HL Deb 12 December 1950 vol 169 cc891-916

4.47 p.m.

LORD RENNELL rose to call attention to the Final Report of the Committee on the Form of Government Accounts (Cmd. 7969) presented by the Chancellor of the Exchequer in June, 1950; to inquire what steps have been taken to implement the recommendations of the Committee; and to move for Papers. The noble Lord said: I cannot flatter myself that the Motion before your Lordships' House is one of such thrilling interest that it is likely to provoke a long debate, but the subject matter, nevertheless, is one that is of considerable interest to a number of professional people and persons who try to follow the finances of the United Kingdom. The Motion arises out of a Report which appeared in June of this year, known colloquially, I believe, as the Crick Report, on the form of Government Accounts, which was preceded by two Interim Reports of the Committee in the course of its very long sessions which started in 1947.

The first point that I should like to make, because I think it is one that appeals to nearly all laymen—and I hasten to say that I am not an accountant myself and therefore am expressing the views only of a layman—is that in Recommendation No. 23, at page 58 of the Report, the Committee recommend that: An annual work of reference to the documents issued on Government finance should be published.

That, I think, is sufficient justification not only for the appointment of the Committee which sat, but also for raising the matter to-day. Those of the public who try to follow accounts, not only have experienced great difficulty in following Government accounts but, indeed, in following the places and documents in which the accounts are published. The Commission evidently recognise that the number of documents on the subject is so voluminous and they are scattered over the calendar year to such an extent that it is extremely difficult for anybody to get the whole collection at any time, or. having got the collection, to obtain a complete picture. That, to my mind, is the most important of all the recommendations made, and I hope it will be carried out in the near future.

I suppose one of the main reasons for the appointment of the Committee was on the rather controversial issue—controversial in professional circles—of whether a major amendment should be made in the form in which Government accounts were published. Roughly speaking, the Budget accounts in this country are cash accounts, and take no account of revenue and expenditure which may be expected, but only of the actual cash received within the financial year. The effect of that is to present an account which is totally unfamiliar to those who are normally concerned with accounting in the commercial and every-day world in which accounts are used. I think there is no example in commercial practice of a pure cash account with-out a profit and loss or revenue and expenditure account and without a balance sheet.

The Committee and the witnesses who gave evidence spent a great part of their time in examining the issue of whether the public accounts should be modified so substantially as to use the revenue and expenditure system instead of the cash system. The Committee came down definitely on the side of continuing the general accounting system in its present form. I will not trouble your Lordships with reference to this in the Report. But I should like to say, from what experience of Government accounting I have had, and I have had a little, that the arguments in favour of continuing the present system seem to me to be quite unanswerable. There is no analogy to be drawn between accounting for a commercial concern, which has to have a balance sheet, and accounting for a Government, which, as 1 think, by the nature of things cannot have a balance sheet. It is materially impossible to assess Government assets anywhere at any time. A great many suggestions made to the Committee for modifications of the system are totally inapplicable and show practically no comprehension of what Government accounts are.

A good story is told about the Committee—the noble Lord will not wish me to quote my authority for it. When the Committee were examining a witness who was a protagonist of the adoption by Governments of the commercial type of accounting, and who suggested that assets of the Government should be brought into account and proper depreciation applied to them, the witness was asked whether such an asset as the Tower of London would be included. He replied that it most certainly would include the Tower of London. When asked on what basis the Tower should be brought into the account, he said with very little hesitation that it would be put on the basis of contractor's replacement value. The picture of some eminent contractor being asked to quote for the Tower of London is one that leads to amusing thoughts not, perhaps, germane to this discussion. The Committee felt that with the modern developments in Government activity and administration there were certain directions in which commercial procedure and form could be adopted with advantage. These are, not-ably, in connection with the Departments which are traders or merchants in goods —for example, the Ministry of Food, the Board of Trade and the Ministry of Supply—where the mere cash results of their activities in a given year are no sort of guide, and are indeed misleading, if brought into the Budget without further explanation.

One can discuss Government accounts for a long time, and legitimate differences of view are possible. What I have to say should not be regarded as contentious or critical. There are great differences about how certain accounts ought to be established, and it does not by any manner of means follow that, because I have certain views, I am right or that other people are necessarily wrong. But, starting at the beginning, one has to be fairly clear about what Government accounts are meant to do. It seems to me that Government accounts have two different purposes. One is to establish an accurate record of what has happened, and the cash accounts we have do establish that, even if the results when published do not convey to the public what they convey to the people who are keeping the records. The second —and this, perhaps, so far as the general public is concerned, is the proper purpose of the accounts—is to enable the public to follow what is happening to our finances and to our economic and financial situation. These are two quite different aspects of Government accounts. The first, the complete record, is on the whole of little interest, except to bodies like the Public Accounts Committee and to people who wish to examine particular expenditures for particular reasons.

From my point of view and for the purposes of this Motion, the publication of accounts as a guide to the public in general is infinitely more important. If that is the real purpose of many of the Papers, notably the Financial Statement which usually coincides with the Budget debate in another place, they should be drawn in a form in which all relevant information can be found in one document, or at least in a very few documents, instead of in a large number. The corollary to that is to publish a document containing a statsment—a list of where all the information may be found. Those accounts which lend themselves to commercial treatment, or which are misleading if they continue to be published in the present form—I do not mean misleading because they are wrong, but misleading because a wrong interpretation may be placed upon them—should be modified in form. That applies not-ably to the trading accounts to which I have referred.

The third category of accounts, those which are intended to be informative, and for which there is often a statutory authority for publication, are often found not to be informative and require almost immediate attention. If I may, I will take one or two examples which no doubt will be known to the noble Lord. Lord Pakenham, as they are known to the many people who try to follow these things. The first, to which reference is made in the Committee's Report, is the Paper published annually on the Post Office Savings Bank. That Paper contains two statements, if a whole column can be regarded as one of them. Let me say, frankly, that in the form in which the Paper is published, it is entirely misleading. This statement is entitled, "Statement showing the aggregate amount of liabilities of the Government to depositors in Post Office Savings Banks on December 31"—in this case of the year 1949-"and the nature and nominal amount of securities held by the National Debt Commissioners to meet these liabilities."

On the left hand side there is one heading only, "Balance due to depositors on December 31," with a statement of the amount, which was £1,947,000,000. On the other side is the statement of the assets held. That statement of the assets held is made up of the nominal amounts of various Government securities held, without any relation to the price at which they were bought, the book price at which they are held in the books, or what the aggregate value of those assets is. Nevertheless, one or two of those holdings consist of stocks which to-day stand very considerably below par. The statement of the nominal amount held, without the statement of the value of that security, or indeed of the securities as a whole, means absolutely nothing. For instance, we have a large holding there of 2½ per cent. Consols. To-day, they stand somewhere in the neighbourhood of about 70. They might stand in the books at 50 or 55, at which figure they did stand for many years, or they might stand in the 90's, where they have stood in recent years. Frankly, I regard that statement of the position of the Post Office Savings Bank not only as valueless but almost as misleading.

Another example of the same sort is to be found in the Paper dealing with the nature and nominal amount of securities held by the National Debt Commissioners in respect of the National Insurance Fund and the National Insurance Existing Pensioners' Fund. The same procedure has been adopted here, except that the liability of the Funds is not stated in this particular Paper. The securities again are given by their nature and the nominal amount, without any regard to their value. Quite frankly, this Paper also means nothing. While on the subject of the National Insurance Fund holdings, I may remind your Lordships that there were published in May of this year the accounts showing the operation of the National Insurance Act and the position of the Fund. That is, in itself, a full, interesting and entirely satisfactory document, but it referred in May of this year to the position as at March, 1949. In other words, it came out some fourteen or fifteen months after the close of the account. I have not the account for the period 1949–50, and if the same delay is experienced, I presume that it will not be out until about May, 1951.

The Committee recommended (and this is a particular point to which I hope the noble Lord will be able to reply) that interim statements of the position of the National Insurance Fund should be made from time to time. It would be much more helpful, and certainly less misleading, if interim statements could be made, and if statements or nominal holdings were omitted in the future. The National Insurance Funds are, to my mind, particularly important, owing to the very large surpluses which have been accumulated in these days of full employment. The Economic White Paper of this year showed, I think, that approximately £190,000,000 had been accumulated as a surplus, and had been invested in Government securities. In other words, that amount of the debt of this country has been taken up by a Government or a quasi-Government fund.

That brings me to the second point on this particular issue, on which the noble Lord may be able to say something. In the innovation recently introduced by the Chancellor of the Exchequer, he has developed a statement in the financial figures by the inclusion of certain items in the so-called "below the line" account. That innovation is of great value, and is one for which everyone, not only in this country but also abroad, is grateful, I will come back to that in a moment. I should like to raise one point there about whether it would not fee desirable —and, if not, why not—for the receipts and surpluses of the National Insurance Fund to be included in the below-the-line statements. The contributions for national insurance are statutory contributions. Therefore, they are not in the same category as voluntary pension funds, or the pension fund contributions of, for instance, the great nationalised corporations. These contributions are required to be made by law, and as such they are a statutory demand on the private revenues of the people. I do not know why they should not come into the below-the-line account, especially having regard to the very large surplus, which seems to me to be a true below-the-line surplus, in view of the way those funds are used —namely, by the purchase of debt, and by its at any rate temporary sterilisation outside the market.

While I am on the issue of the below-the-line accounts, I should like to say how much everybody appreciates the changes which were introduced in the Financial Statement of this year, compared with that issued last year. A great many of these changes are, I believe, the outcome of the recommendations of the Crick Committee. Moreover, there is this extremely interesting attempt in the Financial Statement to provide for what they call alternative classifications in certain items of revenue and expenditure. They are placed in this year's Financial Statement on page 27. So far as I can see, a great many of the Committee's recommendations have been incorporated, both in the conventional form of accounts and in the alternative classification.

That brings me to what is perhaps the most important point I desire to raise— namely, the question of dates. The financial year in this country for a long time past ended annually on March 31. Nevertheless, certain accounts, notably the Post Office Savings Bank Account, to which I referred just now—if it is an account—are dated to December 31. It seems to me essential, first of all, that there should be a unity of date. There-fore, it is wrong, and in many respects in commercial practice would be considered grossly improper, to have Government accounts, or any accounts, terminating on different dates, without a reconciliation between them. The effect of that, naturally, is to make it almost impossible to follow what is happening. This difficulty of the financial year and the calendar year is one which comes out strongly in the Economic White Paper and the balance of payment Papers. In point of fact, it has been found necessary, apparently, to try to reconcile the Budget figures to the calendar year in order to get a balance of payment figure, which means, practically speaking, that in some way or another two sets of accounts are being kept, one for the financial year and one for the calendar year. That must be a gross inconvenience to everybody concerned, and must also involve a great deal of expense. I would hesitate to step in where I believe even angels would fear to tread, which is to wonder whether the ending of the financial year on March 31 is really right and ought to be perpetuated for ever and aye. As a matter of fact, I believe that historically it is rather an accident that we chose March 31 instead of December 31.

LORD PETHICK-LAWRENCE

I think it is April 5 for some purposes.

LORD RENNELL

I agree with the noble Lord, but it is only a matter of four or five days. I wonder if it is worth considering whether it would not be simpler to think again and relate all our accounts to December 31. The calendar year is suitable because trade and navigation figures, and so on, are published to December 31, and it is more readily understood abroad in the reconciliation of our economic movements with those which take place in other countries. It would, of course, have the effect of obviating the difficulty of preparing two sets of accounts or of trying to estimate from a financial year's returns what are the results for the calendar year. If that is not possible—and there are, of course, many financial difficulties involved in changing the year; it would mean, among other things, probably changing the tax period and things like that—the alternative seems to me to have a Budget account (in other words, the accounts which appear in the Financial Statement) published in two forms: the March 31 form, in which it is now, and the December 31 form. I know that that would involve a good deal of work, but it would be a matter of great convenience to people trying to follow what was happening and the movements of the National Debt. That is the third point upon which the noble Lord might express an opinion.

I come lastly to what I think is the most important reform advocated by the Committee, and I wish to inquire how far it is proposed to go along the lines recommended by the Committee in setting up trading funds for those Ministries which indulge in trade, such as the Ministry of Food. I am aware that there are trading accounts published, but that is not exactly what the Committee means in its recommendations. Moreover, the actual trading accounts are not easy to find; those accounts which bear on the trade activities of Ministries are buried in the Appropriation Accounts and are singularly uninformative. If I may direct the noble Lord's attention to an example, I have here the Civil Appropriation Accounts for 1948–49. I take the trading activities of the Board of Trade in respect of raw materials, as shown at page 304. It is a Class VI Vote. I shall be happy to pass the copy to the noble Lord in a moment, if he has not one with him. The outturn of the Board of Trade's trading activities is shown to be a net excess of £8,775,035. There are various assessments in respect of surrenders, and things like that, later on. Of course, there is no indication whatsoever in this table whether the stocks of raw material held by the Board of Trade and traded by the Board of Trade have either increased or decreased, and the outturn in the Budget eventually is only the cash result, without any account being taken (I am not talking about profit or loss on the stock) of whether the stocks are greater or less. In fact, we know that we might have a Budget surplus on current account in one year as a result of cash having come in from running down stocks. That would be a wholly fictitious result, and one which would be very misleading.

The same remarks apply to the Ministry of Food trading accounts which appear in Class X Votes in the Appropriation Accounts at page 24, though they are shown in a slightly different form. It seems to me that, in order to get over the difficulties occasioned by our cash accountancy—I repeat again that I have no objection in any way to the Budget— it is essential that we should have as soon as possible a revenue and expenditure and profit and loss account for the trading activities of the various Ministries. I am therefore inquiring now from the noble Lord whether those recommendations of the Crick Committee—and notably those contained in the Appendix B of their recommendations—are to be implemented, and when.

I do not wish to detain your Lordships on this extremely dull subject any longer, except to say two things. One is to ex-press a hope that the work done by this Committee—even if it did not receive as full and as helpful support as it might have expected from the commercial community, as is made very clear in certain paragraphs of the Report—will receive its due recognition. This Report on an extremely complicated and difficult subject is one of the most eminently read-able Reports of its kind that I have ever come across. It is beautifully and clearly expressed, with the exception of one or two regrettable words in it—notably on page 17, where I think the word "factual-ness" is rather a blot upon an otherwise very pleasant document. It should not only receive its recognition, but also have a proper outcome. In other words, the recommendations which we all recognise cannot possibly be brought into force at once should be brought into force gradually, and there should be somewhere—in the Treasury, I presume—an officer or officers charged to see that as and when these recommendations can be brought in they will progressively be brought in: and that in so far as they have been brought in—as for instance in the Financial Statement—suitable publicity or something of the sort should be given to these reforms, so that the public may know that something is being done along the lines of the Committee's recommendations.

I should like to say here, lest anything I may have said is interpreted as critical of the Government Accounts—and my criticism is only in what I have already said, plus the fact that the accounts are so voluminous and the Papers in which they are published are so numerous that it is very difficult to follow them—that our accounts as a whole have been, and rightly so, the envy of a great many countries abroad. I have had it said to me only quite recently by a distinguished and competent professional American friend of mine that he wished that the American Government accounts were as accessible to the public as are ours in this country.

I think it is in order at this point to say that one of the most remarkable of all the productions in the accounting world anywhere is the production annually, within a few days of the close of the financial year, of a financial statement of the cash outcome of the revenue and expenditure of this country, on the scale on which it is done and in the detail in which it is submitted. Without exception, it is a most extraordinary feat of organisation to which too little recognition has been given.

That does not mean that there are not improvements possible even in the Financial Statement, or that some unnecessary detail in it and in the Finance Accounts of the United Kingdom might not with advantage be omitted. The Finance Accounts of the United Kingdom are in themselves one of the most interesting and historic documents I believe one could wish to have in one's hands, but perhaps some of the detail there might be cut down. To have in one document items dealing with the total issues and redemptions, and to find, for instance, Treasury Bills, which in the course of the year run into many thousands of millions of pounds, finding a place with little items like salaries charged to the Consolidated Account—for example, £2 14s. 4d. to the Master and Fellows of Gonville and Caius College, Cambridge—shows a lack of proportion in the finance accounts. With that, I close by saying that I hope that the subject of reform will be kept constantly under review, and that the noble Lord, who has had proper notice of the few questions I have raised, will be able to reply to them. I beg to move for Papers.

5.22 p.m.

LORD PETHICK-LAWRENCE

My Lords, I should like to say to the noble Lord who has just spoken that at least one of his listeners certainly did not regard his speech, or the subject with which he was dealing, as dull. I thought he gave a most interesting account, and that he dealt with the points and properly ventilated them so that we could understand them. I should like to join in paying tribute to successive Chancellors of the Exchequer who have developed the Public Accounts. When I first entered political life, I always objected to the fact that the Chancellor of the Exchequer seemed to regard it as his duty to deal solely with that portion of the national finances which was actually expended by the Government, whereas I always considered, and frequently stated, that I regarded the Chancellor of the Exchequer as being a Finance Minister of the nation. I felt that he ought to bring within his purview not merely the actual money spent by the Government but the whole economic expenditure of the country, and ought to devote his views and assistance to both matters. When, therefore, the noble Lord, Lord Rennell, describes the below-the-line account as one of the valuable additions to the Financial Statement I would add that 1 welcome still more the wide survey of the whole economic position and financial position of the nation which was introduced originally in the days of Sir Kingsley Wood and which—as I am sure we in this House, or those who take an interest in the subject, all know—was largely the work of Lord Keynes, who was for so long an ornament of this House.

Having said that, I want to say one or two things with regard to the actual subject matter which the noble Lord, Lord Rennell, has raised. In the first place, he raised the. question that comes up from 'time to time as to whether the main account which is presented to us in the Budget should take its historic form, or whether it should be altered into a profit and loss account. I entirely agree with him and with the Committee's Report in regarding it as quite impossible to change over the form of our main accounts from the cash receipts and payments to anything in the nature of a profit and loss account. The noble Lord, Lord Renneli, said that he did not believe there was any other body in the country which kept its accounts precisely in our way. That may be true, but I think that a large number of charities and political bodies and movements which exist for certain objects (not necessarily for many years) are in much the same position as the State as to their accounts. Nearly all of them present a balance sheet, but it is there rather to fulfil a certain purpose of indicating stability; and as a matter of fact it is the receipts and payments account which is their proper account. It was certainly so in the case of one large organisation with which I had to deal. To have an account purely along the lines of a profit and loss account for bodies like those would be quite a farce.

There are two other matters upon which I want to touch. Of course, I fully agree with the noble Lord, Lord Rennell. and with the practice of the Government, that a profit and loss account should be put out wherever possible with regard to all those things which are strictly trading accounts. But I want to remind the noble Lord, Lord Rennell, that even if a profit and loss account is set out, it cannot be in precisely the same form as that of an ordinary enterprise, because it necessarily follows in a great many cases, and particularly in the Post Office, that a large part of the items are not factual but notional. I do not think that fact can be escaped. A great many of the services which the Post Office render are not paid for, but they must be taken account of, and they can be taken account of only in a notional way. Therefore, even in those trading concerns, principally the Post Office, in which the Government take a hand, their accounts cannot be in the precise form of the ordinary profit and loss account.

Another matter which affects nearly all the Government trading services is that there are no shareholders. In a very few cases there may be a sort of capital account and a sort of notional payment of interest; but in the great majority of cases what happens is that the State pays out large capital sums, and for those years this enterprise appears in the Budget as a loss. Later on it does not have to pay interest on account of those sums which have been paid out, and in that respect again it differs essentially from the ordinary private enterprise in which the amount of money paid out takes the form of debentures or shares on which interest is paid, either in the form of fixed interest or in the form of profits, and the whole profit of the enterprise is subjected to these various payments to share and debenture holders. You do not get that kind of position in the case of a national enterprise and you cannot get it. For these reasons, not only are our cash receipts and payments different from those of commercial concerns, but even when we do come to trading concerns our profit and loss account is necessarily different from theirs.

The third point on which I wish to say a few words is one that is really partly a matter of policy but it is also a matter of accounting and, therefore, I think it belongs here. The noble Lord, Lord Pakenham, of course appreciates that there are payments by the Government which take two distinct forms. There are those payments which are estimated for the year and which, if not expended during the year, become what is called a saving; and the actual payment which appears in the Budget figures is the amount actually expended by the Department, whatever it may be. On the other hand, there are items paid by the Treasury which often take the form of a grant in aid, and when the amount budgeted for is not expended by the institution during the period, they are not bound to surrender the balance but are able to keep it and spend it in a future year. That is often an accounting point which is very confusing to the lay-man. I remember very well that in the House of Commons some project would be embarked upon by the Government, and an estimate, say of £300,000, was put down. When the year came to an end it would be found that they had progressed very slowly with the work, and instead of spending the £300,000 they had spent, say, only £3,000. This was heralded by some people as a saving of £297,000. Of course, it was nothing of the kind. It merely meant that the Government had been very slack in getting to work, and as a result we had to go through the whole process in the next year, of re-voting the money that had not been spent in the previous year. To a large number of people that was a very confusing process, and I wonder whether in his reply Lord Pakenham would care to say something about that point. But that is not really the main point that I wanted to reach.

When we come to money supplied by the Government to an outside body, I am inclined to think that the necessity of surrendering the whole of the unexpended balance at the end of the year may be a very bad thing, and that it may be much better to allow this body (as I believe is being done more and more) to take the money in the form of a grant in aid which is not liable to surrender. I am thinking in particular of moneys which are given to municipal authorities, perhaps to spend on health or other things. The fact that they have to surrender what they do not spend tends to make them spend all the money that they can while they have it— in other words, while the going is good— and that leads to extravagance; whereas if they know that by not spending too much in one year they will have the remainder to spend in future years, I think they may be more careful in order to save up for a rainy day and have the money to spend then. That is perhaps more a question of policy than of strict accounting, but accounting does come into it. My noble friend may not want to say anything about it to-day, but perhaps he will turn it over in his mind. I believe that it has been an increasing practice of the Government to allow bodies to which money has been given, not to surrender it but to keep it for the future; and I venture to suggest, as a matter both of policy and of accounting, that it would be an advantage if, subject to strict scrutiny and superintendence, bodies to whom money was allocated were allowed to keep it for a longer period than the single year.

5.34 p.m.

THE MINISTER OF CIVIL AVIA-TION (LORD PAKENHAM)

My Lords, I am sure that I ought to congratulate noble Lords who have had the wisdom and hardihood to endure the rigours of this subject, and, in particular, the noble Lord, Lord Henderson, who has allowed himself to be seduced from the international scene on purpose to listen to this topic, of all topics. I feel that all have been rewarded by a delightful exposition by the noble Lord, Lord Rennell, and by some very experienced reflections from the noble Lord, Lord Pethick-Lawrence. As Lord Pethick-Lawrence pointed out, he has not been able to give me notice of his suggestions; therefore he will forgive me if I simply tell him that, of course, they will be carefully examined. The noble Lord, Lord Rennell, has given me notice of most of his points and I shall be able to say a good deal on some of them, but for a number of reasons he will not expect me to be completely definite to-day. The noble Lord, Lord Rennell, is earning a well established reputation as one who can take some horrible subject and present it in a most attractive form. He can seize the ugly duckling and add a permanent wave to its hair, manicure its nails, give it some new teeth, and the latest model dress, and generally woo your Lordships with his debutante daughter—and that is what he has done again to-day, because I think, apart from his particularly charming exposition, few members of the House would agree that this was a subject capable of public discussion.

I should like to reiterate the gratitude of the Government to the Chairman and members of the Crick Committee. As has been stated already by the noble Lord, thanks have been officially extended by my right honourable friend the Chancellor of the Exchequer, or the former Chancellor of the Exchequer; but I certainly take this opportunity of assuring that Committee that the Government appreciate what they have done. I hope these words will be as widely reported as the noble Lord would wish. The Committee was set up in November, 1947, and its Report was finally signed on February 24, 1950. The members of that Committee, who included, apart from Mr. Crick himself, two highly distinguished professional accountants, have-spared no pains in examining this subject in all its detail, and they have undoubtedly produced a most informative and valuable Report which, I have no doubt, will be a landmark in the history of the subject. With the general tenor of the Committee's Report and, indeed, with many of its detailed recommendations, the Government find themselves entirely in agreement. As I have indicated, this was not a Committee composed entirely of civil servants; indeed, it included strong independent representation. This fact lends particular weight to the Committee's main conclusion, already alluded to by the noble Lord, Lord Rennell, which is a unanimous verdict in favour of maintaining the traditional cash basis of Government accounts.

I suppose that there are noble Lords present with us to-day and people who will read my words who may require some refreshing of their specialised knowledge on that particular aspect of things. Therefore, may I illustrate briefly what is involved in that conclusion, though, of course, it is perfectly familiar to the noble Lord, Lord Rennell, and perhaps to most of your Lordships? The existing system of Government accounts is simply a record of money which is actually received or paid out over a given period. I understand that in the business world generally, before the setting up of the Crick Committee there was a good deal of comment to the effect that such a system of Government accounting is obsolete, and that Government accounts should be drawn up in the same sort of way as are commercial accounts; that is to say, on a profit and loss or income and expenditure basis. I will not go over the ground too fully, because those noble Lords who are with us to-night understand these things already, but I would wholeheartedly endorse what was said by the noble Lord, Lord Rennell, about the absurdity of the proposals of those particular business men, whom I will not for a moment describe as representative of the business community.

The point of the critics' case is that Government Accounts should be drawn up on a basis which would give a picture of the operations of government as though the Government were a gigantic commercial concern. The Committee have gone very thoroughly indeed into this question, and they have little difficulty in showing that the analogy is, in many respects, entirely misleading, as the noble Lord, Lord Rennell, has said and as the noble Lord, Lord Pethick-Lawrence, I know, concurs. I will mention just a few of the main reasons why they reach this conclusion. First of all, while the main concern of private business, and the ultimate test of its efficiency, is the earning of a profit which can be distributed to the proprietors, this picture is wholly irrelevant to large sections of the operations of Government—for example, in education, defence or social services. There, quite a different test must be applied to see whether these services are being provided efficiently, and whether we are getting value for money.

For this purpose Parliament has set up its own elaborate machinery of investigation, in the examination conducted by the Comptroller and Auditor-General and, subsequently, by the Public Accounts Committee. It follows, I submit, that the whole notion of an income and expenditure account over a large section of Government activities is, as the noble Lord has said, quite meaningless intrinsically. Even if it were possible in theory, however, the practical difficulties in the way of producing accounts of this kind are insuperable. It would be necessary to distinguish fixed capital assets from other assets, and to draw up a balance sheet in which capital assets were given a specific value. The example of the Tower of London taken by the noble Lord was a very brilliant one. Of course one could think of a number of others only slightly less pointed. How can one value a road, a battleship or a museum? Even if you could approach the task at all, on what basis would you provide for depreciation of those assets? Quite apart from this, there is a vast quantity of miscellaneous stores for which, provided that quantity records are kept, no useful purpose would be served by attempting to value them in addition. It would mean a tremendous volume of extra work, and it is quite clear that the Crick Committee felt—and I do not think this can be doubted—that a change to this allegedly more businesslike income and expenditure basis of accounts, far from effecting some reduction in the accounting staff, would bring about the very opposite result. The staff involved would be increased.

The Government regard as perhaps the more important conclusion of the Report —because eminent figures from the financial world were associated with it— the fact that it seeks to make no fundamental alteration in the structure of Government accounts, That is preeminently a conservative conclusion, and I have no doubt that the long-established Conservatives such as I see opposite, and even fairly recent converts, such as the noble Lord, Lord Rennell, will find themselves heartily in agreement. Of course, in a number of fields the Government's operations are more closely analogous to those of commercial trading concerns—for example, the trading activities of the Board of Trade, the Ministry of Supply and the Ministry of Food. The noble Lord did not give me notice of all the illustrations which he was anxious to take, so I hope that he will forgive me for not following them all up. As he points out, in all these cases the trading Departments already, as the Committee recommend, publish trading accounts which, although the earning of a profit is not the main object of these activities, are drawn up broadly on the lines of ordinary commercial profit and loss accounts.

LORD RENNELL

My Lords, I think that there is a slight misunderstanding. I am aware that trading accounts are published. The point I was seeking to make is the effect on the cash position in the Budget of running down stores by sales, or of purchasing stores. The particular aspect of the trading accounts to which I called attention were recommendations of the Crick Committee for setting up what they called trading funds which would eliminate that defect.

LORD PAKENHAM

By a curious chance I am coming to that. Perhaps the noble Lord will allow me to proceed, because he was good enough to give me notice of that particular point. Such trading accounts are published in the Annual Volume of Trading Accounts and Balance Sheets, and are subject to examination by the Public Accounts Committee, in the same way as are the cash appropriation accounts of Departments.

Having said so much, let me come to at least three of the broad points which the noble Lord was good enough to give me notice that he intended to mention. He has mentioned trading funds. The Committee have made one very important constructive suggestion in the proposal that, both for the Ministry of Food and for any other Department where large and permanent trading operations are under-taken, trading funds should be established by legislation. The Government regard this idea of segregating below-the-line working capital necessary for Government trading operations, leaving only the subsidy element to be provided out of Votes —which is what would be the practical result—as a proposal which certainly can-not be disposed of lightly, either in the affirmative or in the negative sense. The Government wish to examine, among other things, the extent to which it might conceivably weaken Parliamentary control over expenditure by the Ministry. That is one of the points among others which has to be examined. This examination is now taking place.

But it must be borne in mind that no final decisions have been taken about the permanence or otherwise of the trading operations of the Board of Trade, the Ministry of Supply, and indeed of the various Departments concerned, and that the relevance of the Committee's suggestion in the case of these Departments may be affected to some extent by this fact. The Government's decision has not yet been finally taken. But I can assure your Lordships that this question is regarded as one of high importance, and it is being actively considered with a good deal of sympathy with the main purpose which prompted the Committee's ingenious suggestion. I must not prejudice this issue one way or another. I do not wish to put either myself or the Government in a position which could result in our being reproached in the future for having encouraged hopes which were afterwards not fulfilled. One knows—and I am sure the noble Lord, Lord Rennell, does also —that in promising to examine a proposal one may give the impression that, on balance, perhaps it would have been better if the proposal had not been made; or, again, one may give the impression that the proposal contains important and constructive suggestions which, if only the difficulties could be overcome, one would be glad to carry through.

I come now to the matter of Post Office Savings Bank securities The noble Lord referred to the Committee's recommendations on the valuation of Post Office Savings Bank securities. There were thirty-two conclusions altogether, and I appeal to the noble Lord not to expect me to deal with them all. But conclusion 27 of the Crick Committee's Report says that: The Annual Statements of liabilities to depositors in the Post Office Savings Bank should show the cost price and current market value of the securities held by the National Debt Commissioners against these liabilities. This is, I think, almost the only definite statement of a negative character which I intend to make this afternoon, but we cannot accept this recommendation so far as cost price figures are concerned. There is no simple or direct way of establishing such figures, and to produce them the National Debt Office would have to dig into the past, in some cases for fifty years or more. I beg the noble Lord, when he replies, to exempt us from that particular task at this of all moments. The administrative effort would be very considerable, and the result would not justify it.

The question of publication of market values is more difficult I think that the noble Lord is perhaps more interested in this part of the recommendations than the one which I have mentioned. The published account of the Post Office Savings Bank shows a precise figure for current liabilities, but in respect of assets only a list of securities held at their nominal values. As the noble Lord has told us—a little contemptuously, perhaps—it would be possible to calculate the current value of the assets from this list. Indeed, the noble Lord, with his great banking experience and the facilities which are available to him, has probably had this performed. We are certainly not standing in his way in this matter. It may be argued, as indeed it has been this afternoon, that it would be tidy accounting to show at least the total current market value in this statement. I am advised, and personally I see the force of it very much, that to publish these figures might encourage misunderstanding and wrongly based criticism whenever the total current market value of the securities happened to be less than the capital liability. It is not the business of the National Debt Commissioners to invest for capital profit, and they are not to be blamed when they fail to secure it or praised when they succeed. They are not a sort of investment trust to be judged by that criterion. The investments are not the security for the deposits, in the sense that the fund might be, or even could be, liquidated in the same way as a commercial concern. I would refer the House, on this point, to the 1902 Report of the Select Committee on Savings Bank Funds. It is a most intricate issue. I am not prejudicing the matter one way or the other this afternoon. We feel that the arguments (to which I could readily refer the House) of the 1902 Select Committee, on which the practice of the last fifty years has been based, cannot be lightly set aside, but we shall go on looking into the whole thing carefully.

The only other big point of the noble Lord with which I would ask the House to allow me to deal is the question of insurance funds. Most of us, as we proceed in this House, obtain some "King Charles' head." This is one that we are beginning to associate with the noble Lord, Lord Rennell, though that does not prove that it is not a very good piece of mental mechanism. The noble Lord is beginning to make this question of the National Insurance Fund his own, and I do not find any rivals for the possession of it. The point raised by the noble Lord is the suggestion that the National Insurance Fund should be dealt with "below the line" in the Government Accounts. In this case I ought to point out that the Crick Committee, which was for the moment the noble Lord's oracle, made no suggestion that the surplus on the National Insurance Fund should be dealt with "below the line" and brought into the Exchequer, which I understand is the noble Lord's suggestion. The noble Lord has imported his translation into the thinking of the Crick Committee.

LORD RENNELL

No, I made the suggestion and claim the sole credit, or discredit, for it. I do not want to import it into anybody's Report.

LORD PAKENHAM

If the noble Lord goes on much longer, I shall begin to harbour the dark suspicion that his point about the Crick Committee is simply an opportunity to bring up this "King Charles' head."

LORD RENNELL

No.

LORD PAKENHAM

I withdraw that remark unreservedly: I was only joking when I made it. Let me make it plain that this proposal is not recommended by the Crick Committee. It is something which is on a different footing.

The Insurance Funds, as we have argued before, are set up by Statute as separate Funds, outside normal Government receipts and payments. The National Insurance schemes are contributory, and it has been the practice since the beginning to pay the contributions into separate Funds, where they are accumulated against future liabilities. If the balances of the Funds were brought into the Finance Accounts each year, this accumulation would be lost, and the main object of setting up the statutory Funds would be vitiated. I beg the noble Lord to forgive me if I have said anything to pain him, because this is an important issue, and I do not want to hurt his feelings. I beg him to consider whether it would not be entirely improper to appropriate these surpluses, which are the property of the Fund and which may be required against future liabilities, for any purpose whatever, governmental or otherwise. I beg him to ask himself that question: whether it would be right for the Government to take these Funds, as it were, for its own purposes, or even to present them as though they could be used for its own purposes. At the very least, if the Government were going to use them for its own purposes would it not be giving a false impression and suggesting that the position of the Government in those respects was stronger than it was? I beg the noble Lord to ask himself those questions, because we are quite clear that it would be wrong and against all proper principles to indulge in this practice; and certainly the Crick Committee have not recommended it in any way.

I recognise the feeling on the part of the House, since I have made no very positive statement about the recommendations of the Report, which has been published for six months, that the Government are perhaps not doing very much about it. But that is a totally misleading view. I would remind your Lordships that the former Chancellor of the Exchequer, in welcoming the Report on June 20, was careful to point out that it dealt with a wide variety of subjects, many of them of a highly technical and complex character. He made it plain at that time, and I think we all appreciated it, that it would be some time before the thorough and prolonged examination which the recommendations deserved could be completed and final decisions taken. I therefore hope that the House will not feel that there has been any undue delay, and I am bound to add that there does not seem to have been any, so far as I can judge. A lot of work has been done and a great deal of progress made.

Here I strike a rather delicate point and I think the House will agree with me when I say that it would be scarcely appropriate that I should announce in this House alone decisions on the detailed recommendations of the Report. I think most of us would feel that if they were 1:0 be announced here, they should be announced also in another place. I am sure that would be the view taken in another place. I can state in general terms that a considerable number of the recommendations have been accepted, and either have been, or will be, implemented as soon as possible. Examination of the Report has now proceeded so far that I hope it will be possible to announce detailed decisions on a large number of recommendations as soon as Parliament reassembles after the Recess. If a Question could be put down in another place at the same time, one would be able to give some definite information at that time.

I ought to end on a word of caution, but as I have been so cautious throughout I will not elaborate it. We all appreciate that in a general sense the more we can know about the financial activities of the Government and the financial position of the Government the better we are enabled to help with constructive suggestions. On the other hand, there is some limit to the amount of information we can ask for without overloading the official machine. I therefore hope then that, when the final results are known, the House will bear in mind that single point as a possible reason why all the recommendations which appear to be reasonable may not have been accepted. One has always to remember the amount of work some of the Departments already have to carry out. When the announcement is made—and we can say a great deal immediately after Christmas—there will undoubtedly be many recommendations which will have been accepted, either as a whole or with some modification. There will be very few which, for reasons of practicability or for policy reasons, the Government will feel themselves definitely unable to accept. I hope that that gives the general approach of the Government, after a considerable number of months' hard work on the subject. I think we should all be genuinely grateful to the noble Lord, Lord Rennell, for having taken such trouble. I should like to repeat my withdrawal of my lighthearted suggestion that he had any other object in bringing forward this Motion than to enable all of us, whether in Parliament or outside, to appreciate how our country is faring in the financial sphere.

6.0 p.m.

LORD RENNELL

My Lords, I am much obliged to the noble Lord for his reply, especially for the latter part. The statement he made that we may expect an announcement about the recommendations of the Crick Report is really what I hoped would be the outcome of this Motion. With your Lordships' permission, there are two points on which I must touch. Some of the noble Lord's remarks about the Post Office Savings Bank, which was the only complete negative I received, were such that, if they had been made by a mere banker, they would certainly have led to a prosecution, or at least to an inquiry by the Board of Trade. Leaving that on one side, the noble Lord said that the securities held against liabilities by the National Debt Commissioners are in a sense irrelevant, to use a rather exaggerated word, because of the liability of the Government to depositors. But in point of fact, the statement is headed "Nature and Nominal Amount of Securities Held by the National Debt Commissioners to meet these liabilities." In other words, these securities are held to meet those liabilities and they ought to balance. If they do not, there ought to be an I.O.U. put in by the Government to make them balance.

LORD PAKENHAM

With great respect, I would ask the noble Lord to read to-morrow in Hansard what I have said, and he will see that I covered that point in a way which is certainly constitution-ally correct.

LORD RENNELL

I am sure it is con-stitutionally correct, but the statement here is incorrect.

LORD PAKENHAM

I doubt it.

LORD RENNELL

The securities are held to meet certain liabilities, and if they do not, those liabilities cannot be met. The other point is about the National Insurance Fund. It is true that I have raised this matter on previous occasions, and I will not undertake not to raise it again. As to the suggestion of the impropriety (I think that was almost the word used) of taking into the Budget the surplus of the National Insurance Fund, I would point out that the whole surplus accumulated is, if not appropriated, borrowed by the Government from the Fund and used to purchase Government securities, some of them out of the market and others not out of the market. The first item on the statement of the Fund is, "Ways and Means Advances," which are direct loans. Those funds find their way into the Budget in Ways and Means advances and in Treasury Bills, and I there-fore claim that the rest may well do so in a "below the line" account.

LORD PAKENHAM

The answer is fairly obvious.

LORD RENNELL

I think so, too; I think it is very obvious—but perhaps from a different point of view. However, I do not want to pursue it because it is a very technical point. There is no question in my mind of appropriation. If there was a deficiency in the Fund, the liability would remain on the Government and the deficiency would have to figure as a Vote in the Budget. There-fore, I can see no reason why the Fund cannot be placed in a "below the line" account. We must continue to differ about that matter. I raised this question of accounts, not in any sense because I was interested in the National Insurance Fund but because I am interested, so far as any layman can be interested, in trying to disentangle some of the obscure parts of Government accounts. I am very much gratified at the announcement of the noble Lord, which is entirely satisfactory. In those circumstances, I beg leave to withdraw my Motion.

Motion for Papers, by leave, with-drawn.