confessed that he doubted the strict accuracy of charging those pensions to the cost of building the ships. The Admiralty experienced no difficulty in obtaining any number of hired men at the ordinary rates of wages without offering them pensions; but the pensions were given, partly perhaps, from a feeling that it would not be humane to turn them adrift in their old age, and partly on political grounds, to prevent the men from striking for higher wages in times of war or other emergency. He concurred with the hon. Member in his criticism as to the advisability of keeping separate accounts for each dockyard, and had already given directions that the forthcoming accounts should be prepared in that form. With regard to the incidental charges, the Admiralty estimated them at 3 per cent to be added to the cost of building, fitting, and repairing ships, as the final productions of the yards. Then, in justification of his theory, that interest on the whole of the plant, buildings, &c., should be charged on the limited amount of work executed in time of peace, the hon. Member said they spent £400,000 a year in buying ships, which showed that they had not enough building accommodation. The answer to that was that means had been provided for building iron ships at only two of the dockyards—Pembroke and Chatham, and it was on iron ships that the greater part of the £400,000 was expended. Moreover, the buildings and other works in the dockyards had not all relation to shipbuilding, but included accommodation for the repairing of ships, the docking of ships, and the maintenance of ships in ordinary, which ought not to be charged against the cost of shipbuilding. With respect to anchors, the hon. Member talked of their market price, but there was no market price or contract for five-ton Ad- 913 miralty anchors. Besides, what was the value of anchors purchased at the market price? He would give an illustration. A few years ago two ships were purchased for the service and they had twelve anchors between them which were supplied by the private trade, but only four out of the twelve were found to stand the Admiralty test. The remaining eight were rejected. As to the price of anchors, the whole question between them and the hon. Member involved a difference of only £7,000 a year—a very small rate of insurance for the country to pay for the safety of Her Majesty's valuable ships, and the still more valuable lives of their crews. Then, the hon. Gentleman said they did not charge enough for the articles they sold to friendly Powers; but it was their practice in these cases to add 10 per cent on contract articles, and 22 per cent on dockyard articles sold to foreign countries. The hon. Gentleman said they did not make a profit, and that they ought to charge 60 per cent. If they could do that they would drive "a roaring trade," but he feared they would find few customers. At present they charged quite enough to cover any loss they might incur in the manufacture. As to the criticisms of the hon. Member on the dockyard accounts, he had to observe that much of the hon. Gentleman's information was obtained from the improved form of the very accounts he was criticizing, which had been introduced by the hon. Gentlemen opposite (Mr. Childers and Mr. Stansfeld) when they were at the Admiralty; and he would leave it to those two hon. Members to make such observations on the subject as they might think necessary. He would, however, state that, with a view to the better preparation of those accounts, his right hon. Friend the late First Lord (Sir John Pakington) had contemplated a separate office in connection with the Controller's Department. When that right hon. Gentleman was First Lord, and he himself was Secretary to the Admiralty, in 1858, their attention was turned to the subject. Sir Richard Bromley was consulted, and the whole matter was very fully considered. There was at that time a difference of opinion as to whether the Department of the Accountant General or that of the Controller was the one which should be charged with the preparation of the accounts. The Board affirmed the views of the Accountant General, thinking that the accounts should not be prepared in the Department which spent the money, but by an independent authority. That 914 view was confirmed by Sir James Graham, and had been acted on ever since. Having been himself a party to the arrangement made in 1858, he had felt some doubt as to the policy of detaching those accounts from the Accountant General's Department, and creating a new office for their preparation in more immediate connection with the Controller's department, and having considered the whole question with the heads of the Departments, he thought it advisable to adopt an arrangement differing in form from that proposed last year by his right hon. Friend (Sir John Pakington), and yet fulfilling all its important objects. The arrangement which had been decided upon would, he thought, secure greater simplicity; while it would be equally efficient in providing a control over dockyard expense and charges. It appeared to him and his Colleagues that as the Controller, the Accountant General, and the Storekeeper were all concerned, and that as their independent action had not conduced to uniformity and simplicity, both the one and the other of these two objects could be promoted by the constitution of a Committee consisting of those three principal officers, who would report, in the first instance, whether the present basis and form of dockyard accounts realized their purpose, and whose conjoint action would secure more complete uniformity and simplicity in the preparation of the accounts. These accounts would be initiated in the Department of the Accountant General, subject to his supervision and that of the two other principal officers, by whom they would be signed before being laid before Parliament. In connection with this Committee a new officer (Mr. H. Walker, a Gentleman whose ability was well known to many hon. Members) had been appointed as Assistant to the Accountant General, and his duty would be to exercise a supervision over the expense accounts, and to bring all questions relating thereto before the Committee, and also to audit the cash accounts of the Navy, so as to insure harmony between the cash expenditure upon dockyard labour and materials and the charges for these services as recorded in the expense accounts. In order to assist that officer and to secure his undivided time and experience in the conduct of the dockyard account business, he had appointed to the office of inspector of the yard accounts Mr. Henry Brady, the present Accountant of Devonport dockyard, who had been selected on account of his 915 peculiar fitness for the appointment. His relationship would be common to the Controller of the Navy, the Accountant General, and the Storekeeper General; and in the performance of his duties regard would be had to the requirements of these three officers. Without some such common agreement as would be thus secured, it appeared to him that it would be difficult to prepare these accounts in a satisfactory manner without the loss of much time and labour in intercommunications between the three Departments and between them and the dockyards. His intention was to lay before Parliament the Report of the Committee of the principal officers which would suggest the basis on which the accounts should in future be kept and presented to Parliament, with the view of referring it to the Committee on Public Accounts, of which the hon. Member for Lincoln was a member, who would be invited to report to the House the groundwork for the preparation of a Bill, laying down the conditions and form in which these accounts were to be kept. He thought that the Departmental Committee would be at least as competent to deal with the question as any Committee of the House of Commons, and he would therefore suggest for the consideration of the hon. Gentleman, whether any good would result from the appointment of the latter. At the same time he was so anxious the House should not think that he desired to screen the Admiralty from the most searching inquiry, that he would not object to its appointment if the hon. Gentleman thought it right to persevere in his Motion. He had only one condition to make, and he hoped the hon. Member would not think it unreasonable—namely, that the inquiry of the Committee should be limited to an examination of the accounts in relation to dockyard expenditure—and that it should not go into questions of policy, or of the appropriation by the Admiralty of money voted for general purposes.
§ MR. CHILDERShoped the House would allow him to say a few words after the appeal made to him and his hon. Friend (Mr. Stansfeld) by his right hon. Friend the First Lord of the Admiralty. He had, in the first instance, to express his opinion that the thanks of the House were due to his hon. Friend the Member for Lincoln (Mr. Seely) for having on this and former occasions brought forward a subject of so much interest. There was a great difficulty in dealing with this sub- 916 ject, for many of its details were very dry, and, at the same time, were calculated to give rise to differences of opinion. But he must say that, though he and others had had to dispute particular conclusions arrived at by his hon. Friend (Mr. Seely), the hon. Gentleman, in his treatment of the question in successive Sessions, had avoided the use of strong or disagreeable language, and of anything which could be offensive to individuals; while by his facts and figures he had raised discussions which must have a beneficial effect. This abstinence from heat in dealing with figures was somewhat rare just now. There had been a time when the odium theologicum was supposed to be the bitterest of all feelings entertained by disputants; but anyone who had read the papers during the last three years must have perceived that quite as angry questions could be raised and squabbled over by accountants as any which had ever engaged priests or philosophers. The real question before the House was as to the expense and manufacturing accounts which were laid upon the table in connection with the proceedings of the Admiralty. What the House had to consider was, how they could improve these accounts, and put them into a more satisfactory state. He thought that the object of these accounts was two-fold—namely, that the Admiralty and the House might be enabled to compare the work of one dockyard with another, and that they might also he enabled to compare the work done in the dockyards with that done in private yards. They wished to know, not whether their servants were pecuniarily honest, but whether they did their work in a satisfactory way? But in dealing with the question they were met by this at the outset—that no accounts of any company or manufacturing department could be compared with those of the Admiralty, so much greater in magnitude were the latter. He had taken some pains to look into various published accounts of large manufacturers, susceptible of comparison with the dockyards, in order to see how they were rendered. He had, for instance, taken the accounts of manufacturing departments of the Army, and compared them, item for item, with those of the Navy, excluding the victualling and clothing in the Navy and the clothing in the Army. He found that in the manufacturing departments of the Army the buildings and plant amounted to £998,000, and the stock of stores to 917 £1,040,000, making a total of about £2,000,000. On the other hand, the value of the premises belonging to the Admiralty, with their stores, not including a quantity of stock in a half-manufactured state, amounted to £14,577,967. Going outside of the Government Departments and taking, for the sake of comparison, one of our largest shipowning and repairing companies—the Peninsular and Oriental—he found that the value of the whole of their premises and plant did not amount to more than £319,000, and their stock of stores to not more than £515,000, making a total of only £834,000. Taking, also, the case of one of our greatest railway companies, he ascertained that the whole of the wages and materials employed by it in carrying on its operations in the making and repairing of engines and tenders was only about £260,000, while the Admiralty spent on ships under the corresponding heads £1,800,000. He had quoted those figures simply to show that there were no other establishments in the country rendering detailed accounts which we could well compare with so large a Department as the Admiralty. He would, in the next place, remind the House of what had been done within the last few years to amend the very unsatisfactory state of things which his right hon. Friend opposite had found to exist when he was Secretary to the Admiralty in 1858–9. There were then no accounts of the Admiralty expenditure except the cash appropriation accounts, which were audited by the Audit Commissioners. Any other account was merely casual, being sometimes rendered and sometimes not. Every year since then, however, a progressive improvement in the accounts has been going on. His right hon. Friend the First Lord of the Admiralty had pointed out that he began the system of improvement by deciding that an expense account should be prepared by the Department. That was carried still farther in 1860, when Lord Clarence Paget was in office. The whole of the books were put upon a proper system of double entry, and the expense accounts were made out on that system, though they were still very imperfect. This was followed up in the next year by extending the system of dockyard audit. In 1864 his hon. Friend (Mr. Stansfeld) instituted an annual stock valuation account—the necessary foundation of any sound system of accounts—and that was followed during the next year 918 by the establishment by him (Mr. Childers) of a capital account and balance-sheet, and the reform of the rate book and manufacturing accounts. But, notwithstanding the improvement which had thus been introduced into our dockyard accounts, he must confess that he did not regard them as being perfect in their present form, and he hoped the Committee moved for, and which his right hon. Friend opposite consented to grant, would, with the assistance of the officers of the Admiralty, still further improve the accounts. As a whole, no person could take up the stock valuation and shipbuilding expenditure account without seeing that they might be put in a more condensed form, and at the same time give the whole of the information they now contained. There might, for instance, be a more complete consolidation of the capital account, and a more distinct reconciliation between the expenditure for ships and services, and the amount of money voted by Parliament for shipbuilding purposes. He quite concurred, also, in the view that it was desirable that the incidental expenses of each shop, and of each dockyard, should be in a greater degree charged to them, and not spread over the whole work. In fact, we should be able to bring home distinctly to the officers in the various dockyards and workshops the cost of the work done, so that the question might be put to them, "Why is it that that which costs £5 a ton in your yard or shop can be obtained in another at the rate of £4 a ton?" In those and some other respects he thought the accounts were decidedly susceptible of considerable improvement. As to the charge for pensions, he did not agree with the First Lord opposite. He looked upon them as being practically a part of the pay which was given, and it was but proper, he had laid down in 1865, that the charge for them should be taken into account. The main point on which his hon. Friend the Member for Lincoln, however, seemed to dwell was the expediency of having the dockyard accounts made out precisely in the same manner as those of private shipbuilders. Now, both his hon. Friend near him and himself had, while at the Admiralty, carefully directed their attention to that point; but they at once found that there must be always two essential differences between the accounts of a private firm and those of a Government Department. The first was as to the proper charge for interest on capital, to which he would refer after- 919 wards; the other, that it was impossible that there could be at the Admiralty what was termed a profit and loss account. He would give an instance of how difficult it was to deal with our dockyard accounts as with the case of private establishments. Suppose a private firm to build ten, or twenty, or thirty ships during the year; they would, he presumed, open for each of those ships a separate folio of their ledger, and charge her with cash paid in wages, with the value of the stores put into her, and with the proper amount of incidental expenses connected with supervision and other matters; they would, on the other side, place the amount received for the ship when sold, and would carry the difference to their general profit and loss account for the year. But that was not all. Suppose the private shipbuilder had a very large amount of stores and timber, and was obliged from time to time to take into consideration any depreciation of them which might take place. In a year, in which the value of the stock of a shipbuilder became depreciated, he would, of course, charge to the account of a particular ship the lower price of the stock employed, and the ship would thus appear to be built at a cheaper rate. But although the balance carried to profit and loss in favour of the shipbuilder might thus appear to be greater, in reality he might be worse off at the end of the year, because the loss on the stores would go far to eat up the profit on the building, and this loss would be written off before he struck his balance of profit for division among the partners. On the other hand, when the value of stores was on the increase the profit upon a ship would be apparently less, but in reality the builder might be all the better off, being recouped by the increased value of his stock. It must be borne in mind that the Government, with the approval of the House, now revalued its stores at the end of each year; but, in the absence of a profit and loss account, there was no heading under which the item of depreciation was shown, except under the general balance sheet into which went all the Admiralty works in connection with shipbuilding. The result, therefore, was in every case to convey a wrong impression as to the cost of building. Ships appeared to have been built at a greater price in a year when the value of materials had fallen, and, on the other hand, at a less price in a year when the rise in the value of stocks was carried at the end of the year to the credit of the work done. As 920 an instance of this, he might say that the difference between the percentages for incidental expenses, 35 and 51 respectively in the years 1864–5 and 1865–6, which his hon. Friend had pointed out and commented upon, was due almost exactly to the fluctuations which took place in those years respectively in the value of the stock of stores on hand. For these reasons he was disposed to believe that it would be desirable to open a separate depreciation account, in which, upon one side and the other, the changes in value from time to time and their results might be accurately set out. He would give another illustration of the effect of stating the account in the strict mercantile way. His hon. Friend not only enumerated several methods of his own of keeping accounts, but he asked, Why not follow the practice in the Army? The Army accounts were rendered in two ways; one without any allowance for interest and depreciation; the other as follows:—They charged 3½ per cent on the stock of stores, on the semi-manufactured articles, on the working capital, and on the plant and buildings; they charged 5 per cent for depreciation of buildings, and 10 per cent for depreciation of machinery. If the Army method were applied to the Navy, what would be the result? The estimated value of land, buildings, plant, and stores, according to the last accounts, was, in round numbers, £15,000,000. Upon that sum 3½ per cent would amount to £525,000; 3½ per cent on one-fifth of the annual expenditure, on account of working capital, would be £10,000; 5 per cent for depreciation of buildings would amount to £420,000; and 10 per cent upon plant to £69,000; making a total, after deducting the £46,000 at present charged by the Admiralty, of £978,000. Adding this to the £910,000 for other incidentals in 1865–6, this would represent a total of £1,888,000, or at the rate of upwards of 110 per cent on the cost of wages and materials. These figures surely might suggest how absurd the result would be if we applied to the Navy a system which had been adopted as an alternative in the Army accounts. The real explanation of this was plain. In nothing was the disproportion more striking than in the capital invested in the Army and in the Navy respectively in permanent stock. The capital of the Admiralty in land, buildings, plant, and stock amounted to £14,577,967, being eight times the amount of what was paid for materials and wages in ships in 1865–6; thirteen times 921 the amount of what was paid for materials only, and ten times the amount of the materials which passed through the factories, including the value of the labour employed. In the Army establishments, meanwhile, the whole amount of capital was just over £2,000,000, nearly equally divided between plant and stores; whereas the production, without including interest and depreciation, was £894,000, or, including both those items, as nearly as possible £1,000,000. The Army establishments only were on a scale of plant and stores, each equal to a year's out-turn; whereas the capital of the Navy was equal to eight or ten times the year's out-turn. The reason is that four-fifths of the capital of the Navy was not employed in time of peace, but was ready to be employed in time of war; it was therefore out of the question to regard it as capital, upon which interest should be charged in estimating the value of the work done in peace time. There were many questions into which he should have liked to enter more into detail; but he quite agreed with his right hon. Friend opposite that there was one thing which it was most desirable to do, and that was to settle the question. It would be most impolitic to let this question go on from year to year, disturbing the public mind and occupying the time of departmental officers with controversies which, except so far as they led to real results, could do no good whatever. The time had fully come for concluding this matter; and if the Committee which had been granted did lead to the settlement of the many important, though rather minute, questions which had been raised, it would have done a good work, and the position for usefulness of the Admiralty would be very much improved.
§ MR. SAMUDAthought it most desirable that this question should be settled in such a way that the accounts presented to the House should be such as could be relied on for the guidance of those who prepared them as well as of those who investigated them. There was nothing which went more to show the importance of the proposal before the House than the manner in which it had been met by the right hon. Gentleman opposite, and by his hon. Friend the Member for Pontefract (Mr. Childers). It was by no means so easy a thing to form a manufacturing account for a dockyard manufacturing a large quantity of vessels as would at first sight appear. His hon. Friend (Mr. Childers) had intimated that 922 it was most desirable to approximate as closely as possible the accounts of the Government dockyards to those of well-managed private establishments, but that he found a difficulty in the way of accomplishing that object. His difficulty appeared to be that he could not see how, the one necessarily having a profit and loss account and the other necessarily having none, a comparison could be kept up perfect and entire. Now, no such difference ought in the smallest degree to enter into the account. The object of a private yard was to obtain an accurate account of the cost of each vessel produced, wholly independent and separate from that account which showed the profit or loss on the sale of each vessel at the end of the year. The one was a manufacturing, the other was a commercial account, and they had nothing to do with each other; and the importance of having an accurate and simple way of arriving at this conclusion would be ascertained on looking at the question in this point of view, that there was no single item of material that entered into the construction of a ship which did not, in its finished form, represent a totally different value from that which it possessed as the raw material. The difference was sometimes as great as 300 per cent. There ought to exist, therefore, both the means of ascertaining and charging the approximate value of all the finished material that had been used, and also of correcting this account by substituting the actual for the approximate value; and this correction should be attained by the usual process of stock-taking, and a comparison of the value of actual stock remaining with that which the approximate accounts had appropriated. These matters required careful consideration, in order to arrive at a correct system of cost. The Admiralty accounts were not formed on a basis which enabled the House to arrive at a satisfactory conclusion. He thought it would be desirable to refer the result of the deliberations of the Committee, composed of the Controller of the Navy and other Heads of Departments, appointed to consider the means of arriving at the most accurate mode of keeping the dockyard accounts, to the Committee on Public Accounts, and if the suggestions of this Committee were satisfactory on these heads it might be sufficient, but he doubted if they would be; and then it would be most desirable that a Committee of this House should thoroughly investigate the altera- 923 tions in the Admiralty accounts, necessary to furnish a clear and correct account of the expenditure by the various dockyards, on the ships they had built and the work they had done. The total amount of money expended on the dockyards should not be considered as expended entirely on the construction of vessels. Care should be taken to eliminate from the capital account that which was locked up as a national investment for the defence of the country. An erroneous impression might prevail if some notice were not taken of the observations which had been made with reference to the state of things which existed some half century ago. When vessels were built of wood it was insisted that that class of vessels should be built in the Government dockyards, from the difficulty of finding seasoned timber of the required forms, and in sufficient quantities, in private establishments, but this objection did not apply to vessels built of iron.
MR. CORRYsaid, he meant to have guarded himself against intending to apply anything respecting wooden ships to iron ships. He was convinced that iron ships built by contract were quite as good as ships built in Her Majesty's dockyards, and such was the opinion of the Controller of the Navy.
§ MR. SAMUDAwas glad that his observations had produced the statement from the right hon. Gentleman.
LORD HENRY LENNOXstated, in reply to the hon. Member for Lincoln, as to why the Admiralty accepted tenders for the composite gunboats at prices above £25 per ton, that when firms tendered for the boats at prices varying from £20 per ton to £40 per ton the Admiralty were well aware that no firm could build those gunboats on the specifications issued by the Admiralty at the lower price without a great loss, and, therefore, did not think it right or safe to accept the generous offer thus made, except as far as one ship was concerned. He appealed to the hon. Member for Tavistock (Mr. Samuda) or to the hon. Member for Birkenhead (Mr. Laird) as to whether it were possible for any good firm to build such vessels at such a low price as £20 without loss? The Admiralty, accordingly, had taken a medium course, and accepted the eight lowest tenders, of which the highest was £29, and the lowest £20 per ton.
§ MR. SAMUDAsaid, the boats could not be made for less than £30.
§
Motion amended, and agreed to.
924
Select Committee appointed, "to inquire and report (1st) as to the application of Monies voted by Parliament for the use of the Admiralty in the building, repairing, and equipment of Her Majesty's Ships; and (2ndly) as to the Accounts of the Department, and more especially as to the method in which they should be prepared for presentation to this House."—(Mr. Seely.)
And, on March 9, Committee nominated as follows:—Mr. SEELY, Lord HENRY LENNOX, Major ANSON, Mr. DALGLISH, Mr. LIDDELL, Sir MICHAEL HICKS-BEACH, Mr. CHILDERS, Mr. WEGUELIN, Mr. HANBURY-TRACY, Sir DANIEL GOOCH, Mr. STANSFELD, Mr. AYRTON, Mr. M'LAREN, Mr. CANDLISH, Mr. DYKE, Mr. SCOURFIELD, and Sir JOHN HAY:—Power to send for persons, papers, and records; Five to be the quorum.