[Continued.

13 March, 1923.]

344. I think it is fair to say that you might even pay more for the guarantee, but it might prevent loss; it would act as a deterrent of loss? (Sir Henry Bunbury): I doubt if any tradesman would get a Sub-Postmaster's appointment who could not easily get a guarantee.

345. But do you not think you are far better off having a guarantee?—I do not think it would make any difference from that point of view.

346. Surely; we do not hold that opinion in business, I confess.

Colonel Sir William Allen.

347. Just with reference to one item near the bottom of page 20, 66 Deficiency In Accounts due to defalcations of late Sub-Post-Mistress, Nile Street, T.S.O., South Shields, £487," that seems a rather large amount for a sub-office. Would a more frequent audit prevent that sort of thing? These accounts are checked fairly frequently. During the last four or five years the amount of money handled even at quite small suboffices has been very large. If you get a large number of War Pensioners and Old Age Pensioners and people of that sort and perhaps heavy Savings Bank withdrawals going on at the same time, they handle a surprisingly large amount of cash. This is certainly an exceptionally high amount.

348. You do not know the particulars of it at the moment?-No, I am afraid I do not. I do not think anything would be gained by making the audit more frequent.

One has to consider the expense.

Mr. Briggs.

349. If I might just revert to that Derby loss of £505, was that in delivery to Derby or in distribution from Derby? -That would be delivery to Derby, I think. (Sir Malcolm Ramsay): It was from St. Dunstan's to the Head Postmaster at Derby.

350. Then the argument would hardly obtain that there was not a bank in Derby and it might have been paid by other means than cash? (Sir Henry Bunbury): No. There is another reason why the Post Office does not use banks in its transactions with Sub-Postmasters. Assuming that the Sub-Postmaster had a banking account, which is frequently not the case, he would have to take his money

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by hand or send it by one of his assistants to the local bank. What he does at present is to put up the money in what is called а remittance letter which is registered and sent through the post, so that the money only leaves the premises in a registered mail bag and the Post Office opinion is that on the whole that is safer than sending money through the streets.

Chairman.

22,

go

351. We have dealt with the principal material items and we will BOW forward to page 66 Engineering Establishment." Will you explain the item £28,000, "Additional Wages Payments Falling Within the Year in Consequence of the Decision to pay up to Date instead of three Days in Arrear "?— It was decided in this Financial Year in agreement with the Unions concerned to adopt a Friday pay-day instead of a Saturday and to pay up to the Friday. Before that date wages had been paid on Saturday up to, I think, the previous Tuesday.

352. With respect to (c) immediately following, "Payments to Men Mobilised owing to Coal Strike, £8,000," would they be reservists called up?-Yes.

355. All British firms? The Western Electric is a firm under American control but manufacturing in this country. The amount of Post Office material which is purchased from abroad is very small; purchases from abroad are avoided wherever possible.

356. What do you purchase from abroad? I think it is chiefly certain American specialities for telephone purposes. I know it is a very small thing, although I cannot put a figure on it.

357. Do you know where you buy your copper?-No, I am afraid I do not.

ex

Chairman.] On Subhead K, page 22, with respect to the note in planation as to the cause of variation there, owing to the depression in trade and the introduction of the new telephone tariff

B 2

13 March, 1923.]

[Continued.

Colonel Stephenson.] Before you go to Subhead K, may we have an explanation from the witness as to why the change in the payment of wages was made and to the State what advantage accrued from the change? I understood the witness to say that it was made by arrangement with the Trade Unions, but he did not say what advantage the State got out of the change.

Chairman.

358. I thought the Committee were satisfied on that point.-There were advantages to the State also, especially in the case of the engineering workmen. It enabled us to get our accounts out more satisfactorily.

Colonel Stephenson.

359. But you hold no money in hand now ?--No.

you

think that is 360. And advantage?—I do not think it is either an advantage or a disadvantage.

361. Could you tell us why it was the custom to hold money in hand before?Yes. The reason was this, that the Post Office servants both on the postal side and on the engineering side get money in the form of such things as travelling allowances, extra duty pay, Sunday pay, and other odds and ends of that sort, and it is not and was not practicable to pay them in full up to the date on which the money was accrued due if you included these various items of extra pay. What is done now is to pay the ordinary weekly wage up to date and pay the extra pay in the following week, and that is an advantage to the Post Office as well as to the men.

364. Is it substantial?-No.

365. Will you explain this last sentence but one, "The excess would have been £250,000 greater but for the transfer of that amount to Telephone Capital The Account, Suspense Head "?—Yes. stock of engineering stores which is kept by the Post Office

on

as

366. What page are you on?-The stock is shown about 4 page 37 million pounds. That is a common stock used for all engineering purposes whether they are capital purposes or whether they are Vote purposes, but the stock is financed partially out of telephone capital because the stores are held for telephone capital purposes and will ultimately be charged to telephone purposes. Owing to the rapid development of the telephone service since the Armistice it was thought right that a larger proportion of that stock should be held by telephone capital, and accordingly a quarter of a million pounds worth of stores, as it were, were transferred to telephone capital during this year. Another quarter of a million pounds was similarly transferred in the succeeding year.

Colonel Assheton Pownall.

for

in

367. On that, this extra expenditure of £487,000 will presumably make it necessary you to buy less the following year, will it not?-That is so; in this current year there is a corresponding under-spending.

368. I am afraid I have not yet mastered these accounts. Where do we see this extra £400,000 odd being carried forward as a larger stock than you had the year before?-That is in the Commercial Accounts, House of Commons Paper 14, page 6. You see against the year 1922 a quarter of a million pounds is the increase in the value of stores held for construction purposes.

360. A quarter of a million pounds, but this sum is nearly half a million, engineering materials extra ?-I beg your pardon; that is the over-spending. That item does not appear anywhere else.

370. The £487,000 does not appear?No, the £480,000 is the excess of the actual purchases less issues over the estimated purchases less issues.

371. That would surely have increased by a very large sum your stock in hand The at the end of the year?-That is so. stock in hand at the end of the year

and at the beginning of the year is shown on page 37.

372. It is rather hard to make out?Yes, you see we started the year with a stock of £3,700,000 on page 37, and ended it with a stock of £4,600,000; that is an increase of £900,000.

373. Part of which is in this figure here? (Sir Malcolm Ramsay): That particular figure is a comparison with what is spent by reference to the estimate, which is a purely hypothetical figure; it is not a comparison of the increase on the value of stock at the two dates. (Mr. Watson): The whole expenditure of £2,000,000 is included in the statement on page 37, the Appendix to this Account.

Mr. Wise.

374. Where do you keep your stocks— all over the country?—(Sir Henry Bunbury): There are main depots in London and Birmingham, and then engineering section stocks all over the country.

375. What part of London?-Chiefly at Studd Street, in Islington. Then there are special stocks at other places, for instance, the submarine cable is kept at Woolwich and Dover.

376. And the buildings and so on belong To you? Yes.

Colonel Sir William Allen.

377. With regard to these stocks, I presume in a case of this kind stocks are getting out of date, and is there any place in the Accounts where there is a cancellation of stocks of that character which cannot be used owing to the up-to-dateness of telephone systems? -The writing off of obsolete stores is shown on page

37, I think

no, it 18 not shown in detail there. (Sir Malcolm Ramsay): On page 36 of the Appropriation Account. (Sir Henry Bunbury): You will find it in the Expense Accounts; on page 36 in the sixth line "Worn out and obsolete plant and stores-book value written off stores ledger."

378. Could you give us an idea, Sir Henry (I presume most of those stores are got by contract) of the procedure with regard to contracts-advertisements or otherwise, I mean with a view to anyone who desired to enter into a contract with the Post Office, getting an opportunity? -The principle followed by the Post Office is to give an opportunity to all contractors to tender who are likely to be

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[Continued.

able to supply what is required. In most cases, that is stores which anybody can supply, tenders are invited by advertisement. In cases where there is something special, such as to limit the number of firms who can supply, tenders are invited from a selected list, but the Post Office aims at free competition wherever possible.

379. I presume the selected list would really refer to special patents more than anything else by these particular people? -Chiefly, but for a good deal of electrical material you are restricted to quite a handful of firms, and in those cases nothing would be gained by advertisement, and the simpler course is to send tender forms to all the firms who are known to be supplying this particular apparatus.

380. Is there any special way of a particular firm getting on to that selected list? They have to apply to be put on the list, and if they prima facie satisfy the Controller of Stores that they are able to supply the article, they would probably be given, subject to price, a trial order. That is the usual procedure.

Mr. Ellis.

381. Is it not in that respect very much the same as when electricity companies are buying, that they know that only certain companies can supply certain stuff? That is so, where the circumstances apply.

382. It is known that certain firms only are capable of making the stuff properly, and that is what you mean by a selected list? That is so.

Chairman.

383. With regard to this statement shewing losses of Engineering Stores beginning on page 23, have you anything to say on that Section ?-No.

Mr. Ellis.

384. On page 23, I suppose the Railway Companies were not liable for those losses? No, we send stores at owners' risk.

Chairman.

385. Passing now to sub-head L on page 24, and regarding the note of explanation to L1, Sir Henry, will you please say in what way it came abou that the increased rates of payments were made? These agreements with the Railway Companies for the maintenance

B3

13 March, 1923.]

[Continued.

of Post Office wires had not been revised until after the War, and until this revision we were paying at pre-war rates.

Mr. Briggs.

386. I presume those will be subject to revision like all other Railway rates at the present time; they are not established for any lengthy period?-Not for any lengthy period, but my recollection is that there was an agreement for two or three years or something of that sort. (Sir Malcolm Ramsay): It was three years.

387. Presumably then there must be some advantage in that agreement which would be equivalent to a possibility of reduction? (Sir Henry Bunbury): We regarded the agreement as on the whole a favourable one.

Colonel Stephenson.

388. Could you tell us how much it is in excess? Is it fifty per cent. more than it was before or anything like that? That is what the railways are charging in a general way? This is maintenance of lines; it is all day to day expendituredisbursements.

389. Cost of labour?-Cost of labour; that is what it really is.

Mr. Wise.

390. As to L2 and L6, Wayleaves and Royalties, how do you settle them? Is there some definite scale? As regards Wayleaves, there is no scale, but the Postmaster-General has certain statutory powers, and owners of land or property over whose land or property he wishes to run his wires have certain rights of appeal to the County Courts and to the Railway and Canal Commissioners, but in nearly every case the amount to be paid is settled by agreement. In most cases the payment cannot be considered as much more than a nominal one where there is no real interference with convenience or amenity. Occasionally you run against a cantankerous customer, and then you may have a dispute which will end in Court.

391. And Royalties the same?-Royalties are a very small thing; they are dealt with on lines which have been laid down by the Treasury.

Mr. Gershom Stewart.

392. With regard to these big amounts

under L3 and L4, contract work and rent and rates on wires, etc., those are both for telegraph and telephone? That is so, but in the case of telephones it does not include capital works; telephone capital works are chargeable to the capital provided under loan.

393. All the posts you see on the railways belong to the Post Office and are maintained by the Railway Companies?No, I think not; the Post Office has certain telegraph lines running along railways but the great bulk of them belong to the Railways themselves.

Chairman.

394. On page 25 respecting this very heavy loss of which the £360 here noted is only part, will you please say whether the Post Office is at fault there?-Yes, these frauds were committed by a servant of the Post Office and had there not been at the best a certain want of acumen it is considered that they would not have taken place, or rather that they would have been found out almost at once.

395. And who was responsible?—The Officer who was held primarily responsible was the Engineer in charge of the Section.

396. What action did you take?—He was censured and required to contribute £100, and he also lost his increment.

Sir Henry Craik.

397. The charge against the Engineer only involved carelessness in his supervision, not any suspicion that he had been connected with the fraud?-None whatever; it was merely want of supervision. (Sir Malcolm Ramsay): My information is that the culprit got three years' imprisonment in that case; he was prosecuted. (Mr. Watson): There was a Committee, on which the Treasury and the Post Office were both represented, which investigated the cause of that loss, and it was after their inquiry that the Superintending Engineer was required to pay the £100.

Mr. Wise.

398. As to sub-head M "Charges in respect of debt created under the Telegraph Acts, 1892 to 1920," is that interest? (Sir Henry Bunbury): Partly interest and partly repayment of principal.

13 March, 1923.]

399. At what rate is it? That is shown in the Commercial Accounts page 7. The rate varies with the year in which the money was borrowed. It is in the fourth column of page 7.

Chairman.

400. That is subject to some explanation, is it not, that the borrowing would be for the year previous: Is not that so? That is so; the Annuities were paid in respect of money borrowed in the year 1920. The Annuities began in the financial year 1921-22, but of course those annuities under sub-head M are not merely the annuities in respect of the capital borrowed in the year 1920; they are also in respect of the capital borrowed in all previous years so far as the loan has not been discharged.

401. Are they paying 6 per cent. ?-1 think at the present moment 51 per cent.

Mr. Wise.

402. Is that 6 per cent. on money already borrowed ?-That applied to money borrowed in the financial year 1921.

403. That is rather heavy, is it not?It does not, unfortunately, rest with the Post Office. (Sir Malcolm Ramsay): These rates are fixed, I think I may say, by the Treasury and represent the appropriate market rate at the time of borrowing for a loan of a given currency.

404. Does that include sinking fund?(Sir Henry Bunbury): No. (Sir Malcolm Ramsay): That is interest. (Sir Henry Bunbury): That is purely interest. (Sir Malcolm Ramsay): The money was borrowed as a matter of fact from the National Debt Commissioners and they were able to invest their money in the market at that particular moment at 6 per cent. and they said "We will not lend to the Post Office at less than we can get outside," but in previous years the rate has been 3 per cent. depending on the time the money is borrowed.

405. And now you are paying 5?(Sir Henry Bunbury): 51 for money borrowed in this current quarter. 406. That is pretty stiff.

Colonel Sir William Allen.

407. Could not the Post Office have borrowed elsewhere much cheaper than that? I am inclined to think they could.

Colonel Stephenson.] In 1921 this was borrowed.

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[Continued.

Colonel Assheton Pownall.] In 1922.

Chairman.

408. What do the Treasury say to that? -(Mr. Fass): The National Debt Commissioners until quite recently could obtain 5 per cent. for their money and, of course, they do get a security which has not quite the same marketability as the 5 per cent. War Loan which would return them a clear 5 per cent.

Mr. Wise.

409. It is at a premium?-Now; that is within the last few weeks, but at the beginning of the calendar year they could get their clear 5 per cent. on a security they could dispose of at any moment. It is, we recognise, a proper matter for discussion. They charge something for their trouble, and for the fact that they are getting a security which they cannot market in the same way as the securities they purchase.

410. 5 per cent. they charge?-5. We have got to consider that

411. You cannot buy Government Securities at 5 per cent. to-day?—I admit that it is a matter for consideration with the Post Office and the National Debt Commissioners whether they are not paying rather too much at the moment.

Chairman.] If we deal with this interest question now, we need not deal with it when we come to the column containing the particulars.