SHIPPING LIQUIDATION.

HC Deb 07 March 1922 vol 151 cc1185-98

Motion made, and Question proposed, That a Supplementary sum, not exceeding £100, be granted to His Majesty, to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1922, for the Salaries and Expenses in connection with Shipping Liquidation.

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Sir W. Mitchell-Thomson)

This token Vote for £100 covers Appropriations-in-Aid amounting to nearly £9,780,000, and is for the service of Shipping Liquidation. In case the Committee have not got it exactly in mind, perhaps it may be as well if I explain the nature of this Shipping Liquidation service. On the cessation of the Ministry of Shipping, on 31st March last, the work divided itself naturally into two parts. Firstly, there was that part of the work which was permanent and continuous and administrative in character, that is to say, the work which used to be done by the old Transport Department of the Admiralty and the old Marine Department of the Board of Trade. That work was carried on, under the heads of the Mercantile Marine Services and of the Mercantile Marine Department of the Board of Trade, and with that administrative work this Vote is not concerned. This service is a purely liquidation service, and is not, strictly speaking, an operative or administrative service at all, though there is, of course, the ordinary maintenance of assets such as is practised by any liquidator pending the disposal of the assets, which, in the present case, are ships.

I do not propose to go into the general question at any length, and, indeed, it would not be in order that I should do so on a Supplementary Estimate. Further, it is really unnecessary, because my hon. and gallant Friend the Joint Parliamentary Secretary to the Treasury (Colonel Leslie Wilson), in making the final speech for the Ministry of Shipping last year, went so fully into the general position that hon. Members who want to be informed as to the general course of the work will find all the information they require on reference to that speech. At the same time, there are one or two things which I think it right and respectful to the Committee to say with regard to particular items in the Vote. Firstly, I would say this single word with regard to the existing assets which still await disposal. The ships which still await disposal consist at the present moment of only 13 prize and detained vessels, and I am sure the Committee wlil be glad to know that the number has been reduced to so low a figure. Their total tonnage is about 50,000 tons. They will be disposed of as soon as they have been condemned by the Prize Court, if that event occurs. Whether or not it will occur is, of course, not for me to say, but as soon as condemnation takes place, if it does take place, the vessels will be disposed of.

Lieut.-Commander KENWORTHY

Why are they not coming before the Courts now?

Sir W. MITCHELL-THOMSON

They are coming before the Courts now, but it takes time. In addition to these prize and detained vessels, of which now there are only 13, only one Government-owned ship now remains out of the enormous armada acquired during the War. This one was taken over by the Government because it was considered to be less expensive, and so it turned out to be, to do so than to re-condition her and return her to her owners. Her name is the "Himalaya," and at the present moment she is employed on trooping service. The only other vessels which remain are one old paddle steamer and two barges, and I have hopes that we shall be able to dispose of these at an early date.

Turning to the actual Estimate, I should like to make it clear to the Committee that, apart from certain small administrative charges, as to which I will say a word in a moment, there are in this Supplementary Estimate no fresh liabilities at all. The Estimate is only for the purpose of bringing into final account liabilities which have long since accrued—some of them accrued some years since—but which it has not been possible to ascertain with the exactitude which is necessary for bringing a liability into final account. What I am doing, therefore, in moving this Vote, is in a sense reporting progress to the Committee as regards liquidation. I think the Committee will see that, whatever there is to be said—and there may be something to be said both for and against—as regards the practice of the introduction of Supplementary Estimates in general, in the case of a liquidation service a Supplementary Estimate is really a virtue and not a vice, is a subject for congratulation and not for reproach, because it means, in effect, that the work of liquidation has gone on faster than was expected at the beginning of the financial year. Having said that, perhaps I may be allowed to say one word asking for the sympathy of the Committee upon the position of the unfortunate liquidator. In no other system of accounts that I ever heard of, except that of national accounts, would a liquidator be expected to estimate exactly what his receipts and payments were going to be during a given financial year, 12 months, or even more than 12 months—because the Estimates are made up in December and January—beforehand. That would never be done in commercial practice, nor would it be necessary for a liquidator to do what in effect I am now doing, that is to say, to hold a shareholders' meeting in order to get leave to bring to account faster than was expected various items which have come up in the liquidation during the current year.

With that small comment, which I think the Committee will feel to be not at all unjustified, let me say a word about the particular items. The Committee will see that the gross increase in the Appropriation-in-Aid is £9,721,900, as against an anticipated increase of £9,722,000. The increase in receipts is due, broadly speaking, to two causes. In the first place, greater progress has been made than was anticipated in recovering sums due to His Majesty's Government, and, in the second place, further settlements which were not anticipated during the financial year have taken place with various foreign Governments, and with certain Dominion Governments. I think it is important that the Committee should realise that this token Vote not only covers Appropriations-in-Aid of nearly £9,750,000, but that it actually means that there is an increase of revenue coming into the Exchequer, represented by the difference between £100 on the one side and the extra receipts, which the Committee will find stated at the bottom of the page, amounting to £1,500,000. What I am reporting to the Committee, therefore, is that we have made better progress, and have collected more money for the Exchequer to the extent of £1,499,900, than we expected to do at the beginning of the financial year. There is still, however, at least one large financial settlement to take place with a foreign Government. That is the final settlement—the last settlement with the United States. We are in close and active negotiation, and I have good hopes that we may arrive at an agreement during the current financial year, and provision has accordingly been made on the other side of the account. On that other side of the account subheads B, D, E and F are administrative charges in respect of which there are extra amounts due. In some cases the necessity for the extra amounts is duo simply to the fact that greater progress has been made than was anticipated with the liquidation and, in consequence, increased charges have become due. In the majority of the amounts it is due to the bringing into final account of back charges, which have accrued in past years, which were not capable of exact ascertainment, and which it has only been possible now accurately to ascertain, and in at least one case, in the case of Subhead B, travelling expenses, it is due to an error in the original Estimate. The original Estimate was a bad Estimate. It was a considerable underestimate, and I have to acknowledge that and to express regret. There was also in Subhead D, a considerable underestimate in the sum of £27,250 due to a similar clerical error. But apart from those amounts, the majority of the charges under B, D, E and F are merely the bringing into final account of back charges.

Subheads G and H comprise the anticipated settlement with the United States and also the bringing to account of expenditure in the accounts for previous years which it has hitherto not been possible to examine so accurately as to satisfy the requirements of the Comptroller and Auditor-General. These have now been examined, and they are to be finally agreed. They are in the state in which they will pass the Comptroller and Auditor-General, and it is necessary to provide money to pay them. There are further included in G and H sums of money to meet various claims for liabilities which it is now known have been incurred during the current financial year, but which it was not possible at the beginning of the financial year accurately to anticipate, and in regard to that any Member of the Committee who has practical shipping experience will know that, in cases of delay, repairs, collisions and damages, it really is not practically possible in advance accurately to estimate what your ultimate liability is going to be. In collision cases, for instance, you do not know what the actual amount of the claim is going to be until the liability is determined, and in the majority of litigious matters—and all the amounts under this Subhead are litigious—until you have reached what they call the discovery stage, the stage at which your documents are communicated to the other side and theirs are communicated to you, you do not even know what the amount of the claim is going to be, let alone what the amount of the ascertained and adjudged liability is finally going to be. It is not, therefore, possible, as anyone with practical knowledge of the business will agree, accurately in advance to estimate the amounts which you are going to be called on to pay under these particular heads. Sub-head J consists of three different items, in the first place, of balances due on final account for shipbuilding to the amount of £326,000. These represent the final payments in respect mostly of vessels which were cancelled at the time of the Armistice. They were then in various stages of completion, and it has been matter of great difficulty to ascertain the exact amount finally due for the balance of payments in respect of each, but this amount of £326,000 represents the payments which have now been really ascertained and made for that purpose. The next item in this Subhead is £400,000 which it has become necessary to pass as a credit to the Prize Fund in respect of the valuation of prize vessels, and the balance consists of a sum which has to be passed as a credit, not to the Prize Fund but to the Prize Court, in respect of sales of detained vessels. The Prize Court means the Exchequer.

Lieut.-Commander KENWORTHY

Does this payment to the Prize Courts come out of the Prize Fund generally?

Sir W. MITCHELL-THOMSON

No, there are two quite distinct sources. The thing works the opposite way to what you expect. The Droits of the Crown go to the Prize Fund, and are paid out to the various recipients. The Droits of the Admiralty go to the Exchequer. The £400,000 in respect of prize vessels are Droits of the Crown payable to the Prize Fund, and will be ultimately distributed. The balance of the amount is Droits of Admiralty, in respect of detained vessels, payable to the Prize Court, which will go as appropriations to the Exchequer. Subhead K, £19,000, represents an amount in respect of claims for diversions which it was hoped to settle, when the original Estimate was framed, before 31st March, 1921. In fact, it was not possible finally to settle it before that date, so it lapped over into this financial year, and provision has accordingly to be made to pay it now. In Subhead L, miscellaneous Services, including losses on exchange, the amount to the debit of exchange account in respect of losses is £50,000, but as a matter of fact most of that represents purely book-keeping charges, because it is the practice, in working the Treasury Chest Fund, that issues from the fund are made at the rate of exchange for whatever the particular accounting period is. They are issued by the Drawing Department at that rate of exchange. Any fluctuations of exchange during the course of that accounting period are for account of the Department which draws the money. Therefore, in the majority of cases, this purely represents a matter of bookkeeping from one side of the account to the other. The rest of the Miscellaneous Services cover a variety of items, payments to harbour boards, and various other small things which are stated fully in the annual accounts in accordance with usual practice, and are presented to the House and reported on by the Public Accounts Committee, and unless anyone desires any particular information in regard to that I do not think it is necessary to go into details.

Perhaps I should say something about Subhead Q, amount required to meet losses and sums deposited with Russian banks, £100,000. Before the revolution we were engaged in sending munitions and stores, and in the course of the work transport officers were installed at various ports in Russia. They had sums of money to their credit in various banks with which to work. When the revolution took place the revolutionary Government stepped in and embargoed those sums in the banks and ultimately confiscated them. They will no doubt form part of the claim which may ultimately be preferred against the Russian Government.

Mr. J. JONES

Which Government?

Sir W. MITCHELL-THOMSON

I have no exact knowledge, and I have no right to say which, but ultimately, sooner or later, a claim will be preferred against some Russian Government in respect of the amounts due to His Majesty's Government. In the meantime, I am clear that the proper thing to do, as being responsible for the liquidation, is to write the amount off. Therefore I ask the leave of the Committee to write it off accordingly.

Mr. WISE

Which bank is it in?

Sir W. MITCHELL-THOMSON

In a variety of banks. I can give my hon. Friend the exact information as to the allocation if he wishes it, but I have not the information with me at the moment. It was in various banks at the ports of entry into Russia. To complete the story, I ought to say something as to the extent and duration of the work. I will not say anything about the staff, because it would not be in order, as there is no money in this Vote for staff; but in order that the Committee may understand the extent of the work, I may say that the staff numbers just over 300. They will be reduced progressively as the work continues to be reduced. In case my hon. Friends may feel anxious in regard to the staff, I can assure them that if they will turn to the relevant section of the Geddes Committee Report they will see that they use words almost of encomium in referring to the work of the shipping liquidation. The real thing is that in a liquidation business like this you cannot take short cuts. It is no use saying: "Here is an old service, cut it away; take the axe to it." If you were stupid enough to do that, you would be confronted with one of two alternatives, either of which is unthinkable. You would have to repudiate the existing obligations of His Majesty's Government to people who had claims against them, or you would have to pay all the claims in full. Clearly, that is an impossible course.

There is one matter which deserves consideration, and that is that in all these liquidation services there will come a time when you get so far down in your liquidation that the balance of claims either to pay or receive on the one side and the balance of the staff costs on the other will become nearly approximately equal. We have not got near that point yet in regard to this service, but we shall reach that point sometime, and I cannot help thinking that it would be exceedingly desirable that those who are particularly charged with consideration for these matters, the Public Accounts Committee, should consider the position which is going to arise then. The position from the point of view of the Department is that the Department is bound by the letter and the word of the Exchequer and Audit Act. It has to satisfy the Comptroller and Auditor-General, and the Comptroller and Auditor-General has to work by the Exchequer and Audit Act. When that situation arises, it might be desirable possibly to have some modification or some relaxation of the exact letter of the Exchequer and Audit Act; but we have not yet got anywhere near that point in regard to this liquidation, because the monthly costs of the staff on the average of the last six months has been just over £8,000, while the savings per month by recoveries, disallowances, and reductions have been just over £308,000. Therefore, there is still on the monthly balance a sum of £300,000 per month over and above the cost of the staff.

9.0 P.M.

As regards the extent of the remaining work, the Committee know that Sir Joseph Maclay has resigned the position of Shipping Controller, but that we are fortunate in having his advice and assistance in an advisory capacity. It would be simply presumption on my part to say anything about the great services of Sir Joseph Maclay, but I do say that for one reason, if for no other, he deserves the eternal gratitude of the taxpayers of this country, because after the Armistice, at a moment when many other expert people in the shipping world held contrary views, Sir Joseph Maclay persistently gave the Government the good advice, which they took, to get out of the shipping business as quickly as they could.

Mr. J. JONES

Yes, and sell the ships to the shipowners at half price.

Sir W. MITCHELL-THOMSON

I cannot pretend to be able to give any exact estimate of the balance of the work which remains to be done, and I hope that the figure I am going to give will not be quoted against me in future, because one cannot make more than the best conjecture. I think that I ought to make a shot at it, and I estimate that there will still remain after the close of this financial year to be paid by His Majesty's Government something like £8,000,000, and there will still remain to be received by His Majesty's Government something like £13,000,000. I cannot translate this Estimate into terms of months. The process is almost certain to take more than the next financial year, but how much after that I cannot say. I can, however, give the Committee the assurance that, so far as it is in the interests of the Exchequer, we will use our utmost endeavours to expedite the progress. Probably Members of the Committee will be inclined to receive that assurance with great confidence because of the progress, on the whole, the unexpectedly satisfactory progress which is revealed by the presentation of this Estimate.

Lieut.-Commander KENWORTHY

I do not wish to delay the Committee, but there are several points which we must notice in this Estimate. I congratulate the hon. Member on the very charming manner in which he has presented the Estimate. I only wish we heard him more often, and that we had more of that sort of lucidity practised on the Government Bench. It is true that the Geddes Committee in their Report say: We have not investigated the staff in detail. The cost appears to be small in relation to the turnover and we make no recommendation. When one remembers the composition of the Geddes Committee, hon. Members will understand perfectly well why they said that. In case there was any doubt about it, they state: The actual administration is conducted with the assistance of an Advisory Committee consisting of the late Shipping Controller and other shipowners formerly associated with the Ministry. Dog does not eat dog, and I should have been very surprised if they had said anything else. I do not wish to be misunderstood in this matter, and the fact that the late Shipping Controller gave his great services unpaid, and that he was, on the whole, very successful, is a matter on which we can join with the hon. Member in a note of congratulation. I am glad to hear about the £400,000 Prize Court money. I wish it had been settled earlier. It has taken far too long. We have not yet got the final consignment of prize money. It is not the men in the Service, but the men who are demobilised and out of work who want this money. I only wish that this £400,000 could have been put in before. Is this an estimate of the total amount, or will there be some further amount when these last ships are sold up? There is a great deal to be said about the selling of these ships which can be said on Report.

Sir W. MITCHELL-THOMSON

The reparation ships do not come into this Vote.

Lieut.-Commander KENWORTHY

But the captured ships have been sold. They are all part of the same policy. The items at the bottom of page 42, £7,500,000 include some ex-enemy ships—I do not say under the reparations but as prizes. But in reference to these losses of money deposited in Russian banks, I do not understand what the hon. Gentleman said about the Transport Officers lodging these great sums in Russian banks. That is not what was done by Transport Officers in cases which I have known abroad. I do know that there are very heavy claims by shipping companies against the Russian Government for carrying munitions and transport as a private commercial contract with the Russian Government. These are legitimate claims. Do these companies get any compensation? This sum has been written off. Does that mean simply a bookkeeping entry or rather an erasure? Will this £100,000 be available for making good, losses in other Departments? Is it money advanced by the Treasury to these Transport Officers and used by them? What I want to be certain about is that none of this money is money due to British shipping companies.

Sir W. MITCHELL-THOMSON

indicated dissent.

Lieut.-Commander KENWORTHY

I am glad to have that clear. These are legitimate claims and are as much entitled to be paid as any others.

Mr. MOSLEY

I will stand only for a few minutes between the Committee, and the more important discussion which awaits the Committee, but there are a few matters in this Estimate which require some further elucidation. The hon. Gentleman congratulated himself upon being in the position to present a Supplementary Estimate on the ground that a Supplementary Estimate in the case of liquidation departments meant that the work was being speeded up. It is easy to understand on the administrative side of the work that a more rapid sale of assets than was anticipated will, or may, result in greater charges on administrative expenditure, but the hon. Gentleman went on to point out that the main increase in these administrative charges, that is under the first four headings, was due to a clerical error.

Sir W. MITCHELL-THOMSON

No, only a small amount under Sub-head B. I said on the contrary that the main amount was due to bringing in back charges.

Mr. MOSLEY

Then I should like to know how this extraordinary miscalculation arose under the heading D, where we find an increase in the charge for salaries, wages and allowances of three times the original Estimate. A miscalculation of that kind seems almost inconceivable. Does it mean that additional staff which was taken on? Again, a clerical error, which he admits under B, of over 100 per cent, appears a remarkable performance for any Government Department, a performance which would incur sad consequences for a clerk or employé in an ordinary firm. Then under heading E we find that travelling expenses have increased four times the original Estimate. The hon. Gentleman has given no explanation. A further explanation of the extraordinary miscalculation of these administrative charges should be offered before we pass this Estimate. Again, I cannot see why under the remaining headings, which represent, so far as I can make out, the payment of bills incurred in the War, none of those amounts could be estimated in the original Estimate. Presumably they are all at least three years old. Why for instance under Q, losses of £100,000 for amount deposited in Russian banks prior to the revolution, were not those amounts introduced in previous Estimates? Why does the hon. Gentleman's Department wait four or five years and then spring them on the Committee in a Supplementary Estimate? There are in these Estimates numerous other cases of extraordinary delay and miscalculation the like of which I have never witnessed in any other Supplementary Estimate presented to this House. This will be another of the points which can be raised on the Report stage. I would also like some explanation of item H in which the original Estimate was £1,000 and the revised Estimate is £300,000. There is another extraordinary miscalculation under heading K. All these are War bills presumably three or four years old. They are sprung suddenly on the Committee and in every case we find these amazing miscalculations. On the Report stage we anticipate a full explanation, as is the custom of the hon. Gentleman in reference to these points.

Mr. WISE

I want to ask my hon. Friend two questions. One is in connection with Item L. I think he stated that £50,000 had been lost in exchange. Is that all for this year? Who advises him on the exchange question? He also said he expected to pay out £8,000,000 and to receive £13,000,000 in the future. Are these sterling amounts or will they be liable to exchange?

Sir W. MITCHELL-THOMSON

Perhaps it will be convenient if I first answer the question put by my hon. Friend who has last spoken. The amounts of £8,000,000 and £13,000,000 are sterling amounts, but they are only arrived at approximately. I cannot pretend to go any nearer. As regards the loss in exchange, I have explained that this is really in effect a bookkeeping transaction between the Treasury and the Department. The Treasury Chest Fund lays down money in ports abroad in local currency for this purpose, and when the Department draws upon the Treasury it draws from the Treasury at the rate of the day. It has to bring into account ultimately that expenditure at the end of its accounting period, and if there is a fluctuation in local currency during that period it is a matter for the account of the Department which draws the money.

Mr. WISE

You do not draw the currency yourselves?

Sir W. MITCHELL-THOMSON

No, the Treasury Chest Fund exists explicitly for the purpose of laying down money in ports abroad for the use of Government service abroad. With regard to the other questions which have been asked me, I may say, in reply to the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy), the delay in paying prize money has not been attributable to the Shipping Liquidation Department. Until the vessels are adjudicated as prizes, it is quite obvious we cannot make payment. So far as I know, I think this is probably, from the Shipping Liquidation, the final payment into the Prize Fund. As to what amount remains in that fund still and as to how long the disposal will take, the hon. and gallant Member should address a question to the representative of the Admiralty. With regard to what was said by the hon. Member for Harrow (Mr. Mosley), I am afraid, after all my explanation, I have still failed to make the matter clear to him. I hope when the question arises in the future I may be more fortunate. I have failed to make clear to him that you cannot in a service of this character pretend to estimate in advance. With regard to these particular heads, there is no pretence made that you can make an estimate in advance with any hope of being accurate. What you have to do is, towards the close of the financial year, when there is only a short time left and when you can estimate with some degree of accuracy over the remaining period, to find what your ascertained liabilities have been during the financial year, what you have actually brought to account as passed by the Comptroller and Auditor-General. Then you have to come to the House of Commons and ask for money to provide for that. If you wanted to estimate in advance on the safe side, you might ask for such a large sum of money in your estimate as would make you quite sure of covering yourself, but that would be grossly unfair, both to the House of Commons and to the taxpayer, because it might mean estimating for a much larger sum than you would ultimately require. In connection with liquidation services there is no alternative to be resorted to in these matters, but to go by your ascertained liabilities when you can bring them into account, and then ask the Committee for the money as I ask them now to give this Vote.