HC Deb 30 July 1900 vol 87 cc37-51

I have to intervene for a short time in order to raise a question which is important constitutionally, since it affects the powers of this House. Let me state at once what my grievance is. It is that, instead of the whole of the receipts for the public accounts being paid into the much as£18,000,000 of or nearly that amount. Exchequer, as public money, never reaches the Exchequer, and does not appear in the revenue and expenditure accounts. The effect of this is to falsify the accounts, to prevent comparison with former years before this practice was adopted, and to seriously impair the control of this House over public expenditure, inasmuch as this money escapes being annually voted. When I put the motion down the Chancellor of the Exchequer said I had taken an unprecedented course. But even if that be so. I assert that the act is not unjustifiable, This practice of deception is only eighteen years old, but it is growing to such an extent that even an unprecedented course is justified in order to call attention to it. As regards Supply, there is only one Amendment to be put on the motion that you, Mr. Speaker, leave the Chair, and the subject must be restricted to Supply, but when the House proposes to go into Committee of Ways and Means any number of Amendments may be moved, and you sometimes got as many as fifteen or sixteen, embracing all sorts of subjects, from conventual institutions down to them is deeds of income-tax collectors. There is, in fact, no subject barred, and when, in1861, a Committee sat on the business of the House, it avowedly refused to restrict this right of moving Amendments ongoing into Committee of Ways and Means, on the ground that it was a legitimate opportunity for the introduction of discussions on a wide variety of subjects. The rule itself, too, was enlarged so late as 1891, when the Standing Order was so amended as to allow Amendments on your leaving the Chair to be moved not only with regard to Ways and Moans, but also with regard to a new subject—the Committee on East India accounts. That motion was received with favour by the right hon. Gentleman the Member for West Monmouthshire and by the Vice-President of the Committee of Council on Education on behalf of the Government. I trust, therefore, the Chancellor of the Exchequer will not be angered with me for taking this very first opportunity of drawing the attention of the House to this extremely important subject, especially as I promise to endeavour to compress my remarks into as small a space as possible. The last Return on the subject for which I moved has been made up to 31st March last. It shows that the following public moneys are not paid into the Exchequer:—Customs, £204,000; Excise, £5,000,000; estate duties, £4,200,000. The total is £9,251,160. Then there come the appropriations-in-aid. These are sums which formerly naturally went into the Exchequer, but which, in consequence of the modern system introducedin1891, the Departments are themselves allowed to take in diminution of the amount they ask the House to grant for these expenses. These amount to £6,700,000, in addition to which there are certain payments which the Departments make of their receipts—the Post Office being the chief offender—amounting to £1,575,000.Consequently, the £9,521,160, the £1,575,242, and the £6,702,776 amount altogether to £17,799,178, and that is the sum to which my complaint refers. I am afraid I cannot dispense with a short history of the matter, and I will begin with the appropriations-in-aid. The House will observe that, roughly speaking, one-half the amount consists of appropriations-in-aid and payments out of the revenue by Departments and the other half of sums intercepted from the tax-collector and paid over to the Local Taxation Account. First, as to the appropriations-in-aid. Before 1810, when old naval stores were sold, they were charged with pensions and all sorts of payments. In 1810 an Act was passed to prevent that, and as regards the Navy the right principle was for the first time asserted. Every receipt, whether from old stores or any other quarter, was thenceforward paid into the Exchequer, and the Vote for the Navy included the total amount expended by the Navy, and not the amount less appropriations-in-aid. At that time and until many years later the collecting or revenue Departments of the State—in fact every Department that ever got any money into its hands other than by Vote of Parliament—were accustomed to pay their own expenses, only the balance going into the Exchequer. In 1831 the Commissioners of Public Accounts drew attention to this great abuse, and in their first Report dealt with the larger question of the payment of the gross revenue to the Exchequer, which involved the voting of the charges for the collection and management of the public revenue, which at that time were paid out of the revenue collected, and the net revenue only was accounted for to the Exchequer. The Commissioners considered that no branch of administration should be permitted to dispose of any other funds than those specially voted for its service by Parliament —these £18,000,000 are not specially voted for its service by Parliament— and that all public moneys should be paid in the first instance to the Exchequer. That is what my resolution reaffirms. That was not the last time the matter received attention. In 1848 the House passed a resolution almost identical with that which I am now moving. This is the resolution of 13th May, 1848— That this House cannot be the effectual guardian of the revenues of the State unless the whole amount of the taxes and the various other sources of income received from the public accounts be either paid in or accounted for to the Exchequer. That, as the House will see, is practically the same as there solution I submit to-day. It embodied the only true and safe principle of public accounts, and the Treasury of that day, foreseeing no doubt: what the resolution was that would be passed by the House, had a few days before made a Minute to the effect of that Resolution, namely, that all extra receipts; should be paid into the Exchequer. They directed that the Government Departments of public expenditure should thenceforward submit their annual Estimates to Parliament without the deductions on account of appropriations-in-aid, that Votes should be asked for the whole of the sums required for the naval and military services, and that the extra receipts should be paid to the Exchequer and be appropriated in the same manner as other moneys appropriated to the Consolidated Fund. That was the resolution of 1848, and it was carried out in 1849. From then the right system prevailed and lasted until 1881. The principle was reaffirmed in 1857, when the Select Committee on Public Money said this— Although the Acts 17 and 18 Vic, c. 94, and 19 and 20 Vic, c.59, have removed from the public revenues the charges of collection and management of hereditary and other pensions charged thereon, and the gross revenues are consequently now paid to the Consolidated Fund, yet it is considered that there is no security that the Government may not order payments unauthorized by parliament to be made out of those revenues before they are transferred to the Consolidated Fund. It was the suspicion of this Committee, on Public Moneys that the Government I might order unauthorised payments. I do not pretend to have such a suspicion now, but in 1857 it was at the bottom of the Committee's minds, and they therefore said— …it is essential to a complete Parliamentary control of the public money that no part of it should be arrested in its progress to the fund for which alone it can be issued and applied with Parliamentary sanction. It is therefore suggested that it may be provided by law that the gross receipts of the Customs, Inland Revenue, and Post Office Departments, after providing there out for the payment of drawbacks, bounties, repayments, and discounts, shall be paid or transferred to the account of the Consolidated Fund at the Bank of England and Bank of Ireland. That suggestion of the Committee was carried out, and in 1866 the "Exchequer and Audit Departments Act," which was a renewed and most solemn affirmation and enactment of the right principle, was passed. By that Act it was provided that the Commissioners of Inland Revenue, of Customs, and the Postmaster General, should pay their gross receipts to the Exchequer—the principle I am now contending for. I would also call attention to the opinion on this subject of a very eminent official of this House—namely, Sir Erskine May, who in 1879 said— The propriety of presenting the accounts of public income and expenditure in a correct and intelligible form is universally admitted. They should exhibit, beyond the reach of misunderstanding, the total burthens upon the people, and the actual cost of each Department of the State. Formerly the system of accounts was such as to keep out of sight a considerable portion of the gross receipts and expenditure. That is what I charge against the present system. The charges of collection were deducted from the gross revenue, and fees and other extra receipts were appropriated from the payment of the salaries of several departments, the balance only being defrayed by Parliamentary grants. The gross amounts of income and expenditure were thus apparently reduced— Yes, that is the object—to make government appear to be cheaper than it is— while large sums were withdrawn from the direct control of Parliament, and a wide financial discretion was left to the Departments. Then he goes on to tell the story I have just related to the House—that this system was objected to and a remedy found. It was about this time the Treasury first conceived the plan of extending the appropriations-in-aid. Sir Erskine May was not wholly opposed to that, but he attached the very remarkable condition that if the appropriations-in-aid were to be deducted from the gross Estimates, at any rate this House should vote the gross Estimates, and the amended sums be provided in Committee of Ways and Moans. He said— If the proposed scheme were adopted, the gross expenditure would still be voted. My complaint now is that the gross expenditure is not voted. The House votes the net expenditure, and it has no control whatever over the remainder except that it may remark upon the appropriations-in-aid themselves which make the difference between the net and the gross expenditure. Thus from 1810 to 1879 the right way was sought and followed, but the Memorandum of Sir Erskine May to which I have just referred may almost be said to have been the song of the dying swan of finance, for almost immediately after the Treasury with, I am sorry to say, the agreement—though not, I think, the whole agreement—of the Public Accounts Committee, suggested the new method, which has been in operation almost ever since. The reasons of the Treasury were these. In the Minute of 27th June, 1881, they state with regard to the extra receipts that— The payment of a large proportion of these receipts into the Exchequer, and the consequent voting or re-voting which they represent have the effect of over-stating both the public revenue and the expenditure, or, as the public understand it, the taxation of the country and the cost of government. Not at all. Those are two entirely different things. Taxation and expenditure are one thing; the burdens of the country are another. Receipts are receipts, from whatever source they are received; expenditure is expenditure, for whatever purpose it is incurred. Your receipts may be one sum, and your taxation another. You may come, as it were, into a fortune; you may inherit a large death duty, which may enable you to make your taxation less, but nevertheless that is all receipt, and it seems to me that the Treasury confuse expenditure and revenue with what is quite a different thing—namely, the burden of taxation on the people. However, that is the reason they gave. They said, further, that it would involve re-voting. But that is a necessary incident of our system of accounts. The national system of accounts is a strict and annual cash account, and therefore when you have cash to be expended in the course of the year, and you have not expended it, it must go over to the next year, and the next year if you want to expend it it must be re-voted. So long as you hold to your system of an annual cash account without a balance brought forward, and without a balance carried forward, so long must you either spend what you have in the year or re-vote it. This very Treasury Minute recognises the true principle while proceeding to violate it. It says— Every penny coming into the hands of a Department is to come under the view and control of Parliament. But then it recommended the system which we now have, by which many many pennies are taken out of the control of Parliament, and that system was adopted. This wrong system, therefore, was adopted so recently as 1882, and its extension has been so enormous in the eighteen years since then that appropriations-in-aid now amount to eight and a half millions. Now I come to the effect on this House. Of all these appropriations-in-aid not one penny appears in what is called the Revenue Account. When my right hon. friend rises to make his statement, what he deals with is what he calls the receipts of the Exchequer. No part of this £18,000,000 appears in these Exchequer receipts. Again I say that every penny of those appropriations-in-aid escape all control by this House. When I asserted that fact once before in October last in a question, the Chancellor of the Exchequer said he thought the statement was too broad. I should like the right hon. Gentleman to explain how it is too broad. I got a considered answer to a question which I put on this point to the Chairman of Committees, by whom I was told that the appropriations-in-aid were not grants made in this House, but were made under the Public Accounts and Charges Act, 1891, by the authority which the Treasury exercised under that Act. I was told that we could not touch a penny of them, and that "the Committee, in voting the net sum, sanctions the expenditure of the gross sum." Therefore, we are entirely without any control over it. I do not think my right hon. friend will now dispute my point, although he seemed to doubt it when I first suggested it. I think it is absolutely true. Now I come to my second head, which is the interception of taxes for the purpose of being paid over to the Local Taxation Account. These taxes amounted in 1898–99 to £9,521,160 and in 1899–1900 to £9,916,825, or close upon £10,000,000, which is taken away from the taxes collected on their way to the Exchequer, and handed over to the Local Taxation Account for local purposes. This plan is only twelve years old, for it was in 1888 that the new method of intercepting these taxes was first initiated in connection with the Local Taxation Act of that year. It was never contemplated then that the total would reach £10,000,000, and the present First Lord of the Admiralty at that time estimated it at £5,500,000. Part of the increase is due, I know, to some extent to the Agricultural Rates Act of 1896, but there has also been an increase in other portions of the grant. If you want to make gifts or doles to local governing bodies you should make it a certain fixed annual sum. It is one of the vices of this system that the local people never know what they are going to get and we never know what we shall have to pay. It is, therefore, bad in principle. It is contrary to the resolution of 1848, which provided that all the revenue should go into the Exchequer, and I believe that to be the only sound principle. It is opposed to the Exchequer and Audit Act of 1866, which enacted that all gross receipts should go into the Exchequer. This alteration was made in 1888, and I think the House is more to blame for agreeing to this change than the Treasury or the Chancellor of the Exchequer of the day. In 1888 the House tore up the resolution of 1848 and destroyed in all its essence the Exchequer and Audit Act of 1866. Since then, interception of a new kind has gone on, and what I want the House to know is that again and again the Department have attempted to get control over the money over which this House should have control; again and again this House has resisted them and re-established the principle upon which the money should be dealt with. It is only during the last eighteen years that this attempt has grown up, and as a student of finance I invite the House to affirm the true principle and say that all this money should go to the Exchequer. Under the present system this money escapes every one of the safeguards which this House and the wisdom of our ancestors has devised in dealing with public money. You do not need a Minister to propose an interception of this sort, for it may be proposed by any private Member. I often expect to find an hon. Member from Ireland standing up to propose that several millions shall be intercepted in order to support some excellent Irish agricultural scheme. It escapes the Committee, and there need be no resolution in Committee. It is not subject to an annual grant by Parliament, and is not subject to annual review, but once done it remains a perpetual first charge, not definite and fixed, but of varying amount. This second head of interception by Act of Parliament for Local Taxation account is much worse than the first head, because appropriations-in-aid, although they cannot be touched by Parliament, yet they can be discussed on Estimates; but the interceptions that are made out of the Customs, Excise, and Death duties for Local Taxation cannot even be discussed. The appropriations-in-aid appear in the Appropriation Bill, and there again they may be discussed, although I believe that the rule of the House is that no Amendment can be moved, but the interceptions for Local Taxation do not appear in the Appropriation Bill at all—they are permanently charged by a permanent Act. In this way control over nearly £10,000,000 has gone from us for ever. I will not enter upon the objections that might be made with regard to the system of sops and doles, and gifts to local authorities from the Imperial Revenue. I think they lead to local extravagance and waste, and often do more harm than good. That is not part of my argument to-day. My argument to-day is that it is essentially wrong, false finance, and essentially mischievous to intercept any portion of the public revenues from coming to the Exchequer; and if this is done as it is done to-day to the tune of £18,000,000, I think the time has come when some attention should be paid to it. This House should remember that this is £1,500,000 more than the whole of Mr. Pitt's revenue in 1792, which was £16,500,000. Therefore we are withdrawing from the financial control of this House a sum larger than the whole of the national revenue of 1792, and I do not think that I need make any apology for drawing the attention of the House to this question. I am sorry for having detained the House so long, but I am approaching the end of my remarks. The result of this system is to falsify the accounts and prevent a fair-comparison. How can you compare the accounts in which £18,000,000 are omitted with the accounts for years when no such omission has taken place? I think I am right when I say that the constitutional theory as to finance is that there should be annual grants in Committee of Supply; that we should annually find the money in Committee of Ways and Means; and that all the money so found shall be paid into the Exchequer and only be capable of being taken out by Act of Parliament; and finally that we should have annual accounts. I hold that if you touch any part of that system you destroy the whole. What I feel most strongly of all is that you destroy the control of Parliament. Let me dwell for a moment on this question of national accounts. There are various methods. In France they treat each year as though it were a separate entity, and whatever expenditure belongs to the year, whether contracted before or after, comes into that year. That is not our case, for we have deliberately adopted the system of an annual cash account in which no balance is brought forward and from which no balance is carried forward. No doubt this has its defects. It might, perhaps, with advantage lie supplemented with a national balance-sheet. You would have to put on one side many assets, including the Suez Canal shares, and on the other not only your national debts, but also your liabilities to foreign countries, which are very enormous. This makes the present situation more serious than it otherwise would be. I want once more to point out to the Committee that this Interception of Revenue is not an ancient abuse or a well-considered method, but it is entirely new. The first appropriation-in-aid began in 1882, and it is now £8,500,000. The first interception for local taxation began in 1888, and it is now nearly £10,000,000. My contention shortly is that all these sums ought to be paid into the Exchequer, and what I fear is that unless some attention be called to this matter, as I have endeavoured to do, this system will go on as it has been going on, increasing to a large extent, and the result will be that the Minister will have at his disposal a large sum entirely independent of Parliamentary control. As I have said, the House may justly be blamed for this, but Parliament did not foresee that it would grow to such an extent when it adopted this system. I affirm that all public money should be paid, in the first instance, into the Exchequer, because it is essential for a complete Parliamentary control of that public money that no portion of it should be arrested in its progress to that fund from which alone it can be issued and applied with Parliamentary sanction. I affirm the propriety of presenting the accounts of public income and expenditure in a correct and intelligible form, and finally I affirm the resolution of 1848, which declares— That this House cannot be the effectual guardian of the revenues of the State unless the whole amount of the taxes and of various other sources of income received for the public accounts be either paid in or accounted for to the Exchequer. Hon. Members may think that this is merely a question of accounts, that the money does not get embezzled, and that it is all spent on the State. It is much more than that. It is a question of the power, the authority, and the duty of this House. Every halfpenny of this £18,000,000—it will soon, I think, be £20,000,000—ought to be controlled by this House. Let me beg the House to remember that it is the control of the purse that has made this House what it is, and can keep it what it is. This House has no power to make peace or war, or to make treaties, but as long as it holds the purse-strings it will remain one of the most potent bodies in the British Empire—aye, in the world. But if the House is content to part with its control over large sums of money, then I say it is parting with the most important of its duties and the greatest of its powers. I move, Sir.

MR. MALCOLM (Suffolk, Stowmarket)

I rise to second the motion, and will only say that I think a few words from the Chancellor of the Exchequer with reference to the somewhat complex machinery by which our financial arrangements are regulated would be appreciated by the House.

Amendment proposed— To leave out from the word 'That,' to the end of the Question, in order to add the words, 'this House cannot be the effectual guardian of the revenues of the State unless the whole amount of the taxes and duties and of all other receipts received for the public account be paid into the Exchequer,' instead thereof."—(Mr. Gibson Bowles.)

Question proposed, "That the words proposed to be loft out stand part of the Question."


Mr. Speaker, I do not deny the importance of this subject, but I think the House will agree that a more unsuitable occasion for bringing it under our notice could hardly have been selected. We are within a few days of the end of the session, when the time of the House is particularly valuable, and it was generally expected that the earlier part of the evening would be devoted to another subject. In and out of season during the last five years the hon. Member has brought the matter before the House, and his own opinion of the urgency of the motion is best shown by the fact that he allowed it to remain on the Notice Paper of the House for more than four months without moving it.


I could not move it before.


I have been puzzled to understand what, under such circumstances, could have been the motive of the hon. Member in bringing forward this matter to-night, but in the earlier portion of his speech the hon. Member explained his motive, and it appeared to be this: that it was desirable to reassert a forgotten principle. For nearly the whole of the last forty years there has been no occasion on which an Amendment has been moved on the motion that the Speaker do leave the Chair on going into Committee of Way and Means; but the hon. Member, with his accustomed ingenuity, has discovered that, though preventing such motions on going into Committee of Supply, the House omitted to deal with them on Committee of Ways and Means, and I trust that the House will take the earliest opportunity of remedying that defect. I do not complain of the hon. Member for exercising what no doubt is his technical right—[Mr. SWIFT MACNEILL: Technical!]—but I shall be excused, if I deal with the motion very shortly indeed. The hon. Member said a good deal about what he considered to be the iniquity of intercepting the revenue for the purpose of the Local Taxation Account. Parliament deliberately did that by the Act of 1888 and subsequent Acts, and neither the Treasury nor any resolution of the House can interfere with those Acts, or alter the practice established by Parliament. It may be right or wrong—I am not going to argue that now—but it is one of the subjects which is under the consideration of the Local Taxation Commission, and when that Commission reports will, undoubtedly, be the time for the House to consider any recommendation which may be made in regard to it. But the main part of the hon. Member's speech was devoted to the appropriation of extra receipts in diminution of the gross expenditure of the Department to which they belong. The hon. Member attached great importance to cer- tain opinions which were expressed and resolutions arrived at in past days, but he attached no importance at all to the result of the later consideration which altered the practice which it was found impossible to continue, and established the practice which now prevails. What are the extra receipts the appropriation of which by the several departments to which they are paid is so unjustifiable in the view of the hon. Member? They are moneys incidentally realised or recovered by Departments in the process of conducting the services charged on Imperial funds, and they are of all kinds. They are payments from India or the colonies for military or other charges, or for stores or war materials supplied, with which we have nothing whatever to do. They may be proceeds of sales of old Admiralty or military stores, or they may be receipts from fees, fines, penalties, rents or tolls, or they may be payments for coinage from our colonies, or receipts from Government publications. What happened in regard to them? For a long time, while the resolution referred to by the hon. Member was in force, there was no uniform practice in regard to those receipts. They were, in some cases, paid into the Exchequer; in other cases they were treated as transfers between Votes without appearing in the appropriation accounts; in other cases they were applied by the Department which received; them in diminution of their expenditure without any regular authority or proper financial control; and the result of that was that about the period at which the hon. Member ended—in the early seventies—the Comptroller and Auditor General called the attention of the Public Accounts Committee of the House of Commons to the want of uniformity of practice with a view to a remedy being provided, and the Public Accounts Committee, in their turn, called the attention of the Treasury to the matter. A Treasury Departmental Committee sat on the subject in 1876 and 1877, and the result of their inquiry was a scheme, which was framed by the late Lord Frederick Cavendish, who was then Financial Secretary to the Treasury, and who had been Chairman of the Public Accounts Committee, under which the departments to which these payments wore made were allowed to take those extra receipts in diminution of their votes on three conditions—first, that the gross amount of expenditure should be shown to Parliament; secondly, that the Department should not by these means be able to expend money unknown to Parliament; and, thirdly, that the system should be carefully watched by the Audit Office. That scheme was applied, with the sanction of the Public Accounts Committee, in the first place, to the Army and Navy expenditure in the year 1881, and in l883 the Public Accounts Committee approved of its extension to the Votes for the Exchequer and Audit Departments. They expressed their general concurrence with the view that one uniform system should, as far as possible, be observed throughout the service, and they said they would therefore be glad to see a gradual extension of the system as occasion offered to those Civil Service Votes which readily admitted of it. The system was gradually extended, and has been gradually extended to other Votes since that time, and it has statutory sanction, if I may say so, in the second section of the Public Accounts and Charges Act, 1891, which provided that all money declared by any Act of Parliament or by the Treasury to be an appropriation-in-aid should be dealt with without being paid into the Exchequer. The result to my mind is that uniformity of procedure has been to a great extent secured, and that that uniformity has been accompanied with strict Parliamentary control. When the hon. Member says that there is no Parliamentary control over these extra receipts, what control does he want. Does he want Parliament to direct the Departments to refuse them? It is not a question of granting or withholding expenditure, and why should a Department refuse receipts offered to it?


What I want is simple. I want these receipts paid into the Exchequer and controlled by Parliament.


The hon. Member wants that all these extra receipts should, in the old fashion, be paid into the Exchequer and that the House should vote the gross expenditure instead of the net expenditure. Does not the hon. Member see how misleading such a course would be? Take the Army or Navy, or Mint expenditure. The tax- payers of the country have nothing whatever to do with the expenditure of the War Office or of the Admiralty which is recouped to those Departments by the Colonies for troops, ships, guns, or whatever it may be.


They are the masters of the Government.


The hon. Member does not see the point. If the House were to vote on all these occasions the gross instead of the net expenditure a completely false conception would be spread abroad of the amount of the total expenditure which was paid for by the taxpayers of the country. The hon. Member for King's Lynn said something about the change of system having interfered very much with a proper comparison of our financial accounts from year to year. The hon. Member desired to go back to the old system, but in doing so he would introduce a double complication of accounts, and to my mind there is nothing more certain than this that in dealing with matters of account, we should as far as possible retain the existing system, so that proper comparisons can be made from year to year. It would take very strong reasons indeed to induce Parliament to change the present system for a method which would make it extremely difficult, if not impossible, to keep correctly all the national accounts. The hon. Member is a member of the Public Accounts Committee of this House, and this is a matter primarily for the consideration of that Committee. Hitherto that Committee have for years past uniformly supported the existing system and desired its extension. If the Public Accounts Committee were to express any opinion upon this subject, desiring that the present system should be reconsidered, or that any change should be made in it, it would undoubtedly be the duty of the Treasury to consider it from any point of view which they might urge. For the present I think the existing system should he maintained, and I hope the House will reject the motion of the hon. Member.

Question put and agreed to.

Main Question put and agreed to.