I beg to move, "That the Reports of the Public Accounts Committee be now taken into consideration."
Perhaps the office I am holding now is really the oldest office of any existing now in Parliament. I believe the first Public Accounts Committee was formed in the year 1341, and I presume they had a Chairman even at that remote time. The Reports which I have to present, I am glad to say, are devoid of any outstanding points of interest. They contain a good deal of interesting matter to those who take the trouble to read them, but the state of the House is an evidence that the House generally does not realise that this is the one opportunity in the year, which has been given in the last few years of effectually criticising the public expenditure. It has often been said, and said more, I think, of late years, that it would be a good thing if the public expenditure could be controlled not by a Committee of Public Accounts but a Committee to sit upon the Estimates. I do not hold that view because it would take off the responsibility from those who are really responsible for the Estimates, namely, Ministers, and would put it on the Committee, and the House would thereby be estopped 1237 afterwards from a good many complaints which it can now make on the Report of the Public Accounts Committee. It is often said that these matters are far gone by and it is rather late to criticise that which happened the year before last but at the same time it is the earliest opportunity Parliament can have under our present system, which is the only possible one. The deterrent of wrong doing is really fear, and, though Parliament may move slowly, though the acts themselves may have been committed a year and a half or more before, nevertheless there is the fact of the Public Accounts Committee. I hope Governments will take it more seriously to heart and give more favourable and constant opportunities for considering the Report, and I hope the House itself will learn more what an opportunity this really is of criticising the action of Ministers, and that fear is a very valuable weapon in checking irregularities in the administration of the moneys voted by Parliament.
The points to which I want to call attention to-day perhaps range themselves under three heads, financial principles, points of administration, and then there are a few small details. Before dealing with the points of principle I should like to draw attention to some general figures. I cannot but think it is a satisfactory state of things that whereas the total expenditure heretofore under the Votes of the Navy and the Army and the Civil Service was £121,500,000, the surpluses which were surrendered on the Votes themselves were only £1,300,000, and on the Appropriations in Aid only £384,000, and they would not have been so much but for the quite accidental payment from the Government of India to the Home Government of £300,000, so that the surpluses to be surrendered, cutting that £300,000 out, on a total of £121,000,000 is only £1,400,000, which proves that the estimating is very carefully done, and that the spending is equally carefully watched. We know there are dangers attending such a system as this, but this system of surrendering everything at the end of the year is the only possible method of securing anything like the proper financial stability of the country. The main improvement has been in the Army expenditure, but, of course, that had fallen a good deal, and it is no great wonder, considering that Army expenditure very largely and suddenly rose under the pressure of the war, that the administration of such enormous 1238 sums of money in the field led to very great difficulties, and that the accounting, and the estimating necessarily was made extremely difficult while the war was in progress, and almost more difficult while the mess consequent upon the war was being cleared up.
The other thing to which I wish to draw attention, and which concerns the country generally, is the comparison of the main spending departments at the present time and before the war. In 1898–9 the expenditure on the Navy was £24,000,000, and in 1910–11 it is £40,000,000, showing an increase of 66 per cent. The expenditure on the Army in that time rose from £20,000,000 to £28,000,000, an increase of 40 per cent. The Civil Service expenditure increased from £37,000,000 in 1898–9 to £66,000,000 in 1910–11, an increase of 78 per cent., so that the House will see that the balance of expenditure has very rapidly changed from the Navy and Army accounts to the Civil Service accounts. The Civil Service is. now getting much more money, and the trend of social legislation will put still more upon the Civil Service Votes in respect of expenditure of an altogether new and different kind, and will lead, I think, to the necessity for a considerable strengthening of the powers of the Comptroller and Auditor-General, because when more money is spent in these departments more detailed examination has to be given to the accounts of the Departments. As these details multiply the necessity for strengthening the department of the Comptroller and Auditor-General and extending his audit further into the Civil Service departments will arise still more.
This leads me to mention one trend of modern legislation which, I think, wants to be very carefully watched, and that is the tendency to withdraw expenditure from the control of Parliament and to leave it in the hands of the Departments unchecked. In one case which I will mention there has been even a tendency apparently to withdraw control from the courts of law. What I wish to refer to occurred in connection with the Old Age Pensions Act. It was the subject of a special report by the Public Accounts Committee last year, but owing to the pressure of other Government business there was no opportunity for discussion in the House, and the practice complained of was practically adopted. Therefore I dare say the matter escaped the attention of a good many Members of the House. All 1239 last year the Comptroller and Auditor-'General was to a great extent stopped from examining into the expenditure under the Old Age Pensions Act because that Act contains words that certain decisions should be final, and after considerable discussion it was held by: the Law Officers of the Crown that the words did as a matter of fact stop the Comptroller and Auditor-General as a matter of law from going as far as he desired to go into the examination of these accounts.
§ Mr. GIBSON BOWLES
Will the hon. and gallant Gentleman allow me to ask whether the Committee ever actually had the opinion of the Law Officers on that point?
Yes, Sir, the opinion of the Law Officers was taken on that point, but it was not printed. Although I am bound to say that the Treasury admit the difficulty of the Comptroller and Auditor-General, he has during last year been allowed to examine into this expenditure under the Old Age Pensions Act, and free access has been given to him to a good many documents he wanted for information. Some irregularities have been set right on his recommendation, so that this year the Report of the Public Accounts Committee says that there is no case which he can report for disallowance. At the same time there is no doubt that if the Law Officers are right there is no special power for the Comptroller and Auditor-General to do what he ought to be able to do with respect to all money voted by Parliament, namely, to follow the money down and find out whether it has been properly applied. That power has been dropped by the words in the Old Age Pensions Act, and it is for Parliament to consider the position and to take such action as may be necessary to provide against the tendency to which I have referred. That is one instance of the tendency of the Departments to be free from the control of Parliament in the administration of public funds, and as social schemes grow—and we all want them to grow—the expenditure will be of a varied sort, and it will be expenditure which we should be able to follow up, though naturally those who desire to try social schemes will like to have freer hands if possible. There may therefore be a tendency to free from Parliamentary control the details of 1240 the expenditure and to make the expenditure much more in the nature of Grants in Aid where the Comptroller and Auditor-General has to accept a certificate that the money has been paid, while the details are withdrawn from his control.
That is the first of the financial principles dealt with in the reports under review. The other one refers to the financial control over the accounting officers of the Navy and of the Army. As a result of the war confusion the Army Pay Department was entirely reorganised and the Army Accounts Branch was set up in its place, and the various accounting officers in the regiments and in the District Commands were all made to a certain extent independent of the military commands, and they were given, and rightly given, free access to the financial Member of the War Office to whom they were financially responsible. That was the outcome of the Esher Commission and of representations from the Public Accounts Committee of that day. Now for military and War Office reasons that system has been a good deal changed. I will not go into the military side of the subject. It is not for me to do so at all. The change was made by Order in Council and by Army Order, and finally by regulations issued by the War Office. The Public Accounts Committee looked into these regulations and finally they were satisfied that the regulations were intended to alter, and did in fact in their present form alter, the financial control established under the old form of Army accounts. The point to which the Committee wish to draw attention is this. It is possible for the War Office by mere regulations to alter the whole system of accounts, and Army regulations do not necessarily come within the purview of this House at all. If a change is made in this matter it should not be by Army regulations, but by some form of general regulations which would come more particularly under the notice of Parliament. I know perfectly well that no such change as that would be likely to be made without the Minister for War bringing it before Parliament, or some one drawing his attention to it. At the same time the Committee felt that it ought not to be left even to the War Minister to bring it before Parliament, whether he liked to do so or not, but that steps ought to be taken to make any change of the sort as public as possible in order that no weakening might take place in the control of the accounts.
1241 This led the Committee to look into the accounts of the Navy and there we found a rather different state of things. It is quite true that discipline in the Navy must to a certain extent differ from that of the Army. They go on long cruises; they are shut up together; and the captain of the ship must of necessity have much more autocratic power than any one officer of that rank would have in the Army. The Committee fully recognised all that, but they did inquire and found out, and they want to emphasise the fact, that the naval accountant officers, whoever they may be, have an unquestioned right to represent their wishes and opinions upon payments straight to the Accountant-General in the Navy, though they may have to go through certain channels, and their questions and representations cannot be stopped anywhere on their way up to the Accountant-General of the Navy. Therefore the accounting officers of the Navy have full access to the Accountant-General of the Navy. Those are the questions of principle which arise on these three reports.
With regard to questions of administration the most serious are the paragraphs on the Post Office reports. The Post Office is getting to be a matter of increasing difficulty. It is getting larger every day and getting to be more complicated every day. Its accounts, especially in its engineering departments, are getting almost too large. When I tell the House that the engineering Post Office stores number something over 40,000 they will see that the stores accounts for the Post Office is a matter of very great difficulty indeed; and what adds to the complexity is that our telegraph finance and our telephone finance are increasing as well as the Post Office finance itself, and while the interlacing of these departments is almost inevitable, it must lead to a certain amount of confusion. The Post Office have a committee sitting, so that the matter is not escaping attention. On the contrary they are anxious to get the accounting system as complete as possible. But this is just another instance which illustrates what I said before as to the necessity of strengthening the position of the Controller and Auditor-General and his staff. They should have ample means at their disposal for coping with the much larger necessities for audit and the great increase in the number of subjects for audit that are coming under their review in the Civil Service Estimates. These are 1242 largely increasing both in amount and in number of subjects and in detail.
This leads me to another subject which concerns all Departments alike: that is the regulations under which the Services are-carried on. Of course, they are very carefully watched. But the matters mentioned most frequently in former reports of the Public Accounts Committee are those in which there is most necessity for constant revision of the regulations and constant watchfulness to see where the regulations can be improved to stop little leakages, and to get rid of difficulties that cause irregularities, not in themselves intended, but which irregularities nevertheless do lead to a loss of public funds. Returning to the subject of the Post Office there have been great difficulties which I am glad to say have been practically removed. Strong action has been taken on the matter when the difficulties arose. If hon. Members will look at the published accounts of the Post Office they will see-that considerable sums have to be spent from time to time in excess of the sums allotted. But this is quite inevitable, because it is quite impossible for us to say a year and a half before it will come into the power of the Post Office to buy a particular piece of land for a new post office whether they can buy the site. The site may not come in at their price, and they may have to wait, perhaps, until a new-site does come in. It may be more expensive than the other, and it is quite impossible to say whether in a year they will get that particular site. Therefore there must be certain irregularities in the way of spending. But that, again, will form the subject of inquiry and report, and the matter will be watched and set right.
One subject, which is more a matter of principle, and which may be referred to, is the question of the new contracts in the Army and Navy. The only paragraph in which they are referred to in this report is a paragraph which states that in the case of new contracts entered into without competition, by which, of course, a certain amount of work has to be done, the War Office sanction is to be procured for all contracts exceeding £300, and the written sanction of the Secretary of State for War is to be procured for all contracts for over £10,000. But the point which most concerns this House is that it has been: established that the Ministers are responsible to this House for the contracts, which are entered into, that a contract of that sort can no longer be- 1243 withheld from the purview of the responsible Ministers who are as responsible for the contract entered into as they are for the expenditure itself. One rather amusing paragraph in the report which was referred to by an hon. Member on the opposite side the other day incidentally refers to the Mafeking siege notes. During the siege of Mafeking a great deal of paper money was manufactured for the purpose of carrying on business. These notes have got so precious, the public value them so much as memorials of the siege and of the war that a great many of them have not come in. Therefore, the Government have recovered a considerable sum of money from the bank, because these notes have not been presented. They are being sold at high prices instead of being presented. One subject which may interest the House is that some years ago a large fund was established, and a sum of £650,000 was set aside for the rehabilitation of our gold coinage. Now the House will see that that fund has not only been exhausted but that £40,000, I think, was taken out of last year's moneys to provide for the rehabilitation of the gold coinage. It still requires to be improved from time to time through old gold being called in, and the House will have to consider some time or other whether it will establish another fund for the purpose or go on providing the amounts that are necessary.
Another subject which engaged the attention of the Committee was the office of Public Trustee, an office of growing importance. The value of that office is increasing enormously in the estimation of the public. The Public Trustee is being entrusted with enormous sums of money and with an enormous mass of securities. It is quite true that those securities are held by him either solely or in connection with other trustees, and he is bound by the conditions of the various trust deeds under which he holds them. All trustees have the power to vary their investments from time to time, and in consequence the Public Trustee has the sole discretion in regard to the investment of a very large and increasing sum of money. Although I have nothing but praise for the present Public Trustee, and for the way in which the work of his office is planned and carried on, yet I think this matter wants watching, and it becomes a question whether it is not too much to put on a single official, namely, to have the watch- 1244 ing of investments and the power of varying investments of such a large amount. I have nothing to suggest to the House, but I merely desire to call the attention of hon. Members to this matter, which involves an increasing difficulty and possibly an increasing danger. This year a new Department has been created. For a long time the Comptroller and Auditor-General has audited at the request of the Colonies many of their accounts. Gradually the work has become so very great that a new Department has been created, called the Colonial Audit Department, which is entirely independent of the local executive, and the Comptroller and Auditor-General has consented that it may be carried on by this new Department. As a matter of fact, it is at present manned out of the Comptroller and Auditor-General's Department, and he has consented that they shall do the detailed work, and that he will accept the certificate of the responsible officer that the money paid over has been by him paid over to the proper authorities. The power has been reserved to the Comptroller and Auditor-General to ask for any further information that he needs to satisfy himself that any matter is correct, and that the money has been properly disposed of.
I should like to bear my warm testimony to the way in which the work connected with old age pensions is carried out both by the Treasury and by the Department of the Comptroller and Auditor-General. I want also to join the Local Government Board, in giving that testimony, for the way they have assisted the other Departments in carrying out that work. The three Departments concerned have displayed immense ability and skill for the work of providing and paying the money, because old age pensions have involved the creation of the necessary machinery for dealing with a great mass of detail throughout the country. The regulations which they have framed have proved themselves to be, as experience has shown, extraordinarily well suited to the purposes for which they have been designed, and I believe they will require very little amendment from time to time, though no doubt points of detail may arise which may necessitate alteration. The question does arise as to the powers of the Treasury and of the Comptroller and Auditor-General. When in the year 1822 the Consolidated Fund was established as a necessary part of our financial system it, of course, came under the control of the Treasury, who 1245 required—and rightly required—control over all the Departments, and they use that control very well. Of course, I have always maintained that, however the two Departments may work together, and they do work together in complete harmony, the Treasury being always anxious to forward the wishes and requirements of the Comptroller and Auditor-General, still it must never be forgotten—I do not say that it is forgotten—that, after all, the Comptroller and Auditor-General is the representative of this House, and his Department is charged with the duty of supervising all expenditure, whether by the Army or the Navy, by the Treasury or any other Department. The work of the Treasury is extremely well carried on, and the longer I sit on the Committee the more impressed I am with the zeal and ability and care shown to keep out of the clutches of the Public Accounts Committee. As I have already mentioned, the great advantage of the Public Accounts Committee is to see that the national funds are administered in the way prescribed by Parliament, and to take care that there is no unnecessary waste—I say unnecessary waste, because when you come to deal with 121 millions of money, and when it has to be spent in small sums at stations all over the world, it is absolutely impossible to prevent some waste and leakage, or some mistakes. But I do think that our public servants do their very utmost to prevent waste, leakage, or mistakes, and we may be well satisfied that the work of the Audit Department is really carefully administered, and that the House, through the Comptroller and Auditor-General and his Department, does exercise a very satisfactory control over expenditure. I beg to move.
§ Mr. GIBSON BOWLES
I second the Motion. If I may be permitted to do so, I would congratulate both the House and the hon. and gallant Member who has just spoken on the extremely important and interesting speech which he has made with regard to the Public Accounts Report. There is not only nothing more interesting that can be brought before this House than these Reports and this Motion, but there is nothing more essential to Parliament. The consideration of the Reports of the Public Accounts Committee represents the true use of Parliament in the control of public accounts, and therewith of the Ministers who sit upon the Treasury Bench. I myself am personally 1246 extremely gratified that the day, which I had some share in inducing the Government to give for the consideration of this important matter, has now become annual. And I trust that these yearly Debates will be read outside, for they are a revelation of the true methods and the best uses of this House—a revelation which to many will come almos tas a novelty. For it is a fact that some of the very best work and most valuable financial work of this House is done in the Committee Rooms. It is not seen, and where it cannot be seen, it is not appreciated; and of all that description of work I venture to say that that which is done by the Public Accounts Committee is the most important of all. There are two kinds of men who come into the House of Commons. There is the Member who represents a great family, and perhaps territorial influence, and comes in as one of the sons of the gods, destined almost certainly to end in being on the Treasury Bench as one of the rulers of the country. His destiny is straight before him. He begins, probably, as President of the Board of Trade, he goes on to the Home Office, and in due course of time, if no accident intervenes, and if Fate is propitious, he is certain to end in that envied but somewhat arduous post of Prime Minister, which is the object of many ambitions. He will receive pay, honours, salaries, possibly a statue after his death in Palace Yard or in the Lobby. Then there is the ordinary Member, who comes in not perhaps so much with ideas of a personal career as what I may call a national career, more disposed to serve his country than to vote for his party, and desirous above all of doing national rather than party service. The place of such a man, I think, is on such a Committee as the Public Accounts Committee. He will be unheard, unpaid, unrecognised, unhonoured, and unsung. After forty or fifty years of arduous service, having really done good work for the country, he will pass again into as much private life as is left to him without the consolation even of a knighthood. But that man will have done really the work for which this House exists. It is not—Th' applause of listening senates to commandThe threats of pain and ruin to despise,and all that sort of rubbish for which a man is sent here. That is only to be done from the Treasury Bench, and from the Front Opposition Bench when there are subjects which interest them, of which I observe this is not one. The Member who devotes himself to such service will 1247 find no worthier place to do it than on the Public Accounts Committee. The work of this arduous Committee has to be done in most cases, and, indeed, the greater part of it must be done, not in the Committee itself but before the Committee meets, and the Chairman especially, as the hon. and gallant Member who moved this Motion knows, must devote a very large amount of time to the previous preparation of the work to be done under the Committee for the consideration of the very important figures that have to be submitted to him. The work of this Committee is increasing day by day, because day by day we are more governed by permanent officials, and day by day the expenditure and receipts are more and more in the hands of the permanent officials and withdrawn from the knowledge of the great men who sit on the Front Bench. Their minds are in much loftier regions, and they know nothing about those details. I venture to say that there is scarcely anybody in the House that does know anything whatever about the public accounts, unless it be the Members of the Public Accounts Committee.
The Public Accounts Committee, as I have said, has work of a most arduous character, and it does its work behind the doors, in the dark. It gets no glory, and is scarcely known to exist by the outside public, but it is an extremely efficient Committee for its purposes, and its efficiency arises from this, that it has before it not merely the Minister who rarely knows anything about the accounts, but the officials who do know everything. It has the opportunity of examining and cross-examining those officials. It is that particularly that enables the Committee to do its business with the efficiency that it does. The examination of the officials is not always very easy. You occasionally meet with an official who is indisposed to give that full information which the Public Accounts Committee requires. That does not diminish the interest of the matter because upon such an occasion as that the examination partakes of the interesting character of a rat hunt. In my experience the rat is generally caught at last. In this House itself we have what is supposed to be the palladium of our liberties, in the power of discussing the Estimates. Upon that discussion Ministers are asked questions which they cannot answer unless they get the answer under the Gallery. Criticisms are made founded 1248 generally on the notions of the Member who makes them, and when that is the case, easily refuted by even the most ignorant Minister who has to answer them. But this House cannot do what the Public Accounts Committee does. It cannot get the truth of things or get an absolutely final and complete answer to any question that may be raised, for the simple reason that it has not before it those officials who really know of the details.
It was in order to meet that in some measure, and to provide this House with the kind of knowledge for itself which the Public Accounts Committee gets, that there was a proposal that there should be every year appointed either one Committee for one class or four Committees for each of the four classes of the Estimates, and that that Committee should sit at the beginning of the Session and should have power to have before it the officials connected with the Estimates, and that in that way the Committee should accumulate from their answers—answers sometimes, in my experience, obtained from them almost like the pulling of a tooth—a mass of information which the House should have before it as to, perhaps, the four classes of Estimates. This would enable the House to deal with those Estimates with something like a knowledge which it does not now possess. The hon. and gallant Member is not in favour of this proposal, which originally was made by myself and was strongly recommended by the Committee on Public Expenditure which sat a few years ago and of which the Home Secretary was a prominent member. The hon. and gallant Member said he saw some objection to it in the diminished responsibility of Ministers. I do not know where he gets that idea. It is not so. It would no more diminish the responsibility of a Minister than the Public Accounts Committee diminishes his responsibility. A Committee of the kind would have no power of altering the Estimates or reducing them. It would only have the power of acquiring and transmitting to the House that sort of information which at present it has not and cannot have, and which it requires in order to enable it to deal adequately with the Estimates of the year. I hope I have satisfied my hon. and gallant Friend (Colonel Williams), and I am glad" he nods assent. I take it, then, we are all agreed that it is highly desirable that there should be some attention paid to-the recommendation of the Public Expenditure Committee to the effect that 1249 an Estimates Committee should be formed. I hope my right hon. Friend does not dissent.
§ Mr. GIBSON BOWLES
I am sorry that he does, but I am quite sure when he gives the matter further consideration he will come round to my view of it. The Public Accounts Committee, as the hon. and gallant Member has said, is, in reality, not a new invention. It is the lineal descendant of those four councillors to whom, so long ago as 1294, was committed the task of verifying the accounts of the country—which have now become the accounts of the Empire, and thereby so much more is added to the mass of the public accounts—the Committee are the lineal descendants of those four councillors to whom that task was committed.
In my opinion, of all the Committees of this House the Public Accounts Committee is the most useful and the most effectual for doing what I venture to think is the true Parliamentary work. The true use of Parliament is not to put one set of Gentleman in office and another out, and to go on doing that, pendulum fashion, according as each party predominates. The true work of the House is to control the expenditure and to control the Ministers responsible for it; and that is the work which the Public Accounts Committee does. The Members of this House can scarcely appreciate the enormous power it wields through having knowledge. In 1905, when certain Resolutions, for which I am proud to have had some responsibility, were passed, we called for the withdrawal of a Royal Warrant and an Army Order, and insisted on another Royal Warrant and another Army Order being substituted for them; and, I may add, some of us were consulted as to the wording of the new documents before they were finally promulgated. It was an extremely important matter. The Army had claimed that the finance of the Army should be handed over to eight major generals, a Cromwellian proceeding which it was immediately apparent to those who knew anything about finance was entirely inadmissible. But the Army did more. I say the "Army," because I scarcely know who is the controlling authority in the Army. Sometimes I think it is the Minister for War; occasionally I believe it is the Army Council; but I do not know whether behind both there may not be another and more powerful personage, whom we cannot call into question in this 1250 House, because he has no salary. The Army, to use that collective term for a collective and somewhat nebulous authority, claimed that the Major-Generals should have sole control over Army expenditure. The Public Accounts Committee resisted the claim; there was a conflict; and finally the Public Accounts Committee was victorious. The Army Order was withdrawn, and another substituted for it.
Perhaps the greatest use of the Public Accounts Committee is that it acts as a sort of magnificent scarecrow to wrongdoers. It is not in what it detects, but in what it prevents that its true service lies. I remember being cruelly reproached by an Adjutant-General, a very celebrated man, with having complained of and having prevented his giving extra retiring allowances to two colonels. These colonels were two gentlemen whose conduct was not entirely satisfactory. It was proposed to give them extra retiring allowances not in recompense of their good conduct, but in order to get rid of them on account of their bad conduct. We thought that an extraordinary and improper thing, and pronounced against it. The next year I met the same Adjutant-General, who said, "I must tell you that you are of the greatest possible service to me. Whenever somebody comes to me—and they are always coming—for increase of pay, improved retiring allowance, or any other job, I always say, 'My dear fellow, I would do it at once, but there is that something fellow on the something Public Accounts Committee, and if I did it I should have the Committee on top of me like a cart-load of bricks!'" That shows the great use of the Public Accounts Committee in enabling public officers and officials to resist improper demands. I remember with great pleasure the days I spent on that Committee, and, I may add, the nights I spent in preparing my work both for this House, but more especially for the Public Accounts Committee. Every Member of the Committee knows that that is an absolute necessity of the case. When I unfortunately left the House for a period, I had the consolation of having on the Committee a son whom I had trained up for that special work. How he did his work I do not know—I hope well; I am sorry he is not here to take part in this Debate.
I should like to allude to one or two points' mentioned by the Chairman of the 1251 Committee. He has referred to old age pensions, and suggested that something is required in the way of a Statute to enable the Public Accounts Committee to do what it holds to be its duty. I think not. The Standing Order of this House is, I believe, a sufficient justification of the Committee for insisting upon everything that it need require in the way of financial audit and financial regularity. What is its mission? It is "for the examination of the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure." Such a sum is the sum now closely approaching ten or twelve millions sterling for old age pensions. From all time the Treasury has been the financially pure Department of the Government. All Departments of the Government are pure, but sometimes they are financially heretical. But there has never been any financial heresy about the Treasury. It has been the Department which has withstood improper expenditure, insisted upon complete audit, and rebuked other Departments when they were inclined to financial irregularity. But in the matter of old age pensions the position is entirely reversed. The Treasury, which insisted upon everybody else being audited, has now refused to be audited itself. In the matter of old age pensions it claims that there is something final in the Act, in the decision of the local bodies or of the Local Government Board, of such a nature as to withdraw practically all the expenditure from the control of the Public Accounts Committee. I completely and entirely deny that. There is no doubt a discretion given to the pensions committees, to the Local Government Board, and to other authorities, but it is only a discretion within the ambit of the Act. There is no discretion to any such body to go outside the Act—to say, for instance, that a man of twenty should have a pension, or that a man of seventy should have a pension if he is in possession of £100,000 a year; there is no such discretion as that. Whether the Act is really being carried out, whether the sums appropriated by Parliament are, in effect, being addressed to the proper purposes, is for the Public Accounts Committee to ascertain, with the assistance of the Comptroller and Auditor-General. Indeed, the pretension of the Treasury, recently set up, to withdraw entirely from the Comptroller and Auditor-General and the Public Accounts Committee anything whatever, whether old age pensions or 1252 anything else, is a most presumptuous claim, and one which this House must never admit.
Then there is the Post Office. Of all sinners in the public service, financially speaking, the Post Office is about the worst. Of course, the House knows perfectly well that it is a bad business Department. It makes a loss where the telephone company makes a profit, and it, I will not say falsifies, but sugars its accounts to an extent which is almost incredible. By the Exchequer and Audit Act, 1866, governing this matter, all Revenue Departments, Customs and Inland Revenue, and the Post Office are bound to pay into the Exchequer for the year their gross revenue. What do the Post Office do? Out of their gross revenues they pay no less than £2,600,000 away to railway companies, telephone departments, and in various other directions, so that it never comes into the Exchequer at all. Not only do they infringe the financial proprieties, but they falsify the accounts which come before this House. That amount is withdrawn, and this House is not allowed to see it. That is but another instance of the general falsification of our accounts, and consequently general confusion in the public mind of what our expenditure and income is, and to which I alluded yesterday afternoon. I come to the two most interesting paragraphs in the Report of the Committee of Public Accounts, page VII., relating to the Naval and Military Accountancy business. The true principles affecting accounting officers, I humbly submit, are affirmed in the lines quoted from the Committee's Resolution of 1905 at the end of the first paragraph. They are:—The duty of accounting for moneys received, expended, or in hand, and the responsibility for them lies upon the Chief Accounting Officer of the department.(2) That the authority over and responsibility for all sub-accounting officers belongs to him;(3) That no part of that authority or responsibility can be diverted from him to any other person whatever; and(4) That in all matters of account and of payment or receipt, whether matters under dispute or not, the sub-accounting officer is authorised and required to communicate directly with the Chief Accounting Officer.Those are, I believe, the true principles of accountancy in regard to the public services. As I have already pointed out, they have been somewhat disregarded, if not entirely set at nought by the Treasury in regard to old age pensions. With regard to the Army, we did put the fear of God into them in 1905, but I am afraid that that 1253 fear is becoming somewhat diminished, if it has not disappeared. I cannot but think that the Public Accounts Committee, both in regard to the Army and Navy, but especially in regard to the Army, has been a little too indulgent in its Report, and in its comment, and has a little too easily refrained from insisting upon those eternal verities which are embodied in the paragraphs—of my own invention—which I have quoted.
How stands the thing with regard to the Army? I have seen the recent Regulations which have been made, and which, in my opinion, do very seriously impair the second amending and better Army Order which we procured in 1905. Those Regulations do seriously impair the principles laid down in that Order—the true principles of accountancy. While I observe that the Public Accounts Committee, even somewhat too timidly as I think, remonstrated against the supersession of the Army Order, I venture to think that they might more highly have proclaimed the true principles of their Committee, and of true accountancy, than they have done. I will not dwell upon that. I come to the Navy. In the Navy the point has arisen whether the accounting officer, in a ship for instance, may correspond directly with the head accounting officer at the Admiralty, or whether the communication should go through the captain. The Navy holds that it must go through the captain. That is not quite in accordance with correct accounting, because if you have a captain who desires to make improper expenditure, and the responsible officer objects to it, the responsible officer should be able to communicate otherwise than through the delinquent himself. At the same time I am perfectly ready to admit that the case of the Navy is different from that of the Army. In the first place, I would rather trust a sailor than a soldier with money. In the second place, sailors are more simple in regard to money. Though they cannot keep accounts they do not steal. There is another thing. It must be remembered that the captain of a ship is in a wholly different position from any commanding officer in the Army, whether colonel, or general, or commander-in-chief, or even that higher development which is, I believe, called Commanding-in-Chief. The naval captain is responsible for a little world of his own. He is a little god in a little microcosm. He is alone on the seas. He must be the supreme power for the moment. There- 1254 fore I am much more inclined to excuse the Navy, not only on account of the character of its officers, but also on account of the peculiar situation in which a ship is. But this must be distinctly understood: If you are not going to hold the sub-accountant in the ship personally responsible for improper expenditure, then you must certainly put the responsibility on the captain himself.
§ The PARLIAMENTARY SECRETARY to the ADMIRALTY (Dr. Macnamara)
was understood to assent.
§ Mr. GIBSON BOWLES
Very well, that is understood. Have you ever made a captain repay any improper expenditure? Because, if you have not, I should begin to doubt whether that responsibility is anything more than a shadowy responsibility. I like to see the wicked man "brought up" in the way of the Psalmist—his way turned upside down—and I should like to see him made to return any money that he may have improperly spent. That is really the effectual way and is a warning against persons doing similar misdeeds. I am extremely pleased to hear the speech of the hon. and gallant Gentleman. I think the House will yearly find it more and more interesting to examine into these accounts—as no doubt many Members will do. They will recognise that in these accounts is represented the real and one of the most important portions of the work of this House. I think the more they see of these accounts the more grateful will they feel, not only to the Public Accounts Committee, which looks into the matter, prepares the Reports, comes to conclusions, but also of that most valuable officer the Comptroller and Auditor-General. Here let me remind the House, and let me also perhaps remind the Comptroller and Auditor-General, that he is two persons in one. He is not merely Auditor-General of the Accounts of the Empire, but he is also the Comptroller of the Exchequer issues. And if in one capacity it is his business to see that the expenditure, when it is ended, completed, and balanced, is accurate and is justified, in his other capacity it is his business to see no issues are made through the Exchequer, not even by the authority of a Minister of the Crown or all Ministers together, unless warranted by law. I await with interest and indeed with some delight the moment when the Comptroller shall refuse some improper issue demanded of him by a Minister of the Crown. It happened before, and it 1255 may be that it will happen again, and I trust the Committee will remember that we have the security of that officer—not merely the security of a proper audit of the Accounts, but the more important security, the power of preventing issue from the Exchequer not warranted by law.
§ Sir JOHN BRIGG
After the speeches which have been addressed to the Committee by the hon. Member for King's Lynn and others, it is not necessary for me to go into details in regard to the matters contained in the Report. As a Member of the Committee I am exceedingly glad that the Committee have had this opportunity of bringing their affairs before Parliament. This Committee is really one of the most important Committees appointed by Parliament, and it is an exceedingly good thing that its work should be made known not only to Members of the House of Commons but through them to the country generally. The presentation of the Committee's work to Parliament is an encouragement to the Members of the Committee, and must have a beneficial effect upon the officials who have to do with the spending and the handling of money from day to day. Hon. Members connected with large business concerns must know that the handling of money requires—I will not say careful watching—but careful supervising. There are young Members in the House who may, perhaps, think that the Public Accounts Committee should do more in the way of controlling expenditure by Parliament in the interests of economy, but as most of the older Members of the House know perfectly well, it is not in the power of the Committee to do so. The duty of the Committee is simply to see that the money is spent as it was ordered to be spent by Parliament according to the Estimates. The Committee, however, manage to do more than that, for instance, they succeed in reconciling the various Departments when differences arise between them, and they also give advice, and they make suggestions, which I have no doubt are acted upon.
The Committee during the past year held thirteen meetings, and addressed no fewer than 2,682 questions, and examined forty or fifty witnesses, including heads of the spending Department, and, incidentally, they reconsidered an amount of Departmental action, and they made numerous suggestions of improved methods of Departmental work. We would like to see 1256 the Estimates better discussed by Parliament, and, indeed, there may come a time—it is not now, for we are too busy spending and enlarging salaries—when economy and efficiency may once more become the watchwords of the House of Commons, and when the same feelings which existed in past years, namely, anxiety for economy may again be shown. I find that in 1899 a Commission was appointed consisting of seventeen Members for the purpose of looking into these things, and for the purpose of examining the Estimates, and reporting upon them, and upon their Report they should be either recommended to the Committee of Supply, or submitted direct to the House itself, or to a third Standing Committee, to which, on a Vote of the House of Commons, Votes might be referred. The Committee included Lord Hartington, Mr. Chamberlain, Lord Randolph Churchill, Sir Henry Fowler, Mr. Shaw Lefevre, the hon. Member for East Mayo (Mr. Dillon), Sir Matthew White-Ridley, and others. When such a time does come the Members of the Public Accounts Committee, as far as I know them, will be the very first to support a movement tending towards economy and efficiency.
§ Mr. WALSH
I rise with some little diffidence to speak at all on the matter before the itouse. I have listened with very-great care indeed to the Report of the hon. and gallant Member (Colonel Williams), who is the Chairman of the Public Accounts Committee, and I think nothing could really have been better than the statement he has given to the House. I have listened also to the very excellent speech of the hon. Member for King's Lynn (Mr. Gibson Bowles), and I find myself in very hearty agreement with a great deal of what he has said. What has struck me most in attending the Committee has been what I might describe as the prevalent note of sadness or of depression at its meetings. We are always two or three years after affairs. We are trying to overtake faults that have been committed eighteen months or two years before, and we are overhauling accounts with which it is quite impossible to deal effectively. We were sitting in March this year, and we were dealing, I think, with accounts dating back as far as 1907. In some cases there had been embezzlements of cash, misappropriations, and so on, and we were interrogating the officials who were brought before us as to why the 1257 matter had not been attended to earlier. I found myself dealing with accounts over which there was no possible chance of exercising any effective control. That is the reason why I say that to me the note in that Committee is one of depression and of gloom. You are really quite incapable of exercising any effective control or of seeing that the money voted was used for the particular purpose Parliament intended. If you put a question to the very excellent permanent officials who attend, they say, "Well, such a thing occurred," or "There were Supplementary Estimates to meet that," and you find yourself hamstrung and incapable of dealing effectively with anything at all.
We were told by the hon. Member for King's Lynn that the Committee might be looked upon as magnificent scarecrow. I hardly knew whether the Committee were to take that as a compliment or a reproach, but I think he intended it as a compliment. Most scarecrows have one fault. The birds very soon become used to them, and take no notice of them. I am a little afraid that that, after all, is the measure of estimation in which the Public Accounts Committee is held. I am in thorough agreement with the remark of the hon. Member that if the Committee is to be really effective it will have to be instituted at the beginning of the Session to deal with the accounts of that Session. It may be said that would lead to an interference with Ministerial responsibility, but the responsibility of this House, in its collective capacity, is greater than the responsibility of any individual Minister, and, if this House is to become anything like the faithful custodian of the financial interests of the country it ought to be, it will have to deal with the year's accounts at the beginning of the financial year, and not as at present, two or three years after the money has been expended. That is really the reason why I have spoken at all. Nothing could be better than the spirit in which the permanent officials have given their evidence, and nothing could be finer than the way the Comptroller and Auditor-General sits there day after day and gives us of his information to the very fullest measure, but we are practically phantoms, and have no effective control. We cannot say that the money has been expended in accordance with the declarations of Parliament, because we deal week after week and day after day with accounts that have disappeared into the vanished past of two or three years 1258 ago. I think the House ought to put an end to that state of affairs as speedily as possible. It may be the fact that Parliamentary responsibility, which is the very esence of our proceedings, is maintained by the existence of the Public Accounts Committee. In theory that may be all right, but the practical effect is nil. I do really believe the hon. Member for King's Lynn has made a very valuable suggestion, and I hope it may be brought into operation. The Public Accounts Committee, or whatever Committee is instituted by this House, should begin its work at the commencement of the Session and deal with the accounts for that Session. I believe it is only in that way that the Public Accounts Committee can be anything more than the magnificent scarecrow it has already been described.
§ Mr. COURTHOPE
The hon. Gentleman who has just sat down has a little confused—I say it without the slightest intention of offence—the functions which the Public Accounts Committee now performs, and which they are intended to perform, and the functions of the Committee which some would like to see, and which others would not like to see, set up to deal with the Estimates. At the first two sittings, at all events, of the Public Accounts Committee in the present year, there was very general complaint among the Members because we were called together to consider accounts too soon after the Appropriation Accounts were circulated. I know, personally, I found myself in great difficulty in finding time to study the accounts which we had to sit upon in the short interval which elapsed, and which in one case was only something like twelve hours. There was therefore no waste of time so far as the Committee was concerned, and I think if the hon. Gentleman will look at the Appropriation Accounts which we examined, he will find from the date in the appendix and from the date of the Report of the Comptroller and Auditor-General that no time was wasted either by his Department or by the Stationery Office in producing the accounts in the form in which they came before the Committee. I have no desire to follow my hon. and gallant Friend, who made such an excellent speech on this subject, in his general remarks. I only wish to refer to one Department, the Post Office, and I think the Committee have been more than justified in being more severe upon the system of accounts in vogue at the Post Office, or I might almost say 1259 the systems of account, because there was a confusion on several systems. The Postmaster-General has just brought fresh energy into his Department, and I hope that while he is still a new broom he will live up to the character a new broom is supposed to possess, as far as the system of accountancy in the Post Office is concerned. I do not propose to be guilty of impertinently suggesting any lines on which he should proceed. I do not believe any Member of the Committee has a word to say against the accounting officers of the Post Office; what they are against is the system. The officials who are unfortunate enough to have to deal with the accounts are good men struggling to get order out of hopeless confusion, caused by bad rules or the absence of rules. I want to refer to one or two statements made by the Comptroller and Auditor-General, both in answer to questions and in his comments, in order to show that what I say about the Post Office accounts is correct. In answer to the hon. and gallant Chairman (Colonel Williams) the Comptroller and Auditor-General says of the present system:—You cannot get the exact figures, and therefore the main accounts will be incorrect or uncertain to that extent.He was then asked:—As far as you can ascertain the accounts you are satisfied with them?—Yes.There are inaccuracies which you cannot unravel, which are inherent in the adoption of the present Post Office system?—Yes; we know there are inaccuracies, but we cannot say how far they extend.Later on he was asked further on this point as follows:—It is not carelessness or bad administration of the system, but the result of the system itself?—It is very difficult to audit. Under the improved method of accounting which the Committee have recommended the auditing will he very much easier—in fact, we have already been able to look into things better.Again I asked the Comptroller and Auditor-General:—How did it arise that it was impossible to determine whether particular wires, which were spare on the 31st March, 1907, were laid down under vote or capital?He answered:—The explanation is to be found. I think, in the various—two or three different—systems that the Department has followed in allocating cost.The fact is, it is impossible in the matter of works, spare wires, condemned stores, and in such matters as the allocation of the cost of labour, to divide capital expenditure from current expenditure. It is manifestly sad that such a thing should continue, and I hope the right hon. Gentleman will see his way to make a clean 1260 sweep of the system. I do not believe tinkering will do any good; you must establish a sound system of accounting in the Post Office to bring it up to the comparatively high level reached by some other Government Departments. Speaking generally, these inaccuracies and difficulties arise in connection with condemned stores, spare wires, conduits for underground works, and labour charges in connection with telephone instalments. Indeed, there are so many complications that I think the only way to deal with it is by a complete recasting of the system under which the accounting is done. There is another point I should like to touch upon, and that deals with the desire to keep information back. Mr. King was asked about paragraph 19 of the Appropriation Accounts dealing with the capital account for telephones and telegraphs. He said:—There has been no capital account for telegraphs since the purchase of the property of the Inland Telegraph Companies in the seventies. To establish a capital account for telegraphs would have involved the valuation of the assets of the undertaking at the present time and the interdepartmental Committee on which I sat. on which the Treasury were represented, and on which we had Mr. Peat, the then President of the Chartered Accountants, recommended in the circumstances that it was not worth while to incur the huge expense of a valuation, and that for telegraphs we should dispense with the capital account. One reason why that was recommeuded was that we knew the loss was about a million a year, and it was not very encouragingIn other words, if they told the truth they would have to show a loss, and therefore they preferred to keep the House and the public generally in ignorance of what it amounted to. Surely that is a very reprehensible line for any Department or Departmental Committee to take upon so very important a matter! There is a question I wish to put to the Financial Secretary to the Treasury arising on paragraph 33 of the Committee's third Report, and dealing with inter-departmental transfers of land. It appears that the Post Office, contrary to rule, paid the Office of Works a sum of £l,500 in consideration of the surrender of certain land, and it transpired in the course of the cross-examination that this payment arose owing to a misunderstanding between the solicitor to the Treasury and the solicitor to the Post Office, and consequently the payment was made to the Office of Works by the Post Office, apparently at the request of the solicitor of the Office of Works, who is also solicitor to the Treasury. I think it is exceedingly reprehensible that a payment should be made under these circumstances, as it was contrary to existing rules. Officials holding such important positions should be aware of the rules which 1261 govern transactions between Departments. I do not blame the Post Office because the payment apparently was demanded, but I do think the Post Office ought to have had a record of the rule, which really dates back to 1856. But they had no record of it. The principal blame, I think, must attach to the Treasury, because all these transactions must have passed through the hands of the Solicitor to the Treasury himself, and many of them must have taken place between the Departments. They therefore should have been aware of the rules which govern these transactions. This mistake has had no important result, because it was discovered by the Treasury before it had gone very far, and it has been rectified, but I do hope that steps will be taken to see that rules which are in force will be strictly observed before the transaction is entered upon. One other unimportant point—a point of triviality, and then I have done—it applies more or less to all Departments. There seems to be a tendency towards a very incongruous grouping of the accounts, and it would be convenient that the grouping should be of similar subjects rather than of extremely incongruous subjects. This sometimes leads to ludicrous results, and I found that one miscellaneous item in the Appropriation Account for the Navy dealt with the entertainment of Royalty and the training of carrier pigeons. I do think it would be better if the Department concerned would attend a little more to the suitability of the different subjects which they group together.
§ The POSTMASTER-GENERAL (Mr. Herbert Samuel)
Although the House consists for the moment of but few Members, I feel convinced that the discussion which has been commenced to-day is one of very great value to the finances of the country, and also to the efficient administration of the various Departments. Speaking on behalf of one of the great spending Departments of the country, I can say that so far from resenting, we are most grateful for suggestions and criticisms made with a view to improving the methods of accounting. I know from what has been said to me by officers in my Department and by others that the Reports of the Public Accounts Committee and the discussions in this House have a very real influence upon the Departments, although it is true, as one hon. Member remarked, that they come in after the fair and deal with the accounts that are passed. Still these reports 1262 and criticisms have very great effect in moulding future administration in these matters in the various Departments in the years to follow. The hon. Member for Rye (Mr. Courthope) has criticised the Post Office accounts on the ground of the complications that arise in them in discriminating between what ought properly to be regarded as capital and as current expenditure, and the difficulty which arises of separating the charges into these two heads. It is only possible to explain the present system by going back to the reasons for that system. The Post Office carries on its business in three main departments—the postal, telegraph, and telephonic departments. The postal department of the Post Office has no capital account—it never has had a capital account—and in going back, therefore, to the origin of the State Post Office you find that expenditure has always been paid out of annual revenue. There have been no loans to create a capital account, and at this time of the day it would be impracticable to do so.
§ Mr. GIBSON BOWLES
Does not the Post Office take credit for the value of its buildings in the Treasury Account?
§ Mr. HERBERT SAMUEL
Not for the capital value in so far as it relates to postal matters. I shall come to the telegraphs and telephones. There are three systems which I am about to explain. So far as the postal business of the Post Office is concerned, there is not now, and never has been, any capital account, and there is not any expenditure which has been paid out of loans, and, as I said, to attempt to establish a capital account to-day is quite impracticable. To attempt to value the assets of the Post Office for capital purposes would be a vast undertaking, and there would not be any commensurate advantage to be achieved.
§ Mr. HERBERT SAMUEL
Yes, I know, but we do not want to engage in this valuation for any purpose which is not likely to bring in revenue or to be of use to the community. The hon. Member opposite suggested that the absence of a capital account for the Post Office was really uncommercial, and if it was not a question of falsification of accounts, it was at all events misleading, because we had no figures of depreciation in our accounts which those of a commercial company 1263 would naturally include. The case is really the opposite, for if we had had a capital account for the postal side of the Post Office, and if we were to put by year by year-a sum for depreciation on the one hand and were not to include in our expenditure what is really capital expenditure for new buildings and so forth on the other, we should be able to show very much better accounts; we should be able to show an even larger profit than we do now; and the reason is that the money voted each year for present needs is considerably more than the money which would be placed to the depreciation account to make good past expenditure. The reason for that is obvious; it is that the Post Office business is continually growing and our annual expenditure for permanent purposes, buildings, and so forth, is much greater than in years gone by. Therefore, the sum that we vote to provide for these permanent buildings and so forth is greater than the sum which we should vote for depreciation in regard to past capital expenditure. Our accounts err, as I said, if they err at all, by being over-cautious, and include larger sums for the depreciation on the capital account than private firms would make. So much for the Post Office service.
Then as to the telegraphs. When the telegraphs were taken over from the companies by the State, about forty years ago. Parliament granted by various Acts a sum of rather more than £10,000,000 for the purchase and the development of the system, which immediately followed, and that being voted from borrowed moneys, has been recorded as capital expenditure. It should have been repaid, of course, year by year—that was the intention—out of the profits of the telegraphs, but as the telegraphs have not realised profits, the sum of £10,000,000 stands as capital liability. But as soon as the purchase was completed and the immediate large extension which followed had been made, these telegraphs reverted to the normal system of the Post Office, and all the future expansions of the system were paid for out of the annual Vote. Therefore there is no addition to the original capital account for the telegraphs. The capital account stands as it stood originally, at about £10,000,000, and since that time there has always been the same system prevailing in regard to telegraphs as in regard to the postal side, that the increase in the growth of the system, enlargement 1264 of buildings, underground cables, or whatever it may be, should be paid out of the annual Votes of the year, just as in the case of the Postal Service.
§ Sir FREDERICK BANBURY
Do I understand the right hon. Gentleman to say that after the purchase of £10,000,000 was made large developments occurred, and that it was not until those developments had occurred that the system which is in use in the Post Office was applied to-the Telegraph Office—that is to say that the money spent upon the development has apparently disappeared and been added to the £10,000,000?
§ 2.0 P.M.
§ Mr. HERBERT SAMUEL
The purchase money paid to the companies and the expenditure by the Government following that purchase constituted almost one transaction, and the £10,000,000 covered both. As soon as the telegraphs became normal—that is to say, when there was a normal annual growth in consequence of the growth of business and the gradual extensions made in different districts— as soon as the financial outlay became normal, then the annual expenditure was met out of the annual Votes, and there was no increase on the £10,000,000 capital account. The hon. Member for Rye (Mr. Courthope) quoted a remark made by the Comptroller and Accountant-General of the Post Office before his Committee, and he drew from that remark the conclusion that this system was maintained apparently in order to conceal the fact that there is an annual loss on the telegraphs of about £1,000,000 a year. But I think the hon. Gentleman quite misunderstood the remark that was made by the Comptroller and Accountant-General, for there is no concealment in regard to the loss on the telegraphs. It appears frankly stated in the annual accounts presented to-Parliament by the Postmaster-General. I see that on page 9 of the last accounts of the Post Office presented to Parliament by my predecessor last December the total deficiency of the year on the telegraphs was stated to be £1,046,757, so that there is no attempt whatever at any concealment in this or indeed in other matter relating to the accounts of my Department. When we come to the question of telephones, the relation of the Post Office to telephones is much the same at this moment as its relations was to the telegraph at the time, forty years ago, when the telegraph system was bought and was rapidly developed by the Post Office. Vast sums 1265 are being expended upon the creation of a Post Office telephone system, and another further vast sum will be required within the next two years to pay the National Telephone Company what may be determined to be the value of their plant for the purposes of the Post Office. So long as these immense capital expenditures are being made it is obviously impossible to defray them out of the annual Vote. It will be at once clear to every Member of the House that we cannot provide in one year for £5.000,000 or £6,000,000, or whatever sum it is, that is needed for the creation of the Post Office telephone system, or the purchase of the National Telephone Company's system. Therefore, it is essential that there should be a capital account to start the Post Office telephone system. I notice that the hon. Member for King's Lynn (Mr. Bowles) is smiling—I do not know whether it is at the complicated state of the finances of these various undertakings, but I think it would tax even his financial ingenuity to devise any other means by which you can, at one and the same time, continue the ancient Post Office system, paying for annual expenditure out of annual Votes, and, at the same time, undertake a great new business such as the creation of a telephone system without having a capital account. A capital account being created for the telephones, while it does not exist for the present extensions that are going on in the telegraphs a complication is obviously created, and it is a task, undoubtedly, of difficulty, to separate, in any given case, how much expenditure on an underground cable, for example, which is to be used both for telegraphs and telephones, is to be regarded for the purposes of telegraphs, and, therefore, to be paid for out of the Annual Vote, and how much is to be regarded as expenditure for the telephones, and, therefore, to be paid for out of the capital account for the telephones. It is necessary to make that discrimination. You cannot get away from it; you cannot treat them as one matter. You cannot say, "We will put all this into capital," because, if you do, then you will be recreating the telegraph capital account with which Parliament dispensed many years ago. You cannot say, "We will put all this in the annual expenditure," because, if you did, you would be giving a false impression of what is really the cost of creating the Post Office telephone system. Therefore, you must discriminate 1266 between the two, and, as I say, the complication arises to which attention has been called. The distinction which is being made is not so much a distinction between what is capital and what is current, as between what is telephone and what is telegraph, because what for telephone purposes is capital, for telegraph purposes is current. These difficulties-arise in the case, for example, of underground cables. An underground cable may contain fifty wires, twenty for telegraphic purposes, perhaps, and thirty for telephonic purposes. When the cable is-laid down, the officers of the Post Office will not be able to say precisely how many will be used for the one purpose and how many will be used for the other. The accounts for that reason cannot be exact. Similarly that is the case with regard to the erection of a new line of poles, which may be used partly for telephone purposes, and partly for telegraph wires. Similarly, also, is it with regard to buildings.
§ Mr. HERBERT SAMUEL
Yes. Since the last accounts were laid before the Public Accounts Committee a new system has been created for introducing the maximum of certainty into these questions of accounting; and the Public Accounts Committee have expressed their approval of this new system. It is this: When these mixed works are being carried out they are in future all to be financed, temporarily, at all events, out of the Vote, and after they are completed, and when it becomes more clear than it can be at the outset, how many are really on telegraphic account, and how many on telephonic account, then the allocation can be made between current expenditure and capital expenditure, and I think that that will introduce the maximum of certainty into these accounts. This system, with all its complications, is, however, necessarily only temporary, and only exists so long as we are in process of building up this great new business of State telephones. As soon as the National Telephone Company's system has been purchased by the Post Office, and as soon as our initial expenditure has come to an end, then, as in the case of the telegraphs, this complication may be swept away. We may be able to say our telephone system has cost £20,000,000, or whatever the sum may be. A sinking 1267 fund has been created, and then the telephones, as in the case of the telegraphs and of the postal service, will revert to the normal system of finance, an annual expenditure, whether it be for permanent purposes which might be regarded as capital expenditure, or whether for temporary purposes, which might be regarded as current—all these expenditures will be paid for out of the annual Votes of Parliament. Parliament will no longer be asked to vote borrowed monies, and the complications which now exist will disappear in the case of the telephones as they have already disappeared in the case of the telegraphs. I do not think it is necessary to go with so much detail into the allocation of annual expenditure between the three services. I may say, however, where the service is mixed, when, for example, a new building is put up which is to be used partly for postal purposes and partly as a telephonic exchange, it is necessary to allocate the costs between the three services, in order that Parliament should know what really are the items of expenditure on the postal, telegraphic, and telephonic services respectively.
§ Mr. GIBSON BOWLES
You say you have these three services. In one instance you have a capital account, in another instance you have not?
§ Mr. HERBERT SAMUEL
As I explained, the postal and telegraphic services now have no new capital account. The telegraphic service has an old capital account; it is a fixed amount, and it does not increase. The postal service has none. The telephonic service has a capital account, and when a new building is erected so much of it as is postal is regarded as paid for out of the annual Vote, and so much of it as is telegraphic, while the telephonic percentage is put to the telephonic capital account. Of course, when the telephonic capital account is closed, the whole matter will be settled. It really does not make very much difference. There is no difficulty or complication at all. The difficulty is to determine what proportion should be postal, what proportion should be telegraphic, and what proportion should be telephonic. That is determined on methods which are laid down by an interdepartmental committee, which meets at intervals and adjusts the relations. Every three years this committee decides how much is to 1268 be regarded as postal on the one hand and telegraphic and telephonic together on the other, and the present proportion is 77 per cent, postal and 23 per cent, telegraphic and telephonic. Then each year it is decided how much of the 23 per cent, is telegraphic and how much telephonic, because the relations between the two vary much more rapidly than between the postal and the others. Of the 23 per cent., the proportions now are 3¼ per cent. to be regarded as telephonic, and 19¾ per cent, to be regarded as for the purpose of telegraphs. Those proportions vary each year, and are gradually being altered according as the telephonic system grows in proportion to the telegraphic and the postal. That is how those allocations are made. We do not go carefully into each item and endeavour to say how many rooms of a building are to be regarded as for telephonic purposes, how much of the roof is to shelter the telegraphists and how much to shelter the postal sorters, but a general rule is laid down, and these percentages are taken as the guiding percentages for dividing the total amount between the three services.
Then the hon. Member (Mr. Gibson Bowles) made some criticisms, couched in rather severe terms, of certain items in the Post Office account. First, he said that the Post Office is so inefficient that it makes a loss where the National Telephone Company makes a profit. Let me point out, in the first place, that the Post Office came later into the field, and all the cream of the telephone business throughout the country is, and has been for some time, in the hands of the Telephone Company.
§ Mr. HERBERT SAMUEL
It may be partly Post Office inefficiency, but not the Post Office of the present day. Or it may be that the Post Office did not wish rashly to rush into the telephonic business until private enterprise has proved that it was valuable to the country and profitable. The fact remains that while the National Telephone Company has a profitable business in the large towns and in the commercial centres, the Post Office is gradually extending its service into the smaller towns and villages, and therefore cannot expect at present to reap so large a profit. Secondly, the Post Office has laid by, year 1269 by year, out of profits, a very large sinking fund, to repay the capital account. We pay the whole of it in fifteen years, which is a very conservative estimate considering that land and buildings are included.
§ Mr. GIBSON BOWLES
What is done with this sum which is laid by as a sinking fund? Does it escape the rule that gross revenue should be paid to the Exchequer.
§ Mr. HERBERT SAMUEL
No, it goes into the Treasury and repays the annuities which have been raised for the purposes of the telephone capital account. This year our accounts show a very large increase. I think several tens of thousands of pounds are shown in the expenditure of the Post Office, because we have this year a large increase of payments to the Treasury for the repayment of these annuities. The hon. Member then, again, condemned the Post Office for withdrawing from the knowledge of Parliament a sum of about £2,600,000, which is not paid into the Treasury but is paid out of revenue direct to railway companies and others. In the first place, I must demur to the suggestion that this sum is withdrawn from the knowledge of Parliament. Here, again, the sums are clearly stated in the accounts appended to the Annual Report of the Postmaster-General and every sixpence of it is disclosed.
§ Mr. GIBSON BOWLES
Perhaps I overstated the case if I said it was withdrawn from the knowledge of Parliament. That is not what I intended. But it is withdrawn from the control of Parliament and it escapes the rule of the Exchequer and Audit Act, 1866, which prescribes that the gross revenue of the Post Office is to be paid to the Exchequer.
§ Mr. HERBERT SAMUEL
These are not really gross revenues of the Post Office, and with respect to some of them the Statutes indicate that they should be dealt with as they are now being dealt with. The largest item is about £1,000,000, which is paid by the Post Office to railway companies in respect of parcel post. That is done under a specific provision of the Parcel Post Act, which says that 55 per cent of the postage received shall go to the railway companies for the carriage of parcels, and the Department, with the approval of the Comptroller and Auditor-General, has held—and the rule has never been challenged—that this 55 per cent, does not really belong to 1270 the Post Office at all. We have not a contract with the railway companies, and we do not say, "We will pay you this lump sum per annum, which shall be laid before Parliament, and we shall put into our own pockets all the threepences and sixpences which come for parcels." We have to pay 55 per cent, of the parcel post receipts, whatever they may be, to the railway companies. Therefore this 55 per cent. is not Post Office revenue. It really belongs to the railway companies from the outset in consideration of the services that they render. That was provided for in the Parcel Post Act at the time of the establishment of the parcel post.
Similarly with regard to the £400,000 which is collected by us on behalf of foreign and Colonial post offices. There are many services in which the sums received for postage are allocated from the beginning to different purposes, especially with regard to parcels. For example, on a parcel from England to France it may be arranged between the two countries that 3d. is for the English domestic postage, Id. for the Channel crossing, and 4d. for France, or whatever the proportions may be. It would be very misleading if we were to regard the whole of the 8d. in such a case as Post Office revenue, and then, on the other hand, say that the Post Office expenditure consists of Id. paid to the cross-Channel company and 4d. paid to the French Post Office. That 4d. never really has belonged to us; it is not Post Office revenue, and therefore ought not to be included in our accounts. This view is approved by the Comptroller and Auditor-General, who has full knowledge of all the circumstances. The next large item is £600,000 which the Post Office pays to the Board of Inland Revenue, because our adhesive stamps are for both postal and revenue purposes, and this £600,000 a year is the value of stamps which are used for revenue purposes. It would be grossly misleading if this was regarded as Post Office revenue and expenditure; it is Inland Revenue receipts, and is so regarded and accounted for to Parliament by the Board of Inland Revenue. We make the payment of £600,000 to them. We are merely agents for the Board of Inland Revenue. We collect their money for them through the Post Office, and it would be quite wrong to present this £600,000 to Parliament as if it were part of the Post Office accounts.
Lastly, we are agents for the cable companies, and we pay over to them the 1271 amount we receive for foreign telegrams, less the Post Office charge. When a member of the public goes to a post office and pays 2s. a word for a cablegram to India, only halfpenny of that really belongs to Post Office. That is the charge made by the Post Office for dealing with the cablegram in this country, and 1s. 11½d. belongs from the beginning to the cable company. That is not Post Office revenue at all, and the expenditure is not Post Office expenditure. I do not agree that we should regard the whole of the 2s. as Post Office revenue, and that on the other hand the 1s. 11½d. should be treated as Post Office expenditure. Then, indeed, our accounts would be misleading, and I think the hon. Member for King's Lynn would be the first to complain that we were presenting figures which merely represented agency business and which ought not to be included in the accounts of the Post Office.
§ Mr. GIBSON BOWLES
The system which has been pursued with regard to all these items which the right hon. Gentleman has just mentioned is the old system under which the Revenue Departments deducted the cost of collecting revenue and paid over the balance into the Treasury. That was regarded as so vicious a system that it was abolished from all Departments in 1866, and then for the first time the Revenue Departments were ordered to pay in the gross sum. This sum was deducted, no doubt, by Statute, and lawfully, but it is an exception to the general rule in the case of the Post Office. The only true and beneficial rule is that the gross revenue should be paid in and that nothing in the shape of expenses should be deducted.
§ Mr. HERBERT SAMUEL
And that rule is observed so far as the Home Post Office revenue is concerned. We do not pay over merely our balance. We pay to the Treasury £23,000,000, and we get from the Treasury £20,000,000 for our expenditure. We have contracts with the railway companies, and the amount appears in the accounts. We go to the Treasury for the money, and we give the Treasury our receipts. In this case—of the Parcel Post for example—we have not a contract of such a nature, but part of the receipts is looked upon from the beginning as the railway company's. In the view of both Departments— that of the Comptroller and Auditor-General, and that of the Post Office— 1272 these sums ought not to be put into the Post Office accounts. And so it is also in the case of the cable companies. I was anxious to make a full statement in regard to the various important points raised by the hon. Member for King's Lynn, who for many years has rendered valuable public service in this House as a Member of the Public Accounts Committee, and who, though not now a Member of this Committee, still continues to take an interest in its proceedings and to draw the attention of Parliament to the important matters of finance with which it deals.
§ Mr. ASHTON
I am sure we were all very much interested to hear the speech of the Postmaster-General. I was extremely glad to hear what the right hon. Gentleman said about the telephone capital account and the telegraph capital account. I am glad to know that there is to be a sinking fund for the telephone account, because in these scientific days changes are always being made. We know that the Marconi system might take away a very large amount of the telegraph capital account, and I am sorry to hear that there is to be no sinking fund there also. I want to emphasise what has been said by my hon. Friend the Member for Dorsetshire (Colonel Williams) as to the Public Trustee. There is no doubt that the appointment of the Public Trustee has been amply justified by the results. It has been clearly shown that there was great need of such a public officer. This must be evident to everybody who recognises that the Public Trustee, although in office for a very short time, has already the control of something like £7,000,000 of public money. I think he informed the Public Accounts Committee that in respect of more than half of the amount he in sole trustee. That being the case, he has enormous investments to make.
§ Mr. ASHTON
I think he said he was sole trustee for more than half of the money and more than half of the estates. That being so, he has control of enormous sums of money, and has to make very large investments indeed. Of course, he is limited by the investment clauses of the trusts he administers, and in cases where he has no trustees associated with him of course he has the right to decide in what securities these moneys will be placed. 1273 Two points arise which deserve consideration in view of the great responsibility of the Public Trustee. There is absolutely nobody to control or supervise those enormous investments. He informed the Public Accounts Committee that very often where he is sole trustee he does consult with the beneficiaries under the trust, but he is not bound to do so. It is quite conceivable, although at present we have a very distinguished man as Public Trustee, that might not always be the case, There is absolutely no check that even the present holder of the office does make investments within the limits of the trust deeds. I think there ought to be some supervision by some authority to see that he carries out those trust deeds and invests within the prescribed limits. Even supposing that the Public Trustee does carry out the provisions of a trust, he can make investments in practically anything coming within the trust, and I should think myself that that is placing too great a responsibility and too great a power in the hands of any one man without supervision. So long as he acts within the provisions of the trusts he may invest in anything yielding, say, 6 per cent., without anybody or any authority having one word to say as to whether it is a cautious investment which ought to be made. I feel strongly that in some form or another there ought to be some supervision. I think the Treasury is probably the authority which should see that the investments are such as ought to be made for trust purposes. If the Treasury does not feel called upon to act in that way, I would suggest that the Public Trustee should issue annually a list of the securities in which he does invest so that comment could be made on the class of investments which he chooses. I admit that it would not do to issue a list of the securities he holds, for the reason that they are not all investments made by himself, but investments which he had to take over with the estates, whether they were desirable investments or not, which he might be gradually realising; but if he had to issue a list of the securities in which he himself had made investments I think it would be a very good thing, or if that were not done either the Treasury itself or a Committee should supervise the investments in some form or other.
§ Captain JESSEL
I quite agree with the hon. Member who has just sat down as to the advisability of having some Treasury or other control over the question of the investments made by the Public 1274 Trustee. I have the pleasure of knowing the officer in charge of this Department, and a more able and energetic person, I think, does not exist in the Civil Service. But at the same time I think it is too great a responsibility to place on any one person, to give him sole charge over £3,500,000 of public funds. Of course, there is a great difficulty, because he is in charge of all sorts of securities—mining shares and others—which he has to dispose of. And it is very difficult for him to dispose of those at once, and it would be still more complicated if he had to give lists of the investments that he holds as Public Trustee. I think we are very much indebted to the hon. Member who started the interesting discussion on the Post Office, which led to the very clear and lucid speech in reply from the Postmaster-General. At all events it illustrates the good work this Committee has done in supervising the public accounts of public Departments, because we have had the admission from the Postmaster-General that even he is not satisfied quite with the way in which accounts are presented before the Committee, and he has informed the Committee that in the coming year some better disposition will be made showing how the accounts are kept, especially with regard to new telephone and telegraph services. The Postmaster-General drew attention to the fact that the House was not very full on this occasion, in spite of the fact that for some years there has been a great disposition on the part of many Members of the House to demand a day for a public discussion of these accounts. I do not think it is very surprising the House is not very full, because, in the first place, these accounts were not issued until Monday or Tuesday of this week, and not very much time was given to hon. Members to study this rather portentious Blue Book; also we must recollect that to-day is Friday, and at the week end many Members are more disposed to talk about perils and extravagance in the abstract than to sit down and see how they can assist the work of the Committee by criticism to show how the various spending Departments of this country can be kept in check.
The matter to which I rose to draw attention was the question of reserve of stores in the Navy. On page 5 of the Committee's account there is a very interesting paragraph:—With regard to the suggestion of your Committee that the Admiralty might furnish;a certificate on 1275 similar lines to that given by the members of the Army Council, your Committee now learn that the same conditions do not apply to the Navy, and that as, with the exception of a few special cases, there are no separate war reserves such as can be ear-marked and separately stored, such a certificate cannot be given by the "Admiralty.If that paragraph in the Committee's Report were widely known, it would somewhat alarm the public, as they would be under the impression that the Admiralty had no war reserve at all. Either that is the case or it simply means that there is no particular and separate account kept between the stores for ordinary use and those stores which are required in time of war. I think it is very unhappy phraseology on the part of the Committee. I am sure if the Secretary of the Admiralty will elaborate what I have said, his explanation would tend to dispel a certain amount of alarm which naturally must be caused by the Committee's Report as it stands. Passing away from that, a very serious matter is disclosed as regards the War Office, on page 9, and I am sorry that the hon. Member who represents the War Office is not in his place. The Quartermaster-General and the Master-General of Ordnance say:—We certify that on 31st March, 1909. the authorised war reserves and stores, for the provision and maintenance of which we are respectively responsible, were in all respects complete, with the exception of temporary deficiencies to the extent of about £159,000.That is a big figure. We are told these are temporary deficiencies. That seems to me a rather wrong method on the part of the War Office, because, in answer to a question on page 73, we see that a War Office official says:—I think it is perhaps useful in this connection to go back to the broad purpose of the certificate, which I have always understood to be to see that the Government did not unfairly reduce the estimate for a particular year by consuming its stock or living on its fat, so to speak.The question the public must be interested in is that the reserve of stores under the War Office has been greatly reduced. We want to know why there has been this big deficiency up to May, 1909, and the further question naturally arises as to the condition of the stores. Take, for instance, the somewhat alarming statement in the papers the other day about the cordite. It was stated by Mr. Arthur Chamberlain that the Government were accepting cordite that did not pass the Government test. I do not know whether this applies to the Army or the Navy. He went on to say that the magazines in this country were not as full as the safety of 1276 the country required. We have the admissions of the two members of the Army-Council who are responsible that there is this big deficiency in stores, and at the same time we are told by a gentleman who does not belong to the party on this side of the House, a prominent manufacturer, Mr. Arthur Chamberlain, that the Government are neglecting their duty, and that not only are we not having the magazines full, but also that they are taking a cordite which is not up to sample and would not pass their own test. We should have some explanation from the Government of this state of affairs. Question 1,020 relates to the War Office and certain reserves of stores—swords, bayonets, and pistols. Sir John Kempe said:—It is stated that there is no formal authority laying down the number of swords, bayonets and pistols to be held as the war reserve. Is that so?The answer of the witness (Mr. Harris) was:—What Sir John says is correct. The Army Council has not so far seen fit to order that any reserve of bayonets or pistols or swords should be authorised. When it decides to do so, those items will come within the scope of the certificate, but it has not yet done so.After all the discussions that have taken place in this House, and the attention which has been called in public to the deficiency of stores, I do think we should have arrived at a more satisfactory state of things than is referred to in this Report. Complaint has been made as regards the lateness at which these accounts are presented to the Committee. It is unavoidable, of course, that in any great Department there should be a certain amount of delay, but I do sympathise with the remark that there must be a certain feeling of unreality in the proceedings of the Committee when the accounts submitted to it are so much behindhand. I do hope before the sitting closes we shall have some explanation of this deficiency in stores both for the Army and Navy, and I do think that the discussion we have had to-day will serve a great and useful purpose.
§ Sir F. BANBURY
My hon. Friend does not realise the object of the creation of the Public Accounts Committee. It was appointed for the purpose of seeing that the money voted by Parliament had been properly spent. It was not created with a view to seeing that something should be done which had not been done, but was established for the necessary and useful function of examining the expenditure of public money, and if officials spent money otherwise than in the manner prescribed 1277 by Parliament they would be liable to be brought before that Committee to justify the expenditure. If the Public Accounts Committee did not exist, Parliament would simply vote the money, and there would be nobody to ensure that it had been spent in the way Parliament had indicated that it should be spent. I have had the honour of sitting on the Public Accounts Committee for a number of years, and I must say that I quite agree with everything said by the hon. Member for King's Lynn in eulogy of that Committee. It is the only Committee of the House of Commons on which I have ever sat where there has been no party feeling. Members of both sides of the House apparently drop their partisan feeling the moment they enter the Committee room. I think I was there five years, yet I can only recall one episode which could in any way be considered as having been brought about by party feelings. I think every Member of the House will agree with me that that is a very great thing to say. When you get a Committee that puts aside altogether party feeling you ought to treat that Committee with great respect, and feel that its labours are likely to be of a very useful character. I trust that attitude of the Public Accounts Committee will continue in the future as it has done in the past, and that the good work that it has always done will still continue to distinguish it, and act as a great check to ensure the proper expenditure of money voted by Parliament. My hon. and gallant Friend who was Chairman of the Committee (Colonel R. Williams) pointed out that in the years to come the usefulness of this Committee will be even more general and its functions more important than in the past. Undoubtedly there is a growing tendency for the chiefs of Departments to take the bit into their mouths, and to endeavour to do what they really ought not to do, putting aside the control of Parliament. They cannot do that with the Public Accounts Committee, and I think that the usefulness of that Committee is likely to increase very much in the future. I personally hope that the hon. Member for King's Lynn (Mr. Gibson Bowles) will rejoin the Committee, and fill the place which was graced by the presence of his son, who, from everything I have heard, filled a very useful place on that Committee. The Postmaster-General told us in a very clear manner what is the exact position in regard to the different capital accounts of the telegraphs and 1278 telephones of the Post Office. The right hon. Gentleman told us that the telegraphs, when they were originally purchased from the companies by the State, including further improvements which were then made by the State, for £10,000,000, it was then intended to set up a sinking fund to repay that £10,000,000 within a certain time, but as there was no profit from the telegraphs that intention was abandoned and the sinking fund was never set up. In these days of advanced science it is quite possible that the original capital expenditure may become obsolete, and therefore it is extremely necessary, even if there be no profit, to do something to repay the original capital. The Postmaster-General went on to say in regard to the telephones that it was the intention of the Government to set up a sinking fund liquidating that capital. Supposing, for the sake of argument, there should be no-profit on the telephones, is the sinking fund going to be served the same fate as that for the telegraphs?
§ Mr. HERBERT SAMUEL
There is already a sinking fund in respect of the Telephone Capital Account, and the annuities are paid as they fall in. The money borrowed for the telephones was in the form of annuities; for the telegraphs in the form of Consols.
§ Sir F. BANBURY
I gather that the annuities must be repaid whatever happens, because the money has been obtained on that condition. I do not know whether it is within the province of the-Public Accounts Committee to consider whether some steps ought not to be taken towards a reduction of telegraphic capital. I think that is a question worthy of consideration. With regard to the other questions that arose on this point, I think the explanation given is entirely satisfactory. The hon. Member for South Bedfordshire (Mr. Ashton) raised the question of the Public Trustee, and pointed out that he had a very large amount of money to invest, and that in many cases he was sole trustee, and that consequently there was a great deal of power placed in his hands. He also suggested, as I understand, that the Public Trustee should publish a list of stocks in which he invested.
§ Sir F. BANBURY
I do not think it is a good suggestion. Supposing he did, what might be the result? The Public 1279 Trustee, like others is liable to make mistakes. The public would see the list published under the title, I suppose, of "List of Investments Generally Made by the Public Trustee," and they would at once jump to the conclusion that the Public Trustee had some peculiar form of knowledge which was denied to the ordinary person, and would say that such investments must be good, and, therefore, that they would make investments in the same stock. I have no doubt the present Public Trustee is an excellent man, but everybody, however capable in financial matters, makes mistakes. It is quite impossible that he should not do so. If he did, then questions would be asked in this House as to how it was those particular investments had been chosen when they turned out badly. There would be complications and troubles, and no good purpose, so far as I can see, would be gained. I do think, though, that the Public Trustee, however excellent a man he may be—and that does not really arise—like everybody else, ought to have a check of some kind, such as the Financial Secretary to the Treasury, as suggested by the hon. Member for King's Lynn, or some other person who would see that the investments he does make follow the trust deeds under which they are supposed to be made. The publication of the list of investments would not show that which I think ought to be supervised. Uncontrolled authority is not always a very good thing. I believe I am correct in saying that if the Public Trustee made investments contrary to the powers of the trust deed the State would be liable. Therefore it is absolutely.essential that we should see that the investments that he does make are within the powers of the trust for which he has acted. I notice in Question 2110 of the Minutes of Evidence the hon. Member for South Bedfordshire said:—I quite see that point, but there is this in it, that it places an enormous power in the hands of one man as you are unchecked?The Public Trustee replied:—Not at all; I am checked in various ways by all those interested in the trust. I issue my annual accounts to all those interested in the trust, and my practice is, as I say invariably to take them into my confidence and deal with them, and, of course, in a great many cases, I am acting with co-trustees.So that apparently the gentleman who is at present occupying the position does, as far as he can, take the beneficiaries into his confidence, where he is sole trustee, with regard to the investments. But it does not always follow that the 1280 investments will be made within the four corners of the trust deed. Very often the beneficiary does not trouble much as long as he gets a good rate of interest. Therefore, I think it is doubly necessary that there should be some control upon the Public Trustee, which will show whether or not he has acted in accordance with the powers given him by the trust deed. I hope the right hon. Gentleman the Secretary to the Treasury will bear that in mind. To deal with other matters I find here an item to which attention has been drawn by my hon. and gallant Friend (Captain Jessel) as to the dockyard stores. Paragraph 6 (page 5) states:—The value of stocks of naval stores and dockyard-made machinery on 31st March. 1909, compared with the value on 1st April. 1908. shows a decrease of £280,414.Paragraph 10 on page 5 states:—The value of the stocks of victualling and Royal Marine stores, clothing, etc., on 31st March, 1909, was £1,017,796, showing a decrease of £162,239 as compared with 1st April, 1908, which, added to a reduction of £259,639 in 1906–7, and of £345,952 in 1907–8, makes a total reduction in three years of £767,830, due, as in previous years, to the working down of stocks to a revised basis of reserves.That is a very large reduction in three years, and this shows the usefulness of the Public Accounts Committee—
§ Sir F. BANBURY
I did not say it was not, but nobody knew anything about it except the Members of the Public Accounts Committee and the hon. Member for King's Lynn. At any rate, ordinary Members did not know about it. We are supposed to be the representatives of the public, but the public do not know anything about these matters unless some Member points them out, and then very often he is not reported in the Press. I hope the Secretary for the Admiralty will give some reason beyond saying that it is a part of the Cawdor Programme. Whenever it suits the party opposite they say, "Oh, yes, but it is part of the programme of the late Government." But whenever they do something which we do not like they say, "You cannot expect us to follow the policy of a Government which we thought extravagant and foolish and which the electors turned out and replaced by ourselves." Whenever it suits them they shelter themselves behind the programme of the Tory party, which I admit is generally right; but it is no good their doing that unless they are going to say that the policy of the late Government was 1281 a right one, that during the four years they have been in office the present Government have been wrong, and that they are going to revert to our policy. There is a curious item in reference to the siege of Mafeking. Siege notes were issued owing to there being a shortage of cash, and after the relief of the town these notes were bought up as momentoes. Civil law was resumed in 1902, but no steps were taken to obtain an account of the actual sums paid by the bank until January, 1908. Apparently some arrangement has been made with the Bank by which, I presume, if any of these notes are presented the Treasury will find the money to pay for them.
I come now to "Deficiencies of War Reserves." The Report states:—It rests with the Army Council to say when they will lay down a reserve, but it appears to your Committee, that if it has been laid down, a shortage from the authorised quantity of an article which has never actually been completed, should be shown as a deficiency in the article furnished to the Comptroller and Auditor General, and covered by the above certificate. The alternative would be not to lay down items as part of the reserve until they are in existence.I should have thought that that was an ordinary business commonplace which it was unnecessary to emphasise.For instance, if the Army Council had laid down that there should be twenty balloons, of which ten should be in reserve, and there were only ten in existence, it should not be shown in the account as a deficiency in the reserve of ten balloons, but no reserve should be put down at all.3.0 P.M.
Surely under such circumstances the Army Council will not put in the account that there is a shortage in the reserve of ten balloons, when there is no reserve at all. There cannot be a shortage if there is no reserve. This is a glaring case of an attempt to delude the public. On the question of balloons, I do not think it much matters, because I do not believe balloons will ever be much good to anybody. But if, when the Army Council says that there is to be a reserve they do not establish any reserve at all, but leave the public to believe that there is a reserve, I say that some steps ought to be taken by the authorities to put a stop to such a proceeding. Then there is a small matter in reference to diplomatic and consular buildings. As far as I can understand a loss of about $465 was incurred, owing to the fault of a native clerk of the works, and officials were sent from England. It seems rather an extravagant thing, in order to save $465, to send people out from England to China, Japan, and other places. I should have thought it was possible to get competent persons on the spot, because in all 1282 probability the cost of the journey will take up all the savings.
A more important item comes in connection with "Public Works and Buildings, Ireland." There appears to have been a charge of £6,000 out of a total Grant of £20,000, in respect of the Sligo Harbour Grant for Improvements, under which certain things were done. The Report states:—But your Committee are informed that the Board's Engineer was not in a position to certify to more than £5,634 8s. 3d. as having been completed up to that date. Your Committee agree with the Comptroller and Auditor-General that the difference, namely £305 11s. 9d. is not chargeable against the Vote of 1908–9, but should have been treated as an advance and carried to a suspense account, and they therefore recommend the amount for disallowance.I want to know what exactly follows from that recommendation. Apparently the Committee have not disallowed the amount. They recommend that it should bi disallowed. Does that mean that the House itself will have to pass a Vote making the disallowance, or does it mean that the Committee, having the power to disallow certain payments, have not done it in this case, but merely stated their recommendations in the hope that the Department concerned will make the disallowance? Perhaps the right hon. Gentleman can enlighten me. My recollection is that the Committee some years ago did actually make a disallowance in the case of some official who was not very well off. There was an ad misericordiam appeal by the official because he had not got the money. The disallowance was not insisted upon, and nothing further was heard of the matter. What I want to point out is this: that the power to disallow is a very great power. I do not say that it ought to be exercised often. It ought to be exercised seldom and with great caution. It is a great power, and a very deterrent power in the way the hon. Gentleman the Member for King's Lynn desires. But if the Committee have only got the power to put the matter in the Report, or recommend that so-and-so be done, not having the power really to do it, that power does not amount to much. Can the hon. Gentleman behind me, who I believe is on the Committee, inform me what power the Committee has, and whether they intend to pursue this paragraph any further? To find out whether their recommendations have been acted upon, and, if not, what steps have been taken?
§ Mr. CARLILE
If the hon. Member, asks me to intervene and reply to that, I may 1283 say that my impression is that the Committee has not the power to disallow. If they had, I do not think they would have put the matter in the form in which it stands in the Report, merely recommending the disallowance. If they had the power to disallow, I think they would have said so.
§ Sir F. BANBURY
If that is so, I hope the Committee will, presuming that the Department does not do it, pursue the matter and take it up in their next Report, so that, if it be necessary, the House shall compel the Department to carry out the recommendations of the Committee—presuming, of course, that the Committee is still of the same opinion. There is one other point I should like to make a few observations upon—Paragraph XIV. of the Report (Class VI., Vote 5, Old Age Pensions). I am sure the right hon. Gentleman the Secretary of State for the Treasury will remember this, because I had some little discussion with him upon it before. The paragraph says:—The Comptroller and Auditor-General reported that on the 28th February, 1909. the expenditure on Old Age Pensions amounted to £1,269,539 11s. 9d., being £69,531 11s. 9d. in excess of the sum at the time voted by Parliament. In the ordinary course this would have been met by a temporary loan from the Civil Contingencies Fund in anticipation of subsequent provision. As, however, the balance on the Civil Contingencies Fund was only £65,114, the excess expenditure was defrayed out of money in the hands of the Postmaster-General. It is conceded that the use of such moneys was illegal, and that the Treasury was aware some little time before that a deficiency would probably arise, though to an unknown extent.My recollection of what took place between myself and the right hon. Gentleman when I called attention to this, I think on the Estimates some two or three months ago, was that his excuse to me was: "Oh, we did not know that this deficit was coming on; we only knew about it a day or two before it arose." As the Address was going on at the time he said that they could not bring in a Supplementary Estimate, and consequently the Treasury were bound to do this; it was the only course. He said that they did not know that the deficiency was going to occur, or they would not have done what they did. But, according to the Report of the Committee of Public Accounts, the Treasury did know that a deficiency was going to occur. They were "aware some little time beforehand." There was a question or two bearing upon this, No. 2138, which the Chairman put to one of the witnesses. They are as follows:—2138. And it was never mentioned to Parliament?—Well, it was not known. The Comptroller and Auditor- 1284 General could only become aware of it afterwards—after the end of the year.2139. But surely it must have been known to the Treasury?—The Treasury did not know the precise amount of the payments being made from day to day.The point I wish to make is that it was never mentioned in Parliaments though it was known according to the admission of this Treasury official in answer to the Chairman. The only reason given was that it was impossible to know the amounts because they varied from day to day. It is evident that these were not sufficient or proper answers, because the amount always varies from day to day throughout the whole year. The answer given to the hon. Gentleman the Member for King's Lynn was given with intention to avoid giving information to the Committee. I think this is an extremely important point, because it illustrates, if further illustration were necessary, the desire of Government officials and Government Departments to make laws for themselves. They do not seem to be actuated by any desire to conform to the regulations and procedure of Parliament. They seem to think that all they need to do is to say, "Oh yes, it was illegal, but it was more convenient to do that which was illegal than that which was legal, and therefore we did it." I think it is time this House saw that these illegalities did not occur. If some of these payments were disallowed I am certain one thing would arise: no Secretary of the Treasury would ever allow an illegality to happen again. My hon. and gallant Friend behind me says, "Take it from the Minister's salary." I have no objection if he will show me how to do it. I shall be very pleased to propose it, because I think it will be a most excellent thing. I have no personal feeling against the Gentleman who occupies the position, but I think it would have a salutary effect upon all these right hon. Gentlemen, and make them a little more careful in their dealings with public funds. I have ventured to allude to a few matters which seem to me of interest in this Report. I trust that we shall receive satisfactory answers to these questions from the right hon. Gentleman. In conclusion, I would only say that I regret very much that the House has been so empty during the discussion upon this Report. There was a great effort made to get one day for the discussion of this Report in the House. It is rather unfortunate that after the Government had conceded that day—and I am much obliged to them for the arrangement—for the consideration of this Report, that so few 1285 Members should have taken the trouble to come down. I had hoped that a little more interest would be taken in connection with the consideration of this Report. I should like to see more Members present when we are dealing with what is after all one of the most important functions of Parliament.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse)
I am sure there is no Department of the Government which welcomes the discussion which has taken place upon the Public Accounts Committee more thoroughly than does the Treasury, and I am very greatly obliged to the hon. and gallant Gentleman (Colonel Williams) who initiated this Debate, for the kind things which he has said about the Department with which I am connected. There is no branch of the public service the officials of which are more assiduous in their duty, and more blamed very often for doing their duty, than are the permanent officials of the Treasury. The country owes them a deep debt of gratitude for the work they are doing in dark and obscure places on behalf of the taxpayer who is not always very expressive of his gratitude. The hon. Baronet, the Member for the City of London, complained of the thinness of the House. If the Committee had been considering expenditure rather than the saving of money, I think the benches upon both sides would be fuller than they are at the present moment. There is nothing popular about saving, whereas when it comes to spending every Member of the House hopes that with a little perseverance and pressure, he can obtain his share of what is going.
§ Mr. HOBHOUSE
In his representative capacity, and, therefore, it does not surprise me that the House should, during a portion of the Debate, be as empty as it is. I come now to deal with one or two points brought to the notice of the Committee by hon. Gentlemen on both sides. The hon. Baronet the Member for the City of London raised for the second time the question of the over-payment of a sum of £400,000 in respect of old age pensions. I confess I have nothing to add to the defence I made on a previous occasion of the action of the Treasury in regard to that matter. I had it paid for the general financial convenience of Parliament, and, what is more important, for the general 1286 financial convenience of the country and the needs and the necessities of a great many persons who, owing to financial exigencies over which they had no control, were served with considerable harshness. Coming to the points raised by hon. Members, I would like to refer first to the inquiries made by the hon. Baronet as to the powers of the Public Accounts Committee in regard to disallowances.
The procedure is practically this: The Comptroller and Auditor-General draws attention to some occurrence or another in connection with the accounts—shortness of payment or irregularity, or something of that sort—but he has not the power of disallowing. He recommends the Committee to disallow something. The Committee have no power of their own to disallow payment, and they recommend the House to disallow it. The House, however, very seldom does so I do not think I ever recollect an actual disallowance by the House, and for the all-sufficient reason that these points raised by the Public Accounts Committee are subsequently dealt with by the Treasury in correspondence with the various Departments concerned, and the result of that correspondence is that the Treasury communicates with the various Departments who are in error or at fault, and a minute is subsequently sent to the Comptroller and Auditor-General, and is invariably published with his report of the occurrence in the year succeeding that in which attention is drawn to the matter by the Public Accounts Committee. Take, for instance, the case to which the hon. Baronet has drawn attention—the question of public works and buildings in Ireland. The procedure of the Treasury would be this: For a very good and clear reason the Treasury Minute is never issued until discussion has taken place in this House, so that the Treasury may be guided by the views expressed and registered by the House. This particular matter will be dealt with in correspondence between the Treasury and the Public Works Department of Ireland. We shall make inquiry, and the hon. Baronet may rest assured that in all probability this account will be disallowed unless some circumstance with which we are not now fully acquainted comes to light; but; in that case, of course, the determination or decision of the Treasury would be expressed to the Comptroller and Auditor-General, who would, no doubt, refer to the matter in the Report he would make to the Public 1287 Accounts Committee, and then it would be placed before the House. I only put in that caveat not because I think the recommendation of the Committee has to be followed, but in order to guard myself against some unforseen circumstance arising.
§ Mr. GIBSON BOWLES
In case it is decided to disallow the sum in question, in what way would effect be given to the disallowance? Would it be in diminution of the Vote next year, or in what other way?
§ Mr. HOBHOUSE
I think that would follow, but here the suggestion is that it should be disallowed and carried to the suspense account.
§ Sir F. BANBURY
There is another recommendation with regard to disallowance which does not deal with the Suspense Committee.
If the Public Accounts Committee adhere to their decision, recovery will have to be made, or attempted. If they agree to waive the recovery the Treasury will authorise the sum in question to be charged to a vote, of which the account is still open if savings are available, but if that vote causes an excess, provision would have to be made by Vote.
§ Mr. HOBHOUSE
Yes, I think that is done. In the Scotch case the matter is very complicated, and entails a very considerable amount of correspondence which I should not like to anticipate, but I think I have indicated to the House the course taken generally in relation to these matters. Then I come to a question which attracted the attention of nearly every speaker—the position of the Public Trustee—I welcome very gladly the attention which has been drawn to the proceedings of the Public Trustee this afternoon. First of all I think one thing is quite clear, and that is that the establishment of the Public Trustee has been amply justified by the confidence which has been shown in this department. It is not more than two or three years that it has been at work, and I find that on the 31st of last month the current Trusts which were administered by him were 846 in number, and covered 1288 a sum of £5,500,000 in round figures. There were 150 other Trusts in course of transfer, covering a sum of £1,500,000, so that at this, moment the Public Trustee has in his charge something like £7,000,000. I entirely agree with the statement made that this is a very large sum indeed, perhaps too large, to be under the direction of a single person. The character of the person occupying the position of Public Trustee is, I think, well known to every Member of this House; but it is not a question of character at all. The character of every public servant, and of every Civil servant in this country, certainly of all those of the higher ranks with whom I am acquainted, is beyond all praise; but it is not a question of the character of the individual at all. It is a question whether it is proper to entrust so great a sum as this to the unfettered and uncontrolled discretion of a single individual. Some reference was made in the course of the Debate to the nature of the investments in which these large sums were placed. I am not certain whether some hon. Gentleman opposite did not draw the attention of the Committee to a statement of the Public Trustee on this point, but I should like to quote from the Report of the Public-Trustee to this House. He said:—In selecting investments, therefore, the first question that the Public Trustee considers is: What is the range of investment authorised by the trust instrument? In deciding what investments should be selected amongst those authorised, he exercises his discretion after considering the advice of experts and after obtaining the views of such of the beneficiaries as are accessible and sui juris. It is his invariable practice to consult the beneficiaries, even although he is not required by the trust instrument to do so, and, where it is only possible to consult those interested in the income of the trust funds, special care is taken to see that the capital is duly safeguarded.Those are very proper provisions, and would, I think, give satisfaction to this House, and also to the persons themselves; but I do think provision ought to be made by which the nature of the investments is investigated, and the fact of those securities being intact safeguarded. At the present moment. I think, the House will be glad to know, communications are going on between the office of the Public Trustee and the Treasury, which will, I hope, safeguard this matter beyond doubt and meet all reasonable requirements of the situation. At the present moment there is no audit by the Comptroller and Auditor-General, but I think there ought to be joined with the Public Trustee an official who shall be responsible for the oversight and manage- 1289 ment of this Department. I will conclude my reference to this subject by drawing attention to the fact that the office was visited by a Committee presided over by the Master of the Rolls, who satisfied himself that the work of the Department had been conducted in a businesslike and speedy manner.
There is only one other point with which I need deal, and that is the question which was raised by the hon. Member for King's Lynn (Mr. Gibson Bowles) of an Estimates Committee. I think the hon. Member for the Ince Division (Mr. Walsh) mixed up the question of an Estimates Committee dealing with the Estimates, and therefore to a certain extent with questions of policy with the question of the Public Accounts Committee, dealing with the Estimates of the current year. It was pointed out by the hon. Baronet the Member for the City of London (Sir F. Banbury) that that was never intended to be the function of the Public Accounts Committee. Their function is to examine past expenditure, and it must be perfectly plain to the House that past expenditure, having reference to Colonies scattered all over the world, and to payments made in every part of the habitable globe, cannot be brought to account till a long time after the actual expenditure of the year has been closed. Therefore there is sometimes an interval between the actual transaction and the consideration of it by the Public Accounts Committee, but that time is never unduly prolonged, and the examination is never perfunctory; it is always very real, and the cases we have brought to the notice of this House show how carefully the Public Accounts Committee does go into the expenditure. I welcome the testimonial of the hon. and gallant Gentleman (Colonel Williams) who initiated this Debate. He drew attention to the fact that out of an expenditure of £121,000,000 the error of estimation amounted to so small a sum as £1,300,000, a fact which must be gratifying to those distinguished Civil servants who have contributed to so satisfactory a result.
§ Dr. MACNAMARA
There were one or two questions which were specially put to me with regard to the Navy Votes. The hon. Member for the City of London (Sir F. Banbury) called attention to the fact that in paragraph 6 of the second Report it is stated that the value of naval stores and dockyard-made machinery on 31st March, 1909, showed a decrease of 1290 £280,414 compared with 1st April, 1908. I said that was partly due to the ultimate working out of the Cawdor policy, and that is according to fact. The hon. Baronet said no one knew anything about that, but the Cawdor policy has to my knowledge been discussed pretty well on every occasion that the Naval Estimates have been up in any form, and it received a very handsome testimonial from the right hon. Gentleman the Leader of the Opposition in a speech in the early part of 1905, at Glasgow. He spoke of the policy as a most admirable one, and I quite agree with him. It was a most admirable policy, though I doubt whether I should go the length he did, and taking together the scrapping of the ships, the closing of certain foreign stations, and the reorganisation of the Fleet, say it was one of the greatest reforms since the days of Nelson. It was described generally in a speech by the right hon. Gentleman in those terms. We put into the Estimates, the appropriation of which we are now discussing, the fact that we proposed to draw stores from stock without replacement, and we have stated the amount year after year, beginning with 1905–6. I do not know whether the hon. Baronet has the Estimates for 1908–9, but if he will look at them he will find that we proposed to draw from stock £500,150 worth without replacement. The excess withdrawals over the Estimate, namely, £41,225, is made up mainly of obsolete and obsolescent stores which accrued during the year. The reduction in the Victualling and Clothing Vote is partly due to working down to the revised standard of reserves provided for in the Naval Establishments Committee's Report of 1905, and adopted by the then First Lord. It is due also to another fact. Arrangements were made for most of the Reservists to keep their peace kits, so that they would have them on mobilisation. There was, therefore, not the same need for keeping so large a war reserve of emergency kits as there had been up to that time. The hon. Member for St. Pancras called attention to the fact that we do not give a certificate, like the War Office, of our reserve stores, and he suggested that this was likely to give rise to misapprehension unless some explanation was forthcoming, and that people might imagine there was an undue depletion of the necessary reserve of warlike stores. But, at the same time he indicated the reason for the differentiation in the policy of the 1291 Admiralty and of the War Office. As he pointed out, the War Office largely lay their reserve stores separately aside, and they can, therefore, be separately certified. Ours are not so laid aside; we have, in fact, no separate reserves. They form part of the common stock, and, therefore, it is practically impossible to give a certificate which can be verified by the Comptroller and Auditor-General. The differentiation of the two systems has been the subject of much discussion with the Treasury. What we do is, in the Appropriation Account, at the foot of each store Vote, to give a statement of cash value of the stores at the beginning and end of the financial year. The Treasury have admitted that this is the only possible plan, seeing that we do not lay aside our stores as a separate reserve in the same way as the War Office. With regard to the Accounting Department, under the King's Regulations no purchase payment or issue in kind may be made without authority of the executive officer, and the accounting officer has to inform him as to requirements. If the payment proposed to be made is irregular, although the accounting officer has not the power to refuse it, he has access to the Accountant-General at the Admiralty, and if the chief executive officer who is responsible advises a payment which is found to be irregular we can see that he makes good the money improperly paid. My hon. Friend asked if that was ever done. I said off-hand I thought it was, and after the splendid tribute the hon. Member paid to those very sagacious advisers of ours, the permanent officials who sit under the Gallery, he will not be surprised to learn that I appealed to them subsequently and found that my impression was correct. Suppose, for instance, an executive officer ordered passes for railway travel, which were irregular, he could be, and in fact he has been, called upon to refund payment. Supposing he did not make his monthly accounting of cash which he is called upon to make, and thereafter there was a loss, if it can be shown he neglected his duty he would be called upon to make a money payment with respect to the loss sustained by the Admiralty. I desire to associate myself with the Financial Secretary to the Treasury in thanking the Chairman of the Public Accounts Committee for the comments he made with regard to the close estimating of expendi- 1292 ture on the Navy. Of the Estimates for 1908–9 I can speak very freely, because I was not responsible for them. They were prepared before I went to my present office. I went there immediately after their completion; I saw the working of them day by day, I watched it very closely, and I must say I think the Chairman of the Committee did no more than justice to the estimating officers when he paid them the tribute he did. In this case the Estimates were completed at the fall of 1907; they were signed on 29th January, 1908, payments began on 1st April, 1908, and concluded on 31st March, 1909, and the fact that there is a difference of 1.9 per cent, between the Estimates and the actual expenditure is indeed a tribute to the closeness of the estimating to which the Chairman of the Committee referred.
§ Captain JESSEL
Has the hon. Member anything to say with regard to cordite, and especially the question of quality?
§ Dr. MACNAMARA
The only question of cordite which arises in this Report is in connection with a loss which we suffered and which is duly explained in the Report. We had to write off a sum of £8,146 5s. 10d. We were compelled to purchase in default, and we had to buy at a higher price than the contract price. Meanwhile the contracting firm had gone into liquidation and we had no means of securing repayment of the excess.
§ Captain JESSEL
The point I was aiming at was the question whether the cordite in the magazines was up to the Government test.
§ Dr. MACNAMARA
The only reference of any kind to cordite in this Report is the one with which I have dealt where we had to write off a considerable amount as irrecoverable. If the hon. Gentleman desires to ask me my opinion about statements made the other day by Mr. Arthur Chamberlain, I imagine it has nothing whatever to do with this Report, but I would like permission to say in regard to that that the hon. Gentleman need not have the slightest anxiety whatever on that subject.
§ Motion, by leave, withdrawn.