23 April, 1923.]

[Continued.

to an excess of £1,000 only. With regard to the percentage paid to banks, in 1921-22, which is the latest year for which complete accounts are available, the amount spent on percentage to banks was approximately £1,000. The charge made by banks for supplying money at home to naval accountant officers at short notice is at the rate of 2s. 6d. per £100, namely, one-eighth per cent. When a ship puts into a place where the Navy are not accustomed to draw money they have to make arrangements to get it, and the particular charge abroad varies from 1 to 2 per cent., according to local conditions.

Mr. Somerville.

1511. I was not here when the Committee last met, but was the question of Lighthouses discussed then? It was not discussed at the last meeting. This was the only question asked, which I have just replied to.

1512. Can you tell me the practice with regard to the construction of lighthouses? -No; that is a Trinity House matter.

Mr. A. M. Samuel.

1513. With regard to the sale of ships of war for breaking up, you have now handed in a memorandum on the subject. Does the Admiralty exclusively deal with this work?-With ships of war, yes.

1514. Does the Admiralty in any case ask the Board of Trade to help them, or the Shipping Liquidation Department ?Not for men of war; that is entirely a matter for the Admiralty. Our Contract Department knows far more about it than anybody else, because they have dealt with it for years and years.

1515. Is it not a fact that on several occasions you have sold ships for breaking up and then found that the firms who have purchased them from you have not been sufficiently strong to carry out their contract? I would not say sufficiently strong, but it is certainly true they have been unable to carry out their contract, and one such case is mentioned in the Report of the Comptroller and Auditor General to the Public Accounts Committee. The reason is because there has been such a slump in the price of scrap that the contractor has been unable to carry on, and he has lost many thousands of pounds over it, as is said in the Memorardum I have handed in.

41314

1516. What is the position of the Admiralty in such a case. Have you resumed ownership? There have been cases of default in which we have resumed ownership and then sold again. I had a case quite recently in which the man defaulted and could not complete the contract, and there we sold it again to some advantage. But in cases which I am speaking about, where firms have lost a good deal of money, they have come to us and asked us to help them in their difficulties, and we have considered it, in conjunction with the Treasury, and in some cases actually revised the contract.

1517. What are the steps you take to get offers if a ship is thrown back on your hands owing to the inability of the person or firm who has bought it to carry out the contract? What is the procedure adopted? Do you offer that ship by tender, or do you put a notice on the dockyard gates?-We do not put notices on the dockyard gates. The procedure would be as is stated in paragraph 4 of the memorandum I have handed in.

1518. Have you had any complaints. about the way in which you ask for tenders when you resume ownership of ships sold for the purpose of being broken up and the contractors have not been able to carry out their contracts ?--The number of cases is infinitesimal. I know of two myself, but there might be a few more.

1519. There were two cases on which I Do put down questions in the House. you remember those?-I do not remember those.

1520. You are not aware of complaints being made about the way in which contracts are given out by the Admiralty on resumption of ownership of such ships?-I have not heard of any at all.

1521. Why should not these sales of ships be dealt with by the Shipping Liquidation Department, or, conversely, why should not the Admiralty take over from the Shipping Liquidation Department the conduct of the sale of ships which the Shipping Liquidation Department now have on hand for breaking up? -That is a question of demarcation between the two Departments which was settled by the Government at the time. We have got so far now with the breaking up of ships and the sale of old ones that I should say it would be hardly worth while, from our point of view, to transfer the remaining work to the Shipping

E 3

23 April, 1923.]

[Continued.

Liquidation Commission, but what the state of their work is I do not know.

Captain Viscount Curzon.

1522. Is not it a fact that the breaking up work of the Shipping Liquidation Department is of an entirely special character arisng out of the war, whereas the work which the Admiralty do in regard to breaking up ships is work which is always going on?-Our work is always going on.

Mr. A. M. Samuel.

1523. Do you have to break up or sell ships, which are not fighting ships, which come under your control?-Such things as tugs. and so on, we dispose of through the Shipping Liquidation Department.

1524. Then we have two Departments doing that kind of work?-We do the work in connection with the men-of-war and the other Department takes the auxiliary ships.

1525. But we have two Departments. It is true, you tell me, the Shipping Liquidation Department could not advantageously take over the breaking up work in connection with your fighting ships? I do not think so.

1526. But could not you save the State money by keeping in your hands the work connected with the breaking up of tugs or the selling of tugs instead of handing them over to the Shipping Liquidation Department, and could not you take over such ships as they have to break up or to sell? I think we could have taken over the tugs and small craft, and so on, but it was decided, as I say, by the Government of the day that there should be this demarcation.

save

1527. Do you think you could money for the State if that demarcation were non-existent ?-I really do not know enough about the Shipping Liquidation work to say. They had an enormous job to deal with these surplus ships.

1528. £70,000,000 worth of ships?-Yes, and that is purely an aftermath of the war, whereas, as has been stated, the work of the Admiralty is always going on, although to a much smaller extent. In the past, twenty years ago, we had a considerable number of ships to sell for breaking up purposes.

1529. What would you say if, when the report of this Committee comes out, I were to put in a paragraph recommend

ing that the Admiralty should take over from the Shipping Liquidation Department this work of breaking up or selling mercantile ships that belonged to the State? Would you say that that was an ill-advised piece of advice on my part?— It would really depend on what the recommendation wars. If you recommended that the Transport Department should come back to the Admiralty, the Admiralty would be delighted, because the Shipping Liquidation Department is really an off-shoot of the Transport Department.

1530. But do you think your Department could save the State money if the recommendation I propose to make were carried out? With our present staff I should certainly hesitate to say we could save money, because in the Admiralty at present we have no people who have knowledge of mercantile ships and their prices and what they ought to fetch, and

so on.

1531. But could you do it with a small increase of staff?-With a nucleus of staff.

1532. Taking one thing with another and balancing the pluses and the minuses, do you think you could save the State money by doing that work in the Admiralty?-By taking over a nucleus staff from the Liquidation Commission who are dealing with that work now 1 should say that under our organisation we probably could, because you would then have not two organisations but one.

Captain Viscount Curzon.

:7

1533. Have the New Zealand Government expressed any opinion as to whether the sum obtained for the "New Zealand is a fair one?-I have not heard of any such thing, but I doubt whether we have had time to get a reply. We had to get Treasury sanction for transferring this sum, and it really depends on Parliament passing the Vote 11 of the Estimate.

1534. I suppose the Government of the Dominion of New Zealand concurred in the sale of their ship? She was not their ship. If you will remember, although they provided her out of their funds, she was part of the Navy. She was not like the Australia."

1535. still, there was a good deal of sentiment attached to it? Yes, there was a good deal of sentiment about it.

23 April, 1923.]

[Continued.

1536. I suppose they have really concurred in its sale, broadly speaking?Yes, broadly speaking, because it was settled at the Washington Conference where the Dominions were represented.

1537. And no representations are being made as to the smallness of the sum obtained for the breaking up this ship?I hope not.

1538. I see you state in your memorandum that she realised over £1 per ton, and that prices have appreciated since ?As a matter of fact the price has already risen. When these ships were sold in the congested state of the market, owing to cur previous sales and to the fact that we had to force on the sales on account of the Washington Treaty we got almost the worst price.

1539. Were you compelled to break up theNew Zealand" at the moment you did? Could you not have hung on to her for a time with a hope of getting a better price? We had all this large flow of ships which had to be broken up within eighteen months, though not perhaps completely broken up within that time.

1540. Have all the ships earmarked at the Washington Conference been dealt with, except the "Lion "?—Yes.

has not yet been

1541. The "Lion " dealt with ?-Not yet. 1542. Therefore you could have held up the "New Zealand" or any other of such ships for which you might hope to get a better price, in view of the nonratification of the Washington Treaty ?— I do not think the "Lion " was hung on to for that reason, but there were sentimental reasons attaching to her at first.

1543. It was a justifiable reason according to what was said in the House. Was it the action of the Government or of the Department which forced the sale of these ships?-The Admiralty having been parties to the Washington Treaty by their special representatives, immediately took the opinion of the Government as to whether they should proceed in anticipation of the ratification of the Treaty.

1544. The Admiralty asked that?-The Admiralty would move in the matter, certainly. I am not aware whether the proposal was initiated by the Admiralty or by the Government, but of course the money we had in the Estimates was not sufficient to allow for these ships to be

41314

maintained, so it was imperative from that point of view.

1545. So that if you had hung on to them the Estimates would have been raised? If we hang on to so many more ships it means extra expenditure for keeping them.

Mr. Somerville.

1546. Is the work in connection with

boats to be broken up now finished? Have you got through your programme, more or less? We have two capital ships, four light cruisers, two monitors, and a number of small ships, amounting to between thirty and forty, still not sold.

1547. These warships must be sold to be broken up? Yes, we are not allowed to sell them so that they may be used in any way for fighting purposes.

1548. Can they be sold to be used fo commercial purposes?-They are quite unsuitable.

1549. Even the small ships?-Quite.

1550. Then there is no possibility of getting a better price for them in that way?-None at all.

The

1551. Have you ever attempted to sell these old warships by auction for the purpose of being broken up? No, we have not done that, because our Contract Department would probably say that we get a better price in this way. number of firms that can deal with these ships is really very small, and there was such an enormous block of ships to be sold that it is quite certain the prices offered would be very small for those at the bottom of the list.

1552. The trouble is that the number of firms who can break up warships is limited and there is great possibility of a ring being formed?-There is always that possibility, but, as a matter of fact, I do not think there is a ring in this case. There is great competition to get such things as submarines, because a submarine is worth far more per ton than a big ship, as there is so much more metal in it for its size.

1553. It is all a question of the worth of metal for scrap?-Yes.

1554. Do you remove the better class metals, such as brass and copper, or do you sell the boat as she is when finished with? We do not remove anything that is not required for the Navy.

E 4

23 April, 1923.]

[Continued.

1555. So you sell her complete, with all brass and copper fittings and special metals? Yes, it is the special metals in the case of submarines that fetch the price.

1556. The question of selling by auction has not been considered in view of the fact that the Department think they get a better price by private tender?-There are not enough firms to make it worth while to sell by public auction.

Sir Philip Pilditch.

1557. With regard to the totals as between 1914-15 and 1923-24, you will remember, Sir Oswyn Murray promised to supply the Committee with an analysis of the figures as between £450,000 and

£1,134,000, showing how much of it was due to increase of emoluments, how much to increase of personnel, and how much to new or altered services, it having been argued that there were altered services which necessitated some part of the increase?—I saw Sir Oswyn Murray this morning, and he told me that it is rather a big task, but it is being done, though it is not ready at present. He asked me to say that he would send it in as soon as possible, and then, if the Committee wish to ask him any questions upon it, he will be glad to come.

1558. One would have expected to have before us some detailed explanation of how the enormous increase came about, and he undertook to supply it? Yes, it will be supplied.

Chairman.

1559. A paper has been circulated dealing with Votes 13, 14 and 15. The only question I have to ask is with regard to the commutation of retired pay and wounde pensions which is dealt with under Subhead E. The explanation given on page 192a of the Estimates is not very clear to my mind; it says in explanation of the difference in the Vote, "The amount required for commutations effected in 1922 is greater than the amount of the annuity lapsed." Perhaps you will give the Committee a little further explanation on that point?-(Sir Charles Walker): If you turn to page 192 you will there see a little table given. We pay over ten years, so that the payments the year before included the amount for 1912, which was only £3,162. That now goes out, and we get in the sum for 1922, which is £37,000. The reason for these very big figures since the war is, of course, that many officers are commuting for the purpose of purchasing houses, and the specially large sum in 1922 is due to the reduction scheme by which, when small pensions were given to young officers to go out, they were allowed to commute the whole in case they wanted to settle in business, or settle in the Colonies, and so on. This subhead will grow every year, because those small sums for the years 1914, 1915, 1916, 1917 and

1918 will come out year by year; and the years 1923, 1924, 1925 and 1926 will, of course, contain larger sums. This money is payable to the National Debt Commissioners.

1560. Over a period of ten years ?—Yes.

Sir Philip Pilditch.

1561. I have in my hand the typed statement which you have sent in, and I see the first item is "Half-pay and unemployed pay," the amount of which is somewhat reduced as against last year, though, of course, it shows a considerable increase on 1914-15, but in the remarks it states: "The figure for 1914-15 is for half-pay only." Does that mean that the "unemployed pay " is a new term and a new form of payment?—Yes, there was no such thing as unemployed pay before the

war.

When an officer was unemployed he went on half-pay, which was roughly the half-pay of his rank, or less than half-pay in some cases. At the end of the war the system of unemployed pay was introduced, which, roughly, is that in the case of officers of the rank of commander and under, for the first six months, if they are unemployed so long, they draw their full pay without any allowances; after that, for the next six months they come on a reduced scale of pay; and they do

23 April, 1923.]

[Continued.

not come on the real half-pay of their rank until a year has elapsed.

1562. That makes a little difference ?Yes.

1563. So the half-pay and unemployed pay in the current year is substantially for the same thing as half-pay in 1914-15? -Yes.

1564. I am not going to quarrel with the discrepancy, but the estimate for this year for this particular item is £100,000 less. I take it that is accounted for by the fact that there are fewer officers?Yes; the reduction scheme last year has cleared off a very large number of officers who would otherwise have been on half pay or unemployed pay.

on

1565. Still the pay of this kind is four times what it was before the war, whereas, speaking from memory, the numbers are not many more than they were before the war? The numbers before the war half pay were very small; there were very few officers on half pay because of the extreme shortage. At the present moment there will be more officers unemployed. It is possible to allow officers who want half pay now to have it, whereas it was not possible before the war. Of course, the rates of pay are very considerably increased since before the war.

1566. So they get it at a much higher rate?—Speaking offhand, I think you could easily halve this sum of £200,000 on the pay alone, and there are greater numbers now than there were before the I hope myself that figure of £200,000 will come down on numbers alone.

war.

1567. And, of course, it could only otherwise come down if the rate of pay was varied?-Beyond numbers it could only come down if the rate of pay was reduced.

1568. And that depends on the big issue of the rate of pay?—Yes.

1569. As to the retired pay we get the figures as between 1922-23 and 1923-24 given on page 184 of the Estimates. There I see this figure has substantially doubled since 1914-15. I take it your answer would be very much the same there, namely, that it is the increased rates of pay that have caused the retired pay to increase ?-It is not quite that. The retired pay for those who served in the war and for those since retired was increased by 50 per cent, as a maximum only.

1570. The retired pay was increased by 50 per cent. do you say? Yes, as a maximum.

1571. Not, as the ordinary pay was, increased by a bonus which made it work up to more than double?-No; 50 per cent. was the maximum increase.

1572. Then how do you account for this figure given in the Estimates?-The two reduction schemes that have been in progress since the war, the first one voluntary and the second one largely compulsory, have relegated to the retired list between 3,000 and 4,000 officers. The removals from the pension list occur, of course, among the older officers, who have comparatively small pre-war pensions. Those who are coming on the list due to current retirements get the new pensions.

1573. The new rates of pay and new pensions?-You might have the same number of officers on the pension list, but, as the older officer dies and the newer officer comes on, the pension will be at least 50 per cent. up.

1574. Then these increases of retired pay are in addition to what we see in Sub - head C immediately below: "Gratuities to Officers on Retirement." I take it those are cash gratuities; it is a lump sum of approximately £1,000,000 paid out, and there is an end of it?-Yes. 1575. That has practically ceased this year? Yes, it has.

1576. How many officers will retire under that scheme?-1870 was the number to be retired, and I think before the year ended we got rid of very nearly 2,000, including the coastguards.

1577. Has the process stopped now?The process has ceased.

1578. I do not know whether you say there is any difference between the principles which have given rise to the rises in A, B and C, and those which gave rise to the rises in E, the amount of which I see is going up still further. In most services we find there are savings between 1922-23 and 1923-24, but here we are faced with a considerable increase in the coming year?-The Chairman asked me a question on that, and I explained that it will continue to rise. But it must be remembered that, if Sub-head E was not there, Sub-head B would be larger.

Major Sir Archibald Sinclair. 1579. Can you tell us roughly the number of officers who were on half pay