6 March, 1924.] MINUTES OF EVIDENCE TAKEN BEFORE THE Mr. S. H. G. HUGHES, C.B.E. [Continued. BOARD OF TRADE, SHIPPING LIQUIDATION DEPARTMENT. Mr. S. H. G. HUGHES, C.B.E., called in; and examined. 708. Why did not you sell in 1920? I am very anxious to know why the Government thought fit to go on with these?I may say, straight away, that although this is headed, "Government-owned Prize and Detained vessels,' ," the Government-owned vessels were disposed of as early as possible after the Armistice; those vessels had disappeared, I suppose, by the end of 1919; and this Account relates to two vessels only, which were detained vessels; and our purpose was to get rid of the ships as soon possible, but, as they were on our hands, they had to be operated, and, therefore, we were trading in the open market. as 709. Do you think every effort was made to get rid of them, or did you think, having made a profit of £870,000 in 1921, you would go on a little longer? -I do not think the Ministry of Shipping retained a single vessel in order to trade it, but if we had to keep a vessel we traded it. That was the policy of the Shipping Comptroller right from the very beginning, and I am perfectly satisfied it was carried out consistently. Sir Henry Craik. 710. Is this profit just for one year?Yes; there is the Trading Account at the top of the page, and the Balance Sheet is at the foot, showing the combined effect of the trading from the 1st March, 1918. 711. The gross annual profit was about £200,000? (Sir Malcolm Ramsay.) The total profit on that scheme was about £800,000. Mr. Arnold Williams. 712. Would it not have been possible to debit this loss against depreciation; was it not in fact depreciation really?— (Mr. Hughes.) This is the loss on operation, which was purely trading. the 713. Is not it in effect the same thing? -Out of that you have debited another £32,000 for depreciation in the last year, when you suffered this loss?-That was the regular depreciation on the initial cost of the vessel. 6 March, 1924.] Mr. S. H. G. HUGHES, C.B.E. [Continued. 714. But you were selling some of the vessels? They were all sold as soon as possible. 715. Where are those sales credited?The sales do not appear in these Accounts at all. 716. Where are they?-The Prize-ship sales would appear in the Prize Accounts of the Courts in which the vessels were condemned: the London Prize Court or the Colonial Prize Courts. 717. If the ship is not hired, what is the need to write off depreciation ?-Because we had the free use of those ships. We are showing here depreciation, interest, and insurance as the alternative for hire, which we should have paid in the ordinary course. As we were the users of the ships when we had them in our possession, we either hired them from the owners, or we should charge this depreciation and interest on the capital value. 718. Would it have been more accurate to call it a hiring charge?-If you notice in the Balance Sheet we have " Depreciation, Interest and, Marine and War Risk Insurance in lieu of hire." 719. I grant that, but it seems funny to me to be writing off depreciation when you have no asset to write down.-(Sir Malcolm Ramsay.) The capital value of these ships never came into this Account at all. Rather than lay the ships up and get them rusty and rotten, the Government traded with them. This Account is the record of that trading, and as they had no hire to pay they charged depreciation of the value at £25 per ton, and interest and insurance. 720. I quite see that; I only wondered why it was done in this way?-The capital value comes in other places in the Accounts; some items were paid over in connection with the Vote for the Shipping Department, which the Committee will have later, and some into the Prize Account. Chairman. 721. How do you get your allowance for administrative expenses; it seems to me very small in the Account on page 168: only £50, and in the other Account on page 170, £2,030.-(Mr. Hughes.) That is an estimate based on the proportion of the staff's time occupied in dealing with this work. Of course, in that particular case, on page 168, the Overseas Prize Disposal Committee, they were only the Accounts of one ship, and it was the part time of one clerk in this connection. Colonel Assheton Pownall. 722. On page 168 there is an item, "Reserve for administration, £5,650."That is for four years; the £50 is on the Trading Account. Mr. Arnold Williams. 723. Is it not the fact that the whole of these reserves really now practically become a profit ?-That is so. 724. The whole of this money will be left with the Exchequer, practically speaking?-In the Account on page 170 you will notice the total of the Exchequer receipts is £1,760,000. 725. None of these reserves will be required? That is so. Chairman. 726. I suppose we may have got less for the ships owing to the depression in prices? (Mr. Watson.) That occurs in another account; it does not come in here at all. (Mr. Hughes.) As a matter of fact the Government-owned ships, 400 or 500 of them, were all sold, in 1919, at prices which, in the aggregate, exceeded the cost price. Sir Henry Craik. 727. But the last sales, of course, were otherwise?-But taking all those sales into account the total receipts exceeded the cost price. Chairman.] Now we will take the Coast Trading Office, which is on page 171 Mr. Leif Jones. 728. In this Account the Administr1tive expenses charged are £7,700 for the whole period, and £500 for the year?Yes. 729. On what principle are they apportioned; and how many ships are you dealing with here?-Very few in the last Account. There were two vessels in the Coast Trade Account only. 730. And £500 for Administrative expenses! What does that really represent? What is included in it? That is the estimated cost of the Head Office staff dealing with the Coasting Trade Office work. 731. Is not that a very large sum to allow for the Head Office?-In this particular year there was a complete audit made of the Accounts of the Coasting Trade Office, and a representative was sent from the London Office to Newcastle to make a local audit there. 732. Who makes this distribution of the Administrative expenses: the Auditor?— It is an estimate made by me, and I think the particulars have been available for the Comptroller and Auditor General, and he has taken no exception to them. 733. Is there anything to check whether the administration was economical or not; or do you just take the total cost and distribute it, of your own will as it were, among the different services ?— As to the £500, we know exactly what staff at Head Office was engaged on this work, and what proportion of their time it took. 734. Does that apply all through to the Administrative expenses?-That applies all through these Accounts. 735. Was there any check from the outside at all upon these Administrative expenses?-The amount is relatively small. The Manager's fee, just above that, of £754 is part of the administration; but that is the local administration, and the £500 is the Head Office administration in that particular Account. 736. Is there any place where it shows the total cost of the administration ?-Yes, that would be shown in the Shipping Liquidation Vote; and it may be of interest to mention that in the present year's Accounts that is 6s. in the £100 turnover, and in the next year it will be 3s. 1d. in the £100 turnover. 737. Then you have considered whether it was a reasonable expenditure?-Yes. 738. You are satisfied that it was ?Quite satisfied. 739. It has not been an expensive service so far as administration goes ?No. (Sir Malcolm Ramsay.) May I say a word as regards these Administrative expenses generally? We can identify a good number of the people who are engaged on a particular job, but at Headquarters an indefinite number of people give varying fractions of their time to supervision. I cannot check the computation of the latter items. I believe it has been the effort of the Treasury, as it has been of my people, to secure that Administrative charges are fair; and generally, I think, the tendency has been to increase them? (Mr. Watson.) That has been the practice. [Continued. We have made every effort to secure that all proper charges are brought in as Administrative charges, and there have been rather increased charges in consequence. (Sir Malcolm Ramsay.) It is very difficult with regard to Headquarter expenses; I cannot check whether a man gives a quarter of his time or a half to one job when he is dealing with a number; but all the expenses which can be identified with one particular job are debited office accommodation, salaries and SO forth. 740. You think that the charges are high enough in these cases?-We cannot say they have allowed too little. Generally, I think they have brought in the obvious items-subject to the qualification that I cannot check the time which an Assistant Secretary has devoted to, say, the Limpet Destruction Scheme. 741. What means of comparison have you with any other similar service, if you have any other, as to what the Administrative expenses ought to be, for instance, in such a case as the Shipping Liquidation?-(Mr. Fass.) I do not think we have any; we compare the various figures of the various Departments, but there is no means of testing them. (Mr. Hughes.) Here it is comparatively easy, because in the Overseas Prize Disposal Committee we had, at the time, one clerk (there is nobody there now), and it was possible to take the whole of the pay of that clerk, with something added on for other items. 742. Do you think you have really anything to rely on as a comparison except that you trust to the hard work of the Department and to economic administration generally? Of course, these were residues. (Sir Malcolm Ramsay.) I do not think there is any common standard by which you can test the adequacy or excess of Administrative charges; schemes vary so very much. (Mr. Watson.) And these are in respect of services which are not similar to any real trading operations which we could get real details about. (Sir Malcolm Ramsay.) When the Committee come to the Agricultural group they will find considerable divergencies. In some cases there is very little Administrative expense, and in others you will find very heavy charges; they fluctuate in a very curious way. 743. You have been considering the problem and you have put in a certain figure?—(Mr. Hughes.) We did at the tima these Accounts were compiled; we (The Committee adjourned till Tuesday next, at 2 o'clock.) Sir MALCOLM RAMSAY, K.C.B., Mr. H. E. FASS, O.B.E., and Mr. A. E. WATSON, C.B.E., called in; and examined. MINUTES OF EVIDENCE TAKEN BEFORE THE 11 March, 1924.] Sir FRANCIS FLOUD, K.C.B. There are evidently, as one looks through the Accounts, two classes: one, where necessarily the scientific interests or the prospective gain hereafter to some industry is held to out-balance any loss that there may be ?-Quite so. 750. In other cases they are more or less enterprises which ought not to be carried on unless they are carried on at a profit. I think you would admit that with regard to some of them?-Yes. They really very largely fall into two classes; there are a certain number of them which are relics of the war conditions, and are carried on under conditions which could not be expected to pay; there are others with an educational and scientific purpose, which actually cannot fairly be regarded as commercial propositions in the sense of paying a dividend in actual cash, although they give advantages to the industry in other directions. 751. As we go through them we will be able to ask questions as to what your view is as to the advantage of carrying on these through a public department rather than assigning them to scientific organisation in connection with a University, or something like that?— Quite so. some 752. Some of those, I think, you have handed over already?-Oh, yes. 753. Now about the Seed Testing Station; you have lost there; the balance is nearly £20,000?-The excess of expenditure over income? 754. Yes? It is £5,800 in this particular Account. 755. The total loss is about £20,000; you have brought forward some?-Yes. 756. Can you tell us what advantages have arisen from this?-The object of the Seed Testing Station, of course, is to enable farmers to get their seeds tested, and to encourage them to be careful in the choice of good seed. The fees that are charged are considered to be as high as would be sufficient to attract business, although they are not sufficient to pay the whole expenses of the Station. The fees were recently overhauled, a year or two ago, and were increased; but we did not feel justified in putting them up to the full amount necessary to pay the whole expenses of the Station, because that would have raised them considerably above the level in other countries where there are Seed Testing Stations, and also above the level of the private Seed Testing Stations in this country. 757. Have you in any way interfered with the private Seed Testing Stations? . [Continued. No; we are bound to license private Seed Testing Stations if they satisfy the technical requirements, and there are quite a substantial number; but if the Government charges are substantially higher than those of the private Seed Testing Stations, all the business will go to them. 758. What is the feeling of the farmer about this?-The farmer is using it more and more, and we hope that in time we thing self-supporting. We could deal with shall get very much nearer to making the double the number of samples without substantially increasing the overhead charges. 759. Now that you have handed it over, I suppose it is in connection with a University? It is in connection with the National Institute of Agricultural Botany at Cambridge. 760. Which is affiliated with the University? It is not technically a school of with the University. the University, but it has close relations 761. It has the advantage of assistance from the scientific men of the University? -Yes. Perhaps I may say that, in subsequent years to the one of this Account of 1921-1922, the expense has been substantially reduced. The Committee will see that in this Account the loss was £5,800; in the last year, the year ending the 31st March, 1923, we hope to get it down to just over £3,000. There has been a gradual reduction. 762. You contemplate carrying it on, and you think with a deficiency of £3,000 it is still worth carrying on; that the advantages gained would be sufficient to counterbalance that loss?-We do. In spite of the fact that we hope to increase our business year by year, gradually to reduce the deficiency, but it we hope takes time, as I think the Committee will understand, to get the farmers to take advantage of these facilities that are offered to them. They are taking advantage of them in increasing numbers, and we hope in time the Station will be, as near as possible, self-supporting. Colonel Sir William Allen. 763. With regard to the progress made, and the possibility of making a profit rather than a loss, I notice that in 1921 the fees were £2,394, and in 1922 they were £3,476. I presume that that is an indication that it is growing more popular? Yes. 764. Could you give me the fees for 1923, to show the progress that is being |