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a sum

Governments of 2 million pounds. I am not aware that they gave us any preliminary notification and I do not suppose for a moment that they had any means of knowing when the foreign Governments concerned would be in a position to pay up those sums. All these appropriations-in-aid arise out of war transactions, and we have no means of knowing when the financial conditions of foreign Governments will enable them to settle our balances. These receipts were notified to us by the Treasury in March, 1921, and I am sure the Committee will appreciate that although, theoretically, it would be possible up to March to have a Supplementary Estimate, the card is much too full for any new fixture out of Government time in March for it to be possible for a humble Department like the War Office to produce anything of the kind. So that we really had no choice in this matter at all; these things tumbled in unexpectedly and we brought them to credit. One further question is: Why did we spend the money? Well, my answer to that is this, as I have already explained, that of the expenditure four millions was a charge for railway traffic in France during the war. As soon as that was matured there was nothing for us to do but to pay it and charge it to any account which was open. The other main item was in connection with sea transport, and I will explain at some little length how that stood, because it has not only interfered with the finances of this particular year 1920-21, but it interfered with the finances of the current year, 1921-22, and was debated in the House a few days ago in connection with the Army Supplementary Estimate, and I am sorry to say it will interfere again with the finances of next year. During

the war a very large proportion of the merchant shipping of the world was in the hands of the British Government running on Government charter, or, at all events, under Government management, and as long as the war continued the Shipping Department provided the War Office with free services in the matter of sea transport; that is to say, we were not charged. We employed whatever transports we could get to carry our troops and one thing and another abroad, and all that was borne on the Vote of Credit through the Ministry of Transport Vote, and not the War Office Votes; but when the Vote of Credit came to an end the Treasury said quite properly: "Now the War Office must begin and foot its own bills again, and those things must be charged

[Continued

to Army Estimates." Therefore on the 1st April, 1919, we took over the absolutely unknown liability for whatever might come into payment, for the whole of the ship-owning and ship-running transactions of the war; whatever was outstanding we took over the liability for, with no means whatever of forming any estimate of it at all. We have got, as far as we could get, the Shipping Department's estimates of what they think will come into payment, but their accounts have been so heavy and so complicated, and it has been so difficult to say when those things would come into payment, that we have never been able to get an exact estimate from them. Very late in the year, after September-between September and December

288. 1921? - 1921 - further large charges for transports used during the war, and especially for what we call reconditioning transports, that is to say refitting ships for their ordinary mercantile work after we had used them for troops and stores-heavy liabilities of that sort matured, and so long as I could keep the books open I said to the Shipping Department: "Send them along and I will put as much into my account as I can." I kept them open for that purpose, and these heavy shipping charges, together with the railway charge, are what we have spent the five million pounds of appropriations in aid upon.

289. Now as to this four million claim of France. None of that was included in your Estimates for the year ending the 31st March, 1921?-Yes, some of it was included in the Estimate, but――

290. It is only the difference then?Yes, but when we presented our Supplementary Estimate in December, 1920, we were under the impression that nothing would be done in that year at all, and therefore we, so to speak, cook our estimate provision entirely in aid of the Supplementary Estimate of December, 1920. From December, 1920, onwards it was as if we had no provision in the estimate at all.

291. I think you were wanting to say something, Mr. Millar.-(Mr. Millar.) Yes, my impression was that the whole of that figure was in the Army Estimate, but Sir Charles has explained he took it out of the Supplementary.

292. With regard to the sea transport, you knew you had liabilities for sea transport, but there was nothing for that in your estimate?-(Sir Charles Harris. Yes, we made provision in our estimate,

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I cannot say what the figure was, and it was purely a shot, because nobody could then possibly tell what liabilities were likely to mature. The sum which actually did mature was very largely in excess of the £1,000,000 which is required to explain, with the railway charges, this £5,000,000 of expenditure.

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293. In the War Office letter on page 2, line 10, I think, you speak of siderable liabilities outstanding 1st April, 1920, which, having been inadvertently omitted from the heads of expenditure, are now included "?—If I may say so, that does not really arise on this Excess Vote; it will arise when the Committee has the annual accounts before it

294. Then we will not go into that. There is one other thing. The additional provision under head 6 in the Supple mentary Estimate was in excess of requirements. That does come into the Excess, does it?-It is a saving towards the Excess.

295. It comes into these Appropriations in Aid, does it not?-Not so much into Appropriations in Aid as into expendi

ture.

296. Then it does not come into discussion to-day?-It hardly comes into this.

297. It is not confined to the Excess ?This letter is a letter submitting the whole account to the Treasury; it is not a letter written about the Excess Vote at all, and the Excess Vote was only mentioned in it incidentally.

Mr. Marshall Stevens.

298. It is headed "Excess Vote "?-The print is undoubtedly, but the letter was not written for the purpose of the Excess Vote.

Chairman.] Certain of the paragraphs I saw at once did not apply to this, but I imagined the others did; that being so, I do not think I have anything further to ask.

Mr. Stewart.

299. I would like to ask how it was that the Army came into the shipping business? You only came in when the Ministry of Shipping was wound up, because we have had shipping accounts from the Ministry of Shipping and from the Admiralty, who have experience in these things, but I do not think we have ever had the War Office coming in as managing shipping before? No, the distinction is this that as long as all Government Departments were running on the Vote of Credit we were accountable for the expenditure we actually made in the War

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or

Office, and the Shipping Ministry accounted for the expenditure on ships whether they were working on Army account, carrying our goods or men, whether they were doing something else. But as soon as we got back to the regular system of Votes the Treasury laid down quite naturally that the Army must again begin to pay for its own sea transport. We could not requisition ships without paying for them. Therefore we took up, on the 1st April, 1919, not only the liability to pay for anything we desired, but also to pay for any arrears outstanding for work done for the Army.

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300. Then you had no control responsibility for what happened before that particular date?-We practically knew nothing about it.

301. Who was responsible for that?The Ministry of Shipping had done the work. We were always responsible in the sense that we had told them. "We want 20 more transports to carry troops to the Mediterranean," and that sort of thing.

302. If they made estimates for that, did they hand over the estimates to you? -A great deal of these charges relate to the period when we did not make estimates at all. During the war estimates were not made in the ordinary sense. We ran on an open Vote, the Vote of Credit.

303. Still we are speaking of the period now up to 1921, when the war had been over two or three years?—They are transactions which date from the war period, and it is especially the re-conditioning of ships which had been used as Army transports and then have to go into dock to be entirely re-fitted for commercial work afterwards.

304. How do soldiers know anything about it? They know nothing about it.

305. That is not a Military Vote?But we have to pay for it, and it is only salutary that we should pay.

306. But would you be as efficient in dealing with charges of that kind- ?— The work is still all done by the Ministry of Shipping and by the Board of Trade Department, which has inherited what is left of the Ministry of Shipping.

307. It never occurred to you that it is a bit confusing both to us and the public to have three Ministries looking after shipping, one of them being a military Department?-It is the theory of what is called in the public service the Agent Department. The Ministry of Shipping is the Agent Department for that expenditure, because they are

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experts, and we make no pretence to being experts.

308. But you do not raise any objection to being saddled with this particular item? No, I think it is quite sound that the Army should be saddled with the charges for Army sea transport. The only thing is that we should hope by looking forward to get to a state of things when we can estimate more closely the charges.

309. As long as you are content with it I do not wish to raise any point about it.

Chairman.

310. As to the amount, Sir Charles, you have to pay what you are told?— That is Our unfortunate position at present; we have practically no control and we have simply to pay out whatever is demanded of us.

Mr. Marshall Stevens.

311. Upon the same subject, you referred to claims which are now coming in and which are likely to come in for another year or nore; is there the slightest difficulty in ascertaining what the claims are of the shipowners with regard to these charges?-I can only say that to the best of my knowledge the Shipping Department which does the work and is in touch with the shipowners finds very great difficulty indeed in so doing. We are entirely in the hands of the Shipping Department. I have no touch with the shipowner at all; I do not know his name.

312. In winding up an estate, under whatever conditions it may be wound up, surely a time can be fixed within which claims may be sent in?-I think a suggestion of that sort made to the Shipping Department might be quite proper, but it is not open to the War Office to make such a suggestion.

313. Then it will be open to us to put these points again on another occasion? -I entirely agree, and when the Shipping Department is before you I hope you will get all due satisfaction out of them.

Mr. Spencer.

314. May I ask whether you think for one moment that this is a satisfactory method of accountancy in which one Department which has no power of checking the account, as you have just admitted, may be the Department that has got to settle the account?-It is not satisfactory from every point of view, but I

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think it satisfies the main point, and that is that the Department which initiates and orders the expenditure, not in the technical sense but in the general sense, should be called upon to settle its own financial responsibility. It would not be fair that the War Office should say to the Ministry of Shipping, "We think we would like two more hospital transports fitted to be in the water all this year," and make the Ministry of Shipping do that at its own expense. As we have to find the money there is a control upon us in the giving of orders.

315. I understood you to say a minute or two ago that unfortunately you were not able to check the accounts. Now if that is so, do you consider for one moment that you are the Department which should have the final settling of these accounts?-We do not really settle the account; we merely record the expenditure in our particular pigeon-hole of public accounts.

316. They settle the account?-They settle the account as our agents. (Mr. Niemeyer.) Perhaps I might point out in that connection that the checking by the War Office of the Shipping Accounts would not save the taxpayer any money whatever.

317. No, but I take it from the description which has been given by Sir Charles, it is this: his Department is wholly responsible for the payment of this account, and this account is presented by another Department entirely. This Department is more or less practically responsible for that account? (Sir Charles Harris.) I should not entirely agree with that; the War Office say to the Ministry of Shipping, "We want so many transports," and the Ministry of Shipping provide those transports on the best terms they can, and to that extent are responsible, but the ultimate cause which makes it necessary to have the transports is the Army, and therefore it is right that the Army should pay, otherwise the Army Accounts do not show the cost of the Army.

318. But my point was this, that they have not the immediate oversight of the expenditure and yet they are called upon to meet it. That is perfectly true. (Sir Malcolm Ramsay.) The Ministry of Shipping settle what is the proper price and conduct the negotiations with the shipowners. The War Office would not be in a position to do that, but the Ministry of Shipping is, and they have in fact got

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320. Is not that a little as if I were going to build a house, and I employed an architect to stand between me and the builder? He would have the expert knowledge to check the builder's accounts, and then when he checked them I would have to pay them. I should not have the expert knowledge to be able to check the account, but still I have got to do the paying.-(Sir Charles Harris.) Precisely; that is the analogy.

321. In one sense the architect has no special interest in seeing that the bill is cut down; he has merely his professional duty.

Sir William Barton.

322. You tell us that whatever these agreed terms may be in the case of the Army, if you had extra Appropriationsin-Aid they would only encourage you to make fresh expenditure. Now I want you to tell me, that being so, how you get precisely to £100.-It looks very suspicious.

323. It is very suspicious.—If I may say so, when I presented this statement to the Secretary of State to sign he refused to sign on that very ground; he said, "This is obviously cooked; you have got it to exactly £100." May I draw attention to the note above the little framing of the table in which the figures are set out: "The excess of actual over estimated Appropriations-inAid for Army services for the same year amounts to £5,330,894 7s. 9d.," and out of that total such sum is Appropriatedin-Aid as is necessary to balance the expenditure within £100. That is where the cooking comes in.

Chairman.

324. £100 is purposely left in order? -That the House may have something to vote.

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Sir William Barton.

325. It is rather suspect all the same? -It is very suspicious, I agree.

326. How much of this money was in fact for sea transport?-I am afraid I cannot say how much of the total was for sea transport, but I have a note here that the sea transport bills from the Ministry of Shipping which were recorded in my books after September, 1921, were £2,680,000.

327. How much of that was for the transport of troops to Mesopotamia ?—I am afraid it is impossible to say; I do not think even the Ministry of Shipping could tell you that. The ship is in the water, and she runs the whole year under Government charge, and exactly how much of her cost for the year is troops to Mesopotamia would take a very considerable amount of analysis to find out.

328. A ship has some such analysis, though. Those charges apparently were incurred by the Government of India, were they not?-There are charges which were incurred by the Government of India.

329. What check have you upon that? -Practically none, and that is another of our great difficulties in the system of war accounts. We say to the Government of India, "You send us in the bill certified by your own auditor, the auditor of the Government of India, and we will pay." We have no check.

330. I wish I had some dealings with you-"Send us in the bill audited by your own auditor." That is not right.— The difficulty would be that for the War Office to have sent out an army of people to India to audit the accounts of the Government of India would have certainly cost a very great deal in staff, and I do not think it would have paid, because it is a Government audit, in which the individuals who conduct the audit have no interest one way or the other.

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331. I suggest to you, Sir Charles, that inasmuch as this was for the British Army and to be debited to the Army accounts, it was not necessary for you to send out an auditor at all. You could have trolled the expenditure from the beginning; it might have been in your hands and not in the hands of the Government of India?-I beg your pardon, because the Government of India was recruitingraising men by hundreds of thousandsand it was perfectly impossible for anybody from Whitehall to control that. The

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only possible way to do it would have been to send out an army of auditors to do it.

332. I would like to beg your pardon, Sir Charles; it would not have been necessary, but it was quite possible for one auditor in India to have arranged for checking the transport-quite possible. -Even there I doubt, if I may say so, whether that would prove to be of actual use in practice. Nobody but the Government, in fact, could handle transport under the war conditions, and all this deals with the war conditions.

333. Of course, that must be a matter of opinion. It is a very big question.

Mr. Spencer.

334. Assuming you had sent out an army of auditors, is it not just possible that it would have paid you to do so? Is it not the fact that the Audit Department has really been during these last few years a revenue-earning department through its checking?--I think the Comptroller and Auditor General could speak better with regard to that than I can, but as regards Indian expendi. ture I think the Comptroller and Auditor General would confirm what I say. He is in exactly the same position as I am. All we get is a string of figures on a piece of paper, but there is nothing to show what they represent and nothing to show anything, simply a charge to be posted in the ledger.

335. Would that be the whole of the information your band of auditors would get if you sent them out there? Would they get no more than that? If I had sent auditors out, they would of course have seen the details from which those figures for posting in the ledger were built up, but whether they would have been able to disallow against the Government of India a sufficient sum to pay for their own keep is very, very doubtful.

336. I must confess that I have not been long on this Committee, but from the accounts that have been presented to it by the Comptroller and Auditor General, it is proved that it has been to the advantage of the British public that there should be the closest possible scrutiny of all the accounts.-I entirely agree, and there has been a complete scrutiny by a Government auditor. The only difference is that it is the Government auditor reporting to the Govern36106

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ment of India instead of reporting to the Treasury here. It has been all independently audited.

Chairman.

337. Sir Malcolm, from the point of view of the British Exchequer and Audit Department, have you anything to say on this? (Sir Malcolm Ramsay.) I should say that the Indian audit was quite as efficient and quite as effective and as independent as my own. From my observation, the Indian audit is extraordinarily meticulous; I have watched the accounts coming through, and everything is accounted for and audited to the last anna or rupee, and my own feeling about the Indian audit is that it is really almost too meticulous. As regards the question of charges between this country and India, I do not see that a local audit would help you because these matters depend very largely on policy. The Indian auditors can say that this and that has been spent, but in the main the real direction in which saving for the British Exchequer can occur is in the broad decisions as to the apportionment between India and this country of charges for troops which are serving in or in the neighbourhood of India, and which are partly paid for by the Indian Government.

Mr. Spencer.

338. Might we not easily say that the same thing applies to British accounts and yet your Department has been responsible for a tremendous saving in detecting errors.-(Sir Charles Harris.) I would like to explain on this point that it is only in war-time that we accept the Indian audit in that way. For peace-time transactions, for instance when we borrow troops from India in peace, we arrange a commuted rate of so much a head which is final as far as we are concerned, and we satisfy ourselves by a rigorous examination that it is a fair rate. What the Indian Government actually spends is a matter for itself.