HC Deb 27 May 1909 vol 5 cc1424-9

There is one matter on which I should like to have a little more enlightenment. It is a subject on which I have put several questions in this House recently, and the answers have not appeared to me to be altogether satisfactory. I allude to the arrangements made by the War Office with the Army bankers, Messrs. Cox and Co., an arrangement by which the War Office hands over to that firm the pay of Army officers who distribute it to them. It is quite obvious that this is an extremely valuable monopoly. The official answer to my questions has been that there is no monopoly. No doubt two others firms, Messrs. Holt and Messrs. McGregor, have a share in the business, but they only pick up the crumbs that fall from Messrs. Cox's table. I believe Messrs. Cox have an arrangement with over 100 regiments, while the other two firms have only 13 regiments between them. Therefore it is a practical monopoly which the War Office have bestowed on Messrs. Cox and Co. It is an ancient monopoly, dating from long ago, and someone has declared that a sacred veil should be cast over the beginnings of Government; in the same way I think a sacred veil might be cast over the beginning of the connection of Messrs. Cox and Co. with the War Office. I say the monopoly is extremely valuable, and for this reason, that officers are practically compelled to bank with Messrs. Cox and Co., and, that being so, that firm have a very large amount of money which they can use for ordinary banking purposes, especially as in a case like that of the South African War. They also have another advantage by being in a position somewhat to control the pay of the officers. Why this valuable monopoly has been given I do not understand, but I have been told that there are firms who would pay a considerable amount for this privilege. I have the names of highly responsible firms, well known in the banking world, who state that they would give as much as £10,000 a year for the privilege. Twenty years is the term for which the privilege is granted to Messrs. Cox, and that multiplied by £10,000 gives a total sum of £200,000, which in these hard times should prove a source of revenue which ought not to be entirely neglected by the Government. I very much regret that they do not invite tenders from other firms for this valuable privilege. I have been told that no tenders have been sent in, but, as a matter of fact, other firms have not had the chance of tendering, and for some reason or other, I have not been able to understand why, this contract, which expires at the end of the year 1911, was renewed by the War Office in the early part of this year. Other firms never heard that it was to be renewed, and consequently they never tendered, but one firm did ask for information, and received the reply that the matter had been already settled, and that Messrs. Cox had received the contract for another 20 years. When I asked the Minister of War the other day the reason for that, he said it was in order to secure continuity. I do not think that that is an adequate reply, because, after all, it is only a matter of the engagement of a dozen clerks, and I am pretty certain that any firm, in order to secure this extremely valuable monopoly, would quickly make those engagements. It was also stated as another reason that Messrs. Cox did the work extremely well, but, again, I would suggest that any firm would ensure that the work was well done if only they got in return a valuable privilege, worth £10,000 a year, for nothing. A suggestion has also been thrown out that the arrangement is a popular one with Army officers. Since I first raised this question I have had a good many letters from officers now in the Army and from those who have retired, and I must confess that they are not always couched in terms of extrava- gant laudation of Messrs. Cox and Co. Still, while assuming that nothing is to be said against that firm, I want to know, as a taxpayer, why should this valuable monopoly be given away for nothing l Why should it be given away three years before the expiration of the contract'? If the representative of the War Office will give me a satisfactory answer it will be a great relief, not only to the House, but to the outside public, and to a great many officers of the Army, who are extremely interested in this matter, which vitally concerns them.


I do my best to answer the question which the hon. Member has so reasonably and briefly put. I do not understand what he said about the desirability of drawing a veil over the early history of the relations between the War Office and Messrs. Cox, because historically Messrs. Cox are not the agents of the War Office, but of the different regiments. There have been representative agents ever since there was a standing Army, and in the old days the colonels of regiments appointed the agent, Then there were a great variety of agents instead of three, and no doubt a great deal of complication arose, but they were appointed simply and solely by the colonels of the regiments, who were responsible for them, and not the War Office at all. They were paid for doing the work of distributing the pay of the officer in whatever part of the world he might be by the officer himself. When in 1881 the colonelcy of a regiment was made an honorary appointment, it was considered quite naturally that it could no longer be laid upon the colonel to be responsible for the agent if there were any defalcations or shortcoming in regard to the money, and from that time colonels have been relieved of responsibility, and the responsibility of appointing the agents has been taken over by the War Office. At that time it was also laid down and decided that the agents were to be expected to do the work they did without being paid for it, as they had been up to that time. The work they do is of considerable value to the War Office, and does save us a very considerable amount of expense, and if it was not for them we should have to do a great deal of accounting through our own staff. They also relieve us from any possible loss owing to being unable to recover officers' pay after an officer's death. We pay officers in advance, and that is the system. Therefore it mad quite often happen that an officer is paid for a period after which he has ceased to be alive, and Messrs. Cox or other agents are required to refund to us the pay from the date of the officer's death or of his leaving the service, and they themselves take the risk, which is no light one, of not being able to recover money paid to the officer's account from his family or executors. The system of having agents for the regiments is one which was started by the regiments themselves, and now continued also by the regiments themselves, because of its convenience to them. Its convenience to the officers, I imagine, lies chiefly in the fact that they have automatically a banking house in London, to which their pay is given, and they have not the difficulty of having it transmitted to them in any part of the world where they are and transmitting it back again to a London bank.

It is not the case that these agents have a monopoly, that officers are compelled to keep their accounts with them, however much they dislike it, and that Messrs. Cox are unpopular. If any officer requested us at any time to deliver his pay to his account at any other bank we should at once do it on being assured that that bank has his power of attorney, and on being convinced, before the money was paid, that that officer was still alive and that the money was due to him. At any moment any officer can have his pay paid to any bank, or alternatively he can have it paid to the district paymaster and by him direct to himself, and as we hardly ever receive requests of that kind, I do not think the unpopularity of the agent system, and the desire of the officers to be free from the agent system, can go as far as the hon. Member has led us to believe, because it would be perfectly easy for any officer to change the arrangement at any time he desired. That system would no longer be possible—that alternative would no longer he possible so soon as we accepted from the agent a money payment in return for the privilege he has. We could not accept payment from them for doing valuable work for us, unless we can give them some sort of guarantee that the officers would, as a fact, bank with them, and would as a fact keep their accounts with the firms after they had ceased to be officers in the Army. As soon as we took annual sums of money or a lump sum of money down, we should be unable to give the officers the same position which we do now of having their money paid to Messrs. Cox or to any other bankers.

This arrangement was continued at the beginning of this year for a further period, although the previous contract was not due to expire till the end of 1911, but the agents were able to satisfy us that they were contemplating the extension of their premises, as they had rather inadequate premises for the business concerned. Not only in the case of Messrs. Cox, but in other cases as well, we satisfied ourselves that that was true, and that it was necessary for them to extend their premises to deal properly with their business, and we then made careful inquiry to see whether this renewal of the contract in view of the necessity for the extension of the premises was or was not justifiable. We did not hear from any source any complaint of Messrs. Cox, and the regiments of which they were originally appointed agents were perfectly contented to continue the arrangement, and therefore the arrangement was continued. Surely, if there had been this great desire to share in the business of the agency, we should have heard about it before now, but, with one exception, we have not had a single offer to share in this business, and I therefore do not think there can be quite as much of this desire to get a share of the business as the hon. Member thinks. The officer is now free to transfer his account where he likes, but as soon as we begin to take money from these firms, which could not possibly be justified for anything which we do for them—on the contrary, they do a great deal of valuable work for us—we should have to give them some guarantee that the officers' accounts must under any circumstances be kept with the agents, and that might perhaps lead to abuse. We should practically say, "We are going to take money from you for work you do for us. We will insist that the officers shall keep their accounts with you, and we license you to get back out of the officers' accounts, by treating them any way you please, enough to pay the annual or the lump sum which you offer to us in return for this work." I do not think that would be possible. We are very lucky in getting so much of our work done for nothing. The regiments are perfectly content with the arrangement, and the three firms of agents are firms of great repute and position. We hear no complaint in regard to their action at all, and I think we are justified, therefore, in continuing the system as it is at present.