10 TMATZ 102 Chapter IV. GENERAL CONCLUSIONS TO PART I. Redundant Officers and Men of the Fighting Services. 1. We cannot conclude our Report on the three Fighting Services without stating that the suggested reductions will necessarily lead to an increase of the "Non-Effective" Votes. We are of opinion that any such abnormal increase of the Non-Effective Votes might, in certain circumstances, be properly regarded as a special charge arising out of the war, and we propose in a subsequent Report to put forward our views on this point, not only in the case of Non-Effective" Pay, but also in the case of such other items as War Pensions. 66 Need for Immediate Action. 2. The reductions in the Estimates which we have put forward for the three Fighting Services can, we believe, be realised by the measures we have suggested and by the practice of the most rigid economy in the Services. But it must be obvious that, reporting as we are in the month of December, these economies can only be realised in the year commencing April next if our Report is effectively dealt with in main outline without delay. The Committee has been limited in the continuity of its sittings only by the physical capacity of the staff of the Treasury-from whom it has had the most devoted service to do the secretarial work involved. We believe that if the reduction of the Estimates on the lines suggested is taken in hand by the Departments with energy, the sums we have noted can be realised or even exceeded; but if delay occurs in giving effect to such of our major suggestions as the Government may approve, the saving cannot be realised in the coming year. PART II. INTRODUCTION TO THE REPORT ON GOVERNMENT EXPENDITURE ON SOCIAL SERVICES, NAMELY, EDUCATION, HEALTH, LABOUR AND OLD AGE PENSIONS. The Provisional Estimates submitted to the Committee of the cost of these services in 1922/23 in Great Britain amount to over £124,000,000, being nearly four times the pre-war expenditure : Ireland has been left out of account except for the training of ex-service men which under the Government of Ireland Act, 1920, remains an Imperial charge. 2. The reductions proposed by the Departments for 1922/23 as against 1921/22 amount to £8,700,000, or 6 per cent. Disappointing as this figure must appear, it is doubly so when the fact is noted that it is actually less than the saving which will automatically accrue from the reduction in the cost of services arising out of the war." The services so termed in the Parliamentary Estimates are: (a.) The subsidy to private builders. (b.) The cost of certain transactions in housing materials. These services were estimated to cost £18,642,000 in 1921/22 and £8,476,000 in 1922/23, a reduction of £10,166,000, while the expiry of the Unemployed Workers Dependants Act in May 1922 produces a further reduction of over £1,400,000 in 1922/23, as compared with the current year. The Estimates in respect of Ordinary Services for the Board of Education show an increase of £744,000 over 1921/22 and Ministry of Health £3,352,000. It should be pointed out, however, that of the total expenditure of £87,000,000 in respect of education and health nearly £67,000,000 represents contributions towards the expenditure of local and other authorities. The bulk of these contributions is now on the basis of percentage grants, and the Departments have no effective control over a large proportion of the money for which they ask, so that when pressed to economise they can do little more than exhort the various Authorities who are the spenders of the money and who alone have the opportunity to effect substantial economies, apart from policy. These percentage grants raise a question which in our opinion is of the greatest importance and one which is referred to more fully at later stages. 3. The cost to the Taxpayer, exclusive of the additional burden borne by local rates, has grown from under 33 millions in 1913/14 to 124 millions in 1922/23. An analysis shows sensational increases. The increased charge to the Taxpayer has been accompanied by great increases in the sums otherwise raised from the public for the same services : * Figures for 1922/23 not yet available, but will show an increase as compared with 1921/22 of £4,000,000 to £5,000,000. † Sanitary services, hospital and other personal health services, lunacy apart from pauper lunatics. The total cost of these Social Services has risen from £86,500,000 to £243,500,000 during the period under review. 4. Various causes have contributed to these enormous increases and are dealt with later in the appropriate chapters of the Report, but there is one factor of administration which, in our opinion, has materially affected the cost to the Taxpayer, and that is the development of the percentage grant system. This system, which is common to Education and Public Health Services, has also been extensively applied in other Departments. Where in 1913/14 fixed or per capita grants were in force, they have now largely been replaced by percentage grants, while new grants introduced since that date have almost invariably been on the latter basis. The percentages vary from 20 per cent. to 75 per cent., the most frequent figure being 50 per cent. The advantage claimed for the percentage grant system is that it provides a stimulus to authorities to improve the efficiency of their services; in fact, it is a money-spending device. The vice of the percentage grant system is that the local authority, which alone can really practise economy in these services, loses much of its incentive to reduce expenditure, especially when the larger proportion is paid by the Taxpayer through the Exchequer. The deciding voice as to what money shall be spent is not that of the Government or the House of Commons, but that of the local authorities. The Departments are thus in great difficulties in framing estimates, for these are based on anticipations not of what the Department itself will do, but of what hundreds of local authorities may do. The weakness of divided responsibility is manifest throughout. If the Government were to attempt to impose a real and effective check from the point of view of efficient administration as well as audit, it would result in an enormous increase in bureaucratic control. It would mean a detailed scrutiny of accounts and an examination of all new expenditure. This would tend to overload the central machine, diminish local responsibility and lead to greatly enhanced administrative cost. We do not suggest that the Local Authorities are negligent, nor do we suggest that they have not been directed to incur expenditure in conformity with a policy which, if left to themselves, they would not have incurred. We consider that the percentage grant should be abandoned in the interests of economy and be replaced by fixed grants or by grants based on some definite unit. Even though it were necessary to maintain the charge to the Taxpayer at its present very high level, which we do not admit, the change would still, in our opinion, be very beneficial to the country by : (i.) Increasing the incentive to local authorities to economise. (ii.) Restricting the growth of the demands on the Taxpayer. (iii). Enabling staff economies to be effected at headquarters. In the case of the grants to local authorities for housing purposes, the system adopted has gone even beyond the percentage grant at its worst. Here the local authority has lost all financial incentive to effect economy, because the annual loss in excess of a 1d. rate, say, 14/15ths of the total, is entirely at the cost of the Taxpayer. Here we have a vast partnership in a property. The managing partner, viz., the local authority, has absolutely no financial incentive to economy, as no saving he effects redounds to his own benefit. The Taxpayer, through the Exchequer, pays the whole excess, which is estimated at 10 millions a year for 60 years. With these general remarks, we proceed to consider the estimates in detail. Chapter I. BOARD OF EDUCATION ESTIMATES. The Estimates for the Board of Education are as follows: It appears from estimates submitted to us that the total expenditure from taxes and rates on Education in Great Britain will in 1922/23 exceed a total of £103,000,000: |