§ Motion made, and Question proposed, "That a sum not exceeding £47,418 be granted to His Majesty to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1913, for making good the net loss on transactions connected with the raising of money for the various Treasury chests abroad in the year 1911–12."
§ Mr. MITCHELL-THOMSONThere are one or two questions I would like to ask, and there is a suggestion I wish to make to the Secretary to the Treasury, who I assume will, in the ordinary course of events, take his place on that Bench. Meantime it may be for the convenience of the Committee if I explain the exact position in which apparently this Vote stands at present. The Committee is going to be asked to vote a sum of £47,418 for making good the net loss on the transactions of the year 1911–12, in regard to the Treasury Chest Fund. It may be there are some Members of the Committee who have not got precisely a recollection of what the Treasury Chest Fund is. I may therefore explain that the Treasury Chest Fund is a somewhat ancient institution indeed, and dates from as far back as I think 1832 or 1833. It has gone under one or two names in the course of its Parliamentary history. Its capital has been successfully or rather progressively diminished fom £1,300,000, which was the original capital sum, to £1,000,000 in 1873 and to £700,000 in 1877. Briefly put I think the right hon. Gentleman will agree with me that the fund is really a central banking account under Parliamentary control, for the purpose of laying down money abroad for the public services. I say purposely laying down money for purposes abroad.
The question I wish to ask the right hon. Gentleman is whether any of this loss has been incurred from the providing of money through the Treasury Chest for home services. It will be within 668 the recollection of the Committee that my hon. Friend who sits near me called attention to a gross irregularity on the part of the Government in regard to the administation of this Fund, at an earlier period of the Session. Now since my hon. Friend spoke and since the Secretary to the Treasury rather advocated the attitude of the Government, the Public Accounts Committee of the House have presented a report in which the action of the Government in relation to that has been condemned in the most emphatic manner. What occurred was that the Government being short of £3,400,000 for Post Office purposes and £50,000 for National School teachers in Ireland—both very estimable purposes—they went to this particular fund and used the money from the Treasury Chest Fund for the purpose not of foreign services but for the purpose of these home services. That action has been emphatically condemned in the report of the Public Accounts Committee for this year. They say:—
Your Committee adhere to the principle laid down by the Treasury in 1902, based upon the Report of the Public Expenditure Committee of 1861, that the Treasury Chest is a central banking fund which exists for the purpose of laying down funds abroad to carry on the public service generally, and they view with great jealousy any departure from that principle. In the case under review, the Treasury, not having the money to carry on the approved Parliamentary services, and there being no margin in the Civil Contingencies Fund, allowed an encroachment upon the Treasury Chest Fund, although there was no Vote of Parliament to guarantee that the sum borrowed would be repaid to the Fund. Your Committee recognise that an unforseen emergency had arisen and that the course adopted by the Treasury involved no ultimate loss of public funds, but they cannot admit that the emergency justified an encroachment upon the Treasury Chest Fund, which in the words of the Treasury Minute of 1902, 'should only be employed for the legitimate banking operations of the Treasury Chest abroad, and for advances for public and colonial services, repayable out of Votes of Parliament or other funds applicable thereto.' Your Committee are strongly of opinion that to use the Treasury Chest Fund as an auxiliary reserve to the Civil Contingencies Fund is contrary to the wishes of Parliament, and they are glad to learn that the Treasury have no intention, in the event of future emergencies, of repeating the procedure in this case.After that emphatic condemnation of the Government, for which the Government apologised on a previous occasion, may we, take it that none of this loss is due to the repetition of a similar transaction—that no money has been advanced from the Treasury Chest for Home service apart from Foreign service. I think it well, in face of the statement of the Public Accounts Committee, that the right hon. Gentleman should give a definite undertaking that it will not be used so again in the future. I come to the more detailed question of how this loss has arisen. 669 Attention called to the fact that forty Members were not present. House counted, and forty Members being found present—
§ Mr. MITCHELL-THOMSONI might ask the right hon. Gentleman whether I am correct in saying that a great part of this cost has arisen in connection with exchange operations in Hong-Kong?
§ Mr. MASTERMANYes, certainly; practically the whole of the loss is in connection with that.
§ Mr. MITCHELL-THOMSONThat is rather my assumption, but of course the right hon. Gentleman knows, and the Committee will see, the precise extent of the loss in connection with Hong-Kong is not stated, and, therefore, one had rather to assume it. I presume I am right in saying that the general practice in regard to this Fund is that any loss on exchange or any profit on it is charged to Profit and Loss Account. In case of any loss this House is asked to make it good. In the case of profit it is surrendered. This brings me to a matter in regard to which I am glad to have the presence of the hon. Baronet, the Member for the City of London (Sir F. Banbury), as Chairman of the Estimates Committee. I think there is an important question of policy here. It deals with the public service concerning the Army and Navy. This money which has to be paid in Hong Kong is for the Army and Navy there. It is paid them in local currency, and ever since 1889, under an arrangement made by Mr. Goschen, who was then Chancellor of the Exchequer, it has been paid to them on the basis of a rate which is fixed on the price of silver in London during the preceding quarter. I think that is a true statement of the case. The Committee will see at once that the effect of that is that if, in the interval, between the preceding quarter in which the rate is fixed and the quarter in which the troops are paid, there is a rise in the market that means a loss to this Fund. If there is a fall in the silver market it means a loss to the troops. In one case the troops are getting more money's worth than is provided for under the ordinary estimate; in the other case they are getting less.
I have been at some little pains to take out the actual position of the Fund in regard to profit and loss during the twenty-four years in which it has been in existence. I may say that the amount varies very 670 considerably. Usually the Fund has made a loss. I think there have only been nine years in which a profit has actually been made, and fifteen years in which there has been a loss. This year the loss is £53,288; in 1902, the profit was £38,359. The total is, roughly speaking, £404,000 for loss, and £108,000 for profit, or a loss over twenty-four years of £295,000. I do not think that is a very satisfactory state of affairs, either from the point of view of the troops or from that of the taxpayers of this country, and may I say in passing, in connection with the loss which has apparently accrued in the year we have under consideration now, and for which the supplementary sum is wanted, that I think a certain amount of it has been due to a want of communication which ought to exist between different Departments. For instance, the loss has been largely caused by the rise in the price of silver since the rate has been struck, very largely due to the operations of the India Office, which went into the market as a large buyer of silver, and I question very much whether the India Office communicated at all with the Treasury their intention of going into the market as a buyer of silver.
If the Treasury had had that information it is quite obvious they might have made arrangements to avoid the necessity of this further Supplementary Estate. I think a good deal more might be done by communication between the different Departments, but what I want to urge on the Committee is that the Estimates Committee should consider this question about the payment of troops abroad very seriously, because it does not seem that the present system is working in a satisfactory manner. If the price of silver falls in the interval, the troops are getting less money than they ought to have, and the taxpayer is making a profit out of the troops. They are being paid in a nominal amount of currency which is not in practice worth the amount it purports to be worth. I do not think that is right. I do not think this country ought to make a profit out of the troops. If, on the other hand, the price of silver rises, the taxpayer loses. That means the troops are getting more money's worth than this House sanctioned when it passed the original Estimate. I do not think that it is satisfactory either. I admit it is very difficult to suggest the precise method by which it can be avoided. Attempts have been made, and the Public Accounts Committee have called attention 671 to it more than once, but I do think it is a very proper matter for the Estimates Committee to consider, and I raise it now in order that, if the right hon. Gentleman does not see any insuperable objection, the Estimates Committee in the coming year may go into the matter with the Treasury, and try to see whether some other arrangement than the present one which has now lasted for twenty-four years and I do not think has ever been satiisfactory, cannot be devised.
§ Mr. MASTERMANI appreciate both the preciseness and the excellent material of the hon. Gentleman's speech, and there was very little in it with which I have any controversy at all. I will briefly deal with both the points he has raised. The hon. Gentleman has very rightly pointed out that since 1878 the Treasury Chest has been in the main confined to the Foreign and Colonial service, and, I believe, although the Act is not specific on the point, the Treasury have always regarded it as the main purpose of the Fund. He also pointed out that the question of the violation of that principle was thoroughly discussed last year and that I came in for a considerable amount of criticism for the works of my predecessors who used some of the money, for a few days only, for the Post Office and for Teachers' Pensions. There is a Minute of the Public Accounts Committee on the subject. We hope to be able to recommend to the Committee in regard to the next Vote a course which will render it altogether unnecessary in the future to suggest that the Treasury Chest Fund should be used for anything but Foreign and Colonial purposes. As the Public Accounts Committee have pointed out, this irregular procedure did not involve any actual loss to the Treasury Chest; the money was replaced in ten days. The hon. Member has pointed out that there is another case this year in regard to the Local Government Board, but this was done on accounts that have not yet come before the Public Accounts Committee. It is not, however, the case that we have deliberately adopted a course against the recommendations of that Committee since the Debate took place in this House.
I will reserve any remarks I have to make on that until we come to deal with the Civil Contingency Fund. The second point raised by the hon. Member is one of considerable interest. For years we 672 have lost on the Treasury Chest Fund. It is due to one cause and one cause alone, that is the loss on the purchase of dollars to pay the troops at Hong Kong. It was due to the system invented by Lord Goschen in 1889, to strike the rate of exchange some months before the money is bought and keep the rate constant for three months. Anything but a constant rate would be absolutely impossible. The Army and Navy do not understand the elaborate operations of exchange, and if the men did not get paid in the usual way there would probably be mutiny. A constant definite rate of pay from one Saturday to another is absolutely essential. The rise in price of silver must continue a loss to the Treasury Chest. Lord Goschen cleverly devised this scheme when there was a continual fall, in consequence of which for years afterwards the Treasury was making a large profit out of the soldiers and sailors. The hon. Member has suggested that the continual loss of £40,000 or £50,000 a year is a subject that should be looked into, and he advised us to refer it to the Estimates Committee. I do not think that is the right Committee for the matter. I think it would be better to have a Committee of Experts to deal with the question of exchange and currency, for it is a larger question than that merely of the Treasury Chest. We think that after this period of twenty-four years it is time to take a review of the whole situation, and we are quite willing to appoint a Committee, I hope an Expert Committee, to go into the whole subject and see if some better method can be devised. I hope after that promise the hon. Member will see that his protest has not been wasted.
§ Mr. MITCHELL-THOMSONI appreciate very much the tone of the right hon. Gentleman's speech. I am much obliged to him for his promise. I think it will be for the advantage of the public control of finance and for the public services generally that it should be carried out.
Question put, and agreed to.