OFFICE OF THE PUBLIC TRUSTEE. (Hansard, 17 December 1919)

§ THE LORD CHANCELLOR (LORD BIRKENHEAD)

My Lords, I am glad that my noble and learned friend, by putting down this Question, has given me an opportunity of making a statement upon the Report of Sir George Murray's Committee. No one has shown more interest than the noble and learned Lord in the office of Public Trustee, and no one contributed so much to its formation; few, at any rate, contributed more. My noble and learned friend naturally watches over the activities of this Office almost with a paternal eye. I am sorry that the reply which it is right that I should make to this Question must necessarily be somewhat lengthy and, I fear, tedious to those who have not had occasion to take an interest in the work of the Public Trustee's Office. I would only, in condonation, remind your Lordships that, directly or indirectly, the activities of that Office affect the fortunes of many many thousands of our fellow subjects; that millions and millions of pounds are committed to the care of the Public Trustee; and that every indication available to us for our guidance suggests that the activities of the Office are likely to be very greatly exceeded in the future. I ought, I think, to add that there has been much legitimate public curiosity as to the workings of the Department. In the last, two years certain questions have been asked in another place, and it has not been 258 possible to reply to them with authority or with completeness there because, as your Lordships know, I am responsible for the office of the Public Trustee and it is I alone Who, in the circumstances, can make any pronouncement with authority upon this subject.

While the proposals of the Majority of Sir George Murray's Committee have received on the whole a very favourable reception in those circles which are best fitted to judge, there have been in the public Press certain criticisms which merit attention. Many of those criticisms are, I believe, based on a misapprehension, both as to the reasons which impelled me to set up the Committee and as to the effect of the Committee's recommendations, and I am very glad to have this opportunity of dispelling any misunderstanding on those points which may have arisen, and perhaps not unnaturally arisen, in the minds of those who are most deeply interested in the subject.

There were two main causes which led me, in consultation with the Chancellor of the Exchequer, to think the time had come for a general inquiry into the administration of the office of the Public Trustee. I was not in any way actuated by any notion that the affairs of the Office were conducted inefficiently. I shall have a word to say presently about the manner in which the business was conducted. Nor was I actuated by any desire to initiate some far-reaching change the general nature of the conduct of the business, and particularly I had no intention—nor did it pass through the mind of any of those whose opinions were taken upon the matter—of increasing the scope of the duties performed by the Public Trustee. The reasons were, as I have said, two:

First, the enormous and rapid growth of the business entrusted to the Office, and second, the financial situation produced mainly by the war, with which the Chancellor of the Exchequer and myself were faced. The idea of such an investigation had, I believe, been present to the minds of my immediate predecessors. From a period which roughly coincided with the commencement of the war, it had become obvious that the Office of the Public Trustee had passed through what I may call the experimental stage, had justified its existence, and had reached that period of its growth at which it was desirable that 259 a general review should be made of its activities, and there should be a kind of stocktaking with respect to its operations. While the war was proceeding, it was, for obvious reasons, impossible to set on foot such an investigation. But the cessation of active hostilities, with its promise of a return to more normal business conditions, happened to coincide with the retirement of the late Public Trustee, Sir Charles Stewart, and this conjuncture seemed a very favourable opportunity for initiating the work which had been contemplated for so long.

Taking those two motives in order, I should first like to give the House some idea of the enormous growth of the work of the Department. It commenced operations on January 1, 1908. I am unwilling to inflict upon the House more figures than are absolutely necessary, but to give some idea of the position I must say that in the first fifteen months of the existence of the Office the number of cases accepted by the Public Trustee represented an approximate value of 3½ millions. In the last completed year before the war the value of the cases accepted was nearly 13½ millions. In the year which is now last completed the value was somewhat over 17 millions; and the total number of cases accepted up to the time when the Committee commenced its operations was 14,522, representing an approximate value in excess of 129 millions. It is perfectly obvious that a system which was capable of dealing, and dealing adequately, with some 3½ million pounds worth of investments, whether in real or personal property, required complete overhauling and minute examination, when the values with which it had to cope amounted to some forty times that figure and when the gross total value of all the estates to be dealt with was increasing at a rate five or six times that which prevailed during the early months of its existence. It seemed to us that the public at large, and more particularly those of the public whose financial interests had been committed to the care of the Public Trustee, were entitled to know upon inquiry by skilled and impartial observers that sound, careful and honest administration had been exercised in the management of their business.

Now on that I am happy to say that the Report of the Committee is quite clear. They say, "We have been much impressed by the pride which the staff take in the 260 work and the energy and devotion to duty which have enabled them to cope with the rapid increase of business under exceptionally adverse conditions. The figures which we have given (some of which I have already read to your Lordships) show that the Department has now established itself successfully; that it has broken down most of the opposition with which it was at first confronted; and that it has met a growing demand for its services. "I lay stress on the rapid increase of business which I have already mentioned as showing, despite such observations as to mistakes as I shall have to make later on, that there is a widespread desire on the part of the public to take advantage of the Office and that, whatever slips or mistakes have been produced by the emergency conditions of the last few years that confidence in the Office continues and is still growing so that the rate of increase in the number and value of the estates entrusted to the Office grows continually. When we hear, as we do from time to time, general criticism, which seldom condescends to particulars, of the methods or the practice of the Department, I think that I and those more closely concerned in the administration are entitled to point to those figures as a proof that there is general confidence, and that that general confidence is deserved and justified. It can be but seldom in the conduct of a great business that an investigation into its methods is necessitated, not because the business is diminishing or the public are resorting to it less than its promoters had hoped, but because the confidence is so overflowing and the resort to it so thronged as to be almost embarrassing to those who have to conduct it.

My second motive in a setting up the Committee was less cheerful. We were faced with an accumulated deficit which, if present arrangements continue, must also continue, and, I fear, continue in an ever increasing degree. When I speak of deficiency I think that I ought to make it quite clear in what sense that word is used. There is no question as to any deficiency in the trust funds committed to the charge of the Trustee. The only question which arises is with regard to the expenditure of the Office in managing those trusts and the income available to meet that expenditure. Section 9 of the Public Trustee Act 1906 (6 Ed. VII. c. 55) directes that there shall be charged in respect of the duties of the Public Trustee such fees as the Treasury with the sanction of the Lord 261 Chancellor may fix, and it requires that those fees shall be arranged from time to time so as to produce an annual amount sufficient to discharge the salaries and other expenses.

Now I should like to make clear also, once and for all, what my own view is with regard to this matter. The provisions of the Statute are explicit and must be obeyed. But even were it otherwise, in my opinion there is no justification (subject to one observation on one small point) for imposing upon the public any charge in respect of services rendered by the Public Trustee to the private persons who seek his assistance. It is open to them to take advantage of the opportunity afforded by the Office for the care of their affairs and for the guarantee from the Consolidated Fund which is thereby obtained. It is equally open to them to abstain from so doing. I see no justification whatever for the provision to those who make use of the Office of a subsidised service or a service below cost. The Office has justified its existence in the past by providing a service for which the public or certain members of the public were willing to pay. If they should cease to be willing to pay, the facilities must come to an end. I will be no party now or hereafter to providing those facilities at the cost of the general taxpayer, or to setting up at the public expense, machinery which with the aid of that subsidy could compete at an advantage with professional accountants, surveyors and solicitors who live without a subsidy by the exercise of their profession.

Unfortunately, the facts with which we are faced in this matter are very serious. The first few months of the Office not unnaturally resulted in a small deficit. This is inevitable in the start of any business of this nature. But that state of things soon passed away and for some six or seven years the Office showed a small apparent surplus upon each year's working—a yearly surplus which began to diminish when the war began, and which by the third year of the war had become a small, and by now has become a large, and indeed a formidable, deficiency.

One of the tasks which we laid upon the Committee was to consider this circumstance together with others bearing on the same subject matter. The Committee have considered this matter and they have reported not only that the deficiency to which I have already alluded exists, but 262 that it is necessary that further expenditure should be incurred which, if no increased income can be obtained, will increase the deficiency still further.

There is only one source from which an increased income can be obtained, whether to meet the deficiency upon yearly working as the Office is now constituted, or to meet the still heavier expenditure which is proposed by the Committee, and that source is an increase of the fees paid by those who take advantage of the Office. These were the two main motives which induced me and the Chancellor of the Exchequer to set up Sir George Murray's Committee. But I have already alluded to complaints of inefficiency and mistake in the Office, complaints which together with all other relevant matters formed a subject for the consideration of the Committee. I do not shrink from saying that there were mistakes and that there was inefficiency, though these mistakes have been vastly exaggerated in popular belief, and the total loss consequent upon them in eleven years working has been almost negligible. It would, indeed, be strange if in the conduct of so vast a business no weaknesses were disclosed in the course of ten years' rapid growth. It would be still stranger if such weaknesses had not arisen in the course of the last five years of strenuous and difficult administration.

During those years, as I have already pointed out, the business of the office has grown in ever-increasing ratio. Meanwhile, the Office, like all other great offices, whether in the public service or outside it, has suffered most seriously from war conditions. At the commencement of the war there were employed in the Department 155 permanent male persons. It will be remembered that the Department was new, and, as might be expected, a large proportion of that staff were below the average age. No less than 140 of the 155 were eligible for war service and no less than ninety-nine actually joined His Majesty's Forces. Two-thirds, therefore, of all the skilled male staff were removed from the Office and the work had to fall to less skilled and, I am afraid I must say, less efficient hands. Long before, under demobilisation, these men began to return to their duties it had become almost impossible to obtain anywhere efficient male clerks with any skill in the technical matters with which the Office is principally concerned.

263 Nor was this all. It will be remembered that during the whole of that time the growth of business has increased so far as related to what I may call the ordinary work of the Public Trustee. Owing to the fate of the war not only were more estates committed to the charge of the Public Trustee, but death removed an unusual proportion of those whose affairs were so committed, and thus the Department of the Office concerned with distribution and with executorship was doubly overburdened. In addition, the numerous Acts which dealt with enemy property in this country imposed wholly strange and new duties upon the shoulders of the Public Trustee and his officers. He became the custodian of enemy property under the Trading with the Enemy Acts, and I might observe that in that capacity he has conducted his business to such advantage as to give general satisfaction and establish a balance between the fees and the cost of administration. But for this, in the midst of the anxieties and the burdens of increasing work and decreasing staff, a new Department had to be organised and some of the time of his most experienced officers devoted to learning this new work and teaching and managing this untrained and unskilled staff.

My Lords, if in these circumstances some mistakes have been made and some well-justified causes for complaint have arisen, is it to be wondered at? Is there any noble Lord conversant with the conduct of a great business during the war who has not been conscious that his own business has not been conducted with the same despatch and the same accuracy which in more peaceful times made its pride and reputation? I am glad to think, as I am entitled to think upon the Report of the Committee, that those of the staff who were enabled to remain at their duties, assisted by the less skilled members of the old staff, and by such assistance as could be obtained from time to time with great difficulty from the open labour market, devoted themselves day and night to their duties, and in spite of these minor slips and mishaps have earned the commendation of the Committee and have enabled the work to be carried on with the minimum percentage of error.

Now I think that before I proceed to deal in any detail with the recommendations of the Committee, I owe it to the House that I should explain how it is that we come 264 to be faced with this present deficiency. I think it possible, and indeed probable, that when the fees were originally fixed they were fixed too low, having regard to the expenditure which even then had to be anticipated. Almost the whole of the money expended upon the office goes in salaries. The staff at the commencement were young and they were willing to work on small salaries, looking forward no doubt to promotion and advancement if the business proved a success. I think it possible that even then the youth of the staff and the certainty that if they remained in the Service they would require larger salaries might have been taken more closely into consideration and a higher expenditure therefore anticipated, and therefore some part of the deficiency with which we are faced is due to some initial miscalculation. But having said this, I wish to say at once that that is the smallest element in the present situation. It is extremely difficult to analyse figures of this nature, but I am pretty confident that the great bulk of the deficiency is due to other causes—causes which could not possibly have been foreseen at the initiation of the work and which have sprung primarily from the effects of the war.

In the first place, as I have already stated, two-thirds of the skilled male staff were withdrawn for military services. To each of these men, as in the case of all other clerks employed in Government service, and I am glad to think the vast majority of clerks employed in private adventure, sums of money had to be paid to make up the difference between their military pay and that which they would have received had they remained at work. This was just and equitable, but of course the result was to cast upon the Public Trustee a mass of expenditure which was wholly unprofitable looked at from the strict point of view of profit and loss. Nor was this all. In place of each of the men who so went to serve their country in the field there had to be employed, if he could be got, some persons from the outside world. As the war proceeded, it was not possible to obtain those substitutes even at the salary which had previously been paid to the man whose place was being taken. The market continually rose against us. It is common knowledge that all banks, insurance companies, and solicitors' offices were in a like case. We had actually to pay for less experience and less skill a greater sum than before the war had been 265 given to our permanent employees. And unhappily, and this is in itself a high attribute to the existing staff, it was not even found possible to substitute one untrained man for one trained one. We frequently had to get two men where one had previously sufficed. Hence again a heavy burden of expenditure wholly attributable to the war. These factors no doubt will cease gradually to have their effect as the trained men return and resume their duties. But there are other and more permanent factors on the expenditure side, directly attributable to the war, which went to build up our deficiency. Rightly or wrongly, and this is not the time to discuss the policy of the measure, the claims of all clerks employed in Government offices have been submitted from time to time to the Conciliation and Arbitration Board and there have been paid to those clerks war bonuses which now amount to over 30 per cent. upon their pre-war salaries. Similar measures have been necessary in private enterprise. We have here, therefore, apart from the other matters to which I have alluded, a direct increase of over 30 per cent. net to by far the heaviest figure on the expenditure side of the Public Trustee.

On the income side, the effect of the war has been no less serious. It had been the custom, though I am not sure how far the terms of the Fee Order justify it, to charge the income fee, that is to say, the fee reckoned on the income paid to the beneficiary which the Public Trustee receives in respect of his yearly administration of the trust, to charge that fee not on the gross income of the trust but upon that income less income tax. When the difference in the amount of income tax at the commencement of the war from the figure at which it stands at present is remembered, it will be seen at once that we have here a loss amounting to some 25 per cent, upon so much of the Public Trustee's income as is derived from the income fee.

Again, the acceptance and distribution fees, that is, the fees paid when the estate is handed over to the Public Trustee for administration, and when it is distributed to the beneficiaries and which is reckoned upon the capital value of the estate, have shrunk proportionately to the shrinkage in general capital values with which we are all so painfully acquainted. The figures which I have given in an earlier part of these 266 observations of the value of the estates committed to the Public Trustee's charge are to this extent misleading, that the figure of thirteen millions which I gave for the last year before the war is reckoned upon stock exchange values as they then stood, and the figure of seventeen millions which I gave for 1918–19 is also reckoned upon stock exchange values as they stood during the, latter year. Naturally, having regard to the general shrinkage, seventeen millions in 1918–19 represents a far greater excess of labour and administration over the 1913–14 figure than would be supposed at first sight from the mere mathematical difference between the two figures, and if the estates handed over in 1918–19 had been valued at the figure at which they stood in the former year, a far greater fee would have been taken by the Public Trustee.

These then are the causes of the deficiency in the presence of which we now find ourselves. To sum them up they are some small miscalculation at the commencement. The vast dead weight of the sums spent to replace those who had gone to the war. The general increase in expenditure caused by the war bonus and the rise in the labour market. And on the income side, the increased income tax and the shrinkage in capital due to the general depreciation in the value of securities.

Unhappily that is not the full tale of all that we have to face. The Committee have, as they say, found it necessary to make proposals for strengthening the staff of the Department and those proposals necessarily "involve a considerable increase of expenditure." "This must" they say, "be regarded as inevitable under the circumstances. In its earlier years the Office was an experiment depending for its success on its ability to attract business, and there was a natural tendency on the part of those who controlled it to keep down expenditure and charges. The scales of salary offered were low and the staff was insufficient in number."

I do not wish to minimise in any way the gravity of the total effect of the Committee's recommendations upon the expenditure of the Department. In their view, the net expenditure of the Office as at present conducted must be taken at £204,000, and the figure which they have found it necessary to adopt for the purpose of determining the amount of expenditure to be fixed in the future is £275,000. The estimated annual receipt from fees at 267 present rates may be taken at £120,000 and, as the Committee say, it is therefore necessary to construct a scale which will produce the necessary income. Now I am not myself committed without further inquiry to these precise figures. The Committee point out that further consideration of the number and salaries of the staff may enable some reduction to be made in the amount of revenue which must be earned, and they desire their figure to be taken merely as a provisional estimate framed for the particular purpose in view, bearing in mind that it represents the estimated cost at the time when all salaries are exceptionally high and under conditions which can hardly be regarded as permanent. The officers of the Public Trustee and the officials of the Treasury are at present engaged in conference in going through again these estimates and proposals with a view to seeing how far it is possible to avoid unnecessary expenditure. But with these estimates before me, I am bound to tell the House that I see no alternative but a largely increased expenditure, and as a result the making of provision for a largely increased income. With such evidence as lies before me of the amount of over-work and over-strain at present imposed upon the staff, with the actual figures of the salaries paid to the people employed in the Office, it would be idle for me not to face the fact that a very large additional expenditure is imperatively and immediately necessary, and for that purpose a very large increase in the revenue of the Office. I am sure that no one wishes that the staff should be called upon to work unreasonable hours or at unreasonable rates of pay. To adopt either of these courses must mean the perpetuation of the system under which the mistakes and inefficiencies of which complaint is made have occurred. It must do much more than this. It must mean the definite acceptance of a low standard of work and a low standard of duty towards the beneficiaries and the Public Trustee, which must ultimately result in the destruction of the business and the ruin of the Office, and, therefore, however reluctantly, I have felt bound to assent in principle—as I have said I am not committed on any detail until after long consultation between myself and the Chancellor of the Exchequer—to the Committee's main recommendations.

This being so, I have next to turn to the question of the source from which the additional revenue is to be obtained. There is, 268 in fact, only one source, and that is the fees paid by the persons who have the advantage of the services of the Public Trustee. The Act, as I have already pointed out, calls upon us to require such fees as will enable the income to balance the expenditure. It will at once be said, indeed it has been said, that to increase the fees will be to inflict a previous hardship upon those persons whose estates have been entrusted to the Public Trustee without any notice that these increases would be made. I do not stay to do more than notice the technical answer that. any person who so committed his affairs did so with his eyes open to the fact that from his fees, combined with those of others, the expenditure of the Office had to be met having regard to the terms of the Act of Parliament. I would, however, remind you, my Lords, that after all these people are in this position. They are at present receiving a service at much under its cost price. Some of them have had the advantage of receiving that service for some years. We are all, in these unfortunate times, faced with the necessity of paying more for services and articles whose cost we had regarded as never likely to rise, or never likely to rise to any serious extent, and I am afraid that the beneficiaries and settlors who are concerned in this matter must face this disc agreeable necessity like the rest of us.

At the same time, I will point out that there is a considerable misapprehension in connection with the matter. The fees taken by the Public Trustee fall into three main categories, two of which are taken on capital and one on income. As far as the income fee is concerned, it has hitherto been the custom to levy that fee ad valorem on the net income of the estate excluding from the calculation the amount paid by the estate in income tax. There is at least room for doubt whether this practice of excluding the amount paid in income tax is in accordance with the Fee Order. It is held by competent authorities that it would be open to the Public Trustee (and that it was always intended that he should) to levy the fee upon the gross income. However that may be, the recommendation of the Committee now is that the gross and not the net income should be taken into the calculation for the purpose of determining the income fee to be levied. I believe that the fairness of this proposal will commend itself at once to any one who considers it. Some extra charge must be imposed upon the beneficiaries, and regrettable as that 269 necessity may be, this seems, having regard to the considerations which I have already laid before the House, the most equitable manner of obtaining it. But this is the sole measure in any way affecting income which is now proposed.

The two capital fees are taken respectively on acceptance of a trust and on its distribution, and it is by a large increase of these two fees that in the main it is hoped to make the income balance the expenditure. It is at once obvious by raising the fee taken on acceptance, that no injury is inflicted on anyone. No one is obliged to have recourse to the Office of the Public Trustee. If he has that recourse, it is only reasonable that he should pay such a fee as will enable that business to be conducted otherwise than at a loss.

The Committee further propose a large increase upon the distribution fee. Here again I regret the necessity for an increase, but I see no alternative and those who suffer—as some must suffer from the increase of this fee—must bear in mind that they have for some years enjoyed the services of the Public Trustee at a cost to themselves which was less than the market price of the services.

Now, having said this much as to the condition of the Office, as to the recommendations of the Committee, as to the expenditure necessary in the Committee's opinion, and as to the means whereby that expenditure can be met, I should be in-dined but for one circumstance to sit down with this final observation, that I hope that everyone who is interested in the question, either because he has business relations with the Office, or because he takes a general interest in the matter, will read the Report of the Committee. It is short and clear. I do not think that it is possible for me to summarise its contents in such a way as to present its proposals to the House more clearly than the Committee themselves have done. It is in my view a State paper worthy of the closest scrutiny.

The reason why I cannot take that course of bringing my observations to an end which would be alike agreeable to the House and to myself, is that it would appear from communications which I have received from certain professional bodies and from letters which have appeared in the public Press, that the Report has not received that impartial and careful scrutiny which, in my opinion, it deserves. I say that because the criticisms which have appeared upon it, 270 and indeed the impression which seems to have been formed in the minds of those who have emitted these criticisms, proceeded upon a complete misapprehension of the situation and of the proposals of the Report.

Before I come to deal more closely with the matter, I want to draw the attention of the House to the constitution of the personnel of the Committee, bearing in mind that those criticisms proceeded mainly upon the ground that an attempt is now being made, apparently for the first time, to build up some great institution under Government control which is to frustrate private enterprise and place everyone's affairs, so far as I can make out, in the hands of a body of interested officials.

The Chairman of the Committee was Sir George Murray, himself certainly an official of long standing, sometime Secretary of the Post Office and subsequently Secretary of His Majesty's Treasury, and therefore biased, I suppose, with a liking for official interference and official ways. If that is the suggestion, it is curiously wide of the mark so far as Sir George Murray is concerned. After years of eminent public service he is now, I believe, engaged in private business and those who knew him during his official career, whatever other observations they might have to make as to his views on administration, know well that he was not one of those who had sympathy with large Departments or the indefinite extension of departmental activities, or with bloated expenditure. With him were associated Mr. Henry Bell, General Manager of Lloyd's Bank, who may be presumed to have brought from his long and intimate experience in the City a singularly wide knowledge to the consideration of problems kindred to those with which he has dealt during his whole life; Sir Willoughby Dickinson, a very well known former Member of Parliament, a member of the Bar, and of ripe experience in many business and philanthropic enterprises; and Sir William Plender, head of the great firm of Deloitte, Griffiths and Co., chartered accountants in the City of London, who is probably as well known to most members of this House as he is to myself, and who has brought to the inquiry the singular advantage of having had for many years an inside knowledge of its methods and business. It is the Report, signed by these four gentlemen, which has provoked the criticisms to which I 271 have referred. They were impartial, they had wide business experience, no one attempted to dictate to them what they should find or what they should say, and have not the least doubt that any men equally experienced and equally impartial who came to the consideration of the question would have arrived at the same decision.

With them was associated Mr. Samuel Garrett, one of the most eminent solicitors in the City of London, a gentleman very well known to me professionally, universally respected and eminently successful in his profession. Mr. Garrett has concurred in the great majority of the proposals made by the Committee, but he has unfortunately, as it appears to be, coupled with his concurrence certain extremely drastic proposals which not only diverge wholly from the conclusions of his colleagues, but, as it seems to me, cut at the root of the existence of the office itself.

Mr. Garrett's report is published with the Report of the Majority, and here again for those who wish to understand the subject, I can only recommend them to read Mr. Garrett's own words, to which I could hardly do justice if I endeavoured to give a detailed summary of them. Perhaps, however, the main point of the Report is summed up in paragraph 28, which is in the following words:— The remedy is surely obvious. The Department has attempted to do a quantity of work which it was not intended by Parliament to do, which it is unable to do efficiently and which it is not paid for doing. This must cease if disaster is o he avoided. The branches created to do extraneous work must be practically abolished, and the work of the Department must be confined to that which can be done by a competent and careful trustee. I do not think I am doing Mr. Garrett an injustice if I say that the implication in this and in the remaining paragraphs of his report is that if what he calls extraneous work were rejected and the work confined to that which could be done by a private trustee, the necessity for the large increase of fees would disappear, and all would be well. Certainly this is the implication contained in the letters which I have received and the letters which I have read in the Press. No conclusion could be more fallacious, as I shall show in a few moments.

On that, interpreting Mr. Garrett by those who base their criticisms upon the foundation of his Report, I cannot help noticing representations which have been 272 addressed to me on behalf of the Law Society, the Society of Incorporated Accountants and Auditors, and the Surveyors' Institution. They, like Mr. Garrett, seem to read into the recommendations of the Majority some adumbration of a gigantic scheme in which, as they say, "the Public Trustee should himself act as the accountant, valuer, land agent, or any other professional capacity"; or again— If instead of merely instructing and checking the outside agents and their work, the Public Trustee is to have a professional staff to do the work themselves of accountants, surveyors. valuers, land agents, house agents, financial advisers, and so on in connection with these 14,000 trusts, the business of the Department would become unmanageable from its bulk and comp exity. Some of these categories of professional people have definite meanings, others have not. It is quite clear that the Public Trustee must have accountants to keep the accounts of the 128 millions of money which is entrusted to him, and I should have thought it was obvious that he required some small sub-division of his office in which could be located some one who could act as the financial adviser or investment manager. Indeed, Mr. Garrett himself was a party to the unanimous Interim Report of July 8, 1919, in which he definitely recommended the continuation and development of the small investment branch which then existed, changing, it is true, the title of its head from Financial Adviser to Chief Investment Manager, but retaining all and more than all the functions hitherto committed to that branch of the Office. Dealing with this particular branch the Report to which he is a party says: "We think that it is of the first importance to provide a staff which will enable the business to be conducted efficiently." As far as all these other persons—surveyors, valuers, land agents and house agents—are concerned, I quite agree that if it were proposed that the Public Trustee should himself act in those capacities not only would the professional interests of gentlemen in the outside world be injured, but also probably there would be a loss of efficiency. No one has ever made such an absurd proposal, and no one makes it now. It is true that there has been in the Office a small staff of surveyors and valuers. Its duties, so far as these matters are concerned, comprise the general administration of real property including the supervision of the collection of rent, the collection of mortgage interest insurance and records. If by Mr. Garrett's 273 observations, and those of his friends, it is intended to convey that there is to be some new departure of policy whereby the Office will be developed shortly into a place where law, land surveying, and the business of letting and managing house property is to be provided for all those who come without recourse to outside assistance, I can only say that such an idea bears no relation whatever to the recommendations made by the majority. What the majority have recommended is that— trust estates should, while retaining the services of outside agencies, secure the further advantages afforded by a Public Department having at its disposal, within its own walls, independent experts capable of criticising, and possibly correcting or supplementing the advice received through the ordinary channels available to the private Trustee. It is the more curious that this misapprehension should have arisen because the Majority Report deals specifically with the three branches of the Office, which might be thought to provide unduly specialised services. The first of these is the Investments or Financial Section of which I have already spoken. Here the Committee, with Mr. Garrett's concurrence, recommended the employment of one Investment Manager, three Assistant Investment Managers, and a small clerical staff. I may say in passing that nothing has been pressed for more insistently during the last few years by the small Advisory Committee on Investments, than the establishment and development of this Branch. The Advisory Committee consists of four independent gentlemen, whose names are well known in the City, Mr. Frederick Huth Jackson, Mr. Robert Holland-Martin, Mr. Mullens, junr. (of the firm of Mullens & Marshall), and Sir Robert Kindersley—none of them gentlemen, as one would have thought, likely to favour the undue growth of the Departmental system. Can it be contended that a small staff like this can dispense, for executive purposes, with outside professional assistance in handling investments which approximate to £100,000,000 in value?

Next comes the Surveyors Branch. The Majority Report recommended the retention of this Section as "an Advisory Branch on all questions arising out of the management of real property held by the Public Trustee." The real and leasehold property in the hands of the Public Trustee is valued at about £11,000,000 and the mortgage investments at about £3,250,000. 274 The staff recommended consists of one Chief Surveyor with six Assistant Surveyors, and the necessary clerical help. How could a staff of this size deal executively with even a small fraction of this mass of property, or how is it possible for any one with a sense of proportion to base upon the existence of a staff of this size, the suggestion that the Public Trustee is to have a staff of Surveyors, Valuers, House Agents, and so on instead of employing outside agencies for the purpose? The third Specialist Branch is the Legal Advisor-ship, together with its sub-Branch dealing with the legality of investments, and this Branch is recommended for abolition both by the Majority Report and by Mr. Garrett.

There remain the two big Central Branches of the Office—namely, the Administration Branch which actually manages the Trusts, and the Accountants Branch where the Accounts of the Trusts are kept. Now here, when we come to detail, it is very difficult to see what changes in substance are suggested. Mr. Garrett does suggest a diversion of some of the work from the Accountants Branch to the Administration Branch and a more frequent recourse to outside accountants. It is very difficult to follow what economy would result from the transfer which he suggests. It is quite certain that it would not result in meeting the wishes of the professional critics of the Office. It merely shifts work from one portion of the Office to another. What really seems to be running in the minds of the critics of the Office is the idea that the Public Trustee should have no more competence or skill in the administration of his Trust than the ordinary man in the street. Considered as a maxim of general application, it may be that no higher degree of care and duty and skill is called for from him than from the first comer, but in practice it must be remembered, first that those who entrust their affairs to an institution established and conducted under the œgis of the State, look, and rightly look for a higher degree of these qualities, than when they commit them to the Trustee taken at haphazard, and often unwillingly from among their acquaintances and friends, and secondly, that when the Public Trustee selects those persons who are to be employed to look after the Trusts, he of necessity selects them from a class who have a slightly greater knowledge of the Law and of business than can be found in the average private Trustee. The question may be 275 presented ad absurdum. Clearly whoever is employed to act as clerk in charge or in some analogous position, will in course of time, through handling many Trusts, become more skilled in Trust matters and particularly in the simpler legal problems than the ordinary individual who is a private Trustee, and whose life is spent in selling candles or in speculating on the Stock Exchange. Is it argued that as soon as he becomes more skilful, he is to be dismissed and someone less skilful substituted in his place? Clearly such an argument could not be advanced. It seems only reasonable that the persons entrusted with the every day conduct of the Trust should be chosen from among those who have a certain degree of skill derived from education and experience in the handling of Trust matters. It follows of necessity that the simpler legal problems and the conduct of the simpler business operations which arise in the every day work of the office can be dealt with by these gentlemen without recourse to outside assistance, though I can understand that the feelings of the professional gentlemen who suppose, though without any warrant, that they will lose professional business, may be ruffled, and that their apprehensions may be aroused, however unnecessarily.

It would be impossible to carry on the business of the Public Trustee with satisfaction to the public and with due regard to the interests of the Consolidated Fund without the employment within the office of some persons who are specially skilled in the conduct of trust business. It stands to reason that the executive staff must be composed in the main of expert trust administrators. I should like the House to consider how much skill and how much discretion must necessarily be expected of these gentlemen. It was to find that skill and discretion combined with a complete disinterestedness and security that the office was established. Let me give instances of what actually happens in practice. Within the last few months twelve cases have come to my notice in which a solicitor has given to the office demonstrably wrong advice and has been corrected by the office; and within the last few weeks two cases at least have come to my knowledge in which a solicitor acting as solicitor to a trust under administration in the office has maintained a position in which his duty to other clients plainly conflicted with his duty to the trust and has compelled the Public Trustee to refer 276 to an independent firm. In all these cases I think that a private trustee would have acquiesced in the advice of the solicitor, and the trust, and possibly also the trustee himself, would have been damnified.

One further point is taken by way of criticism of the system of the office and of the recommendations of the Majority Report. It is said that simple estates are by the system of a flat rate of fee taxed for the benefit of more complicated and difficult estates. There is no doubt that any flat rate fee must involve the result that some trusts obtain more than the strict value of the amount paid entails them to, and some trusts obtain less. The real practical question is, however, in what degree this results in hardship, and whether any means can be found to modify it. On the former question some light may be obtained by comparing the different proposals of the Majority and Minority Reports. I have already spoken of the three specialist departments. As to the retention of the first for dealing with investments, the Majority and Minority are agreed, and it must therefore be taken that the charge for that Department can reasonably be spread over all the estates met by a flat rate. As to the Surveyors and Valuers, the total cost of that branch would not exceed £6,000 a year. It is an advisory branch and its cost reduced to a percentage is very little over 2 per cent. of the total cost of the office salary. It is purely advisory. The third technical branch, the Legal Advisorship is, as I have already said, proposed for abolition. On the other hand, the Majority Report recommends that certain specialist services should be paid for by special imposed management fees so advised as to cover approximately the cost in view of the special operations which attract them.

It remains for me to say a word with reference to the cost of small estates. No doubt the management of some estates by the Office involves the Office in loss on the cost of administration, and here it is possible that some special arrangements may have to be made to meet the difficulty. The Majority Report makes detailed proposals on the subject. Some of them are concerned merely with administration; some with serious and difficult problems of finance. All these matters will receive my most careful consideration after consultation with the Chancellor of the Exchequer, and at present I have not arrived at any conclusion upon them.

277 I have dealt in the main with the various criticisms which have been made against this Department. I am not unconscious that it may be said of me that at this period of the session I have taken an undue advantage of your Lordships in dealing at such extraordinary length with a subject which can interest only those who have had occasion to pay attention to it. Believe me when I say that I have a justification for so doing. In the history of this Office in the work it has already done, in its contingent importance in the years that lie in front of us, and in the very serious nature of the problem which faces us to-night as to whether it can be maintained on lines which are financially sound, I am sanguine enough to believe that we should be wrong not to draw from the history of the past the confident conclusion that not only is the Office of the Public Trustee desired by the population, but that it can render the greatest possible service to many people who find it difficult to surround themselves with legal advice, and whom, as the past as shown, would have been exposed to risk and hardship if they had not had this Department at their service. I will only acid this. If we can keep this Office going upon an economic basis, if we adhere to the terms of the Act of Parliament and insist that the Office shall pay its way, having spent a great deal of labour on this question since I attained to my present position I venture to predict, first, that this Office will grow more and more in weight and influence, and, secondly, that the increase in its fees which is necessary, and which I propose with the Chancellor of the Exchequer to authorise, will not sterilise or indeed very much alter its activities and its beneficial service to the public.