Page images
PDF
EPUB
[blocks in formation]

2. I do not quite follow that?-The point I am going to try to make this morning is that the Navy and Army Canteen Board, having taken the profits of the Expeditionary Forces Canteens to finance themselves, engaged in trading to a perfectly reckless extent and departed altogether from the objects for which the Expeditionary Force Canteens had been originally founded.

are

3. Are you going to show us the objects for which the Expeditionary Force Canteens were founded?-Yes. 4. You going to prove that? -Yes. It also raises, in my submission, the question of the efficiency of the management of the Navy and Army Canteen Board; and, firally, it raises the question as to whether there was any fraud. Now I should like to say that personally I have never made any charges of fraud. If the Committee will look at Column 2437 in Hansard of July 21st, you will see I said: "I have not accused anybody of fraud. I only accuse this body of mismanagement. I do not know anything about fraud." Secondly, I repeated that statement later on in the same Debate in Columr 2460, where I said, interrupting Sir Laming Worthington Evans: "My evidence is in this report. I do not say fraudulently taken. (Sir Laming Worthington Evans.) This is interesting. The Noble Lord says that four million pounds has been taken from the pockets of the Ex-service men, but not fraudulently taken. Is that the charge? (Viscount Wolmer.) Yes. (Sir Laming Worthington Evans.) Not fraudulently taken "; and then I proceeded to explain the charge. But, of course, other people have made accusations of fraud. Charges of fraud have been made in the columns of Truth."

5. We are going to examine "Truth," and I think you must confine yourself to what you know, and not discuss charges which you have not made?-Quite So. All I wanted to say was that I am aware certain witnesses are ready to come forward, and I shall be prepared to make suggestions who they are, but I know nothing about the fraud, and therefore abstain from making any charge. With regard to my charge, there is no dispute, I understand, that the profits of the Expeditionary Force Canteens were promised to the Ex-service men. I should like to hand in two price lists of the Expeditionary Force Canteens, one dated March 1915, which has this statement Printed on it: "Neither of the two firms

[Continued.

to which the above-mentioned gentlemen belong take any share whatever of the profits made by the Expeditionary Force Canteens, the whole of which will be passed to the War Office after special audit and devoted to the good of the soldier and his dependants under the Orders of the Army Council."

Mr. John Robertson.

"As

6. By whom was this price list issued? -This is a price list of the Expeditionary Force Canteens on which the men were invited to deal with the canteens. It is a general price list from 1st October, 1915, until further notice. It is the official price list, and it is signed by General Long. I will hand that in. (Price list handed in.) This promise was continued in subsequent price lists, and I have here, dated September, 1918, a price list of the same organisation where this statement is made: "The whole of the profits made by the Expeditionary Force Canteens will be passed to the War Office and devoted to the good of the soldier and his dependents under the Orders of the Army Council" (handing in same). Sir Laming Worthington Evans admitted this, as you will see if you turn to Hansard, Column 2457 in the same Debate; this is what he said: Secretary of State for War I find myself in this position: During the war my predecessors, quite rightly I believe in the unanimous judgment of the House, set up a Canteen Organisation so that the serving officers and men might be looked after in distant stations during the war. There was no dispute that that was a desirable thing. At that time the statement was made that it was not intended that any profit which should be made should be diverted from those out of whom it was made. It was promised that whatever surplus there should be out of the Canteen trading should be handed back to the soldiers, or, rather, to the ex-soldiers, their wives, and dependents." So that contention is thoroughly admitted by Sir Laming Worthington Evans, who is largely responsible for this policy. Now what happened? I take it every member of this Committee has the White Paper containing Sir William Plender's Report, and I am going to quote from it now. The Expeditionary Force Canteens' profits up to the 30th April, 1919, are certified by the auditors as £10,256,291 17s. 6d. That is stated in

[blocks in formation]

the

are

Command Paper 1717, page 5:—“ Expeditionary Force Canteens-profit from the inception of the organization up to 30th April, 1919 (i.e., the date on which its business was transferred to Navy and Army Canteen Board)— £10,256,291 17s. 6d." Besides that there are the profits that the Navy and Army Canteen Board made in England up to that date, but, as their accounts taken up to the 31st December, 1920, I cannot state the exact amount. I should like here to explain-and I do not know if the Committee realise it-that the Navy and Army Canteen Board during the war was, as it were, the home side of the Expeditionary Force Canteens. I have never criticised the establishment of the Navy and Army Canteen Board during the war. During the war they simply ran the corresponding work in England to what the Expeditionary Force Canteens carried on at the front. Therefore, in my submission, the profits that the Navy and Army Canteen Board made during the war are part and parcel of the profits that ought to be distributed among the Ex-service men, and I think you will find that is admitted by the authorities, because they are treated in this respect as one. Unfortunately, however, for the purpose of clearness, you will see if you look at the bottom of page 4 of this White Paper under the head of "Navy and Army Canteen Board-main accounts it says: "Net profits from the inception of the organisation up to 31st December, 1920"; that is a different period of accounting from that of the Expeditionary Force Canteens which are mentioned at the top of the following page. I should like to submit that this Committee ought to ascertain what the profits of the Navy and Army Canteen Board were up to the end of April, 1919, that is to say, up to the date on which the War Canteens were wound up and the new permanent peace establishment was started.

Chairman.

7. Do you mean that the Committee ought to ascertain what the profits of the Expeditionary Force Canteens were up to the 30th April, 1919?-No; you have got what the profits of the Expeditionary Force Canteens were up to that date, but you have not got what the profits of the Navy and Army Canteen Board (which was the similar organisation in England at that time) were up to the 30th April, 1919.

42161

Colonel Hodge.

[Continued.

8. From what date?-From its inception, which was during the war.

Chairman.

9. I should say we have, but will you please go on?-My point is this: I think the Committee ought to ascertain what were the profits that were made out of the canteen business during the war as opposed to the period after the war, because it is those profits that were made during the war that were promised to the ex-Service men. This account only shows the net profit of the Navy and Army Canteen Board up to the 31st December, 1920, and therefore it takes in a long period after the time when the Navy and Army Canteen Board had started again, as it were, on a Peace footing. You will notice that those profits given at the bottom of page 4 of the White Paper of the Navy and Army Canteen Board from its ir ception at the beginning of the war up to the end of 1920 are £1,931,729.

10. Does not that give you what you are asking for?-No, because it takes it up to the 31st December, 1920, that is, eighteen months later than the accounts of the Expeditionary Force Canteens.

11. But it is the net profits from the inception of the organisation to the 31st December, 1920?-Yes, but I submit that you ought to find out what the profits were at the conclusion of hostilities, as it were, allowing a reasonable margin. The date for the winding up of the Expeditionary Force Canteens is 30th April, 1919. I think you can say that is a time when the war profits ended, and therefore you ought to take what the war profits made at home were up to that date, as well as what were made abroad. I am going to try and show the Committee that if you take the profits of the Navy and Army Canteen Board up to 30th April, 1919, you will find that they are bigger than £1,931,000, because I think I can show that the Navy and Army Canteen Board were losing money during the year 1920, and my submission has always been that they had no business to be trading in the year 1920 and using the profits of the ex-Service men for that purpose, but they ought to have been wound up in 1919, at the end of the war. Have I made that point clear?

12. Yes, but of course it all amounts to this: you talk about winding up, but you cannot wind a thing until you have sold its assets. They could not be sold

[blocks in formation]

in two or three days, or on a particular date, but it would take probably three or four years to wind the thing up, and you cannot calculate what the net profits are until the whole thing has been wound ur and finished-not wound up by being put in a book and saying it is estimated to be so-and-so, but when the assets have been realised in hard cash.-Quite so, but there is a difference between liquidation sale and continuing trading. I think if the Committee investigate it they will find that the Navy and Army Canteen Board made huge purchases in 1920, and a large part of this loss results from that fact.

Colonel Hodge.

a

13. Is that a statement you are making, or is it something you think?-I cannot prove it, but the Committee can find out by calling for the accounts. I am asking that the Committee should call for the accounts.

Chairman.

14. In your evidence you must be able to prove your assertions.-Yes, when I come to examine the accounts later on I will deal with that point further. I am merely trying to show now why I insist upon this date in 1919 as the point from which the profits ought to be calculated. What my contention amounts to is this: If you take the top of page 5 of the White Paper you will see of the Navy and Army Canteen Board up to the end of 1920, and of the Expeditionary Force Canteens the total profits come out at £12,188,000that is to say, taking the Expeditionary Force Canteens' profit up to 30th April, 1919, and the Navy and Army Canteen Board's profits up to 31st December, 1920. 1 say there is reason to believe that if you take the accounting period to the same date in each case, namely, 30th April, 1919, there would have been a bigger sum than £12,188,000. I will give the Committee my reasons for believing that, later on, but I want to make that point now. I cannot compare very closely this profit of the Navy and Army Canteen Board up to 31st December, 1920, with the profit of the Expeditionary Force Canteens up to 30th April, 1919, for the reason I have given, namely, that they are two different periods. So I am now going to confine my remarks for the moment to these profits of the Expeditionary Force Canteens up to 30th April, 1919. My contention, and the charge that I made in the House of Commons, was that this 10 million pounds should

[Continued.

have been realised at the high prices then available. You have said, Sir, that the liquidation was bound to be a long business. I agree; but it should have been liquidation. In my submission these assets should have been handed over to the Disposals Board and dealt with as surplus for disposal. They very largely consisted of food.

15. Do you think the Disposals Board would have done any better? Have you any reason to suppose they would?-Of course, that is a hypothetical question, if I may say so.

16. Is not yours a hypothetical statement? My contention is that every effort should have been made to liquidate those stocks in 1919, when high prices were available, instead of holding them in order to create a great trading organisation, which traded disastrously.

17. But that is all hypothetical. It is easy enough to say now, when prices have gone down, that they ought to have been sold then; but it is quite possible that the people at that time thought prices were going to remain high, and might even go higher.

Mr. John Robertson.

18. Would your opinion still have been the same if prices had gone up?—Yes, I think so, for this reason, that the profits of this organisation had been promised to the ex-Service men, that is, the war profits, and the war had come to an end.

Chairman.

19. But that is not quite the question. The question is, supposing they had sold them and it turned out that prices had gone up, would you still hold the view that although prices had gone up they were correct in selling?-Of course one might have said they made an error of judgment, but I think they would have been perfectly justified to have sold them, and it would have been the right thing to do, because the profits had been made up to that date and they ought to have been realised.

20. I do not think you can press it too far, because it is only a question of opinion.

Mr. Hugh Morrison.

21. Your opinion is the same whether that trading was profitable or unprofitable? Yes. Sir Laming WorthingtonEvans dealing with this point in debate, said that this profit was made subject to the realisation of stock. If you turn to Column 2461 of "Hansard" you will see

[blocks in formation]

his statement, about the middle of the column: "What has actually happened, as I am informed, is that the Expeditionary Force Canteens made a profit of 10 million pounds, subject to the realisation of the stock. There was not 10 million pounds in cash. The so-called profit consisted of cash and other assets

and it was in course of the realisation of those other assets, at a time when the market was glutted, that the depreciation of the stock occurred, and a much lower sum was realised than was anticipated at that moment, and lower than was anticipated by the noble Lord the Member for Aldershot." That is what I call the official defence-Sir Laming WorthingtonEvans' defence. That carries with it the inference that a proper allowance for depreciation of assets was not made by the auditors when they drew up the balance sheet and showed that profit.

Chairman.

22. How were they to make an estimate? How can you make an estimate of what things are going to realise?—May I show what they did. Going back to the White Paper again, I want to take this profit of 10 million pounds made by the Expeditionary Force Canteens and show you how it is arrived at. If you look at page 14 of the White Paper, at the report of the Joint Liquidators upon the balance sheet of the Expeditionary Force Canteens, you will see it says: “Thus giving total profits earned to date (subject to the remarks made in this report) of £10,256,291 17s. 6d., divided as to £7,494,349 Os. 5d. for the Western Continent, and £2,761,942 17s. 1d. for the Mediterranean and the East." I want the Committee just to pursue those accounts. If you look at page 18 of the White Paper, at the accounts of the Western Expeditionary Force Canteens, I want to show how this profit of £7,494,349, which was made on the Western Front is arrived at. On page 18 you will see "Profit and Loss Account-Profit (after making reserves)"-those are the important words " as shown in balance sheet as at 31st August, 1921, submitted by the officials of the Organisation to the Chairman and Committee with their report dated 18th October, 1920, £7,410,518 2s. 4d." Then there is added a liquidation account for period from 1st September, 1920, to 31st December, 1921, showing a profit of £83,830 18s. 1d. That shows how the profit on the Western Front is made up. Now I ask the Committee to take the corre

[Continued.

sponding figures on the Eastern Fronts, which are to be found on page 21.

Colonel Hodge.

23. What is the point there?-I am coming to it. On page 21 you will see the same thing: "Profit and Loss Account-Profit (after making reserves) as shown in balance sheet as at 31st August, 1920, submitted by the Officials of the Organisation to the Chairman and Committee with their report dated 18th October, 1920, £2,640,497 10s. 4d." Then there is the liquidation balance from 1st September, 1920, to 31st December, 1921, showing a profit of £121,445 6s. 9d. The point I am going to make here is that the great bulk of this profit was shown in that balance sheet on August 31st, 1920, and is after making reserves, which goes against Sir Laming WorthingtonEvans' statement that adequate reserves were not made; but I am going to say something more about this, if I may.

24. Can you refer to the balance sheet of August, 1920?—I am going to refer to it now, because I want to draw the attention of the Committee to that balance sheet.

Chairman.

25. At the moment, all you have done is to prove that Sir Laming WorthingtonEvans made a mistake. I do not know that that concerns this Committee very much? No, but what I am going to prove now is that on this balance sheet of August, 1920, where the great profit occurred, the very fullest reserves had been made for liquidation expenses, and that everything the Navy and Army Canteen Board has lost is over and above those very great reserves. This is the crucial point, if I may say so.

26. The reserves are only sums put aside which, in the opinion of the people putting them aside, would be sufficient to meet any loss which would accrue from the disposal of the assets?-Quite so.

27. If the prices all beyond what the people thought they would be when they put on those reserves, those reserves would not be sufficient and more would have to be taken?-Yes, but my contention is that, if the business had been liquidated, we have very strong evidence to show that the reserves were adequate to realise the whole of that 10 million pounds profit, and that the loss has occurred through continuing the organisation as a great trading concern on a peace footing.

Mr. John Robertson.] Dealing with this point about reserves, I should like to

[blocks in formation]

clear one's mind, because reserves may be a very floating and a very flexible quantity? There is a statement made in Hansard on 22nd March which I think

would condescend on the particular

amount. A statement was made in the House of Commons by the witness that 50 per cent. was set aside for reserves?

Chairman.] But that only repeats what the witness has already said. He said then over 50 per cent. had been set aside, and that is in his opinion sufficient to cover all loss. That only repeats what he has just said, though he did not mention the 50 per cent.

Mr. John Robertson.

were

28. I do not want any misunderstanding about this. I am not a commercial man and when anybody speaks about reserves I want to condescend, if possible, on the amount. When I turn to this speech made by the witness, I find that he is quoting, not words of his own, but from a Government document in which he stated to the House of Commons that these reserves 50 per cent. Are the reserves you are now speaking of, 50 per cent. reserves? They are as certified by the auditors. I am just coming to that point. I must make this little preface to show how the thing arose. Sir Archibald Williamson made a similar statement to that of Sir Laming Worthington-Evans, which I have just quoted. He said in the House of Commons on December 23rd, 1920: "A balance sheet of the Expeditionary Force Canteens up to 31st December 1917 was published. A further report and statement of accounts has been received from the Expeditionary Force Canteen Authorities, but as they contain no provision for loss anticipated on the realisation of unsold stock, no good purpose would be served by their publication. When the liquidation now in progress has been completed a final balance sheet will be published."

Colonel Hodge.

29. What are you reading from?-From a copy of Hansard, Volume 146.

Chairman.

30. I do not think it is worth while repeating all the statements which may have been made by Members of the then Government, and then trying to prove that those statements are wrong. You say that if these assets had been sold earlier there would have been larger

[Continued.

profits. You have said that, and I do not see how anybody can prove that that statement is correct or incorrect. All we know is that in your opinion those assets ought to have been sold earlier. Having said that, I do not think it is any use going on any further on that point ?-My point is that when Sir Archibald Williamson made that statement the auditors wrote a very important letter to the press which I now wish to read to the Committee. I simply had to go into that preface to show why the auditors made that statement. I have copies of it here for the Committee, if you like to have them(Handing in same). At the bottom of page 9 of this pamphlet there is a letter written to Truth" by the auditors of the Expeditionary Force Canteens: "Dear Sir, Our attention has been drawn. to a written reply to a question in the House of Commons made on December 23. 1920, by Sir A. Williamson, the Parliamentary Secretary to the War Office. In the course of the reply, Sir A. Williamson states that as a further report and statement of accounts received from the Expeditionary Force Canteen authorities contain no provision for losses anticipated on the realisation of the unsold stock, no good purpose would be served by their publication. This statement, appearing in Hansard," might lead many people to believe that the statement of accounts to which it refers and which bears our signature had not been properly prepared. We therefore ask you to he good enough to give publicity to the following facts:-1. The "statement of accounts" referred to by the Parliamentary Secretary to the War Office is, in fact, a balance-sheet of Expeditionary Force Canteens made up to August 31st, 1920, and certified by us. 2. In the preparation of such balance-sheet specific reserves have been made to the extent of over fifty per cent. of the cost price of all Expeditionary Force Canteens stock belonging to the organisation, and general reserves have been made sufficient, in our opinion, to cover any further losses on such stock which could possibly arise. 3. Following the practice of our profession as Chartered Accountants, we drew special attention to the reserves against stocks in our report attached to such balance sheet. Apart from the correction of an obvious error in Sir A. Williamson's answer as recorded, we think that it is only fair to us as independent accountants to Expeditionary Force Canteens to correct an entirely erroneous impression

[ocr errors]
« PreviousContinue »