9 March 1922]

over the world, demobilised and dead people, and it is a big business.

110. I think we would discuss this better after we get the Report which Mr. Niemeyer has promised and compare it with the Staff. I am disposed to leave the matter until we hear the Report of the Treasury upon it.

Mr. Myers.

111. I think I understood the gentleman to say in the earlier part of his observations that some of this 7 million pounds was to be explained by the fact that he had to take on a larger Staff, but I gather from the subsequent observations that that is not so, and that, as set forth on page 5, the work has had to be "carried on with a constantly changing and diminishing Staff "; that I understand that no part of this 7 millions is due to any extra Staff taken on.-Not to any extra Staff taken on because all through the year we were steadily reducing. There is an actual deficit on the Admiralty Vote 12 and I think it amounts to £145,064.

SO

112. On page 6 of this White Paper, Mr. Chairman, I find that the Shipping Liquidation Department of the Board of Trade provides sea freight for the Department we are discussing, and the total claims from that Department have been somewhere in the region of £5,000,000. What is the nature of that work?-The War Charges? They took up Auxiliaries for us; they ran Colliers and Oilers, and the services they rendered to us were all over the World. We had I cannot say how many Auxiliaries in the Navy at the end of the War, but they ran into thousands.

113. But this £5,000,000, the Estimate we have before us, is an Estimate for last year, not an Estimate for during

the War. The whole base of that extra expenditure is money that was expended or liability incurred during the War period, and we were all through that year liquidating our War liabilities, in fact those liabilities are still being liquidated during the current financial year. 114. Chairman.] The period now under review began 18 months after the end of the War.-Yes.

Mr. Myers.

115. I now understand that the gentleman accounts for this 7 million pounds

[Continued

as a clearing up of the War time liabilities.-Entirely.

116. There is another thing I would like to draw attention to on the same page 6: "Very large supplies of stores and fuel were made from Admiralty Stocks during the War period and discontinued during the year now under review. It is evident that a too con servative estimate was made of the value of the issues thus made." Is there to be any compensation from the Admiralty for that too conservative estimate which was made with regard to the goods supplied? That is money we get back, and that is the reason given.

117. It refers to the supplies of stores and fuel made from Admiralty Stocks during the War period, which was continued during the year now under review? Yes.

118. I ask, having regard to the fact that that has been discovered, is there to be any compensation from the Admiralty in respect thereof?-We under-estimated the amount of fuel we had supplied to other Departments or individuals, and the result was that when we found out what the actual supplies were which were made, we recovered much more money than we had estimated for.

119. Where is it shown? That is shown in this sheet dealing with the Navy Excess Vote under Surplus on Appropriations in Aid," £5,877,537.

120. Towards the bottom of the same paragraph on page 6 there is this statement: "In this connection it may be remarked that the receipts from Trading operations were much larger than anticipated, and that a sum of over £1,500,000 was received from the Ministry of Shipping "; so that we may conclude that but for that the deficit would be larger to that extent? That is not expenditure might be set off by the entirely true, because some of the gross Appropriations in Aid; for instance, in coal or oil, mostly coal, our gross expenditure might have swelled the amount for coal that we had given to other people. When I say "given," I do not mean given free, and that would come back again in Appropriations in Aid, but it is true to say, of course, that if the Appropriations in Aid had been less our deficit would have been bigger.

121. Your Appropriations in Aid, which included receipts from trading operations, were much larger than anticipated? They were larger than anticipated.

122. And to that extent they have reduced what would otherwise have been a larger deficit? Yes.

Mr. George Barker.] The only observation I wish to make is this, on page 10 I find that the variations between Estimate and Expenditure, during the period from 1908 to 1914, were really negligible, and I think now that we ought to get back to that state of things again.

Chairman.

123. I was painfully impressed with such phrases as, "We hope to get back in the course of years," and so on?-I may say as regards that, Mr. Chairman, that this Estimate was prepared when the war had been only over 15 months; it seems a long time ago now, but when the Estimate was originally prepared the war had only been over 15 months, and active operations were going on at that time in a good many parts of the world, in which the Navy was taking part, which we could not foresee.

124. When do you say the Estimates for those Votes, which are now before us, were made? The first Estimate was prepared in January, 1920.

125. That is 15 months after the Armistice?—Yes.

126. And you say that Naval operations, not exactly war, were still going on then? Yes. I must say as well that there was a Supplementary Estimate in December.

127. That is two years after the end of the war? Yes.

128. You feel that you can assure us that the now current year will show much more accordance between the Estimates and the turnover ?-Yes, the totals certainly; I should not like to say that there will not be variations between the Estimate and Expenditure on individual Votes, but there is no question in our minds at the Admiralty that there will be no excess.

129. And on the whole you think the Estimates and the actual Expenditure and the actual Appropriations will be nearer than the figures which are now shown? I think the expenditure will be less than the Estimate in a good many cases. I do not know whether we shall get credit for that as economists or blame as being bad estimators.

Mr. Myers.] Do we not gather from the top paragraph on page 4 that a somewhat similar hope was held out a year ago?

Chairman.

[Continued

was

130. Yes? That was not applying to this year, that Mr. Chairman; applying to the next financial year.

131. I do not know about a hope; I want to be quite fair, and I do not know that any hope was held out.

Mr. Myers.] I do not say that the word hope " is to be found in the paragraph, but it carries no other interpretationthe first paragraph on page 4-in which they express regret at the then prevailing order of things, and express a willingness to do better in the future.

Chairman.] I do not know that they really did hold out the hope that the then current year would be very much better; I cannot charge my memory that they did.

Mr. Reid.

132. Would it not be possible to separate in the Estimate the actual expenditure from all the Suspense Accounts?-In the Estimate?

133. Would it not be possible? You say that the error comes from these unforeseen matters or unknown matters relating to Suspense Accounts. Would it be possible to put those aside and deal with them as a separate item?-In the Estimates for the current year we did separate out the War Expenditure under each sub-head, where there was War Expenditure. If you look in the Estimates for 1921-22, you will find all the War Expenditure.

134. The point is why the Estimates for this last year, if not actual Estimates for the expenditure in the year, are out? -I cannot say, because we have not separated out the Expenditure during the year from the money paid during the year. That would be a very large task.

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Sir William Barton.

135. The second paragraph on page 6 reads: Apart from purely contract payments in respect of war commitments, very large numbers of claims from private individuals," and so on: who were the private individuals?-A private individual is anybody who is not a Government Department.

136. How does it come about that a private individual has a claim which he only sets up at least 18 months afterwards?-These would be all kinds of things. To give some examples, we are still getting claims from shipowners for ships damaged during the war when coaling the ships of the Navy. Just before

coming down here I had two. A lot of them are only coming in now. The ships have never been laid up; they have been kept running all the time, and when they go to be repaired the claim is made against us.

137. Surely that is not so?-I assure you that I had, within half an hour of my coming to this Committee

138. Would you recognise a claim of that sort, where a man says that his ship has been damaged, meantime it has been running for two and a-half years, and then he comes to you with a claim?-He has certificates. When he is coaling a ship of the Navy, the collier bumps against our ship, and he gets a certificate from the Commanding Officer to say that certain damage has been done. Then he produces that certificate, and, although he produces it several years afterwards, we have to honour it.

even

139. Is that so?-Yes, the survey is held at the time.

140. The survey is held at the time, and he has his certificate, but he does not produce it to you until some years afterwards when you can have no chance of determining what the damage may have been?-The survey was held at the time.

141. The survey being held at the time and the certificate supplied, why is it that the claim comes in 2 years afterwards? There seems to be no reason why the claim should not come in at the time, if it is a bona fide claim, so that you can check it? I cannot say why it is done, and I think the Accountant-General would be able to tell you better than I.

142. I should be glad if he would, because it strikes me as being an extraordinary proceeding?-There was another case I had two days ago; a claim from the Ministry of Shipping came in for £2,000 which must have been spent years ago.

143. And there was a certificate of the damage at the time?-It was from the Ministry of Shipping, a Government Department.

144. I cannot understand it. If it happened two years ago, and the ship has been in commission meanwhile, at common law the thing would have no status whatever?-I do not know whether the Statute of Limitations applies in these cases.

145. While they go on using a thing which is subject to further damage, how can anybody tell what was the limit of your damage? In this case, apparently, there was a survey at the time?—Yes.

146. How does it come, if it was surveyed at the time, that the claim comes in two years afterwards? I have said that in this particular case that I mentioned, the ship has not been repaired yet; she is just going in for repairs.

147. Yes, I know, but the certificate was made at the time of the damage?Yes.

148. Why is it that the claim only comes in two years afterwards?-Because there is no use sending the claim in until the damage has been made good.

Chairman.

149. Is it that they do not know the money value of the damage, or the money value of the repairs, until the repairs are actually done? That is of course perfectly true, and we should also not pay until the repairs were actually done. (Mr. Naef.) May I say that we have in experience found that it pays us better not to pay on an estimate because when we come to the actual facts, and we are bound to make good the damage, it has been found to be less than the damage as it was estimated. Then there is another thing, that if we were to pay for cach single little bit of damage, the shipowners also charge demurrage, whereas if we wait until the shipowner is laying up the ship for his own purposes, we may not have to pay anything for demurrage at all, because the repair for which we are responsible does not lead to any extra delay of the ship.

Mr. Myers.] Even although that case may hold good as far as a ship is concerned, it could not very well be sustained in such an item as is mentioned on page 9: "A large claim relating largely to the War period has only recently been put forward by one of the Armament Firms."

Chairman.

150. Can we be told why that particular claim was so long in being put forward? -I may say that their accounts are in a worse state than ours even; they have been far more in arrear than we have been.

151. Owing to War pressure?—Yes.

Sir William Barton.

152. Is there any limit of time when you limit accounts coming in? That is quite a usual thing in commerce?-I take

it the Crown could plead the Statute of Limitations.

Mr. Myers.] What would the Treasury Auditor say to a Local Authority if they were auditing the accounts of a Local Authority which presented an account three years old? I know what would happen; they would send the Chairman of the Finance Committee a surcharge note very quickly.

Sir William Barton.

153. There is another question I would like to ask if I may. Are the Treasury satisfied with this Report we have got before us? (Mr. Niemeyer.) We state in our letter on page 8: "It is obvious that proper Parliamentary and Budget control cannot be exercised when Departments have so little knowledge of receipts and expenditure as is revealed in this case." I do not think the further Admiralty letter has modified the Treasury view upon that. In this case, for the second year running, they have an Excess Vote. They start with a gross estimate of £96,000,000; this was in 1920-21; they have a Supplementary Estimate in December of 8 million pounds, and then they tell us in March-that is, quite at the end of the financial year-that they expect to have a surplus of about 14 millions; in May, that is, two months after the year is closed, they still think they are to have a surplus, and it is not until October, that is, many months after the actual year is closed, that it appears— so far from having a surplus-they have got a gross excess of 7 millions, leaving them with a net excess of 1 millions. That, so long after the end of the War, does not fill one with any very great feeling of certainty that the Admiralty really know how their expenditure is going, and I am afraid that nothing I have heard to-day convinces me that even now they really know how their expenditure is going. They say, of course, pointing to their Estimates in pre-War days, that they got very close then, and I think that might be a very good answer if they were able to tell us that they had got rid of their War Expenditure, but when we ask them, 'When are you going to get to the end of liquidating your War liabilities?" they say that they cannot tell us. Therefore I do not think that that in itself is an answer, and I think the Treasury feel that they must press the Admiralty to say definitely what precise steps they take, month by month as the year goes on, to see that

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[Continued

their expenditure is not exceeding their estimates. Sir Charles Walker told 'us that he got returns, but it is obvious that those returns must be exceedingly deficient, and I should like to know what steps the Admiralty have taken since last year, when practically this same point arose, to see that those returns are more complete and accurate. Sir Charles drew a distinction between what he called the expenditure belonging to the year and the remainder of War Expenditure. I do not think that distinction is entirely valid looking to the facts. Their budget at the present moment is for the amount charged against any particular year, and, after all, that is the amount for which the Admiralty estimate; they budgeted in their original estimates for their War commitments, they must do so, and I do not think they are entitled to say, "Oh, it is perfectly possible for us to have an Excess Vote, because they are all War commitments." War commitments are one of the things Public Departments have to estimate for now. I realise and agree that the Admiralty have a difficult job, they have been a good deal upset by the War; but, after all, this is the second year that this has happened, and what one would have liked to hear was some more definite information as to what steps they have taken, after a year's experience, to see that that should not happen again. I have not heard anything sufficiently definite to satisfy me on that point. (Sir Charles Walker.) No steps taken after I appeared before the Public Accounts Committee last year would have had any effect on the Account which is being discussed now. (Mr. Niemeyer.) I agree, of course, but what I am thinking of is the Account of 1921-22.

Chairman.

154. Were any steps taken which could have had effect on the accounts of the now current year?-(Sir Charles Walker.) Undoubtedly most drastic steps; we have been, I will not say more thoroughly than ever, into things, but we have impressed on all Departments the absolute necessity of estimating, much more closely than they did in the past, what their liabilities were; or rather we have reiterated it, we have drawn attention to the remarks of the Public Accounts Committee and the absolute necessity for returning to our pre-war standard, which I think stood rather high, at the very earliest date.

155. That deals with the question of estimating. Now on the question of knowing what your expenditure has been actually up-to-date · I think, Mr. Niemeyer, you touched upon that could you for instance at the present date give any fair idea as to whether you have spent the whole of а particular Vote or whether you have still got £100,000 or £1,000,000 in hand on that Vote; and can you, on the Appropriations in Aid, tell to-day whether nearly all has come in or more than was expected or so many millions less than expected?-May I ask the AccountantGeneral to answer that as it is an Accounting question?

156. Yes? (Mr. Naef.) The Returns to which Sir Charles Walker referred, which we get month by month from the various officers who are responsible for the different Votes, enable us to tell pretty accurately how we stand.

157. What has been done to enable them to tell you with more accuracy today than they did 12 months ago?-We have taken the steps to which Sir Charles has referred.

158. But that had to do with estimating. The estimating of their liabilities.

159. I understood him to mean the estimating of the Votes to be asked for?(Sir Charles Walker.) I meant both, Mr. Chairman, but as the war liabilities are gradually extinguished, the touch between the spending Departments and the Accountant-General's Department becomes much closer and the position of all the Departments is very much easier. I think I explained last year-I frankly confessed, as Mr. Niemeyer has said, that there was something very much wanting, at the end of the war, between the spending Departments and the Finance Department; there was a gap which was not satisfactorily bridged over, and that gap would only be bridged as the war liabilities were extinguished, but when that was done, which would not be as I said last year until this current financial year at the earliest, we hoped to get into more or less our prewar position, and I can assure this Committee and the Treasury Representative who has raised the question that that Order has been re-gained and that the Account of the present year will be very much more satisfactory.

160. Mr. Niemeyer, does that meet the point you raised?—(Mr. Niemeyer.) So

far as it goes, yes, but Sir Charles has very carefully excepted the war liabilities. He says in effect that he does not know how he stands as regards his War Liabilities, and he says in his letter to us that he cannot tell us when his war liabilities are coming to an end. That may mean-I do not say it does-that for the next two years he really does not know what the total of his expenditure is to be. (Sir Charles Walker.) There is one particular question which is at present before the Royal Commission, and I cannot in the least say what decision the Royal Commission is going to give. I think the sum of money involved――

I

161. Which Royal Commission do you refer to? The War Compensation Court; and we cannot in the least tell how much we shall have to pay, but it may be in the neighbourhood of half a million. cannot really say what the decision is going to be. We have also got still one very big action against us in the Courts about the loss of a ship in which the claim is-I do not know, and I am speakfrom memory-three-quarters of a million.

162. I can understand that, but what puzzled me was that I understood Mr. Niemeyer to say that two months after the close of the last year you did not know, not what your liabilities were, but you did not know the money that had been paid out by your Departments?We did not know the money that would be brought to account in that year. (Mr. Niemeyer.) That had been paid out at the 31st March.

163. I think I ought to ask Sir Malcolm, from the point of view of the Exchequer and Audit Department, is there anything you would like to say on this Admiralty Accounting, because this is a big question really?-(Sir Malcolm Ramsay.) I should like to say this, Mr. Chairman. Sir Charles Walker said that one of the two causes which operated to produce the excess was that they were confronted with unknown liabilities, оп account of claims from other Departments. It is not clear whether any steps were taken to ascertain, by inquiry from other Departments, what those claims were and when they were likely to mature. I do not think there has been any evidence given about that. second point, which I hope the Committee will go into, is the clearing of Suspense Accounts. There are at the Admiralty large amounts which have been spent, but which for some reason or

The