HC Deb 19 June 1918 vol 107 cc361-444

Resolution reported, "That a Supplementary sum, not exceeding £500,000,000, be granted to His Majesty, beyond the ordinary Grants of Parliament, towards defraying the Expenses which may be incurred during the year ending the 31st day of March, 1919, for General Navy, Army, and Air Services in so far as specific provision is not made therefor by Parliament; for the conduct of Naval and Military Operations; for all measures which may be taken for the Security of the Country; for assisting the Food Supply, and promoting the Continuance of Trade, Industry, Business, and Communications, whether by means of insurance or indemnity against risk, the financing of the purchase and re-sale of foodstuffs and materials, or otherwise; for Relief of Distress; and generally for all expenses, beyond those provided for in the Ordinary Grants of Parliament, arising out of the existence of a state of war."

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."


This is a convenient and suitable occasion on which the House might consider a matter which is causing grave concern both to the House itself, and to the country at large—the question of the better control of national expenditure. The Select Committee which the House has set up to deal with questions of national expenditure has now presented six Reports. We have dealt with a large proportion of the Government Departments. We have not limited ourselves to criticism. We have been anxious to make constructive suggestions where we thought matters were at fault. We have, indeed, in the course of those Reports presented over 100 specific recommendations for adoption by the Government.

It is right to say, at the outset, that we have found the Chancellor of the Exchequer and the Government Departments very ready to adopt the suggestions which the Committee have made. So far from resenting them, they have, as a rule, welcomed our suggestions, because they realise that we, on our side, have not been seeking opportunities for attack, but only seeking opportunities to be of assistance. Before I refer to larger matters relating to the general control of expenditure, I should like to invite the attention of the House to a small number of outstanding questions as to which the Government have not met the suggestions of the Committee, or have met them only in a partial and insufficient degree. First, with regard to the swollen staffs of the Government Departments themselves. The Financial Secretary to the Treasury was good enough yesterday to give me a reply to a question which indicated that the total number of Government officials and Government clerks in this country at the present time is certainly over 100,000. The incomplete return which he gave came to a total of 94,000, but the items excluded from the list will certainly bring the whole sum above 100,000. That relates only to the Government Departments that have expanded owing to the War, or to the new Departments that have been created, and does not include such very large staffs as that of the Post Office.

It is, of course, necessary, in view of the immense volume of work now to be transacted by the State, that large staffs should be employed. When you are manufacturing or purchasing munitions of war at the rate of £2,000,000 worth a day, when you are dealing with 1,000 new claims for pensions every day of the year, when you are dealing with the man-power of the country by the million, and when you are regulating the food supplies of every person in the nation, obviously there is an immense amount of office work to be accomplished for these and similar purposes. But we formed the opinion that in some cases the staffs have been swollen beyond all measure, that they are frequently ill-organised, and that there is much waste of labour, and consequently of money, in connection with these establishments. We came to the opinion that the Treasury had not risen to the occasion during the War. The recent Report of the Treasury Committee, to which I will refer in a moment, states that there has been no special organisation created either at the Treasury or elsewhere to watch and control the growth of that staff, from the general standpoint. There ought unquestionably to have been from the beginning of the War an expanded Treasury keeping a far more active watch than has been the case over the growth and development of these new Departments.

The Select Committee in December last recommended that the Treasury should hold a series of inquiries into the numbers and organisation of the large clerical staffs recruited during the War. Two months later a Treasury Committee was set up, and in my judgment that Committee began at the wrong end of the problem. Instead of appointing officers to go into all the various Departments at once, to see how they were organised, to measure the amount of work done, to consider the constitution of the staffs, they devoted their attention for four or five months to the method to be adopted in future for recruiting additional staffs, and obtaining returns from the Departments themselves. After 100,000 clerks had been already recruited, the Treasury Committee has been four months considering what should be the future method of recruiting additional staffs. I have no quarrel with their conclusions, but I should have thought it to be unnecesaary, at all events on any large scale, to recruit any additional staffs at all, and that if these Departments needed increased men-or women-power, it could have been obtained by economies of staffs already existing, and by the Departments transferring labour force from one to the other. I very much regret that six months should have passed since our recommendations were laid on the Table of the House, and nothing effective done to reduce these large staffs to which I refer. Inspectors have now been appointed, but I gather from the Chancellor of the Exchequer that they were appointed only quite recently, within the last few weeks, and so far as I am aware no result has yet been seen from their labour.

In our Report of December last year we dealt also with the question of the increased expenditure due to increased profits and to increased wages, and we spoke very frankly on both those topics. With regard to excessive profits, my hon. and gallant Friend the Member for Greenock, to whose indefatigable labours the Select Committee and the House owe so much, will, I believe, have something to say later in the Debate. With respect to wages, we found that the whole situation had been almost from the beginning of the War very greatly prejudiced by the fact that the Board of Trade published, and subsequently the Labour Department also published, month by month, figures which were understood to give the increase in the cost of living. Those figures, as a matter of fact, were based on a collection of household budgets of the working-classes, more than five years ago. They allowed nothing for the changes in the direction, or in reduction of consumption during the War, or for one article being substituted for another, and some of the figures dealt with the increased prices of food alone. Nevertheless, the working-classes became impressed with the idea, as they thought, on official authority, that the cost of living had gone up by something like 100 per cent., while as a matter of fact the expenditure of the working classes due to the increased cost of living had probably gone up to between not more than 50 per cent. to 60 per cent. All the arbitrations and negotiations between employers and employed were prejudiced from the beginning by the argument being used—no one meeting it—that the working-classes' expenditure had been increased owing to the War by 100 per cent. and that wages ought, in consequence, to be increased to an equal degree. The matter is one of great importance and urgency. We recommended last December that the Government should set up an expert Committee to investigate this subject, and to give an authoritative guidance to opinion as a whole, as to what has been the real increase in the cost of living owing to the War. In January we were told that a Committee was to be appointed; it was not, in fact, appointed until March, and I asked a few days ago when the Report of that Committee would be received. I was told that, although much progress had been made, it was not possible to indicate when the Report would be received. So here, again, six months have elapsed, and speedy and expeditious action, which the circumstances required, I regret to say has not been taken.

4.0 P.M.

In the same Report, we recommended with respect to wages that while we realised that the increased cost of living must in many cases justify an increase in wages, there were very many eases in which increases were paid that had no relation at all to the cost of living, but owing to the fact that in some other trade or grade an advance of wages had been secured. We unanimously recommended that the strongest case should be required to be established before any advance is to be conceded on any ground other than the rise in the cost of living, and, further, that a single policy under the general direction of one authority should be adopted in all industries for the determination of wages questions. It was quite plain that any advance conceded to one portion of an industry instantly, almost inevitably, affected other portions, a wave being set going which covered the whole field. The Government appointed a Conciliation and Arbitration Board for the purpose of dealing with the wage advances to the pre-war and post-war staffs. It was formed of a representative of the employing class and a representative of the workers, and my hon. Friend the Member for Derby was the chairman. The tribunal did much good work. It took a judicial survey of the whole field, and made many awards, which were accepted. They have recently found that the whole position has been undermined by, once more, the 12½ per cent. which the Minister of Munitions, now many months ago, perhaps with insufficient consideration, granted to certain classes of munition workers. The Minister of Munitions gave that 12½ per cent., not only to manual workers, but also to clerical workers. The Admiralty found themselves obliged to extend it to the dockyards and to certain clerical classes in those dockyards, and the consequence has been that, as in the case of a stone thrown into a pond, the waves have extended wider and wider, and at last have submerged the tribunal of which my hon. Friend was chairman. He has found himself in such a position that he was unable to deal with any of these matters in a judicial fashion, as they had been prejudged, and he has therefore resigned the chairmanship of the tribunal, much to the regret of all of us. I hope that the Government will, nevertheless, take steps to secure that the recommendations in the Committee's Report last September will be adopted and enforced, and, while there may be in very many cases an equitable claim on the ground of the increased cost of living, yet where claims are made for increased expenditure the whole matter shall be carefully and scrupulously examined, and only where an overwhelming case is made out shall the taxpayer be asked to provide the necessary funds.

An even greater ground of complaint is in connection with the military staff of the War Office itself. I would invite the serious attention of the House to this matter, because an important question of principle is involved. When the War broke out the military staff of the War Office numbered 218 officers. During the first two years of very rapid expansion of the Army the War Office staff naturally and necessarily increased, and the number grew from 218 to 588. I do not think any complaint is to be made of that. But during the following fourteen months after the War had been going on for two years, and when, although, perhaps, the Army had not reached its maximum, at all events it was expanding far less rapidly, the figure of 588 was multiplied nearly threefold, and the number of military employed in the War Office itself increased from 588 to 1,504. A Sub-committee of the Select Committee inquired into the matter and was not satisfied that all these officers were really necessary. We had an impression that they were to some extent in excess of the needs, particularly in view of the very large staffs employed in the various local commands throughout the country. In the field it is the duty of the General Staff to review the establishment from time to time, and to curtail it when it is found to be in excess, but in the War Office it is no one's duty. When the staff of a particular branch has increased owing to some new work being thrown upon it or to some great pressure the increase is submitted to the Finance Department and to the Treasury, but if, months afterwards, the work contracts and some of the additional men are surplus to requirement it is no one's specific duty to review the matter and to require the curtailment of the staff. It is left to the individual discretion of the head of the branch to act or not to act as he thinks fit.

We thought any outside inquiry would probably be ineffective. Certainly we ourselves could not go from room to room to see whether any officers were employed there whose time was not fully occupied, or who were engaged on work that did not need to be done—perhaps a more important source of possible waste. We recommended, last December, that the War Office should hold an inquiry of its own under the direction and authority of the Secretary of State, and that the whole matter should be reviewed. That was in December. On 7th January we were told the War Office were undertaking such an inquiry. In May, in an answer given in this House to a question put on behalf of the Committee, we were told that the Army Council had appointed a Committee of its own to make the investigation, but it found it could not give the time which was necessary for a detailed investigation. We had not in mind, however, a Committee of the Army Council. We had in mind one or two officers chosen for the purpose of going through the establish- ments, and seeing what was necessary or not. The Army Council had appointed an officer to go through various Departments and make recommendations. I believe he set out on the work full of zeal and energy, and was in process of making very interesting and useful proposals, but when the matter had reached that stage he was sent to Palestine, and another officer was appointed to continue his work. Hardly had he become fully seised of it, and was also making some impression on the staff of 1,500, when he was, by a strange coincidence, given a military command elsewhere. The answer given in May was that no progress had been made but it was hoped to proceed shortly with the investigation. The Committee thereupon wrote to the Secretary of State (Lord Milner) drawing his attention to the matter and asking whether steps would be taken before their next Report was presented to the House. But no reply other than a courteous acknowledgment was received to that communication, and we reported to the House in May what the facts were. In the interval the staff of the War Office had increased another 20 per cent., nearly 300 more officers having been added, after allowance is made for the transfer of the whole branch of the War Office which dealt with the Air Service to the Air Ministry. The remaining branches had in fact increased by 289 officers. On 15th May we reported to the House what the facts were, and we expressed our regret that the matter had been dealt with by the War Office in so unsatisfactory a manner. A month later, in June, we put down another question asking what had been done, and the reply was that nothing could be added to the previous answers, and that the matter was being pursued.

We have regretfully come to the conclusion that in this matter the War Office, or the military chiefs at the War Office, have been adopting a deliberately obstructive attitude. The subject has been twice reported on to the House. Three questions have been asked in Parliament on behalf of the Committee. The personal attention of the Secretary of State has been drawn to the whole matter, and the only result has been that the staff of the War Office shows a steady, un-diminished increase. We feel that the War Office has been playing with this matter. It has been playing with a Committee of the House of Commons. Such an attitude ought not to be tolerated, and will not be tolerated. Committees of this House have very large powers. We shall make a further inquiry after a very brief interval, and we trust by that time adequate steps will have been taken, and that, it will not be necessary for the Committee once more to bring to the direct attention of the House what has become a public scandal.

There is another matter on which we have some ground of complaint against the War Office. It relates to another recommendation made in our first Report in October last. We then made two recommendations, after a careful survey, dealing with the troops maintained in the United Kingdom. There was one large issue involved and one small issue. The larger question was the number of units maintained hero—in fact, the total forces maintained in the United Kingdom. That was, of course, not a matter for our Committee. We reported that it was not a mutter for us to deal with, but we were impressed by the fact that the, number maintained was very large, and we suggested that the War Cabinet and the General Staff should give it fresh consideration. Fresh consideration was given, and I believe suitable action was taken. The other point was of very much more modest dimensions, and it fell within the strict purview of the Committee. It relates to the actual numbers of many small establishments maintained throughout the United Kingdom, scattered here and there, ten in one place, fifty in another, a hundred in a third, and a thousand in others. They are all War Office establishments of one kind or another.

In France a most useful inquiry was made into the numbers of similar establishments by a general officer of high authority, Lieutenant-General Lawson, who had also visited the theatres of war at Salonika, Egypt and elsewhere, and had made a series of valuable reports suggesting economies here and there. They were made mainly from the point of view of man-power, but as man-power is economised so also may expenditure be economised. We suggested that an officer of similar rank should visit the establishments in the United Kingdou and do the same sort of work, and we felt convinced from what we heard of the result of General Lawson's inquiry, that such an investigation in the United Kingdom would bear good results. We drew attention to the matter again in our subsequent Report, but nothing has been done by the War Office, and when we have asked about it no direct reply has ever been given. The War Office has always combined the two recommendations as though they were one. The question of the large number of troops maintained in the United Kingdom is a big one, and obviously in the public interest, no public statement could be made regarding it. But the smaller question of a detailed review of particular establishments stands on a different footing. However, although the two questions have always been put separately they have been replied to in one answer, which has been to the effect that it is not in the public interest that information should be given on the point. It is quite clear from the action of the military chiefs that the War Office are quite satisfied with the existing situation. Apparently they cannot conceive that any suggested alteration by a fresh mind would be to the advantage of the public purse. Again I would press on the Government the desirability of an inquiry such as I have described being made in this country.

The last point dealing with the War Office to which it is necessary for me to refer relates to the employment of German prisoners of war. We made an inquiry into this matter in France, and we have also taken some evidence with regard to their employment here. We found that the methods of giving inducements for good work and the methods of imposing deterrents for bad work varied very much from place to place, very often according to the opinion of the individual officer in command. There has been no general survey of the whole question of the best method of employing prisoners of war, and it seemed to us that very frequently the methods employed were exceedingly imperfect. In consequence, in December, we proposed that a small Committee should be appointed, including persons accustomed to the organisation of large bodies of civilian labour, to inquire whether the existing methods could not be improved and to collate the experiences of various places and compare them—to look into the methods adopted, not only in the United Kingdom, but also in France, and compare them. Quite recently the matter has been handed over to the Prisoners of War Employment Committee, under the Ministry of National Service. That is a purely official body, and does not contain any contractor or experienced business man—

The CHANCELLOR of the EXCHEQUER (Mr. Bonar Law)



I understood that no one had been appointed. If so, it must have been within the last two days.


Yes; one, at least.


Better late than never. I am glad that even one has been appointed with experience of civilian methods and of handling large bodies of labour. There is another great defect in regard to this Committee. It has not taken into its cognisance the whole question of the employment of prisoners of war in France, where there are many tens of thousands, and where, in many respects, the methods employed may be susceptible of even greater improvement than in this country. I would suggest to my right hon. Friend that the reference to the Committee should be enlarged, and that either they or a similar Committee should be required to review the matter in relation to the prisoners employed in France as well as in this country. I should like, very briefly, to refer to two points dealt with in the very valuable Reports received from the Sub-committee over which my right hon. Friend the Member for Rushcliffe (Mr. Leif Jones) presides, which deals with the Board of Trade, the Food Department, and other similar Departments. One relates to the bread subsidy. It appears from evidence given before that Sub-committee that when the Cabinet took its decision to subsidise bread, costing about £40,000,000 to the Exchequer, there was no preliminary discussion at all with the Departments concerned who would have to administer and distribute the subsidies. The question is one of great difficulty, but it appears from the investigations of my right hon. Friend and his Sub-committee that in all probability many millions of pounds a year, possibly £10,000,000 a year, are now being absolutely wasted in paying unnecessary subsidies to the bakeries. The question is one, I know, of very considerable difficulty, but it seems that the matter has hitherto been dealt with clearly on wrong lines, and I think my right hon. Friend will describe to the House more fully how the matter stands, but I wish to emphasise the urgent importance of giving immediate attention to this question.

The other relates to the arrangements made by the Controller of Coal Mines in respect to the execution of the agreement that was entered into between him and the mine-owners last year. The House will remember that there was a Bill presented to Parliament in the latter part of last year, the Coal Mines Control Agreement Bill, which gave rise to a very considerable amount of discussion in this House at every stage. That agreement guaranteed certain profits to particular classes of coal-owners. I will not trouble the House with details. We were very anxious that the trade itself should be self-supporting, and that the Exchequer should not be asked to make good any guarantee of profits to coal-owners, and the Government gave us an assurance that their intention was that the whole scheme should be self-supporting, and that the prospect was very remote indeed of the State ever being called upon to find any money in order to guarantee those profits to owners of coal. We pressed the matter very strongly at every stage, and those assurances were specific and were definite. But what occurrs? My right hon. Friend's Sub-committee reported to us, and we reported to the House, that, questioned as to the financial effects of the inter-colliery compensation under the Government scheme, the Coal Controller replied that "he would not like to say that very heavy liability might not fall upon the State, as the situation becomes more difficult every week." That shows that the fears expressed in this House were not altogether unfounded, and I think that, in advance of any claim being made upon the Exchequer, we should make it abundantly clear to the President of the Board of Trade and to the Coal Controller that they must be held accountable to Parliament in this matter, that they will be expected to make good the assurances which were given when the Bill was before Parliament, and that they must not suppose that failure of management will not matter because the House of Commons, as a matter of course, will foot any bill that may be incurred. We secured from the Government a promise that if any loss should accrue, and if these profits were to be made good out of the Exchequer, the money should not be taken from the Vote of Credit, but that a special Bill should be laid before Parliament for the purpose. I can assure the President of the Board of Trade and the Coal Controller that if ever such a Bill is laid before Parliament it will be scrutinised with a most jealous eye.

There are two or three comparatively small points which arise on our Report on the Ministry of Pensions. They are too technical and too detailed to trouble the House with now, but I should like my right hon. Friend the Chancellor of the Exchequer, if he will be good enough to do so, again to look at our recommendations numbered, two, seven, and eight, which the Government have said they are unable to accept, and to consider whether, if they cannot be accepted in that form, some alternative to meet the objects we have in view could not be devised. Other members of the Committee will deal with other specific points that arise, and I hope the Chancellor of the Exchequer will be able to wait for his reply until they have been able to make their points to the House. Finally, I should like to say a few words on the general question of control over expenditure at the present time. I think every member of our Committee, which has now been sitting for the best part of a year, and which, with its Sub-committees, has held literally hundreds of meetings, has come to the conclusion that that control is very insufficient, and insufficient in three directions. The control of the Treasury as a department is inadequate, the control of the Chancellor of the Exchequer is inadequate, and the control of the Cabinet is inadequate. We recommended some time ago that the Treasury ought to be strengthened. The effective manpower of the Treasury before the War numbered only thirty-three, and a few months ago we reported upon that matter, and it then numbered only thirty-eight. While all the spending Departments had been expanding with immense rapidity, the Department whose duty it is to keep a watch and to put a brake upon expenditure had expanded hardly at all. That is not a true method of enforcing economy, to keep the forces that make for economy at a minimum. We recommended that outside men of ability and business experience should be added to assist the Treasury in its labours. Some additions have been made, and I invite my right hon. Friend to tell us to what extent the Treasury has been strengthened, and whether he himself is satisfied that it is now adequate to perform the vast tasks thrown upon that Department. With respect to the Chancellor of the Exchequer himself, I think the country suffers very much from having a Chancellor of the Exchequer who is so amiable. It suffers in two ways. In the first place, he is not stern enough with the spending Departments, and, in the second place, he commands the good-will of all of us in this House. His candour, his conciliatory methods, and his courtesy tend to disarm criticism, but criticism ought not to allow itself to be disarmed. He, after all, is the man ultimately responsible, and the stern fact remains that during his tenure of office of eighteen months our national expenditure has increased by 50 per cent., from a rate of £2,000,000,000 a year, a sufficiently appalling sum, to what it now is, £3,000,000,000 a year.

Lastly, there is the question of Cabinet control. I ventured early in this Session, on the second day of the Session, to address to this House, not on behalf of the Select Committee, but purely in a personal capacity, a speech of criticism of the many cases in which the performance of the present Government had fallen short of promise. I did not, however, make a speech that was intended to be critical without any constructive suggestions, and I ended by indicating the probability that these many questions of maladministration were largely, perhaps chiefly, due to the fact that the War Cabinet as an instrument of government was really a failure, that it had attempted to accomplish far too large a task, that it was physically impossible for any group of men so small, no matter how high might be their personal qualifications, at one and the same time to deal with all the problems that arise out of the conduct of this world-wide War, with our relations with our Allies, with the Dominions, and with India, and at the same time to have the supreme management of all questions of domestic administration, the co-ordination of the various Departments, the settlement of disputes amongst them, and all the matters that must come before this House relating to the United Kingdom. It is right, therefore, that I should say now, with respect to one of the matters of which I complained, that the indications at that time that the position was less satisfactory than it should have been have since been falsified. I refer to the Food Production Departments. Then the figures which had been supplied me by the Boards of Agriculture in answer to questions indicated that the amount of land to be ploughed up would fall very short of the estimate. It is most satisfactory to all of us and to the House to realise that that now is not so. I paid a tribute then to the efforts of the President of the Board of Agriculture and those working with him, and to the Chief Secretary for Ireland and the President of the Board in Scotland, for the admirable work that was already being done and only expressed regret that it had not come up to their and to our expectations. The figures which have quite recently been laid before the House show that the acreage which will be put under arable this year is likely to total the immense number of 4,000,000, and I think the whole House will desire to congratulate most cordially the President of the Board, the Director of Food Production, and others concerned on this most remarkable achievement. I say so much because earlier in the year I used words of criticism on that particular point.


May I ask if there is anything being grown on the land?


I dare say the produce will not be in proportion to the increase of acreage, but unquestionably a very large increase of foodstuffs will have been obtained. The fact remains that when the War Cabinet was first constituted it was anticipated and intended that its members should be able to devote their minds to the conduct of the War and nothing else, that they should be fresh minds, not fatigued with a multitude of other comparatively minor questions, and that they should have leisure to think and plan on the great problems of diplomacy and military matters arising out of the War. I suggested that there should be a Home Committee dealing with home matters, leaving the War Cabinet free to deal with foreign and military matters, and I ventured not only on that occasion but on two or three subsequent occasions, in season and out of season, to urge the same pleas until at last I exhausted the patience even of the Chancellor of the Exchequer, and with all geniality he suggested that dishes which had been twice cooked, thrice cooked, were neither pleasant to the palate nor wholesome to the digestion. He did not use those precise words, but that was the effect of what he said, but it seems now that that dish at last is to be eaten, and that a Home Committee is to be set up. My right hon. friend the Member for East Fifeshire (Mr. Asquith) was about to take that step within the week when he resigned office, and it is a thousand pities that that was not done a year and a half ago or at any time during the succeeding interval. I should like to address to my right hon. Friend the Chancellor of the Exchequer a question on this head, and to ask him whether it is the case, as we are told from the sources from which we are accustomed in these days usually to get our information, that a Home Committee of Ministers is to be set up, and, if so, how it is to be constituted, what will be its relations to the present War Cabinet, and what will be its functions? I see it is suggested—I hope it is not the case—that these two bodies, the Home Committee and the War Cabinet, are not to be parallel bodies, but that the War Cabinet is still to be superimposed upon the Home Committee; in fact, that we are to adopt the two-chamber system of government within the Cabinet. If that is so, we may have more delay and not less. If the many matters on which Departments cannot agree when dealt with between the Ministers, have to go first to the Home Committee and afterwards to the second chamber of the War Cabinet, we may find that we have introduced only another complication in the machinery of government, and that there is more delay even than now. I trust that the two bodies will be dealing, each within their own sphere, with the matters referred to them, and that where there is difference of opinion, or where the topics dealt with overlap between the two, as in many cases they must necessarily do, the matters will be decided by a joint sitting which will be something in the nature of the old Cabinet. I wish to ask, lastly, in connection with the Home Committee, how finance is to be represented upon it, because that is a matter of very great importance, if the Chancellor is not able himself to give the time to attend? I think the House will be probably glad to learn that the Financial Secretary to the Treasury, in whom, I think, we all have great confidence, will be able to attend the meetings of that Committee and protect the interests of the public purse.

Those are the matters upon which I wish to invite the attention, not only of the Government, but of every Member of this House. I believe that we, in common with the whole nation, are unshakably determined to see this War through to the end, which we have resolved from the outset to attain, but I submit that, where we see maladministration, or where we see waste, our duty to the country is not to adopt a timorous or subservient silence, but to let the voice of criticism be heard, because, for the sake of the prosecution of the War, it is not only necessary to have an effective diplomatic and military policy, but it is necessary also to have efficient, businesslike, frugal administration at home. I believe I speak the mind of the whole House when I say that we are not satisfied that that is at present being fully obtained, and we require that, whatever changes may be necessary to secure it, whether they be comprehensive or whether they be detailed, whether they be in the machinery of the Government itself or in the working of the machinery, they should be resolutely and speedily made.


I can assure the members of my right hon. Friend's Committee that it is through no feeling of discourtesy to them that I rise now, before they have taken their part in the Debate. I do so because, in spite of the detail with which my right hon. Friend has spoken, he has dealt with the broader aspects of finance, and I think that I should at this stage make a statement on that general question. In any case I could not, of course, on the spur of the moment, deal with detailed criticism in connection with the Departments, and if it be necessary, as the Debate goes on, those responsible for the finance in the Departments will themselves take it up. As regards the speech of my right hon. Friend, I say at once that his speech, like the action of the Committee of which he is the head, is one in regard to which no Government can find any fault. I say also that no member of the Cabinet—and my right hon. Friend was a member of one in the early stages of the War—any more than anyone outside, doubts that in this immense expenditure—in the emergency and urgency with which it has to be carried out—there must be a large amount of money spent which could be saved. That must be so, and certainly the Chancellor of the Exchequer more than anyone else has it as his duty to welcome any measure by which greater control and some chance of saving can be secured in this immense expenditure. For that reason I welcomed the appointment of this Committee. I welcomed it on the understanding, which has been adhered to, that it would be set up for the purpose of helping in this matter, and not for the purpose of finding material with which to criticise the Government.

I am going to deal with the particular points raised by my right hon. Friend, but I shall deal with them very briefly, because there is a real danger—and the speech of my right hon. Friend illustrates it—that in dealing with this big question we may be so lost, in details that we shall not be able to "see the wood on account of the trees," and it is the business of the House to look at the larger aspects as well as the smaller aspects of this question. My right hon. Friend was good enough to say that the Government have tried to carry out the recommendations of this Committee. That is so. Not only the Departments concerned, but in every case each of those recommendations was examined in the Treasury, and looked into by myself. We asked those Departments what they were going to do respecting their answers, and scrutinised and criticised them before they were given to the House of Commons.

I shall take, first of all, the most important one. It is in regard to the Question of staffs. That is very important, not only on account of the amount of money involved, but for another reason. In all this kind of discussion—it is inevitable and it is right—there is a distinct danger which the House ought not to leave out of account. If there be an exaggerated view of the faults in this respect, immense harm is done, and it is used as an excuse in every direction for people not helping in the War, as, for instance, lending money to the State in the way they otherwise would do. It is therefore essential that, while legitimate criticism should take place, it should not be exaggerated, and the position should not appear worse than it is. As regards staff, the amount of money involved is great, but, in comparison with the immense expenditure in other directions, it is comparatively small, but it is of immense importance, because everybody knows of this growing number of officials, and it is looked upon as a test of extravagance everywhere. For that reason, when the Committee made this recommendation—it is very likely it should have been done earlier; I do not deny that—but the moment that recommendation was made, I determined to appoint a Committee which should secure real results. For that purpose I asked, in addition to business men who are very competent and gladly gave their services, Sir John Bradbury, one of the heads of the Treasury, and Mr. Fisher, who is in the Inland Revenue Department, and has had great experience of organisation, to take part in this Committee. It was almost unfair to ask them to do it. They are overworked men, but they were willing to do it, and they agreed that if anything was to be done there was more chance of the recommendations being carried out if those at the head of the Department for which I am responsible were themselves admitted to it, and were themselves determined to see it through.

My right hon. Friend complains that there has been delay, and also that they began at the wrong end, but I do not think he should too hastily come to that conclusion. I set up this Committee. I thought they were as competent certainly as myself, or as any member of the House of Commons, to judge as to the best way of dealing with it. They took that view. It is true they have only given one Interim Report. They had to deal with the system on which the staffs are recruited. My right hon. Friend suggests that if there were sufficient economy, there would be no need of recruiting. There is recruiting going on all the time, and when the Departments come to the Tresury with demands for this additional staff—for let the House remember that in this respect there is Treasury control in the old sense—they make a case, which is unanswerable to my officials, that the additional staff is necessary to do the additional work, which, the House must remember, has been growing steadily in every stage of the War.

This Committee has reported, and, as a result, has secured a system of recruiting, but I admit at once that the bigger problem is the examination and control of the existing staff, with the view of finding out whether or not they can be reduced and the work correlated so that economies may be secured. It is true there has been delay in that too. But it is not easy to do things with rapidity at a time like this. It is a fact—the recommendation came from the Chairman, Sir John Bradbury—that we have set up already eleven panels consisting in nearly every case of business men and Civil servants, very often retired Civil servants, who are dealing now, and have been dealing since the beginning of May, with Departments and Sub-departments. They are hard at work. They will go on as quickly as they can, and it is certainly the intention of the Committee, as it is mine, that anything feasible in that direction shall be done. In regard to this, I may say that the one Department where, on the face of it, I should consider that this examination was necessary, is that of Munitions. My hon. Friend the Financial Secretary had already set up a Committee of this kind before the Treasury took action. We at once decided that we would wait for the Report of that Committee, but, in the meantime, we asked Mr. C. F. Wood, a well-known business man in the City, who has been giving us his services at the Treasury for some time, to join the Committee as representing the Treasury, and this work is going on. There may have been delay, but we are doing our best to deal with the subject.

I come to the next two items where there has been delay. They have to do with the War Office. My right hon. Friend referred to the question of horses, but, as he pointed out, that was not a fit subject for this Committee, for it involves in the most intense degree military considerations, which I am quite certain my right hon. Friend remembers, for it was discussed even in the Cabinet of which he was a member. Civilians in the kind of war which is going on were always inclined to think that Cavalry could not be used immediately, and were not likely to be so useful. We have all been urging for years that the number of horses should be reduced.


I did not refer to horses. I said "forces."


After all, this observation is not thrown away. It is an instance, which the House will understand, of the kind of subject which has been constantly before the Government with a view, not only of cutting down the use of unnecessary ships, but with a view also of saving unnecessary expenditure when we are not able to get results from it. That was not dealt with by my right hon. Friend, but he made some very strong criticism of the action of the War Office in regard to specific recommendations of his Committee. As I said, I saw myself the answers which the War Office gave to the recommendations of this Committee. I shall take the smaller of them first. It is the case that General Lawson was sent out by the War Office to examine the branch establishments with a view to cut down unnecessary men. Of course, from a military point of view, apart from money, and from the point of view of the War Cabinet, that is vital, for it means saving man-power, which is our great difficulty at the present time, and to whatever extent you can save man-power you will inevitably also save money. The answer given to me was, not that nothing was being done, but that the problem at home was being dealt with. The Commander of the Home Forces, the heads of the different Departments were themselves going into this with a view to cutting it down. I say—and if my right hon. Friend or the House desires to consider it as a proof of the effectiveness of the House of Commons I am quite willing that he should do so—on account of the questions he put to me, I saw Lord Milner personally with regard to this matter, and I confess to the House that, in view of the situation in which we are, in view of the enormous problems facing us in connection with the War, I have hesitated very much before interviewing Lord Milner personally, but he is as alive, as far as opportunities permit to these considerations as the House of Commons, and he has now agreed that this will be done, and, if possible, General Lawson will be appointed to do it.

The other question is a more difficult one. It is the question of the staffing of the War Office. My right hon. Friend talks of frankness, and I myself am liable to fall into it. Nobody can go to the War Office without feeling what an immense number of people there are there, and wondering what they are all doing. Lord Milner himself told me he had the same feeling. Yes; but it does not follow that it is not justified. Remember it is a fact, which anyone with any knowledge of any of the Departments of the War knows, that, though the War has now been going on for three years, every additional month seems to bring additional work in every direction. When I tell my right hon. Friend, as was told to me by the War Office, that, in spite of this great increase of staff, the amount of work done by the War Office, as judged by the number of papers dealt with, is twenty-six times greater than in the first months of the War, it will be seen that it is not such a simple problem as at first sight one would be inclined to think. What was done? My right hon. Friend described it correctly. The Army Council thought, at first, they would be able to do it by a Committee of their own. They found it was too much, and they gave it up. They appointed another Committee. My right hon. Friend suggested that because of their dislike to men being employed on these Committees, they have been sent away to other employment. I really do not think the House should draw that inference. I certainly draw another. It is this: If this work has to be done, as the right hon. Gentleman says it can only be done, from within the War Office itself, they naturally try to get competent men to do it, and, as the needs of the War grow and the competence of these men was shown, they thought at last that their ability was required in more vital fields. They were, therefore, taken away for that reason, and, I think, for no other.

The position is this: This Subcommittee has now prepared a Report. This Report is going to be submitted to the Army Council first, then to the Secretary for War, and finally to myself as Chancellor of the Exchequer. Lord Milner is himself going to try, by taking personal note of the matter, to see whether he can help this work. I can assure my right hon. Friend that, as far as the heads of the War Office are concerned, there is a real desire to get rid of unnecessary staff at the War Office, as we all desire should be the case everywhere else. As regards prisoners of war, that is not, as my right hon. Friend knows, a big problem from the point of view of the amount of money involved. What has been done by the Committee which is dealing with this under the Ministry of National Service? There may have been delay, but they are going on, and Sir Edward Pearson has now agreed to serve. It is quite true it is only to-day, at my request, that he definitely agreed to do that. But he was asked a good many weeks ago. He was uncertain whether he could do so or not. But the work is being done.

The next question is a bigger one, the question of the Coal agreement. When this Bill went through the House, the view of the Board of Trade and the Government was that it must be self-supporting. That was the intention. It is still the intention of the Board of Trade. The President of the Board of Trade tells me he has no doubt he can so arrange matters that it will be self-supporting.


Without State interference?


I will say something as to the effect of leaving things without State interference later, if my hon. Friend will allow me, but I wish the House to understand that at this moment there is probably no problem—and this is a War problem—which is more difficult than that of the supply of coal. That difficulty has been rendered very much greater by the necessity under which we believed we were placed, in spite of the need for coal, of allowing a considerable number of men to leave the mines and take their place in the fighting ranks. It may be said—and, of course, if we were discussing this problem by itself, I am sure the majority of those who speak would say it—"You ought not to take away men from coal." Well, Sir, the front line is the first line. We have to deal with that first. In coming to that decision the Government took the decision which they thought was right in view of the emergency. This increased the difficulty. It may be that this will mean more difficulty than was expected in making the accounts balance, but, at all events, it is certain that if there had not been controlled coal, and if it had been left, as suggested by my hon. Friend who owns coal mines, to the free play of ordinary economic law, not only would the State have paid many times more, but we would not have had the coal which is necessary now for the needs of the nation.


That is done under the Coal Prices (Limitation) Act to which I never objected.


We considered, after very close examination, that this method was more effective. We still think so.

The only other point of detail is the bread subsidy. There is one general observation I should like to make on this. With the exception of the bread subsidy, there is not one of these specific items dealt with either by the Comptroller and Auditor-General, or by the Committee, which do not refer to events that took place not later than the year 1916. As a matter of fact, therefore, we are dealing with a state of things in the earlier stages of the War. As I have said before, there has been a great deal of improvement since then. Take this bread subsidy. It is perfectly true—I have said it before—that there is room for great difference of opinion as to the wisdom of this subsidy. But I can tell my right hon. Friend that it had to be done. The Report of the Committee suggests that much could have been done, and that a saving of something like £10,000,000 could have been made. I am absolutely certain that is incorrect, and I shall give my reasons why. My attention was first called to this by an interruption of my right hon. Friend the Member for Rushcliffe (Mr. L. Jones). The Treasury got into communication with the Food Controller. The mailer has been dealt with between them, Sir Robert Chalmers acting on behalf of the Treasury. I myself had an interview with my right hon. Friend the Parliamentary Secretary to the Food Department. And this at least is certain, that if the subsidy is to be given at all, the method of saving suggested by the Committee is absolutely impossible. Their proposal is that the whole price given to the bakers should be raised.

What are the facts? It is perfectly true that the best equipped bakeries can make at the price at which the flour is sold profits which are altogether too high. On the other hand, there are altogether something like 40,000 bakers, and the ordinary ones are able to make only a reasonable profit on this scale. If, therefore, you were to raise the prices all round in this way, the effect would be that in large parts of the country it would be utterly impossible to sell the loaf at anything like this figure, and the one object of making the subsidy—that is of trying to prevent discontent in the masses of the people who have to buy bread—would entirely disappear. That method is not possible—I am sure of that! There is one consideration which I do not think my right hon. Friend took into account. I am sure if he had thought about it he would have done so. It has been pointed out—I do not suggest it as a reason for doing nothing, but it is a vital factor—that the bakeries which are making these big profits are the bigger ones, with the most up-to-date machinery. Every one of them pays Excess Profits Duty, so that it is not too much to say that of this excess, in the case of the great bulk of them, 80 per cent. of it comes back to the Treasury in the form of Excess Profits. That, at all events, should be taken into account in the Estimate. I quite admit that in every direction this is not a method one likes in fixing these prices. I believe that something can be done, though not on the lines of the Select Committee's Report. It is being considered now, both by the Treasury and by the Food Controller. I am not going to deal with the suggestions which have been made, but I can assure the House that if there be any feasible way by which this discrepancy can be got over it will be adopted as soon as possible. I think that covers all the questions of detail with which I have to deal.

I should like to come to the more general question. My right hon. Friend gave my amiability as one of the weaknesses of the present financial position. Well, that may-have its advantages, but it is not altogether a crime. I quite admit—and I have noticed it in the House—and if it were serious it would be something that would have to be put an end to—I do not think hon. Members have any pleasure in annoying me for the sake of annoying me—and to that extent, perhaps, I do escape some criticism. Possibly that is a bad thing! But I ask the House to remember this: The question of the amount of money that can be saved must apply to the big items, and not to the details which we have been discussing. I ask the House to remember also that even in peace times the Treasury made no attempt to control contracts in connection with which the greatest extravagance was likely.

They could not do it. That had to be done within the Department, and, of course, it is obvious that it requires an immense expert staff, and no amount of increase of Treasury staff could possibly have any effect in regard to this matter. I came to the conclusion that the only way in which one could hope to avoid this waste of money was in two directions—I mean on the part of the Treasury. The one is to make as certain as you can that a good system exists in the Departments. That is the first direction. But something else is essential. A system is no use unless you have a competent man who understands the work to deal with the system in the new conditions which have arisen. If I were not a member of the Government, I could have made a speech like that of my right hon. Friend. Possibly I might have made a stronger speech. I had that view long before I was a member of the Government. In the first months of the War I expressly asked to see Lord Kitchener, and I told him that in every war that has ever been in this country there was extravagance, and the man at the head of the Department responsible got into trouble. I suggested to him that the way to deal with the War Office was to get the best business man he could, to put him at the head of it, and make him responsible—leaving the work to be done by him. In my belief that is the only way you can save great sums of money.

5.0 P.M.

Before I say what has been done in this direction, I would like to draw the attention of the House to one particular consideration which I really believe is doing a great deal of harm. Most of the Press comments upon extravagance have been caused, not by the Report of the Select Committee, but by the Report of the Comptroller and Auditor-General. That is because it is not under-stood what are the Comptroller and Auditor-General's functions. His Report is not a final judgment on this question, and it is not to be taken as proof that the things to which he calls attention are wrong. His business is to present to the Committee on Public Accounts any accounts which he thinks should be examined. It is his business to present to that Committee any primâ facie case that requires examination. Think what that difference means! They come before the Committee on Public Accounts and, in many cases, it is found that a primâ facie case does not exist, and that is no reflection on the Comptroller and Auditor-General. But what happens in the public mind? Everything said in the Auditor-General's Report is taken as the final verdict, and the Press is full of that. The Public Accounts Committee see the Report, and while a great deal will be found not to be of importance, they will dwell on other things which are found defective; and what seems to be an entirely new set of scandals appears in the public Press, and they are multiplied in that way. I notice in a letter to the Press a case which bears out all these points put by the Auditor-General, and in which they are summarised. They come to a total of upwards of £17,000,000, and the letter treats it as if all this was a waste of money. As it happens, these matters have now been examined before the Public Accounts Committee. There are members of that Committee present who, I am sure, will corroborate what I am saying. I shall give my experience. The Treasury is represented at the Public Accounts Committee. I went into this matter and I have been given a report—


The Public Accounts Committee has not reported upon this matter, and I think this point is very important. We are bound over to absolute secrecy until we do report. I am speaking in the absence of the Chairman of that Committee, but I may say that the documents are marked confidential, and we are not entitled to refer to them or to quote them until the Public Accounts Committee has reported.


Perhaps my right hon. Friend is right. I shall not go further than to say that these are events which took place before March, 1917. They all began in 1916; they are only primâ facie cases, and the House is not to assume that there is any evidence in any one of these cases that a single penny of public money has been lost on account of what has been done by those Departments. I think that is very important. I now come to the general question as to how you are to attempt to save money. The first thing which I did on going to the Treasury was to send to the three principal spending Departments, asking for an account of their methods of dealing with expenditure. I went into it with the officials of the Treasury, and I came to the conclusion again that the only chance of saving money is by a good system obtaining in those Departments, and by having good men to carry it out What has been done? In the War Office we have now the very position which I think is the only possible one if money is to be saved. We have Mr. Andrew Weir, who is responsible for these purposes. My right hon. Friend (Mr. Samuel) has come into contact with this gentleman in connection with the War Office in his position as Chairman, and I say to the House, without fear of contradiction, that the methods adopted by him mean simply an immense saving in the large sums involved.

I am not going into details, but I will give the House one or two illustrations. In regard to the question of purchases, there is still a certain amount of purchasing by tender, which, of course, is the best way; but under present conditions there could not be free economic play. They have set up a system of costs, and by a Regulation under the Defence of the Realm Act they have the power to requisition everything. This Act was passed a long time ago, and it gave them this power. The result is that every tender of any consequence is examined from the point of view of what the cost is, and if it seems above that cost the seller is asked to bring it down. In every case there is this power. The real question of whether money is being lost or saved depends upon something else which is now almost universal in industry. This is control, and it is a question whether this control is exercised wisely or unwisely. I will give one illustration. In the case of Army boots, the price this year, in spite of the general rise in wages and in everything else, is 2s. less than it was last year.

Let me take a bigger saving in money, and I will only give one illustration. Wool is now controlled. Anyone who has any experience of business, and knows the difficulty of combining business methods with Government Department methods, will realise how difficult is the problem in dealing with an article of this kind. What has been done is that the whole of the clip of the wool of this country, and—thanks to the co-operation of our Colonies, in Australia, New Zealand, and, to some extent, South Africa—is now under control, and it is no exaggeration to say it would have been impossible that the world price could have been paid. It is a fact that the total amount spent on wool last year was £100,000,000, and if that had been bought at anything like the world price, it would have meant an addition of at least £20,000,000 to the amount paid by the nation. It is in that kind of way that big sums of money have been saved. As regards the Admiralty, we have adopted the same principle. There the evil was not so great, because the extension of the Navy has not been in the same proportion as the Army; but there we have secured a business man to control contracts, and he is actually doing the most useful work. There also is a Treasury Committee dealing with Admiralty matters, which meets, I think, twice every week, or once, at all events. It goes into every question of that kind, and is there to control expenditure.

Now we come to the Ministry of Munitions. I wish the House of Commons and the country to realise what is the position of that Department. Everyone admits now quite freely that you could not scrutinise too closely the financial methods in the early stages of the setting up of that Department. Urgency was the first thing, because the goods had to be got. It is quite true that the War has lasted so long that there is a general feeling that everything ought to be stabilised on a permanent general war basis, but that cannot be done. Every now and then there is an urgent remand for some big article, involving a large amount of money. For instance, it is true in regard to the tank programme and aeroplanes that you cannot delay production whatever else you do. In the Ministry of Munitions there was not anyone in supreme control. I think that was a bad system, and it was condemned by the Select Committee as a bad system. That has been changed, and my hon. Friend the Financial Secretary to the Ministry of Munitions has been appointed to do that work and that alone, and be responsible for it. He is, in fact, to be the Chancellor of the Exchequer in the Ministry of Munitions. That is a very difficult task, with as great responsibility almost as that of the Chancellor of the Exchequer for the Kingdom. The amount of money over which he has control is three times greater than the total expenditure of this country before the War. It is vital that this work should be well done, and if there be any detailed discussion of this Department I hope my hon. Friend will explain the steps which he has taken, to show to the House that, at all events, a real effort is being made to grapple with this question.

I would like to say this about the Ministry of Munitions. Account keeping is essential to good business of all kinds, but remember—and this is true all through the Service—that the experienced clerks who did that work have been taken away, and you have in their place inexperienced people and inexperienced women. It is inevitable that a much larger staff is required to do the work. It is inevitable, in the second place, that mistakes are far more likely to occur, and it is far more difficult to prevent mistakes which create an impression on the public mind. I am certain that any business firm would agree that the system of accounting which has now been established will give reasonable security that the money is being properly spent. After all, the House of Commons ought not to look at this question entirely from the point of view of the mistakes that are pointed out, for there is something bigger involved than that. In the Ministry of Munitions there are some of the most competent business men in the country. They are rendering great service to the State, and in my view nothing would be more unfair to them than to convey the impression that their work on the whole was being badly done.

In the Ministry of Munitions, as in the case of the War Office, the real question of the saving of money is the way in which the big business is done. It is the way in which the output is produced and the way in which affairs are controlled. That is the real test, and I shall give to the House proof of how that test turns out. It is quite easy to do it. I shall take the big items which were produced in 1915, and compare them with the same article produced in 1918, and compare the cost. That in reality is the test as to whether the work on the whole is being done well or badly. I shall take first of all the 18-pounder gun and the 4.5 howitzer. I tried to get a general statement of all guns and ammunition, but that was impossible, because so much had been changed during the War. These remain constant. In 1915 the price of an 18-pounder gun was £2,100. Last year it was £1,900. The price of a 4.5 howitzer was £2,115 in 1915; it was £1,790 in 1918. Coming to ammunition, in 1915 the cost of 18-pounder ammunition was 62s. 3d.; in 1918 it was 42s. 6d. High explosive shell for the 4.5 howitzer was 106s. in the first year, and 66s. now. Put this in a bigger way. If you take a supply of ammunition for these two weapons in the year 1918, and assume that you would have paid for it at the price that would have had to be paid in 1915, the result is that the cost to the nation would have been £45,000,000 more than the actual price paid.


Increased output reduces cost.


Of course. My hon. Friend must not suppose that I am meaning to imply that they ought to have remained at anything like the old prices. That would have been ridiculous. The output is so much greater, but that is the real test as to whether the extent to which we cut down cost is efficient; and I am confident that if it were examined from that point of view it would be found that on the whole, taking all the difficulties into account, the men responsible for production in the Ministry of Munitions deserve well of the country which employs them. When my hon. Friend (Mr. Roch) pointed out that the output must reduce the cost, while that is true he must remember that there have been other factors in the other direction. There has been a rise in the cost of all material and of wages, and you must take that into account in dealing with the whole matter. I am very unwilling to give the impression that I am minimising either the importance of this or the possibility of still greater improvement, but what I wish the House of Commons to bear in mind is that the particular strictures apply to a long time ago, that an immense effort is being made to improve them, and that it should not be assumed that great improvements have not been made, and are not constantly being made in connection with this matter.


What about increased Treasury supervision?


If my hon. Friend will have a little patience, I was going to tell him one respect in which a change is being made. The Select Committee recommended that the question of contractors' costs and prices paid should be examined. A Committee was appointed, consisting of Lord Inchcape, Sir Peter McClellan—who has done good service at the War Office—and Lord Colwyn. They presented a Report, which has been carefully considered by the Government and the Departments. It is evident that there is still, though much less than there was, a considerable amount of overlapping in buying, and it is to co-ordinate that that the efforts must be directed. The Committee point out, as anyone would in their place, that the ideal method would be to have one Supply Department for all Government, services. That had been considered by the Government before the Report. Its advantages are obvious, but there are great risks in making a change like that in the middle of the War, and we have not felt justified in doing it. The Committee recommended as an alternative that the heads of the contracting Departments of the War Office, the Admiralty, and the Ministry of Munitions should be formed into a Committee with an outside man as chairman. That has been done. Lord Colwyn, who will have to give up other work, has undertaken to be the chairman of the Committee, which will consist of Mr. Weir, Sir H. Livesay, and Sir John Mann, and, in addition, we are putting on Sir Hugh Levick, a business man of high capacity, who has proved himself of great assistance. He has been helping the Treasury for more than a year, and will represent it on that Committee. I hope that if the work be undertaken with good will by the Departments, it will be very useful, as I am sure it will. One result will be that each Department will see everything that the other is doing, and it is my hope that they will rise to the level of the best Department, whichever it be. I shall be greatly disappointed if a great deal of useful result does not come from that Committee. I am not going to say anything more—


The Treasury staff.


The Treasury staff has been increased—I cannot say to what extent. We have, in addition to the names I have mentioned, three or four business men, who are giving us their whole time. My right hon. Friend must know that the difficulty of increasing the Treasury staff is that it is all special work, and is done by special people. It is not at all possible to throw in a vast number of men, and say, "You are to assist in the control of the Treasury." What we do is to increase its efficiency as much as we can, and I believe we have had considerable success.

That raises again the problem which would be quite big enough for a speech by itself—the question of the constitution and work of our present Cabinet system. My right hon. Friend's speech is pretty much the same kind of speech we have had from him before. I am not now going to make a long speech in reply, but I say this at once to the House: I can understand that kind of speech, as we had it the other day from, I think, a Member for Sheffield—from a Member who has had no experience of the ordinary system of Cabinet government. I really cannot understand it from my right hon. Friend. The old system was not very effective in peace. It absolutely broke down in war, and that was admitted by everybody. My right hon. Friend (Mr. Asquith), who was then Prime Minister, was making constant efforts to improve it. He set up the War Committee, and in the very last days of his Government other changes were proposed about which there was difference of opinion. One of them was that to which my right hon. Friend (Mr. Samuels) seems to be wedded, of having two more or less independent Cabinets. I was really surprised to hear his suggestion that there should be a joint meeting between them when there was any point of difference. I cannot imagine any method more unsuitable for carrying on a war. The one thing above all others needed is that there should be central control, and that there should be no doubt about it. If you had a really independent Cabinet Committee to deal with internal affairs, what would be the result? In the first place, where would you draw the line? A Department which is in its essence a Civil Department is drawn into the War in every direction, and at every point comes into consideration where the War does arise and where there would be a conflict between authorities.

Take another case. If you are to have this Home Department, which is to be more or less independent, to deal with special things by themselves, is the Prime Minister, are the Leaders of both Houses, to be on it? If not, how can it work; and if they are on it, are they also to be on the War Cabinet? How can it possibly work? There is not a question of any great importance which may not at any moment be raised in this House. It is inconceivable that the Leader of the House should not take a part in coming to decisions for which he has to be responsible when they are raised in the House of Commons. Whatever other plan is possible, that plan would absolutely break down, and I am perfectly sure would never be adopted by any Government now that was responsible for carrying on the War.

Let me point out another difficulty. It has been suggested that a better method would be a comparatively small Cabinet, with a War Committee dealing with the War alone. How could that work? The Cabinet is to be in that case in the end responsible. It is impossible for them to accept responsibility for decisions which were unknown to them, and over which they had no control. In effect, if you are to have a body which is at once doing the work and responsible for it, it must be a small body, and it must have full responsibility. It is assumed that the Cabinet is in arrears in all these questions. That is absolutely not the case. What happens is that there is now in connection with the Cabinet a Secretariat. It is, in fact, a general staff for the Prime Minister. The secretary of [...]at staff has the duty of bringing to the notice of the Cabinet any questions submitted to him by one of the great Departments. He at once makes efforts to get it dealt with. It would be perfectly impossible for the Cabinet to deal with these questions if they were to go into them all themselves. That never has been done.

The system on which the Cabinet works I think it might be as well to explain to the House. It meets every day. The first business is to get reports of the military situation from the War Office, the Admiralty, and the Air Board. The next is to get a report from the Foreign Office. Afterwards it deals with the subjects on the agenda. How are these questions dealt with? The system has grown. First of all there were great arrears, which took a long time to overtake, but now the method by which we deal with them is twofold. We either submit questions to particular Cabinet Ministers, with power to decide them, or bring them up again to the Cabinet, or submit them to ad hoc Committees. They deal with them. In nineteen cases out of twenty there is agreement between the Departments, and they never come again to the Cabinet at all. If there be disagreement, then they come to us, but they come with the case thoroughly sifted, where we have only to decide on questions of principle, and it does not usually take a very long time. But even that method is giving place to another method of standing Committees that has grown up under our system. We have already a number of them. We have one, for instance, a very important one, dealing with all questions of priority. It is a permanent Committee which meet regularly. We have others dealing with all economic questions. We have a Committee dealing with military questions in the East.

That is how business is done. There are no arrears, absolutely none. When there is a talk of arrears it is about questions like Home Rule. Is that a question the decision of which depends upon the inability of Cabinet Ministers to deal with it? It is a question the difficulty of which is inherent, and it is not want of time which prevents us dealing with it, as every Member of this House knows. That is not the kind of question in which the House is interested in the main. It is interested in carrying on the War, and I would remind the House of this, that there is probably no other country engaged in the War that has attempted so much legislation as has been attempted by this Government. I am not at all sure that we have not attempted too much; but, at all events, I can say that there is no delay whatever, absolutely none, in any question which directly or indirectly affects the conduct of the War. I would ask the House—I am making no criticism on the previous system—to contrast that method with the old Cabinet system. I gave the House before the figures of attendance at Cabinet meetings. In the last five months of the Government of my right hon. Friend (Mr. Asquith) the War Committee met forty-one times. The Cabinet Committee met eighteen times in five months. What possibility was there of co-ordination?


The Cabinet itself?


Yes; the Cabinet itself.


Surely my right hon. Friend knows that there were other Committees which met during that time!


And does my right hon. Friend not think that Committees are sitting now at the same time?


No; I did not say there were not.


That is not the point. The question is one of co-ordination. Does my right hon. Friend suggest a Special Committee for the special purpose of dealing with co-ordination? Of course he does not! The only possibility of coordination in that sense was in the meetings of the Cabinet. But, as a matter of fact, everyone connected with the Government knew that was a problem which at that time rested on the Prime Minister. All the Departments came to him, and he had the burden of dealing with them. That was a system which could not last, and I say to the House of Commons that what has been talked about as a "Cabinet Committee" under this Government is entirely a mistake. It is nothing of the kind. It is simply another ad hoc committee, appointed to deal with definite sets of questions. It is not independent. The ultimate authority on every question will still be the Cabinet. It is just a further development of a system which is going on in other directions, and, after an experience of both systems, I am convinced that the real method of getting the work done is by a small body which has the final authority, and that the question of efficiency depends upon the extent of the devolution, or the way in which they can delegate their work. That is being improved all the time. Finally, I want to say, without any hesitation, that we are not afraid to be judged by the results of what we have done, and, if the House of Commons wishes to know the result, let them look at the Report given of the immense work which was done last year in every direction, and, as a sample, take the 4,000,000 acres to which my right hon. Friend has referred, and judge by that whether or not essential work is being done at the present time.


The right hon. Gentleman has told us that the present Cabinet are not in any arrears with their business, but the charge that has been made against them is not that they are in arrears with their business, but that they decide matters without giving them proper consideration. From the very nature of the case, a small Cabinet consisting of six members, charged with the tremendous responsibility of carrying on the War, cannot possibly give time to weigh the pros and cons, of the different questions which the Cabinet are being constantly called upon to decide in interdepartmental disagreements, and the criticism which I have to make in regard to the Wheat Commission, which has been prominently referred to in these Debates, is that the Cabinet came to their decision, not after delays and with slowness, but immediately without consulting the people really concerned in the question and without asking their views. They said that bread was to be sold at the uniform price of 9d., and, as a result, a very heavy expenditure has been thrown upon the people of the country. That is the charge that we make against the present system of Cabinet government. All the House who listened to the right hon. Gentleman's speech must have noticed a singular contrast between the beginning and the end of it. In his opening words, he posed almost as a monument of patient suffering. He acknowledged that the investigations of the Expenditure Committee had revealed weaknesses in the existing system, which, as Chancellor of the Exchequer, he had been only too glad to welcome, and to give effect to throughout the public service. He admitted that there had been great defects, and he said that he had tried to put them right and he was going to put right the other points which have been referred to by my right hon. Friend (Mr. Samuel). At the end of his speech his tone entirely changed.

Mr. BONAR LAW indicated dissent.


I think it did. I listened with amazement when the Chancellor of the Exchequer became a positive apologist for expenditure. Perhaps it was the unfortunate result of the double capacity my right hon. Friend occupies. In the early part of his speech he was a most correct Chancellor of the Exchequer, but in the latter part of it he was a member of the War Cabinet who in many respects are responsible for the waste of which we have had to complain. My right hon. Friend indulged in a criticism of the Comptroller and Auditor-General, which I very much regret, and which I cannot but think that he on reflection will also regret.


No; I did not. I really cannot allow that to be said without trying to correct it. I said nothing of the kind. I said that there was a misunderstanding of his functions, which was not to judge of the expenditure but to bring it to the Public Accounts Committee to be judged by them.


I am grateful to my right hon. Friend, and I apologise if I have in any way misrepresented him. It is most important that nothing should be said by the Leader of this House in any way in derogation of the Comptroller and Auditor-General, who is a great officer of this House, who reports to this House, and whose Report the Public Accounts Committee is appointed to consider.


I did not do so.


And I am heartily glad to know that I slightly misunderstood my right hon. Friend, and that there was no such intention. The Public Accounts Committee in due course will report upon the Report of the Comptroller and Auditor-General upon all these Departments, and I do not doubt that this House will take them into consideration and deal with them. My right hon. Friend in the latter part of his speech endeavoured to give the impression that this expenditure of which we complain relates to matters of the distant past and that there is nothing going on now which calls for the same criticism. Having served upon the Expenditure Committee, I should like to say that I most gladly recognise that there is a great improvement in the spending Departments at the present time. There has been a very great effort made in many Departments to improve their financial system and to prevent wasteful expenditure. In many ways some of the new Departments are now organised with a financial system on paper which really could not be better. It has been my duty, for instance, to investigate the accounts of the Ministry of Food, and I should like to confirm the claim made by the Undersecretary (Mr. Clynes) the other night, when he said that I had, as Chairman of the Special Committee charged with the investigation of the affairs of his Department, approved of the financial system which has been set up in that Ministry. They have a financial system there which if it is carried out as it is on paper, and I have no reason to think otherwise, will result in the expenditure being as closely watched as it possibly can be. They have set up in that Department—I should like to see some of the other Departments follow suit—a financial secretary who is the accounting officer responsible for matters of cost and accounting and the examination of traders' books throughout the country, and in each of the administrative divisions of the Ministry there is an assistant director of finance directly responsible to the Financial Secretary. The Financial Secretary, or these assistant directors who are responsible to him, are associated with all spending from the very outset. The opinion of the Financial Secretary, according to the evidence given to us, is asked upon all schemes for spending money. He is allowed to criticise before they are embarked upon, and he and his officials watch the schemes while they are being carried out, and they are accountable for them to this House and to the Comptroller and Auditor-General. If that system of the association of finance with the inauguration of schemes, with the working of them out, and with the accounting of them is really kept up, I do not see what more can be done in the way of accounting to safeguard expenditure, and I congratulate the right hon. Gentleman (Mr. Clynes) upon having secured this system in the Ministry of Food.

After all, it is matters of policy more than anything else which, in the end, determine whether or not there is lavish expenditure, and it is there that our criticism of the War Cabinet comes in. I refer especially to the affairs of the Wheat Commission. I will ask the House to recall the establishment of the Wheat Commission, and the way it was worked. It was set up towards the end of 1916, and its purpose was to buy wheat all over the world and secure the wheat supply of this country—it was subsequently extended to other cereal crops—to co-ordinate the demands of the Allies, to economise shipping, and to avoid competition in buying. The purpose which the Commission set before themselves was to achieve all this without any cost to the taxpayers of this country. The Wheat Commission worked for nearly a year. They built up a great wheat reserve, which they said in evidence before us would cost, through wastage and through the fact that there were no suitable buildings for storing, about £2,000,000, but they were selling to the public wheat at a price which, if they had closed up their account, would have wiped out the loss on the wheat reserve and would have left the account balanced. The Wheat Commission would have discharged their functions of supplying the people of this country with cereals, of caving shipping, and so forth without any cost to the taxpayers of this country. Suddenly a matter of policy was decided by the War Cabinet without consultation, and the most extraordinary part of the business is that, as far as I can find out, nobody on the Wheat Commission was consulted as to the decision of the War Cabinet that bread should be sold at a uniform price of 9d. throughout this country.

I have to say, as the result of the evidence that was put before us, that if the War Cabinet had had more time at their disposal, and if, instead of disposing of their business with that rapidity and swiftness of which the right hon. Gentleman boasts, they had delayed in order to take the evidence of the Wheat Commission and of people throughout this country in regard to the method of selling bread, the price of bread, and so forth, they would never have reached that decision to sell bread at a uniform price of 9d. throughout the country. The whole mischief arises very largely from their insistence upon the same price of bread for every part of the country. The country was not accustomed to have bread sold at the same price—in the very North of Scotland and in London. It was not accustomed to the same price in the rural and in the town areas. There- fore it was an unwise thing for the War Cabinet to lay down a general rule at the outset without exploring the problem. That was the first blunder that was made, and it was due to the insistence of the War Cabinet in deciding matters offhand so as to have no arrears. The problem ought really to have been explored with infinite care, especially seeing that it involved an outlay of £40,000,000 of public money. I do not blame the War Cabinet for not having accepted the decision. They had no time to go into it, but they are responsible for the system under which that decision was taken; therefore we must hold them responsible for the loss of public money which has ensued as the result of their action.

I want to trouble the House—I am sorry to do it because it is wholly a matter of detail, but as the right hon. Gentleman holds out no hope of accepting the recommendation of our Committee that the price of flour should be raised as we suggest, although he hopes to attain part of that aim by other methods—I must trouble the House with the reasons which induced our Committee to make the recommendations which the right hon. Gentleman will not accept. The way the Wheat Commission proceeded to give effect to the Cabinet's decision to subsidise bread and sell the loaf at 9d. was this: They endeavoured to ascertain from bakers what price they could pay for flour, provided they were compelled to sell the loaf for 9d. The price arrived at was 44s. 3d. per sack of flour, with an allowance for cash payments in regard with which I need not trouble the House. The important factor in that decision was the cost of baking. It all turns on the cost of baking a sack of flour. The Wheat Commission estimated the cost of baking a sack containing 20 stone of flour, with a normal profit, at 23s. per sack. The investigations made by the Committee which went into this matter point to that average being considerably too high. The 23s. which is allowed for bakers is a great deal too much for many bakers, although it may be too little for certain bakers. The evidence given to us by the Wheat Commission was that the cost of baking varied between 10s. and 25s. per sack. The average cost was probably not more than 15s., according to them. The allowance made by the Wheat Commission was 23s. Our Committee thought and think that that allowance was a great deal too high. But we have discovered something else. The cost of 23s. was based on the baker producing from the sack of flour eighty-nine loaves. That was a great deal too low on the average. The evidence given to us was that it is probably nearer ninety-six loaves on the average.


It all depends on the quality of the flour.


The hon. Member is perfectly right there. He understands the question, and I put it to him that ninety-six loaves to a sack is not a very high number for a baker to produce. Many of them produce 100.


It ranges from ninety-two to 106.


That is so. The calculations of the Wheat Commission were based on an average of eighty-nine; therefore, on the lowest of the hon. Member's figures, there is 2s. 3d. more to be allowed to the bakers, while in the view of the Committee 4s. or 5s. more would not be an unreasonable amount to allow on that head.


Would the right hon. Gentleman allow me to say that I do not know how many can be produced out of the rubbish they call flour nowadays?


I will give the hon. Member an instance. I had a letter sent to me a few days ago. I do not intend to give the gentleman's name to the House, as he did not intend the letter for publication, but I will show it to the right hon. Gentleman, if he would care to see it. It is a letter from a leading miller in the North of England, who read our Report and wrote to say that we were quite right. He says: As regards the turnout of bread per sack of flour, ninety-six 4-lb. loaves would be a correct average. I have had two tests made by two bakers in this town with my flour, which they had on hand, and one is 100 4-lb. loaves and the other ninety-six…. The cost of baking is well covered by 7s. per sack. If my right hon. Friend is going to look into this question himself, he will see that there is more in the Report of our Committee than he supposes, and that if we are right, as I think we are, in thinking that the Wheat Commission estimated altogether too high the bakers' costs, then there is a possibility of raising the price of flour to bakers without increasing the price of the loaf. That is the whole issue between us. The Committee thought, and still think, that you can raise the price of flour 4s. or 5s. per sack to the baker without increasing the price of bread on the whole. I do not deny that when we come to deal with the bakers in the more remote parts of the country, who have no up-to-date plant, the cost of production in their case is very much greater than that of up-to-date bakers. That is a matter which will have to be dealt with in any reorganisation of the scheme. But if the Government would remember that four-fifths of the bread is produced by one-tenth of the bakers they will see that the problem remaining of the smaller bakers is a comparatively little one in extent, although the number of those bakers is very considerable. I urge upon the Government not to make us an utterly un-conciliatory answer, and not to reject altogether our Report in its present form. I am still not sure that the best way of dealing with the question is not to raise the price of flour from 43s. 9d., say, to 48s. 9d., and to allow the price of bread to adapt itself to the level of the price of flour. I do not think the variations would be so large as the right hon. Gentleman fears. It is true that you would not have a 9d. loaf all over the country. You would have an 8½d. loaf in some parts of the country, and, perhaps, a 10d. loaf in certain remote districts which are ill served by up-to-date bakers, but, on the whole, the country could save easily £10,000,000 on this head, because every 1s. a sack you put on the price of flour means a saving of £2,000,000 to the taxpayers of the country. Therefore it is worth while to do it.

So far as I know, the Government have not considered the question of controlling the bakers, or of installing up-to-date plant in those places where there is none. The cost of baking plant is very small, indeed, compared with the figures of the subsidy. You could equip every bakery in this country with up-to-date machinery, capable of supplying the people with bread as good as the flour will make it—I agree with the hon. Member opposite (Sir W. Rutherford) that it is not very good—and save a sum of between £5,000,000 and £10,000,000 on the whole, while you are paying at present £40,000,000 a year in order to get the 9d. loaf, if, indeed, that is the limit of the expenditure. I press this very much upon the Government, because here is a large lump sum which could he saved by the Government if they will act promptly, go into the matter thoroughly with their experts, and co-ordinate the whole business, instead of doing, what they have done up to now, that is, leaving the Wheat Commission altogether outside the purview of the Ministry of Food, or really only connected with it by a sort of liaison officer, if I may use a fashionable term.


It is definitely under it.


I am afraid the right hon. Gentleman is a little content with paper arrangements. I wonder how much responsibility the Ministry of Food is prepared to take for the decisions of the Wheat Commission and the functions of the Wheat Commission. I have had the accounting officer of the Ministry of Food before me. He is not the accounting officer for the Wheat Commission; they have an accounting officer of their own. The accounting officer of the Ministry of Food, though he said he was informed of what happened at the Wheat Commission, utterly declined to take any responsibility for the condition of the accounts, for the form of the accounts, or for the work of the Wheat Commission in any respect whatever. Therefore, my right hon. Friend is entirely mistaken if he thinks the Wheat Commission is really under the Ministry of Food. It is one of those instances of the lack of coordination that exists because of the haphazard way in which these Departments have grown up. It is not the fault of the Government, nor the fault of the Department, nor the fault of the Wheat Commission, nor the fault of the Ministry of Food. Let the right hon. Gentleman be sure of this, that there is rivalry between the Wheat Commission and the Ministry of Food. There is a want of a clear demarcation of functions, there is a need for greater control somewhere over the Wheat Commission. I beg the Government to take this matter into their serious consideration immediately, and to have it put right. It is a matter of exceeding importance to the public service, for the sum involved is very large.

I will only trouble the House with one other point which came before our Subcommittee on which I feel bound to say a word, because the right hon. Gentle- man was very unsatisfactory upon it in the few words he said about it, that is, the working of the coal compensation scheme. Very specific undertakings were given in the House when the Bill was before us that no expense was going to fall upon the public as a result of the Coal Compensation Scheme. Some of us were sceptical upon the point. I remember that I myself expressed some doubts and ventured to give as an illustration the working of the Wheat Commission, and pointed out to the Government that, though it worked well enough so long as the War Cabinet let it alone, yet the moment the War Cabinet came upon the schene the immediate result was that the Wheat Commission showed a deficit of £40,000,000 on its accounts. I ventured to prophesy that the Coal Compensation Scheme might be in the same state, that they might be willing and able to prevent expenditure from falling upon the public, but that they might not be able to take the necessary steps because of decisions given by the War Cabinet. Well, the situation has arisen. My right hon. Friend knows that the Coal Compensation Scheme at present is not paying its way—that there is a loss, I believe, of many hundreds of thousands of pounds a month falling upon the public purse at the present moment.


Not many hundreds of thousands of pounds.

6.0 P.M.


It all depends what my right hon. Friend means by "many." At any rate, several hundred thousand pounds a month are now being charged to the British taxpayer owing to the working of the Coal Compensation Scheme. I want to know from my right hon. Friend—we are entitled to ask him this—is the Coal Controller going to be told to work his compensation scheme—that is, to sell his coal at such a price to consumers that the scheme shall be self-supporting, or is a subsidy going to be given to the coal trade in order that coal may continue to be sold at present prices? It is a very important question. It amounts to several hundred thousand pounds a month. The amount is rapidly rising; therefore it will be more difficult to deal with the question if it is postponed. Perhaps, as the War Cabinet has no arrears, it will be able to decide the matter straight away or tell the Coal Controller that he may decide it for himself, provided there is no burden thrown upon public funds. We have had an undertaking from the Government that if any burden is to be thrown upon taxpayers, we are to have a Bill brought before us. That in itself will Joe a deterrent to the Government in the matter. The House is to be congratulated on securing that undertaking. I understand that they will not take the money out of the Vote of Credit. The undertaking is that if it is necessary to use public money to keep the scheme going, then the Government are coming to the House. That in itself will provide the Government with a strong motive to adopt the course I recommend of telling the Coal Controller that the consumers of coal can well afford to pay the necessary price for making the scheme a self-supporting one, and that they must not look for any help from the taxpayers of the country. I am thankful that the right hon. Gentleman did not say to-day that any of us who are engaged in this attempt to prevent wasteful expenditure are nagging at the Government. It is not in that spirit that the Committee approached it. We recognise to the full the great difficulty which the Government has in spending wisely the vast sums of money which are passing through its hands. We desire to help it. We claim that we have helped it, and that makes us put forward this further claim that the Government should give our suggestions careful and favourable consideration.


I do not propose even to attempt to cover any considerable part of the area which the speech of the Chancellor of the Exchequer covered, not because I do not find it tempting, but because I am aware that for me to attempt to do so would be to encroach upon the time of hon. Members who, with considerable public spirit, have devoted time and study to this question of national expenditure. But I wish to make one comment upon the chief illustration upon which the right hon. Gentleman relied in his case for the Government on the positive side—that is to say, the argument as to the savings effected by various systems of control introduced by the Government. He quoted the special case of wool as his main illustration, but I was amazed to find him putting his case in this form. He said you see at once the great savings effected if you contrast the price of Government wool with the world price. Surely he had momentarily forgotten the essential fallacy in that argument, because he knows that the Government, by its system of control, has destroyed the world price, and the only contrast he could make was with the current price of the limited amount of free wool from the Cape and from South America, which, I admit, does, in reference to the South American price, give an appearance of success to the Government scheme of control. But when you acquire absolute control of eight-tenths, say, of the full world supply of wool, the inevitable economic consequence is to send up, arbitrarily and artificially, the price of the remnant of 20 per cent. of free wool. But in reference to some part of that free wool the case is quite different from that which he suggested. He is probably unaware that Cape wool, for some months past, has been sold at a price considerably below the Government price. The cost of South American wool, where the price is comparatively high, is due to the purchases of our enemies, and it is, solely due to the enterprise of Germany in regard to the market for South American wool, not proportionately a very considerable market, that has raised the price to a point higher than it would have been under the automatic effect of the Government control. I admit that the Government by its statement of accounts will, in connection with the system of wool control, show at the end of the year a considerable margin of profit, but it is a false margin as compared with private trade, because from that total of profit there will not have been deducted the 80 per cent. of excess profits which would have fallen upon them had they been left in the hands of private traders and manufacturers. So it is altogether misleading to quote, as the Government Department has quoted, the great profits made during the year under the system of Government wool control as net profit which would not otherwise have been received. The destination of the wool exported from Australia and New Zealand is the only thing that is essential in the control of the woollen industry. If that trade had been done by the existing manufacturers a profit would have been made, though not so great a profit, but from every £1 of profit so earned the State would have received back eight-tenths in the way of Excess Profits. I make this passing comment in order to suggest that the actual success achieved by the Government in the main illustration used by the Chancellor of the Exchequer is much more fallacious and misleading than his words would suggest.


I desire to call attention to three specific points, one dealing with the Admiralty, another with the Ministry of Munitions, and the third with the general scope of the work of the Expenditure Committee. In the third Report of this Committee the Admiralty Sub-committee has gone into the question of overtime on Government work in the Admiralty, and found that a very unsatisfactory system was in vogue by which men habitually worked less than the normal day but, in spite of that, worked overtime at an increased rate of pay. We found it was quite common to knock off a quarter of an hour in the morning and work the quarter in the evening at the increased rate of pay. We took a somewhat serious view of that circumstance, and we called attention to it in the Report in the full belief that some change would be made. No man is justified in getting an increased rate for overtime until he has worked the full normal day for which he is paid. If that practice were allowed to become general it would tend gradually to turn night into day, for if a man can knock off a quarter in the morning with a view to working it in the evening there is nothing to prevent him from knocking off a full half-day. This is the reply we got from the Admiralty to our suggestion that this practice should be abolished: The payment of overtime, irrespective of whether a full normal day has been worked, is a long-established practice in shipbuilding trades and any attempt to change it would in the opinion of the Board of Admiralty meet with considerable opposition. I feel that it is my duty to call attention to that fact and to press for some radical dealing with this matter, and for a change which certainly seems to me to be overdue. If it is an old-established practice, that only makes it worse.

The next point I want to deal with is the question of subsidies. The principle of giving State subsidies, by which articles are supplied to the public at less than their real cost, is an injurious and a false state of things. We have seen the first great step taken in the subsidy on wheat, and we are told that it is coating something like £40,000,000 a year. The effect is simply that the cost of the bread, instead of falling on the person who consumes it, falls on the body of taxpayers in general. A justification to a certain extent may be made out for bread, because it is consumed by all, and it is paid for by all in this other way. But when that principle of subsidies is extended to other articles which are not of general consumption, we are in danger of adopting a very iniquitous system. I find this principle has been adopted in the Ministry of Munitions, and in certain cases the makers of articles required by the Ministry, instead of being paid the full price which would be necessary to cover the cost of production, are selling those articles to the Government at less than their cost price, and receiving a subsidy to make up the difference. So long as the whole production was consumed by the Government there would not be very much harm done except in the matter of principle, but of course the principle applies in a minor degree to articles which are sold to the public. The particular article I am thinking about is steel. What happened was that certain controlled prices for steel were fixed. Then we had large increases in the cost of raw material, and especially of labour, which was due very largely to the action of the Minister of Munitions. This produced the position that the makers of the steel were no longer able to produce it at the controlled prices. They very naturally went to the Government to ask for an increase in price, but instead of getting it they were told to keep on their original price and to receive a subsidy instead. Obviously the private individual who buys a boiler, or some other article into which this subsidy enters is getting it too cheaply, and the whole body of taxpayers is making up the difference—a principle which, of course, is entirely wrong. Let us admit that the principle of subsidies is a wrong one. If I am told it has been adopted only as a temporary expedient, and that when the existing contracts run out it will be abandoned and the controlled price will be regulated to suit the requirements of the new contract, I shall be satisfied, but I want particularly to guard against this principle growing into a general custom.

It is suggested by a Resolution now standing on the Paper that the terms of reference to the Expenditure Committee should be broadened, and that it should be empowered to report on the financial aspect of prospective legislation as well as on expenditure which has already been incurred. I am one of those who hold that the French system of committees controlling Ministers is wholly untenable. It is not suited to this country, and I think the effect of reducing Ministerial responsibility entirely outweighs any other advantages which that system may have; but I cannot help thinking that if it is possible to make use of the machinery of this committee system merely for the purpose of drawing the attention of this House to the financial aspect of projects which are brought before it, it would be the duty of such a committee, immediately when any legislation or scheme was brought before this House, to go into the financial aspect of it, so that the House might be enlightened and informed as to the commitment involved in regard to it. I think we have suffered for a long time from the fact that a great many of the schemes brought before us are argued with a total neglect of their financial side. We are not told sufficiently what things are going to cost. In most cases the Government themselves, when they propose things to us, have not even gone into the cost, and I cannot help thinking that if it was the duty of some body of Members immediately to examine the financial aspect of the case, it would not only be giving useful information to the House dealing with the scheme as a whole, but the mere fact that that committee would be able to ask immediately for papers and estimates would necessitate the making of those estimates in good time, which very frequently does not take place. In that way, I think, it would tend to a more general regard to the financial aspect of the matters brought before the House, and by that means we should be able to exercise economy in control and administration.


The Chancellor of the Exchequer this afternoon covered in detail several points raised by my right hon. Friend (Mr. H. Samuel). There was one reference to the Comptroller and Auditor-General which I regret he made. He seemed to me rather to question the accuracy of recent or past Reports by the Comptroller and Auditor-General. I quite agree that those Reports are only primâ facie, as he stated, and that they have to come before the Public Accounts Committee for that body to report to the House; but I regret the tone in which the right hon. Gentleman referred to this public servant.


I think I said definitely that I was making no reflection upon him. I pointed out that there was a misunderstanding as to what his function was. That is all I said.


I am glad to have that assurance from the Chancellor of the Exchequer, as I am sure he, like this House, appreciates the very difficult and onerous task which that official and his subordinates do in the Government Departments throughout the year. I have no desire to refer in detail to the Ministry of Munitions. We have had a recent Debate on that Department, and we have the assurance of the Government, of the Ministry of Munitions, and of the Financial Secretary to the Ministry of Munitions, that they are going to take every possible step to place that Department in an efficient state. We are content with that assurance, and I am sure that the Financial Secretary will only expect us to judge that assurance by the results which we hope will be achieved in time. In the earlier part of the Debate reference was made by my right hon. Friend who opened the Debate, and by the Chancellor of the Exchequer, to the staffing of Government Departments, and reference was made to the Return which has been presented to this House. It may have escaped the attention of hon. Members that those figures were asked for by the Treasury Committee in February last, and in some cases they are not yet complete. In other words, Departments which were asked for a statement of their staffs in February last have not yet supplied the information, several months afterwards. In glancing through this statement I find that the Ministry of Food is costing £620,000. The staff of that Department has increased considerably both in numbers and in cost since then, and, if my information is correct, the cost of the staff of that Department is now nearly £2,000,000. Since this Return was issued I have been making a calculation to try to find out the total cost of the staffs of these Government Departments, and by the total cost I mean not only the cost of salaries, but the cost of buildings, etc. If my calculation is correct, the total cost of the staffs in these Departments amounts to a sum nearly equal to 6d. in the £ on the Income Tax. In other words, when the taxpayers come to pay 6s. in the £, they know that 6d. of that sum is used by the Government to pay for the staffs in the Government Departments and the buildings in which they are housed. I think this is a very serious matter. In addition to that a large part of this clerical staff, as the House knows, is situated in London. I assume that London will become a great bureaucratic city in which every inhabitant will be working in one or other of the Government Departments. Whether the business men and working men in Lancashire, Yorkshire, Glasgow, and Scotland will appreciate being taxed while this great bureaucracy grows in London is well open to question. As the Chancellor of the Exchequer on several occasions quotes some of the sayings of Burke, may I remind him of one saying of this great man many years ago. Speaking on the subject of economical reform, he said: It is impossible for a man to be an economist under whom various officers in their several Departments may spend just as they please as contributing to the importance, if not the profit, of their several Departments. I think this is the real question which baffles the Government in solving this problem that officers in these Departments consider only the importance of their offices. They gather round them large staffs which are not entirely necessary, and the psychological question arises how best to reduce those staffs. We are glad to have the assurance of the Chancellor of the Exchequer that there are these various Committees at work to-day in the interests of the Government Departments, and we hope that those Committees will have the assistance of the heads of those Departments, for without the assistance of the heads of the Departments I am afraid their work will be in vain.

I am anxious this afternoon not to refer in detail to any of the points quoted to this House by the Sub-committee on the Ministry of Munitions, but I would like to say, in fairness to the Minister of Munitions, that the Report published by the Comptroller and Auditor-General during the past few weeks refers to a period previous to which the Ministry of Munitions was not responsible. In other words, the present Minister of Munitions is not responsible for the mistakes, or the alleged mistakes, which the Comptroller and Auditor-General reports. I am anxious to make that statement in fairness to the Minister, more especially in view of the recent letters to the Press on this subject. So far as I can understand the Minister who is more responsible for the construction of the Ministry of Munitions, especially on its financial side, is the Minister of Reconstruction. Let us hope that he will be happier in his methods of reconstruction than in his constructive methods at the Ministry of Munitions. Undoubtedly he left certain gaps in that Ministry. Whether he will continue to leave gaps in the new state of society which he is about to set up is well open to question. The Debate this afternoon has revealed very clearly the fact that the House of Commons is anxious to assert itself in the realm of public finance, and undoubtedly the public feeling which exists outside to-day finds expression in this House, because directly after my right hon. Friend had opened the Debate, we had a long speech from the Chancellor of the Exchequer, who met point by point the arguments advanced.

On many occasions during recent months the Government have appealed for unity. That appeal for unity, coming from the Government, implies, I think, an obligation on their part to meet the reasonable demands of the House of Commons. They cannot successfully appeal for unity unless they are prepared to meet the reasonable demands of this House. The House of Commons in this matter, and I believe in every matter that concerns the War, is anxious to assist the Government, and on every occasion on which the House of Commons has asserted its authority, that authority has led to increased success and increased efficiency. Yesterday this House appealed for facts, for more knowledge, for more light from the Treasury Bench. The House of Commons exists to inform the country as to the true situation. Democracy itself can only exist if it knows the facts. Listening to the Debate yesterday, it occurred to me that it would be well worth the consideration of this House whether we should not set up a Select Committee to review the military situation, and the question of man-power, and report to this House. I think something in that direction will be necessary for the Government and the House to regain confidence in the public interest. The Government yesterday referred to the temporary failure of our cause. The temporary failure of our cause does not weaken but stiffens our resolve, and Britain to-day is showing the same spirit that she showed 100 years ago, but with this stiffening and increased determination there is arising, and there has arisen in an acute form, a desire by the country for increased efficiency in Government Departments. I am anxious to press that point of view upon the attention of the Chancellor of the Exchequer having regard to a remark he made yesterday. He said, "I think the possible production in this country has nearly reached its maximum." In other words, that all our great internal resources are now organised for war. If that be so, a new situation has arisen. We can only increase our efforts by increased man-power. We have an assurance, or rather a statement by the Chancellor of the Exchequer that there is no possible increase of our productive effort.

Therefore, to increase our productive effort we must economise in other channels, and every Department which is employing labour in an uneconomic manner is weakening our war effort. That leads me to the point which I am anxious to bring before the House, and that is the machinery we had to control while our expenditure was £2,000,000 or £3,000,000 a day is insufficient for an expenditure of £6,000,000 or £7,000,000 a day. The powers that make for control and the powers that make for economy in Government Departments in many cases have not sufficient power or sufficient assistance. In peace times, with closed Estimates, the Minister of the Department is always anxious to consult the financial authorities. He knows that if he can save money in one direction he can utilise those savings in another direction, thereby getting increased efficiency. The position to-day is that the financial authorities where they exist in Government Departments are subordinate to the Ministers. There is no necessity for the Minister to consult or confer with his financial authorities. Therefore the main factors in a Government Department which make for efficiency, which by their criticism enable increased efforts to be made in other directions, have neither the power nor the position to make their criticism effective, and also the central force which makes for economy—that is, the Treasury itself—is also weakened. The Chancellor of the Exchequer this afternoon told us of the steps which he was taking recently to coordinate the working of these Departments. I am anxious, however, to bring a further point before his attention, and I am encouraged to do that by a speech, delivered on the 29th of January last in this House by the right hon. Gentleman the Member for West Birmingham (Mr Chamberlain). The right hon. Gentleman referred to recommendations made by this Committee dealing with Treasury control, and he said: There is no man in the Treasury who has any time to think about anything but his daily round and common task,"— And further on he says that the Chancellor of the Exchequer should take to heart this paragraph of the Committee and see even in the stress of these times if he cannot strengthen the Treasury, both for the purpose of economy control and above all the thinking out of the great problems that are going to confront him and us within a short time."—[OFFICIAL REPORT, 29th January, 1918, cols. 1490 and 1491, Vol. 101.] Will the right hon. Gentleman who gave expression to these views, when speaking as an independent Member of this House a few months ago, support them now that he is a member of the War Cabinet? Will he put his precepts into practice? Will he confer with the Chancellor of the Exchequer to see whether it is not possible so to increase the power of the central authority as to be a check on and an assistance to the great spending authority? Twelve months ago in this House I suggested that the Chancellor of the Exchequer had not the time to give to the study of these problems. We all recognise that the Leadership of the House demands his unlimited strength and all his time. In addition to that he is, as I understand, Vice-Chairman of the War Cabinet. A public expenditure of from £6,000,000 to £7,000,000 a day cannot be, and never will be, controlled properly while the one person represents the Government in this House, represents the Government in the War Cabinet, exercises the power as Chancellor of the Exchequer in his taxing capacity, and finds a certain amount of time to check expenditure in Government Departments. We must, at the very centre and source of our public expenditure, create new machinery. I say this in no spirit of hostility to the Chancellor of the Exchequer himself. I have expressed these thoughts many months ago. I criticised the Government severely last year, and now this afternoon the Chancellor has said that he has welcomed our criticism, and I again appeal to the Government to appoint a Controller of Expenditure, either in the War Cabinet or in the new body that they are going to set up; give him the full powers of a Chancellor of the Exchequer. Divorce entirely from him any taxing power. Place in his hands and in his hands alone the power to supervise every Government Department, the power to insist that the public interest and the public service shall be safeguarded by the numerous Departments. At present every Department is a law unto itself, whether it be on questions of staff, or rate of wages, or rate of profit.

I understand that the Ministry of Labour are going to take into their own hands the exercise of increased supervision over the rates of wages in this country. I would ask the Chancellor of the Exchequer whether that is going to be done or whether it is going to be left to the numerous Government Departments? I would be very glad to have some assurance that this matter is going to be centralised in the hands of one Department. I am not sure whether the Chancellor is going to centralise it or not. I would also press upon his attention the necessity of centralising, or rather giving direction from the centre, as to the rate of profits on contracts placed by the numerous Government Departments. My right hon. Friend the Member for Rushcliffe, drew attention to the large sum of public money which, in his opinion, and in the opinion of the Select Committee, the Government are wasting by the method of the bread subsidy. This is one instance in which a Department did what no doubt it thought best in the public interest, but in which, I think, if its actions were reviewed by someone acting in the public interest and with the power to insist that his will should become law, such a state of affairs would not have arisen.


It is only fair to the Wheat Commission to say that it was not their decision, and that it was forced on them by the War Cabinet.


But the method by which it was to be carried out was left to the Wheat Commission. The machinery set up to carry out the policy of the War Cabinet should be supervised by someone representing the public purse who has the interest and only the interest of the taxpayer at heart. I can quite well believe and it is only natural that the numerous Controllers in Government Departments have other things to consider. They are not fully alive solely to the interests of the taxpayer. What I am anxious to see is a control of expenditure in the War Cabinet, and by some such method to bring to bear upon Government Departments influences to effect this reform. This House is showing a keen interest in expenditure. It is anxious to assist the Government to impose its law on Government Departments. The pressure for reform has come from without, but reform, to be effective, can only proceed from within. It can only proceed if the Ministers and the staff are fully seised with the necessity of reform, and I hope that, as a result of this Debate, the Government may see that in any action which they take they will have the full support of the House of Commons in this matter. When we consider that we have to-day some 3,000,000 Income Tax payers, and that every year of the War brings an increase in the Income Tax of 1s. in the £, the Government should take some further steps to control expenditure. As I have said, I have no desire to refer to the Ministry of Munitions. I desire to lay these general considerations before the Chancellor of the Exchequer, and to ask him to give us some more definite assurance that in these Government Departments and in the Treasury itself there will be a man with an iron hand in a velvet glove to insist that the interests of the taxpayer shall be safeguarded.

Major WOOD

The hon. and gallant Gentleman who has just addressed the House stands, I think, in the relation of godfather to this Debate, and, I think, that he may be congratulated upon the course of the Debate. I think that the Chancellor of the Exchequer also has had no reason to complain of statements made since his speech. He was certainly preaching to the converted when he urged the House to bear in mind the difficulties of the situation and to be on its guard against exaggeration. I hope that no word of mine will fall into either of those evils. Everybody who has intervened in this Debate, I think, must obviously do so with the simple desire that any suggestions which he may have the power to make will be suggestions that will be of assistance to the Chancellor and those who work with him. Before I come to the general observations which I want to lay before the House, I would like to make a remark upon one point as to which I think the Chancellor fell into some error. As I understood him, he rather held the view that the points urged by my right hon. Friend the Member for Cleveland had been small in character and that it was only by attention to big things you would achieve much improvement. I cannot help thinking that that is a dangerous doctrine. Unless you look after even small things, where things may be wrong, you are not likely to get good administration on the big side, and I hope, therefore, that the right hon. Gentlemen will not be unsympathetic to any criticism made in the course of the Debate merely because it is not as important as others that might be made. Of course the Chancellor, I dare say, views with mixed feelings the increased interest of the House in expenditure. There are good reasons for it. The main reason is that everybody has to pay increased taxation and therefore takes more interest in where the money goes, and is also anxious, if possible, to avoid the necessity of more money having to be taken to do what the money at present being taken is doing. But over and above that, it is perfectly true, as my hon. and gallant Friend has just said, that there is increasing anxiety in the country for two very good reasons. In the first place, the country is uncertain whether the money which is being voted is being used to the best advantage in all cases; and, in the second place, which is the more important, the ordinary person in the country and the ordinary Member of Parliament has no facilities, and I would almost say has considerable difficulty, in forming before his mental vision a complete picture of the general financial position in which the country stands.

As to the first point—security that the money voted is well spent—it is not neces-to remind Members that their responsibility does not end with voting money to provide the silver bullets and that it is only elementary prudence to take such steps as they can to see that the money so voted is well, fruitfully, and beneficially expended. I want to reinforce, if I can, some remarks made by my hon. Friend the Member for Windsor. They were made at a moment when the Chancellor of the Exchequer was compelled to be absent from the House. My hon. Friend made a suggestion which is very well worthy of the right hon. Gentleman's attention. At the present moment there is a Committee over which the right hon. Gentleman the Member for Cleveland (Mr. H. Samuel), presides, and that Committee has established for itself a definite position in the work of this House, and in the opinion of the country. I think the Chancellor will be the first to admit that while he is unable to accept all its recommendations it has been doing quite definitely good work, but, as we all know, its activities are confined to current or present expenditure. I want to suggest to the House that it is not enough for the Committee to review present expenditure unless, as my hon. Friend has said, they are also in a position to take a comprehensive view as to future expenditure. It is quite essential, in my view, that the House should be in a position easily and at regular intervals to view the general picture of the financial position that is placed before it. You cannot really dissociate the position of £500,000,000 War Credit from the consideration of the financial position of the country in days ahead for two reasons, obviously, because your £500,000,000 is borrowed money, and that is bound to affect your future policy and future commitments. Therefore you must view the problem as a whole. If that general premise be admitted, I want to suggest to my right hon. Friend whether he would consider the desirability of taking the advice of my hon. Friend the Member for Windsor, namely, to extend the terms of the reference to the Select Committee as it stands at present, in order to enable it to examine and report upon prospective schemes in such a way as to give a complete picture of them to Members of this House and to the country. I am perfectly well aware that when the Committee was established it was understood that it was to have only within its purview current expenditure. I would remind the House that when it was appointed the Committee was something in the nature of an experiment, and that it has made its position amply good. I am very much inclined to think that the time has come when we might reasonably press the right hon. Gentleman to consider whether he could not extend the scope of that Committee in the direction I have indicated.

At the present moment the ordinary Member of Parliament, like everybody else, wants to get a complete knowledge of the whole balance-sheet of the country. At present he has to get what information he can about it from the Chancellor of the Exchequer's Budget statement, or from his statement on the Vote of Credit, or from various Reports of different Committees in regard to proposed schemes, or he reads the speeches of Ministers in Supply in regard to those schemes, and it is only in that piecemeal way that he can get anything approaching a complete picture of the whole prospective expenditure of the country. I want, therefore, if possible, to get an improvement in that matter, and I think the case would be very different if the scope of the Committee could be thus enlarged. The Committee would be a very valuable instrument if you could give it a discretionary power, no doubt guarded in such a manner as might he thought necessary, but a power that would not limit it purely to current expenditure, as it is at the present time. May I give two or three examples of the kind of work I should like to see that Committee do? I should like to see it enabled to lay before this House, either quarterly or half-yearly, a clear, simple statement of what the financial position of the country will be on the existing rate of expenditure, on the existing basis of taxation, and on the hypothesis, let us say, that the War ends at the end of March next year, or in September, or at what time you will, so that people will know what are the facts. I would like to see that Committee reporting upon the probable cost of the Government housing scheme, so that we could find out what it is that the Local Government Board thinks that project will involve in the way of expenditure. We also know that there are a great many prospective schemes in the air which have not got so far as the housing scheme. For instance, there is a scheme for the provision of unemployment insurance for soldiers and sailors after the War, but no one in the least knows what that project is going to cost, nor are there means of finding out. These are only chance instances, which I give the House as examples I have in my mind, and in these directions this Committee could do thoroughly useful work. As the result I claim that Members of Parliament would get some view, in perspective, of the whole financial position of the country, perhaps not the whole, but it would be a great deal more of the whole than is possible at present.

There is a further word I would like to say to the Chancellor of the Exchequer, who perhaps will be a little suspicious in regard to the proposal, and it is that this suggestion is not intended in any way to hamper Government responsibility Nobody appreciates Government responsibility more than I do—we see representatives of four Government Departments on the Front Bench, which is frequently more lightly tenanted—but I think every reflecting Member of Parliament will see that there is great danger of the House of Commons being called upon to vote great sums of money without any definite sense of personal responsibility, or financial responsibility, for the sums voted. I know that it is not easy to invest Members of Parliament personally with responsibility in the matter, but one of the best ways of giving it to him is to give him knowledge, and if you put the facts clearly, and use such machinery as you have to put them clearly before him, I firmly believe you would get more personal interest and responsibility on the part of Members of Parliament than has been found in years past. This is a subject on which there is profound feeling. It is our desire not to hamper but to help the Government. The country from top to bottom is anxious to help, but in regard to the Government Departments they, do not think that the whole of wisdom or power can be expected to lie in their hands. I would say this last word, in conclusion, to the Chancellor of the Exchequer: His position as Chancellor will be very difficult in the future if he has to work in a House of Commons that has no sense of responsibility in the direction I have indicated. Is it not in his own interest and in the interests of his Department that he should take what steps he can, and examine impartially any suggestions people may make in order to see whether he cannot enlist the House of Commons on his side in the cause of reasonable prudence and economy. At present the House is too apt to be on the side of extravagance, and a genial Chancellor is often unable to resist it. I hope the right hon. Gentleman will think over what I have said, and that he will consider the terms of the Resolution supported by many hon. Gentlemen, or perhaps he will see his way to move a Resolution on behalf of the Government in these or in similar terms. I hope that he will be able to do something to achieve the object we have in view.

7.0 P.M.


These Votes of Credit come before us, and we have discussions in this House. I am very glad to see from the Debate to-day that the discussion is beginning to be a little more lively as the debt increases. As to the Front Bench and the Government, I am very much afraid that many of us are somewhat hopeless on this question, until the occupants of that bench acquire a new mentality and effect some alteration in their policy. We have had appeals to sub-scribe to War Loans, but we have had lately in the Press, for the first time—and I was glad to see it—notification to the Government that people will not subscribe while they are uncertain that the money is not being to a large extent wasted. I do not want to exaggerate, but we cannot escape from the knowledge, we who mingle with people from day to day, that thousands and millions of money could easily be saved if we had a stern Cabinet and a stern Chancellor. I do not blame the Chancellor, who has many duties to perform. I rather blame the Prime Minister, who is a genial man that does not care for money. I will say that for him; he does not care for money himself. That is a very amiable trait in the character of a private Gentleman, but a most dangerous one in the case of a Prime Minister looking after the country's finance. What makes me feel hope-less about this matter is that we have had an Auditor-General's Report of a very serious, of an even deadly character, and if such a report had been issued in connection with any financial institution it would have ruined it. We have had admissions from the Financial Secretary to the Ministry of Munitions in regard to that Department's finance, and he stated that the whole matter would be put right, because the books were now to be kept by double entry. Double entry! But the trouble was that there was not even single entry. You have a meticulous record of entries, you have the card index, filing index, and the letter books in thousands. That is all there. But when you sell a million pounds' worth of goods there is nobody to enter it. How is double entry going to save you from that? The hopeless thing about it is that the Government think that it is all right. The fact is if you had a real man who had a grip on the thing he would walk into these Departments and touch every second man and woman on the shoulder and say, "Get out!" I undertake to say that if that were done there would be no forgetting to record transactions of millions. I remember one of the Ministers a little while ago, in reply to a question put by an hon. Member, said that he was glad that the hon. Member had put the question because it afforded him an opportunity of telling the House that the whole thing was a mare's nest. That was not a question of £100; it was a question involving millions, and I do not believe it has been put right yet. You have some excellent men in your Departments, but you have a lot, thousands of them, who are not really worth the money you pay them, and it would be a great advantage to the country if you gave them a solatium and told them to go away.

With regard to this Vote of Credit, I have something to say about another Department. There is a Department called the Ministry of Information, and it is spending close upon £2,000,000 a year. That went on last year, and it is going on this year on a greater scale. As the Committee are examining that Department just now I am not at liberty to disclose anything, but it will be an eye-opener for hon. Members when they sec the Report. There is, however, one thing I am entitled to deal with, and that is the question of policy. My right hon. Friend the Chancellor of the Exchequer may suggest that that is a small matter. But the salaries of that Department amount to £350,000 a year, while those in the Food Controller's Department amount to over £260,000 a year. Part of the propaganda of last year took the form of cinema exhibitions. I remember it was thought to be a fine piece of propaganda to get all the Ministers to pose for the film. I went into a cinema to see this, and of all the saddening sights I think that was the most depressing. I could not help but feel for the Chancellor of the Exchequer. There he was all by himself, apparently muttering to himself. I could not think he was addressing an audience, because he was standing and addressing the inkstand on his writing table. I am quite sure it will take him a long time to live it down. A more pitiable thing I never saw. How any Minister could allow himself to face the film I cannot understand. That is going on now. There are thousands of these films; they are being exhibited to-day. I happened to be in Manchester last Thursday. It was a nice sunny evening, a sort of evening I had never seen there before. I took a walk out. I came to a cinema and saw advertised "Official Pictures." I went in. This was propaganda, and the first thing I noticed when it was put upon the screen was that half the audience got up and walked out. I suppose they had seen the pictures before. The first picture was the inauguration of piggeries by the Member for East Grinstead (Mr. Cautley). There was a very large pig shed, larger than usual, and a furnace, and a large barrel of potatoes. In walked the Member for East Grinstead at that impossible pace which is only to be seen in a cinema picture. He set a light to the copper, and someone began to ladle out the potatoes to the pigs, which began to eat them. What has all that to do with propaganda? In the next film the pigs were enjoying themselves in the country. Whether it is a film of Ministers or a film of pigs, what has that to do with informing neutrals of all our fine endeavours in this War? It is an absolute and pitiable waste of public money; it can do no good. At all events, I am perfectly certain that this money ought not to be covered up in this Vote of Credit. We ought to have a special Vote for it.

We had a Vote for War Aims last year. What were those war aims? The object was to get up a large number of meetings throughout the country and to engage speakers, giving them from half a guinea to two guineas each and paying their expenses. Thirty-three thousand pounds was estimated for that, and £12,000 for the hire of the halls. I believe, after spending about £20,000, they stopped it for the good reason that no one went to the meetings. There was one very illuminating fact about that Vote; it was that £130,000 was set aside for England and for Scotland only £5,000. I ask why was this? They sent down to agents in Scotland hundreds of thousands of circulars and leaflets, but we in Scotland sent them back. There we do not want to know about war aims. From my own Constituency we have sent thousands of men to fight, and we know what the war aim is. All this is a fiddling and idiotic waste of public money. The hon. Gentleman who spoke just now said we wanted a balance sheet. Roughly speaking, this is the balance sheet. According to one of our best economists our estimated capital value is £15,000,000,000. Some people put it higher. Let me put it at £16,000,000,000. With these Votes of Credit we have absorbed a half of it. That is your balance sheet. And how you are going to pay I do not know. The Prime Minister with an easy sweep of his hand says most of it is being spent in this country. Nothing of the kind. How much of it is spent by our soldiers in France? All their pay goes there and is spent in the French villages. Of course an enormous amount goes to America, to Holland and Sweden, and in countries where the exchange is deadly against us it all means that the money is absolutely lost to this country. I will give the Chancellor of the Exchequer the best advice I can. Let him grip hold of this money and scrap some of the Departments altogether. Some of them are really of no use; they are only wasting money; they are not bringing in a single additional soldier. Scrap a lot of them, save the money, grip it tight and you will find even then at the end of the next twelve months, when you face the country with the debt you will then have incurred, you or your successors will have a mighty difficult task to carry through.


The speech which has just been delivered by my hon. Friend contained a great deal that was humorous, and it also contained much that was more pertinent to the discussion before the House, and although he has made some of the expenditure for which this House is responsible appear to be ridiculous, neither the House nor the country can afford to ignore the way in which money is being spent in these forms for propaganda and other kinds of extravagance. The general effect of lavish expenditure does not begin and end with Reports of the Public Expenditure Committee, or of the Comptroller and Auditor-General. The effect of lavish expenditure and the loss of control over the distribution of public money goes far beyond the immediate Department concerned. It permeates at the present time the whole of our public life, it goes down into every factory which is now in close alliance with the State, and the general effect is a scale of national extravagance from which we shall only recover after the War with the greatest difficulty. It is not only a matter which concerns the reputation of the Treasury, and of the spending Departments. It will lie at the very root of all our national recovery when we return to the days of peace. The Chancellor of the Exchequer said that many of the items to which attention had been drawn by my right hon. Friend the Member for the Cleveland Division (Mr. H. Samuel) were comparatively small matters, but every- one of us who has been in business, as he and I have been, knows that if expenditure is loose over small matters the big ones slip through your fingers. None of us has attempted to make ends meet in difficult times without knowing that it is not only the economy you make under the minute heads, it is the general spirit, whether of looseness or tightness of control, which makes all the difference between success or failure in a business. And what is true of a business is equally true of a Government Department. I cannot believe for a moment that the mere fact of our spending £13,000,000 a year over the extended staffs of the Departments which have been created or which have swollen during the War is a negligible matter, or that £13,000,000 is the full measure of the loss. It has been patent to everybody who has watched the growing up of the Departments that in large numbers of cases the staffs have been collected before the Minister has had the remotest idea as to the extent of his work. That has occurred again and again, and indeed in some Departments which are now being severely overhauled the staffs have been reduced, I venture to say with an increased efficiency.

One instance has been currently reported, and I dare say the Chancellor of the Exchequer may have heard of it through other channels, of a Controller of a new Department only recently appointed who had a request made to him by the head of one of his branches for an increase of fifty in his branch, and the head of the branch said that unless he got the fifty he feared he might have to resign. The new head of the Department said he would look into the matter himself, and on the following day he did so. He then sent for the head of the branch and told him that he had decided that the branch could do with fifty less, and that as the head of the branch had offered his resignation he was prepared to accept it. When it was pointed out toy the head of the branch that he had not definitely offered his resignation and that he would not press the matter, the head of the Department said he never went back on his word. The head of the branch has gone out. There has been a reduction of fifty in that comparatively small branch, and I venture to say that the branch will do its work ten times better because there are fewer men or women to do it. That sort of thing goes through all the Departments. If there are 14,500 people in the National Service Ministry, it does not follow that the Ministry will not be doing more harm than good. It only means that there is an example of a gigantic organisation priding itself to some extent on its own size and quite conceivably doing much harm by the multiplicity of those who are tumbling over the top of each other, doing work which would be better done by a comparatively small number of people. It is appalling to find that these thousands and thousands of staffs can be piled up in a comparatively short space of time when the experience of those who are at the heads of these Departments can only be limited and when there is no chance of knowing whether the work of every extra hundred added is is giving a commensurate return. The general effect of lavishness goes through the whole of the Departments, and if the staffs are to be unlimited it is little wonder that the general effect of looseness in control is felt by not only those at the head, but by those right at the bottom of the Departments.

The Chancellor of the Exchequer pointed out that the big items were the main thing to which he must devote his attention, and he reminded us of what happened in regard to contracts even in times of peace. I can well understand that he feels that the Treasury is not capable and is not equipped and ought not to embark on making contracts for other Departments, That would be an unbusinesslike proceeding, but that they should not be cognisant of the contracts which are entered into and made aware of them at the time at which they are entered into, and that they should not be subject to Treasury criticism, is a procedure which the experience of the War has taught us is likely to lead, not to economy, but to a certain amount of extravagance. But were the contracts before the War never under Treasury control? It is certainly true that individual contracts were not so under control, but my right hon. Friend knows very well that what happened was that you granted from the Treasury certain sums of money on carefully prepared estimates, and that the total sums available for the Army or the Navy were limited, and that the Army and naval authorities had to make the best they could with these sums. That was a form of check which made the supervision of contracts by the Treasury unnecessary. I do not say it is possible now, but I suggest that there must be some way found of preventing absolutely unlimited expenditure without anything but internal control.

The Comptroller and Auditor-General has reported recently on the accounts of the Royal Aircraft Factory and of the Ministry of Munitions for the year ending 31st March, 1917, and I observe that the Chancellor of the Exchequer made some point of the fact that it was for the year 1916–17. I do not particularly wish to make any point as to when the responsibility of Ministers began or ended, for I know this, that the country cares very little who is the Minister concerned in extravagance, but it will call to account all those who have been responsible for any form of extravagance when it realises how grave is the bill which it has to meet. Let us take the Comptroller and Auditor-General's Report, and see the kind of thing which gives the general impression of which I have been complaining. I do not say that his Report is fully justified. It cannot be justified until the Public Accounts Committee has reported. But I will say this, from my knowledge of what has passed in the Public Accounts Committee, of which I was at one time a member, that I have very seldom known the Report of the Comptroller and Auditor-General upset. He is a reliable official of this House, who is absolutely trustworthy, and I know of no instance where any serious criticism offered by him, any facts adduced by him, have been upset before that Committee. However, with that reservation, I would draw the attention of the House to two or three items which have already been made public in the Press, but which are quite germane to this discussion, and especially to the point which I am now making. The general looseness of control that runs through half a dozen Departments will run through practically all Departments and go from top to bottom. Take the Report on the National Factories and the Royal Aircraft Factory for 1916–17, and in paragraph 5 this is the kind of thing that is reported: Detailed evidence of the failure of the Ministry to establish a system which would Secure reconciliation of the cost accounts with the cash system at headquarters is conspicuous throughout the reports of the Ministry auditors. The chief weaknesses disclosed were (a) the failure of the Ministry to invoice goods, with the result that very large entries in the accounts are based on provisional prices; in one instance, out of a sum of £38,098,590 for materials supplied by the Ministry £16,885,562 represents materials for which no invoices were received. I understand that under the new system which is being inaugurated by the hon. Gentleman the Member for Colchester (Sir Worthington-Evans) such a thing would be impossible. I hope it will be. It is almost incredible that in the administration of any great Department £15,800,000 out of £38,000,000 represents materials for which no invoices were received. When as a comment on these Reports the Chancellor of the Exchequer said that the House is not entitled to assume that a penny has been lost, I would like to know where the value has gone to. Has it disappeared? It may be said it is all there and that the nation has received full value for it, but I am sorry to say that everybody who buys for or sells to the nation is not as honest as the right hon. Gentleman opposite, and it is quite conceivable that when you have a book discrepancy of that kind and no book-keeping check upon it some people may have been enriched in material and therefore in value who are not entitled to it, and until you have a better system than that you have no safeguard against a repetition of improper transactions. The Report goes on to say: Such invoices as were sent by the Ministry were frequently wrongly priced. Why they were wrongly priced I hope the Ministry will explain. It either means that incompetent people were set to do the work or that the whole system was wrong. As you go on to local records of materials you find something of this kind: After the accounts had been certified by a firm of chartered accountants the factory accountants recently discovered an error to the extent of over £3,000,000 in respect of the value of materials supplied by the Ministry. The error has now been adjusted. Of course it has been adjusted. But what has happened to the firm of chartered accountants who were responsible for certifying an error of £3,000,000? They certainly ought not to be in the employ of any Government Department, and I think it would be interesting to know from the Finance Minister whether the same firm is in any way connected with any Government transactions at the present time.


Give them the Order of the British Empire!


I turn to some of the remarks made by the Comptroller and Auditor-General on the Ministry of Munitions accounts. On page 8 of that Report, recently issued, it is stated: There had also been failure to keep a complete and accurate record of repayable cash advances made to the firm—for example, an advance of £250,000 had not been charged in the contract ledger, while two other advances amounting to £750,000 had been posted twice in the same ledger.


Double entry!


Previous to this year the Ministry of Munitions, I understand, was working on a single-entry basis, and now that they are working on a double-entry basis the result is that they get £750,000 entered twice over and £250,000 not charged in the contract ledger at all. It is all very well to regard this as merely a Report to be discussed at a later date. This kind of thing causes disquietude to business men all over the country. No business man and no local authority would tolerate it in their affairs for five minutes. There is not a big bank in the country that would allow a mistake of a thousandth part of that magnitude to be made without getting in a new staff or in some other way rectifying the matter at once. Here are some of the comments made by the Comptroller and Auditor-General on page 9 of the same Report: The contract ledger recorded payments of £1,400,000 only, although payments amounting to some £4,700,000 had been made. Further, it was not shown that an abatement of over £10,000 was due from the firm in respect of a departure from contract conditions, and it could not be traced that this sum had been claimed. The comment that may be made in respect of this is that they are purely matters of book-keeping. Rut we all know that you cannot have good business without accurate book-keeping. It is the very basis of economical business, and unless there is accurate book-keeping I fear that the business of the Ministry of Munitions may go on in the future as it has in the past. The Finance Minister will no doubt tell us what steps he will take to prevent errors of this kind occurring in the current year. When we come to the question of duplicate payments again, the Comptroller and Auditor-General says: Only recently it was observed that a contractor had been paid the sum of £111,362 19s. 11d. which he had previously received in the shape of payments on account. That is to say, having received them piecemeal, he was then given them again in one lump.

Colonel Sir R. WILLIAMS

I should like to say the Public Accounts Committee have examined a good many of these, and they are mistakes of accounting to which the Comptroller and Auditor-General's Report drew the attention of the Public Accounts Committee, but they have been both satisfactorily answered, and there has been no real loss to the public, and the mistakes in book-keeping have all been put right. This is an instance of the evil of the Report of the Comptroller and Auditor-General being made public before going to the Public Accounts Committee. If that Report were treated, as it ought to be treated, as a private document before the Public Accounts Committee reported upon it, these facts would be set out in true light. I assure the right hon. Gentleman that all the three facts he has quoted have been most satisfactorily explained to the Committee.


I should also like to point out that the right hon. Gentleman the Member for Rushcliffe (Mr. Leif Jones) stopped the right hon. Gentleman the Chancellor of the Exchequer from dealing with these matters on the ground that they were before the Public Accounts Committee, and therefore I do not think the right hon. Gentleman ought to raise this matter and another right hon. Gentleman prevent any reply.

The FINANCIAL SECRETARY to the MINISTRY of MUNITIONS (Sir Laming Worthington-Evans)

The right hon. Gentleman has raised these matters, and I claim the right, at least, to reply on the matters he has raised. I was not going to deal with this, because, as my hon. Friend says, this evidence has been given before the Public Accounts Committee, but that Committee has not yet reported. But it is just this uneasiness in the country that arises from the, at present, uncontradicted reports. As the right hon. Gentleman has himself lent the weight of his authority to these reports, I claim the right to reply.


May I be allowed to say why I endeavoured to prevent the Chancellor of the Exchequer from quoting from a statement of the Treasury official who represents the Treasury at the meetings of the Public Accounts Committee?


I beg my right hon. Friend's pardon. I at once stopped, because I was naturally anxious not to do anything that interfered with the custom in this respect; but what I was going to do was to say that, on the evidence given to me, they were not justified.


Because he was quoting the evidence of the Treasury official—


My official.


Yes, but he was speaking to the Chancellor of matters which had come before the Public Accounts Committee and of which he was aware through attending the Public Accounts Committee.


It is quite clear that now the matter has been so thoroughly opened a reply must be expected to it. The right hon. Gentleman (Mr. L. Jones) very properly, as I thought, stopped the Chancellor of the Exchequer, and I was inclined to stop him too. But now the ice has been broken, and we must plunge in.


I would ask whether it has not been the custom in discussion of Votes of Supply in this House to refer to the Reports of the Comptroller and Auditor-General; whether I have, in any respect, departed from the custom; whether the Report of the Comptroller and Auditor-General is not a Report made to the House, and not to a Committee of the House; and whether he is not the servant of the House and not of the Committee? As to the point of Order raised by the right hon. Member for Rushcliffe, I submit I was not responsible for that. I understood the Chancellor of the Exchequer was not going to refer to what passed before the Committee; nor was I, but I do submit that the Comptroller and Auditor-General, as an official of this House, and one of the most important officials of this House, reports to the House and not to the Committee, and that we are entitled to refer to the Reports he has made, and have done so in the post.


The Report having been presented to the House, the House has referred the whole matter to the Public Accounts Committee, and the matter is now, I understand, actually before that Committee, being investigated and discussed by them. Now the right hon. Gentleman says, "Notwithstanding the fact that the Public Accounts Committee have got all this evidence before them and are now discussing, sifting and weighing it, and will eventually give us their Report. I claim the right to make my criticism of this document." That being so, and having gone so far, I cannot stop a reply being given.


The House would absolutely misapprehend my feelings if it thought I did not wish any reply to anything I have said. I am most anxious to hear anything Ministers have to say, but it is not a question in which I desire to take a step which is improper. I am simply taking a step which, at least, from the time of the first appointment of the Comptroller and Auditor-General, has been taken by Members of both sides of the House in the discussion of Votes in Committee of Supply. However, as you, Sir, deprecate anything further on this subject—


I think the matter has gone so far now that the right hon. Gentleman had better proceed to the end and allow a full reply to be made, but I cannot, without investigation, say whether, whilst a matter has actually been engaging the attention of the Public Accounts Committee, the thing has been discussed here or not. I cannot charge my memory with that, but I should be a little doubtful about it. As a rule, matters before a Select Committee of this House are not discussed until the Select Committee has reported. However, as we have gone so far, we had better go on to the end.


I thank you very much for your guidance in the matter, but the very point raised by the Chairman of the Public Accounts Committee was the very point made at the beginning of my speech, namely, that if you have loose accounts you must have loose expenditure, and I was suggesting that the statement made by the Chancellor of the Exchequer that we were not entitled to assume that a penny was lost does not dispose of the whole question, and that though you may afterwards explain away loose account-keeping, as I have no doubt the Finance Minister will when I have sat down, or, as I understand it, has been explained away upstairs, the, fact is that bad book-keeping has been reported by the Comptroller and Auditor-General, and if we have succeeded in getting out of these transactions without the loss of a single penny of public money, we have done it by sheer good luck and not by any prevision. The last thing to which I wish to allude is the reference made by the Chancellor of the Exchequer to the coal account, and here I think I am not treading on the susceptibilities of anybody. I am referring to a matter which has been referred to in the discussion without anyone raising objection. It has been pointed out in the course of the discussion to-day that there is the prospect—I will not say the certainty—of a heavy deficit on the Coal Controller's account. We foresaw that at a time which, I think, must be fresh in the memory of Mr. Speaker, when we raised, as a point of Order, that the Coal Bill ought to have been preceded by a Financial Resolution, because it was inevitable that there must be a loss under the coal control scheme, and that Parliament might be called on to make good the balance At that time, I believe, the ruling which was given from the Chair was based on the information which was given in the House, that there would be no deficit under the scheme, and Mr. Speaker thought it right to rule that, as there was no deficit, there was, of course, no necessity for a Financial Resolution. Now we discover there is a heavy loss being made month by month on the coal account. If by the end of the year the Coal Controller has succeeded in making ends meet, it will not be necessary for him to come to this House; but I must reinforce the point of my right hon. Friend the Member for Cleveland that if there is a deficit the Government is pledged not to take money out of the Vote of Credit, but to come to the House and ask for special provision to be made to meet the deficit.

Can we wonder at the deficit when we remember the enormous reduction in the production of coal during the last six months? The mere recruiting of men from the mines was bound to bring about a great reduction in the output of coal. I believe one of the great anxieties the Coal Controller will have in the next twelve months will be in supplying the coal necessary for our national, industrial, and domestic needs, and how can he expect to keep the output up? I am told that something like 70,000 more men are to be taken from the mines. Taking the average production of these men on the basis of the year 1916, which was not a good year, it means that the production must go down by 24,000,000 tons in the year. That will cause embarrassment, I think, but it is equally certain that with the drop in the output the standard of working expenses must go up proportionally, and, moreover, at a time when you have a smaller tonnage over which to spread your wages, there has been an increase of wages paid to the miners. It was pointed out more than once to Ministers that they would find themselves at the end of the year with a debit account, so I hope the prophecy made by my right hon. Friend, and about which a great many of us have apprehensions, will not be fulfilled; but, if it is, the Government will, of course, remember their pledges, and will ask for special provision for the deficit, and give us a chance of reviewing the expenditure of the scheme as a whole.

My final word on this subject must refer to the course of this general Debate, and to point out how widespread has been the anxiety about our national expenditure. It is not confined to any one party. It is not confined to any one section of the House. It is general both inside the House and outside the House, and I do not care whether it be the present Ministry or their predecessors, or those who preceded them, I believe the country realises now how vital is this piling-up of expenditure month by month, year by year, to figures which really tend to shake the whole of our credit system from top to bottom. After the War is over the Debt will be stupendous and our taxation past imagination. The greatest risk we shall run will be that our credit system will not stand the strain of reconstruction. The moving of machinery will probably be the most critical period in the whole of our commercial history, and the extent of our Debt, and the way in which our capital has been mortgaged for the future, the extent to which we must raise taxation out of annual income, will give not only Ministers, but financiers, in every part of the country and Empire the gravest anxiety.


I confess I did not expect to have to deal this evening with the Comptroller and Auditor-General's Report, but, as the right hon. Gentleman has referred to it, and as it has been so largely commented upon in the Press, and has, on the whole, caused a feeling of real anxiety, I may really welcome the opportunity of dealing, at least, with the cases the right hon. Gentleman has mentioned. The Chancellor of the Exchequer, speaking earlier this afternoon upon the Comptroller and Auditor-General's Report, reminded the House that it is not, and never has purported to be, a final judgment upon the question upon which he reports. He has the duty of bringing before the House, and through the House before the Public Accounts Committee, any question that arises on Departmental accounts which he considers requires investigation, and I do not complain for a moment of his having brought any single one of these cases before the Public Accounts Committee for investigation. Each case presented by him was a good primâ facie case which did require investigation. Now that investigation, has taken place, and I propose to take the various cases that the right hon. Gentleman mentioned to the House in the order in which he took them. He called attention to the fact that the Comptroller and Auditor-General reported that out of £38,000,000 of materials supplied by the Ministry to its factories, £15,000,000 or thereabouts was not invoiced. I do not think the right hon. Gentleman himself appreciated the point of view on which I lay emphasis. This material was sent by the head office of the Ministry to its own factories. There is no question of this material going to contractors to enrich them—to contractors who would receive material and not pay for it, and then get an undue profit—but this material went from the Ministry to its own factories. It was accounted for by the factories, but was not invoiced by the Ministry. Not a penny of public money could possibly have been lost in that way. I quite agree that in a highly-developed system, a system developed at leisure, it would be unpardonable not to invoice even your own factories as a matter of administrative check and control—not as a matter of accounting for money there, but merely as an administrative chock and control. That is being done to-day. I repeat again that this has reference to 1916 and to the early part of that year—not with the view of shelving any responsibility or putting it upon any particular Minister, as the right hon. Gentleman seemed to think the Chancellor of the Exchequer intended by his reference to the date, but in order to call attention to the fact that that was in the rush and tumble of the supply and the building up of these factories, that then it was impossible, for want of staff or a developed system, to be sure that the greater refinements were put into operation. As I say, to-day there is a system which provides for the complete invoicing of all materials even to our own factories. I am so glad the right hon. Gentleman has called attention to the £3,000,000, because he seems to have thought that there was a risk of that £3,000,000 having been lost, mislaid, or unaccounted for in some form or another. If he did not, I am not quite sure why the right hon. Gentleman laid such stress upon it.


I will tell the right hon. Gentleman why I raised that point. It was because I wanted to know whether this firm of chartered accountants, who were reported to have discovered the error of this £3,000,000 in respect of the value of material supplied by the Ministry, were still in the employ of the Ministry.


The right hon. Gentleman has not got the facts quite right. It was not the firm of chartered accountants who discovered the error—


They certified it!


They certified it. I will deal with that error in a moment. I will not run away from it, but I want to get the facts right. They certified it. A member of the staff of the Ministry found out the mistake. I will deal with that mistake in a moment. The Comptroller and Auditor-General, dealing with the work of the Ministry, put this matter into this Report. These are the facts: This factory was one of the factories belonging to the Ministry. It received from the Ministry certain materials which happened to be shells, upon which a further process had to be done at the factory. The factory charged these shells, debiting its own production account with the price of these shells. There happened to be four different types of shells. They took the same price for all four types of shells. They overcharged and debited themselves with £3,000,000, which was placed on one side of the account. On the other side of the account there was a credit for production added to the £3,000,000. It was on both sides of the account. There was no question of the loss of £3,000,000, and no question about anything except a book entry on one side, and on the other side of the account. I am glad the right hon. Gentleman mentioned it, because in the Press I have seen the heading "Muddled Millions." [HON. MEMBERS: "Hear, hear," and laughter.] I am not defending it. It is a mistake. But what is the proportion of mistakes? Is it a serious tiling? Is it something which ought to jutify a man saying that he will not subscribe to the Government Loans, because they have thrown away £3,000,000? No; but that is the real risk, unless the matter is gone into and explained, of the harm this class of criticism does. Not that I object to criticism in the least, but I object to the misunderstanding which the casual reader may derive from it. As regards these accounts, if you ask have I had the head of the firm on a charger? No, I have not! They are a very respectable firm of accountants. They took this price—they are not technical people who can price shells—they took this price. It made no difference to the result of the accounts, and they have not been dismissed.


What was the error?


I really cannot explain the thing again. I have explained it in some detail. Let me take the next item on page 8 of the Report, to which the right hon. Gentleman called my attention.

Colonel Sir C. SEELY

May I ask if these shells were invoiced?


These were shells sent out by the Ministry and received by one of our own factories, and taken in charge by that factory at a price. The item was taken at the wrong price, at £3,000,000 more than the standard price, but that same £3,000,000 appeared on the other side of the accounts as part of the production cost, or rather as a credit on the production side.


Then they were not invoiced?


Yes; very likely they were not invoiced at that time. I do not know whether they have since been invoiced, but that was not the point to which the Comptroller and Auditor-General drew attention. I propose next to deal with the allegation on page 8 of the Report referring to the £250,000. The Report says: There had also been failure to keep a complete and accurate record of repayable cash advances made to the firm—for example, an advance of £250,000 had not been charged in the contract ledger…. The answer to that is this: It has not been charged in the contract ledger, but there is a ledger in which there is an account against the firm which is there all the time. There has never been the slightest risk of it ever being overlooked. The firm had a contract account, and in the firm's account the firm was debited with the £250,000. I should be very much surprised if that answer, which has been given to the Public Accounts Committee, is not accepted by them as perfectly satisfactory. As regards the £750,000 which is alleged to have been posted twice, I can give the hon. Gentleman the history of that. It has been given to the Public Accounts Committee. The facts are these: These were loose leaf ledgers. The £750,000 was posted provisionally before the contract came to be noted—that is part of the technique of the Department. It was put inside the ledger. The contract came through in the ordinary course. It was duly and completely noted, and the £750,000 was debited to this firm. What ought to have been done then was that this previous provisional debit should have been taken out. It was not. They were both left there together. [Laughter.] There was no risk of loss there. If there was anything at all, there was a double debit risk—a risk of getting too much. As a matter of fact, the Comptroller and Auditor-General himself, had he known these facts, would in all probability not have used the words he did use in his Report. The next item to which the right hon. Gentleman called attention was that the contract ledger recorded payments of £1,400,000 only, although payments amounting to some £4,700,000 have been made. Of course that sounds a very serious thing, that £4,750,000 of payments should have been made, and only less than £1,500,000 should have been recorded. I quite agree that it was a prirmâ facie case for inquiry. What was the result? An inquiry took place. The contract files were produced showing that there was a complete record of every one of those things in the office.


Was that explanation given to the Comptroller and Auditor-General?


I do not know. But do not let us forget that this Report has been before the Public Accounts Committee and that the officers of the Department have been there and have been examined, and that is the answer they gave. What I am glad to deal with is the comments made in the Press, at any rate in a letter to the "Times," by a gentleman who was for many years a Member of this House, a letter which appeared the other day under the heading of "Flapper Finance." In this letter this was quoted as an instance of the waste of public money and of the risk that anyone ran in subscribing to War Loans, because their money, it was said, would be waste-fully dealt with; which means that it would be lost in some sort of way. There never was any risk of loss whatever in connection with this transaction. The other one referred to was the £111,000 which was paid twice over. That was right. Cheques were drawn, and here again the contractor returned the cheques, and there had been no loss. [Laughter.] Yes, it is all very well for hon. Members to laugh when they hear of duplicate payments, but you never will eliminate human error in munitions or any other big Department dealing with thousands and thousands of cheques per day. You are dealing through people who are not trained, not expert and skilled people, but with a staff composed of young girls who have had little or no previous experience and who, with the best will in the world, sometimes do not know the difference between a debit and a credit. It happened only the other day, and it was just stopped in time. We very nearly had another duplicate payment, but eventually it was picked up. But there it was! Some junior member of the staff made a slight error, and it might have resulted in a duplicate payment. It did not, because the system is now improved and the position is better. But I am not going to guarantee the House even now against a possible recurrence of duplicate payments. Whenever you are dealing with a staff got together under the circumstances these staffs have been got together, it is impossible, at times, not to have errors duo to inexperience.


While the right hon. Gentleman is on this subject, can he give the House a public assurance that such large sums of money will not be handled by incapable clerks and by young persons?


The right hon. Gentleman must not suppose that any incapable clerks deal with these large sums of money. They may have some mechanical part of the work to do. The documents may have to be passed from one place to another, but they have no administrative control, which is carried out by some of the most experienced chartered accountants in the country. We have added highly trained professional men to the staff in the last-three or four months to a very, very large extent indeed. A system has been devised by them, and is now being operated by them and the 4,000 girls employed in the finance group of Departments, which, of course, includes accounts of the different contracts, etc.


Do not the responsible heads sign the cheques?

8.0 P.M.


Yes. Naturally much good-natured chaff comes my way about a cheque signed in blank which was found in Trafalgar Square. I do not mind that so long as people do not imagine that this is the way we deal with our work. That particular case I explained in the House in answer to a question. The explanation is the complete stupidity and want of sense on the part of a man who goes and signs a cheque in blank, and I cannot guarantee the House of Commons that this kind of thing will not happen on a great staff. It happens in private business. [HON. MEMBERS: "No!"] Yes, stupidities do happen in private businesses just as much as in a Government business, but the difference is that in a private business it is everybody's business to hush it up, but in a public business there is no interest in hushing it up, and it comes through the House of Commons to the Press of the country. I am not complaining. It is public business, and the public are entitled to know, but they ought not to draw a false inference, and suppose that the finance of the Ministry of Munitions on its financial as well as its productive side, is not carried on with as strict care as any business in the country. The only difference is that it is about 100 times as big as any ordinary business in the country.

I have now dealt with the specific point raised by the right hon. Gentleman, and truthfully I am not sorry to have had this opportunity because the stories that are circulated are really damaging in more ways than one. They are damaging to the Ministry as such, because men do not care to join the staff of a discredited Department, if it is discredited, about which such stories are told. Such stories do not do any good, and they may put people off subscribing to the war loans. There was a story going about that we bought a barge and paid £600 for it, and that instead of treating it as a purchase, we treated it as being hired, and it was said that month after month we sent £600 as the hire. That story came in a private letter to the Chancellor of the Exchequer, and when it was investigated we found it had its origin in a tale overheard in a restaurant, and I got the person identified who was supposed to have said it. When run to earth this man denied having said anything of the sort. Then there was a case of £800 paid for some timber, and the allegation was that we went on paying for it over and over again, and that somebody got so many cheques for this item that he got very tired, and had to open a separate account in a certain bank. We approached the firm which was alleged to have sold this timber, and they denied having had anything to do with it, and also denied ever having had any account at the bank alluded to, and the bank knew nothing about it. These kind of stories go round, and naturally they do no good.


May I put one point to the right hon. Gentleman? Before any account is finally settled, is the whole account thoroughly investigated before the settlement takes place, because in big dealings we all know you have many errors to correct in the course of a current account. If we have the assurance that before an account is finally settled it is thoroughly investigated and checked by competent auditors, then I am sure that will satisfy us all.


The accounts of all these firms are scrutinised and the most minute examination of the account is made. Nearly all these are cases of payment on account, and in the particular case that has furnished all the examples which the right hon. Gentleman quoted, it is one firm and one of the biggest, and, even if there had been anything wrong in any one of these accounts, it would have been picked up in the final settlement. The right hon. Gentleman asked me whether I could give him any sort of assurance on this point. I may say that I have now in the finance group of Departments some extremely competent officers. [HON. MEMBERS: "Hear, hear!"] The right hon. Gentleman opposite has seen them before the Public Accounts Committee, and he must recognise that they are some of the best men and equal to any men in their profession. I am getting from them the most loyal and splendid co-operation. I cannot promise miracles, but I can promise that those men have worked out what they believe to be a good system. They are working hard at it, and they shall have every support from me. With regard to the other financial group, I have initiated what amounts to a reorganisation. I have divided off the commercial from the Departmental finance, and I have succeeded in getting into the Ministry men with commercial and financial experience of a very high order to take charge of that Department, so that the commercial or the contract finance questions can come before men whose ordinary business life has been spent in dealing with that class of case, and I believe that that organisation now set up is competent to deal with a very vast number of questions that come before it in the course of ordinary business. I cannot pretend that we shall never have mistakes because we shall. It is too big a business to give any such guarantee as that, but I am sure the organisation and the control is infinitely stronger than it was in the earlier days of the War, and I believe there is now in existence a system which will work well.


I should not have spoken but for the course the Debate has taken. I do not wish to say anything in advance of the Report of the Public Accounts Committee, but I want the House to remember that it is hardly four years since the War began, and it is only during that time that there has been this enormous demand of every kind which has been so suddenly sprung upon the country. Everything had to be provided, including a form of accounts practically from the beginning, and in something like two and a half years the Ministry has built up one of the biggest business organisations in the world. At first the difficulties were very great. Munitions were constantly arriving; some would arrive by ship in a certain port, and as they were wanted urgently in France, sometimes they were shipped off before anybody at the Ministry had a chance of seeing them, much less being able to make a regular store account. That happened sometimes during the War, and it was perfectly unavoidable. All that kind of confusion at first made the formation of the accounts of the Ministry extraordinarily difficult, and all I can say is that from what I have seen and heard, and in spite of all these mistakes, some of them very culpable, I am perfectly amazed at the way in which the Ministry has built up not only a very large business, but also a form of accounts which does extraordinary credit to all concerned, and which has taken hold of the difficulties and is preventing such mistakes from occurring in the future as far as any human form of accounts can do.

With reference to the aircraft factory the demand for aeroplances has grown and is growing day by day, and this necessitates new buildings and factories working day and night at the greatest possible pressure, and everything had to be subordinated to the fact that these machines had to be got out quickly, but a form of accounts is gradually being built up and put into a very effective shape. With regard to the extended functions of the National Expenditure Committee, it has to consider not only present and past finance, but future finance as well. It must not be forgotten that the House does consider future finance every year in the Budget of the Chancellor of the Exchequer, which is brought in at the beginning of the financial year, and it deals with the finance of the whole year, and, although nothing can be added to those proposals without being brought before the House, it is subject to the control of the House. It is true that the House has lost a great deal of control over expenditure, but that is the fault of the House itself. It must not be forgotten that whereas the finance of the year is fixed by the Budget at the beginning of the financial year, every item in that Budget has got to be justified by the Minister of some Department when his particular Estimates come up for consideration.

There was a time when a certain economist, of whom we heard so much in Mr. Gladstone's time, used to take up those Estimates and discuss them in the House. What happens now is that the House often has some acute question of policy to discuss, or some question that happens to be in the public eye at the moment, and that discussion starts after the Minister's statement to the House, and often nothing else is discussed, and, as a rule, very few items arouse sufficient interest to induce hon. Members to examine closely into the Estimates which the Minister has explained. The question of enlarging the functions of the National Expenditure Committee is, of course, a revival of our old friend the Estimates Committee. The House of Commons had an Estimates Committee just before the War. What was the result? They took one class of Estimates, and it took them the whole of the Session to examine that one class. They did a great deal of good, because no doubt it has an influence on Estimates if it is known that there is an expert Committee of the House which will examine them. Nevertheless, such a Committee can only take one class of Estimate each year, and if they took more one of two things would happen. Either their work would be performed perfunctorily or they would delay the whole financial arrangements of the country. I think an Estimates Committee is useless, and any form takes away from Ministerial responsibility. It is no use saying to the Minister responsible for a proposal that the House wants to examine that very closely. If the House takes on itself the functions of examining, revising, or altering Estimates in any way, the Minister, of course, will in time be more haphazard in his Estimates. He will throw the burden of the examination on the Estimates Committee, and that will lessen the sense of Ministerial responsibility. I hope the House will not run away with the idea that an Estimates Committee can do much more than examine a particular class of Estimates from time to time and overhaul the whole machinery by which these Estimates are brought forward.