28 March, 1928.]

which affect that comparison: First, the charges for depreciation, pensions, interest on capital, and so on, all come into it, and the charges in the Commercial Accounts are of course quite different under those headings from the charges in the Appropriation Account.

645. But would not that rather tend to make the difference smaller? If you charge depreciation, etc., in your Commercial Accounts, they are not, naturally, in your Vote. Perhaps it would be as well, if it is not putting the Department to too much trouble, if you could for that year put in a statement.-Yes, I will certainly do that.

646. Now there is one other question on that I would like to ask: Do you make provision in your Commercial Accounts for the repayment of capital? -No, only for the interest charged, except through the Depreciation Account.

647. That is one thing, of course. The Depreciation Account you must have because your plant goes on depreciating, but if you were running as an ordinary business and you had to find the money in the form of Debentures, some provision would naturally have to be made for repayment of capital.-But is not that met by the Depreciation Account, that under the construction of that Account by the time the life of the plant is exhausted, we have reserves equivalent to its cost?

648. Not necessarily. You have a Depreciation Account, but I am not quite sure that that fully meets my point. In the first place, is your account sufficient at the end of a given time to repay your capital?-It is calculated so that it should be; that is to say the estimated life of the plant is averaged at a certain figure, say at 20 years, and the equivalent amount is put aside for depreciation each year; so that at the end of 20 years the Depreciation Fund should contain the equivalent of the cost of that plant which is worn out.

649. Now I would like to ask you a question on the Advisory Council. Is its composition supposed to be private?No, not in the least.

650. Who do compose it-how many members are there?-About 15 I think.

651. What sort of people are on it?They are chosen by the PostmasterGeneral not as representing particular

[Continued.

interests, but for their individual qualifications. I can send you a list.

652. Thank you; I would like to have it. How often does the Advisory Council meet?-It varies. About two or three times a year.

653. Could you give us two or three of the names?-Mr. George Lawson Johnson, Sir Edward Manville, Mr. Holland Martin, Sir Charles Barry. I do not remember the rest.

654. I think that is sufficient. You say this Advisory Council meets once a month? No, two or three times a year.

655. What are its functions exactly?— It considers and advises upon any question which the Postmaster-General remits to it.

656. What sort of questions are remitted to the Council ?-Usually questions affecting public facilities.

Mr. Ammon.

657. Such as cash on delivery ?—That question, I think, was referred to it. We asked the Advisory Council to consider the institution of a postal cheque system, and they appointed a Sub-Committee which has just reported upon it. That is an instance of the kind of subject which is referred to them.

Chairman.

658. Fairly big subjects?-Yes, of fair importance.

659. You have nothing in the Post Office, have you, to correspond to what a good many businesses have found useful, to have some kind of machinery for suggestions by members of your own staff? -Yes, we have. Suggestions are invited, and there is an Awards Committee which recommends rewards for those that are adopted or considered worthy of merit.

660. Do you adopt many of the suggestions? Yes, in whole or in part a substantial number are adopted; they are mostly rather small things.

661. Now as to Superannuation: Was the Superannuation Scheme in force in 1914? Yes, the Superannuation Acts date from William the Fourth, I think, if not before.

662. Has it in any way been altered? In other words, is the relative expense

28 March, 1928.]

[Continued.

greater now than it was pre-war ?—Yes, considerably. There was the Pensions (Increase) Act of 1919, and then the pension is payable in part upon the bonus that the pensioner receives at the time of retirement.

663. I notice in your Estimate, page 75, you have under B an amount of £136,620 for the year 1928-Non-Statutory Marriage Gratuities. Does that mean to say that-those marriage gratuities were not fixed, or the scale of them was not fixed by Act of Parliament ?-I think not; it was fixed by the Treasury.

664. I notice that in 1928 there is an increase for superannuation allowance of £120,000 roughly-page 40.-Yes.

665. Is that likely to go on increasing? -Yes, certainly, I think it is bound to go on. At the present moment it is perhaps exceptionally high because a large addition to the Post Office staff was made about 1885 when the 6d. telegram came in, and those are just passing out now.

666. In other words, it has not reached the peak yet ?-Oh, no; in the last 40 years the staff has increased enormously, and I think we have got to look forward to this charge going up steadily.

667. On that question of superannuation, I understand that the Post Office have been considering making some offer as regards superannuation to the redundant staff in the Telegraph Department, have they not?-We have considered in certain telegraph offices, where there is some redundancy of staff, retiring some of them under the provisions of the Superannuation Acts relating to Abolition of Office.

668. That is as far as you have got-you have only considered it ?-Yes.

669. Was the idea that if this scheme matures it would be a sort of proportional superannuation according to the length of service?-Yes. Under the Superannuation Acts an officer retired from Abolition of Office gets his accrued pension up to date, that is to say, the pension he has earned by the service that he has already put in.

Mr. Ammon.

670. Does he get no compensation ?— No, I think not.

Mr. Wardlaw-Milne.

671. At this point, as one not knowing and not understanding it, may I ask what

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a marriage gratuity is? Is that a gratuity given to people who get married, or to prevent them getting married, or as a means of getting rid of them when they are married?-A female Civil Servant is required to resign when married, and she gets a gratuity based on length of service.

672. In lieu of any pension ?—Yes.

673. It is not based on pension ?—No; I think it is a month's pay for each year's service.

Mr. Ammon.] It is a little less than the pension would be if they were pensioned.

Chairman.

674. To what extent is there a redundancy in staff in the Telegraph Department? That is very difficult to ascertain, and it depends in part upon whether the decline in telegrams is going on or not. Our most recent calculations show that by the normal course of retirement any redundancy-that is assuming the traffic remains pretty much at its present level -will be cleared out in post offices within a few months and practically in all within about a year; but, of course, that may be affected by a reduction of traffic and certainly by an increase of rates.

675. Has the staff of the Post Office decreased since 1914? I am rather puzzled. Your figures do not seem to show it, and yet in this Memorandum on present and pre-war expenditure it gives the Post Office pre-war staff as 188,900 and on the 1st April, 1926, there are 186,000 odd, showing a decrease of 2,751. It does not in the least seem to square with your Vote. For instance, on page 88 of your Estimate you have got a total at the 1st January, 1927, which is the nearest date, of 224,000?—Yes.

676. What is the reason, do you know, for the discrepancy ?-I did not quite catch the earlier figures.

(The Estimates were handed to the Witness.)

677. Does that only refer to your nonindustrial staff? It is at the very endthe last page?-This only refers to the non-industrial staff.

678. What is the difference? What do you mean by non-industrial staff?-The industrial staff are the personnel of the

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Engineering and Stores Department; the rest of the staff is designated non-industrial.

679. The industrial staff is just as much part of the staff as the non-industrial, is it not?-Yes.

680. In other words, that statement gives rather a wrong impression, does it not? I think this statement was compiled for a different purpose and I imagine it was intended to exclude such classes as the employees at the Dockyards, Ordnance Factories and so on, to which the Post Office Engineering staff is analogous.

Sir Philip Pilditch.] If you look at the top it says: "Personnel of the Army, Navy, and Air Force other than Industrial Staff." They deliberately kept out the non-industrial staff, because this is meant to be a comparison with what is properly described as the Civil Service. For that reason they took out the industrial staff, or they would have had to take in all Dockyard staff and all the rest of it.

Chairman.

681. Now can you tell the Committee, do you do much business in life assurance and annuity work?—No, it is a very small business.

682. Is it worth carrying on at all?— I think it is very questionable.

683. Because it must be costing something. I do not suppose it pays?—I am not quite sure how the expenses are met. It is formed by the Savings Bank, but I think the cost is recovered from the Annuity Fund.

684. But the point I wanted to arrive at was this: Whatever may have been the case in years gone by, I should think that now there are plenty of opportunities; in fact there are plenty of insurance companies to do this kind of work outside?—Yes.

685. And unless the Post Office make a profit, it hardly seems worth while to carry it on at a loss?-I quite agree with that view.

Mr. Thomas Williams.] Is there any reason to believe that it is carried on at a loss?

Chairman.

686. That is what I am trying to get at. I have an idea that it is carried on at a loss, but I wanted Sir Evelyn to

[Continued.

give us figures if he could?—I have not got them here. I could give you a statement of the position.

687. Your impression is that it does not pay?—I should not like to say that.

Mr. Charleton.

688. The benefits are lower than the companies outside, are they not?-In some respects, anyhow, they are. Then of course the Government business is limited to investments in Government securities.

Mr. Charleton.] So there should be a greater margin of profit on premiums paid, seeing that the benefits are less. You pay for an annuity in the Post Office a greater amount than you would outside.

Chairman.

689. Probably, therefore, the business must be very small?-Yes, the business is quite small.

690. But you might put in a statement to show whether it is worth while carrying on this business, showing the volume of business in the last two or three years, and whether in the opinion of the Accountant-General it is carried on at a profit?—The Post Office has discussed the question of continuing it with the Treasury, and I think the Treasury share the views of the Post Office that it is hardly worth keeping on. Legislation will be required to discontinue it.

691. The Committee might wish to make a recommendation upon that point. Now coming to the question of Stores, as far as I can gather, your total purchases appear to be in the neighbourhood of £5,000,000. I would just like to check up those figures. I do not know whether I have taken them correctly. I have taken the Vote under G: "Stores, Uniform, Clothing, and Manufacture of Stamps, £1,015,000." That is on page -(Mr. Sparkes.) Yes, that is so.

39.

692. Then there is K: Engineering Materials, £1,287,000," to which, for the purpose of arriving at the cotal stores purchased, you have to add on the £2,875,000 that you charged to Telephone Capital?--That is so.

693. That is all for stores. That makes the total of £5,000,000 ?-That is so. 694. It really represents the total that you purchased?—Yes.

28 March, 1928.]

[Continued.

695. First of all could you tell me what the total value of the stock that you are carrying at present is, roughly? I can tell you what we expect it

to be at the end of this month. We expect it to be £3,249,000 SO far as the Engineering Stores are concerned, and a figure approximating to the stock shown last year, £353,000, for Postal Stores-non-Engineering Stores. 696. It is about 3 millions altogether, is it.?-Something like that, yes.

697. Who decides upon the stock which the Post Office thinks it advisable to carry? I am responsible for that.

698. Do you do that on your own responsibility or how? How do you decide, for instance, whether you are going to carry £3,000,000 or £4,000,000 worth of stock?—I do it on the consumption of stores and, as far as the engineering stores are concerned, after consultation with the Engineer-in-Chief, who is the main user of engineering stores and who knows what the trend of engineering events is likely to be.

699. Do you check up the statements that you receive? The tendency would naturally be for most of the Departments to be on the safe side, I suppose? -There is a tendency for people to play for safety, but I watch that very, very carefully myself and keep the stock as low as possible.

700. I suppose the tendency is to increase, especially in the Telephone Department? It is a growing service and because of that there is a tendency to increase; but on the other hand during the last few years we have been keeping a very tight hand on stores and we have tried to reduce the value of stores in hand. We have done it this year and we hope to do still more in that direction next year. Of course there are certain circumstances over which I have no control at all: The recovery of stores; the change over from one system to another. That throws a very large quantity of stores into my hands and they have to be kept until they can either be used or disposed of.

701. Incidentally, is interest charged on this capital that is employed in stores? -I am not sure of that.

702. In other words, if you are carrying on an average 3 million pounds worth of stores, if you were a private concern you would have to pay somebody about £175,000 a year for interest ?--Of

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course they have been purchased either out of Capital or Vote Account. We have actually paid for them, and the Service has to stand the interest on it in that way. (Sir Evelyn Murray.) I think there is a charge in the Commercial Accounts. Mr. Strauss.] There is a charge of 21 per cent. on page 36.

Chairman.] On stores?

Mr. Strauss.] "Telegraph Capital and Annual Charge in respect thereof," on page 36? That is the original capital that was borrowed for the purchase of the telegraph system.

Chairman.

703. That does not apply?-No.

Mr. Wiggins.] I take it it means that if they had not this big stock in hand they would be able to get interest on it. The concern is having to carry the cost of that money lying idle, is it not?

Mr. Wardlaw-Milne.] I could not Is understand exactly what that meant. it the regular practice to take it at 2 per cent., at the rate at which the money was borrowed?

Chairman.] I think that only refers to the old capital.

Witness.] It only refers to the original capital.

refers

Mr. Wardlaw-Milne.] But it back really to the position in the Commercial Accounts at the very beginning in which the statement of the balances is shown as a profit and loss, at page 9 of the Commercial Accounts, after charging interest on capital. What I want to get at is, is it the regular practice to charge that amount at the rate of 2 per cent., or why is it in the case of the Post Office so charged? because manifestly the value of the money to the Government is not the value of the interest at the time it was borrowed, but the interest the Government have to pay to-day.

Chairman.] I think you will find the answer to that on page 7 of the Commercial Accounts. It states there, for instance, Interest both for the Annuities and for the direct charge is calculated on expenditure prior to the 1st April, 1892, at a rate equivalent to the average yield of Consols for the year and for all years subsequent to the year of expenditure, at the minimum rate ruling for loans from the Local Loans Fund on the 31st March of the year of expenditure."

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