[Continued.

profit there would be no question of allowing them interest upon it.

67. It is not quite a trading account, is it? It is not possible to give an exact analogy between these accounts and a commercial concern, because you do not distribute any dividend to the shareholders.

Chairman.

68. Perhaps we had better begin on the Food Department of the Board of Trade? -(Sir Malcolm Ramsay.) Before you go to that, may I say one word. These two volumes of Accounts, as regards most of the Accounts, are identical; there are a

very few in the earlier volume which do not appear in the second, and vice versa, but for the most part, the two volumes cover the same ground. I understand you want to direct your examination to the later Accounts, those for 1921-1922, but there are a few points on the earlier Accounts which perhaps, if you see fit, you could take up at the same time.

69. On what Departments do they arise? There was one about bacon, was not there?-There are certain questions mentioned in my Report, and I will call attention to them if you will allow me. Chairman.] Yes; when we come to the particular Accounts.

Chairman.

70. This starts on page 151, and the Account goes on to page 158. What does this mean: "Miscellaneous, Sundry Sections in Liquidation." What do they cover? This Account should be read in conjunction with the Account of the previous year, which is on page 140. There all the services were dissected in detail, but the Accounts for the latter year lump under one or two general headings services which have been wound up, on in which there were no trad

ing operations in the latter year. For practical purposes, in the 1922 Account you have only three or four undertakings in which there were any real transactions; and the balance, which are all set out under about eight headings in the previous year, are lumped under one heading of "Sections in Liquidation."

71. I do not quite understand what these assets on page 156 mean from the accounting point of view. The Free Services were shown at £7,394,000 on

Mr. FRANK H. COLLER

Mr. Leif Jones.

75. On page 155 I see: "Loss by Defalcations by a Temporary Official of the Scottish Live Stock Fund." I note from the Comptroller and Auditor General's Report, that the loss was incurred " as the result of the adoption by the Officer in charge of the very undesirable practice of leaving signed blank cheques to be filled in by his

page 154, but they were really treated in this Account as debits to the Food Department, were not they? I do not see how they cover these items shown on page 156? (Mr. Mead Taylor.) It seems to me to be a credit. "The estimated value of certain assets handed over to the Liquidation and Disposal Commission and taken into account in calculating the net figure for Free Services in the Balance Sheet": in other words, these assets were handed over for disposal to the Liquidation and Disposal Commission.

72. They were deducted from the Fres Services before you arrived at that figure of £7,394,000?-Yes, the net figure.

73. On page 151 you show a figure of £7,394,000 ?--Quite.

74. The item shown on page 156 was deducted from that?-Yes. May I say

that Mr. Coller, who is responsible for the Accounts for 1920-21, is here; he was formerly the Secretary of the Ministry of Food, and obviously knows more about this than I do.

Chairman.] Then perhaps he will come forward.

was called in, and examined.

assistant, and it was with considerable reluctance that their Lordships deferred to the legal advice given, to concur in the waiver of proceedings in relief against him." Why did the Treasury agree not to proceed against the gentleman who left blank signed cheques in the hand of an assistant?-(Mr. Fass.) We were advised that the form of agreement with the Officer responsible really gave us no chance of succeeding against him for

[Continued.

recovery, and we thought it would be a waste of money to proceed against him without any hope of recovering anything.

76. What was done to the Official who was in the habit of leaving the National cheques at the mercy of his underling?— He was an Official not of the Treasury, but of the Board of Trade.

77. Did the Board of Trade do anything to him. It is not the custom in the Board of Trade to leave blank cheques about, I suppose? Can anyone tell me about that?-(Sir Malcolm Ramsay.) Yes, I think I can throw some light on it. This gentleman who left the blank cheques was not a regular employee of the Government at all. He was acting in a voluntary capacity, and was Deputy Commissioner, I understand, for the South Eastern area of Scotland. When the vacancy arose which is in question, he was asked to take on this work involving the oversight of certain transactions in Edinburgh, and he agreed to do it on the understanding that the Headquarters duties were purely nominal, and that the work would be done by the Secretary. I gather that the Food Department allowed him to take office on that understanding, and therefore he exercised no supervision at all over the Secretary, and signed these blank cheques. Counsel advised that having regard to the understanding on which this gentleman was appointed, they could not advise the Treasury to institute any legal proceedings against that particular gentleman.

78. Had his services come to an end when this was discovered, or is he still being employed?-(Mr. Coller.) Yes; they had come to an end.

79. He is not now being employed?No; he was only employed quite temporarily.

80. Then there is, "Loss incurred on the realisation by the Ministry of Food of stocks of Feeding Stuffs," and there is a reference to paragraph 26 of the Comptroller and Auditor General's report for 1920-1921. A very large sum of money is lost here, £140,000. There the Treasury came to the conclusion that the claim to recover this loss should not be proceeded with.-(Mr. Fass.) With regard to that, again, I would like to say it was the legal advice we received. There seems to have been, on the part of the Agricultural Wholesale Society, an impression that they had been covered by something said at an interview at the Board of Trade.

The Officers of the Departments concerned took different views as to whether an undertaking had in fact been given. In view of that, seeing that we could not show that no undertaking had been given, we had no chance of recovering the money. I do not know whether reference has been made by the Comptroller and AuditorGeneral to the terms in which we did finally authorise the writing-off of this money. The whole trouble arose from the fact that there was, apparently, no definite statement made at the critical interview at which this promise, if it was a promise, was given.

81. This was in 1919?—Yes.

82. Why should this loose contract have been entered into in July, 1919?-That is for the Board of Trade to say.

83. Might I have an answer from the Board of Trade? (Mr. Coller.) I am afraid it is the Ministry of Food. I may say at once that the situation in 1919 was, in some respects, more difficult than it had been before, in the single respect of feeding stuffs, certainly.

84. Would it trouble you to give me an account of the whole transaction. How did the Agricultural Wholesale Society come into it at all?-I could give you a full account of it and will, of course, if directed; but a full account was given two years ago.

very

Sir Henry Craik.

85. We did go into it; we had the whole question discussed?-The Committee had the whole thing before them very thoroughly.

Sir Henry Craik.] We were very difficult to satisfy, but I think ultimately we were satisfied.

Mr. Black.] Might I ask if 1920-1921 has been under consideration, or is it under consideration now?

Chairman.] Last year's Committee did not go into it, but I think we had better take 1921-1922-and have the other before us, so that if any Member likes to refer back, he can; otherwise it will be a very long procedure.

Mr. Black.

86. I should like to ask with regard to the notes, on page ix of the 1921-1922 Account, if this loss on bacon, £3,500,000, is to be added to the £6,300,000, making a total loss of £10,000,000 on that bacon; is that right. £10,000,000 lost on bacon? (Sir Malcolm Ramsay.) If I may say so, that was in connection with one

[Continued.

period only, known as the period of recontrol. Bacon had been released from control, but in August, 1919, it became necessary to recontrol it. The first step of the Food Controller took was to requisition all the stock of bacon in the country or bought under contract, and that was called the Requisition Bacon Account. Then he placed further orders ahead, which were known as the Recontrol Account; it all relates to the two aspects of the same transaction, and it was when bacon was recontrolled in 1919. Then when the control was released, prices fell with a slump. (Mr. Coller.) The policy of the Government in 1919 was to utilise past profits for the relief of current prices. Recontrol converted a profit of £6,500,000 into a loss of £3,500,000. But the rise in the cost of living was checked.

87. Then there is the paragraph, at the bottom of that page, about Chinese bacon; it says there was £100,000 recovered in reference to that. From the previous book it looks as if the amount paid in excess was £250,000, so that on that one item the Nation lost £150,000; is that right?-(Sir Malcolm Ramsay.) You cannot say exactly what the loss was, it is a speculative figure; it would not be more than £150,000, it might not be quite so much; but the whole of that arose owing to the error of one individual who made provisional advances on account of this bacon at the price of £40 a box when he was told only to advance £30.

t

88. I understand there were two of them, so there must have been some collaboration between them, because I see on page 9 of the 1920-1921 Report says: "I am informed by the Board of Trade that the two Officers primarily responsible for the over-sight in question have now left the Department " ?Yes, there were two.

89. I do not see how two of them could have made the same mistake. They were not prosecuted at all, were they?-(Mr. Coller.) No, there was no criminal liability. They seemed to have been working under very great difficulties, and of course in ordinary circumstances a loss of this kind would have been recovered. Of course, there was not, in fact, a loss of £150,000; as the Comptroller and Auditor General said that is a purely speculative figure, because the firm in question contended that the amounts received by them on account fell short of the value of their supplies by £500,000,

while the Department maintained that another £500,000 was returnable. (Sir Malcolm Ramsay.) That is so. (Mr. Coller.) Ultimately the matter was settled for £100,000, and in some respects we were rather lucky in getting that amount, because if the Company had been forced into liquidation the assets would probably not have realised that amount. It was covered by subsidiary Companies.

90. I should like to know if we can have any information on Paragraph 23; page 9, as to the American packers, and how the assets will ultimately turn out compared with the liabilities. There is an excess of £6,700,000?-Do you mean the whole of the assets?

91. Yes? So far as the American packers are concerned, we are expecting during next week a Judgment from the Court of Appeal on the Award in the first arbitration; so I will not say anything definite on that point. But as regards the total results of the trading of the Ministry of Food (now the Food Department of the Board of Trade) I may say that a rough balance sheet taken out to the last day of last month shows a net profit of £7,160,289 1s. 6d.

92. Less this liability?-All that is reserved for.

93. On page 154 I see there is an item "Less reserve for bad debts £218,345,' that is a large amount to be wiping off for bad debts?-Not on a turnover of £1,200,000,000.

94. I should not have thought the Board of Trade would have run any risks at all from the people they sold things to?-1 am afraid that was impossible. As a matter of fact, two meat companies let us in for nearly the whole of that amount. The bad debts otherwise were, I think extraordinarily small.

Col. Assheton Pownall.

95. Are there any substantial losses on trading accounts other than those we have in these two years' figures?-None; you have all the figures there.

96. We know the worst when we know these? Well, of course, with deference, I should not say it was "the worst."

97. But some of them are rather frightening?

Mr. Arnold Williams.

98. Are we clear that interest has been charged? It is not shown separately, but I suppose it has been?-Yes, it is charged on everything.

[Continued.

99. And insurance and depreciation?--Absolutely from the first moment we started, because our accounts were originally done by Sir Harry Peat on strict commercial lines.

100. May we know what the trade creditors are; have they all been liquidated now?-They have not been liquidated yet. The trade creditors at the moment amount to £2,320,440. That is at the moment.

101. They are very little down then? -They are very little down, but I think I can explain that. For example, there are two cold storages grants. They are cold storage extension loans. Personally, I am not an accountant, but I should rather have seen them as separate items. 102. It looks funny we should be owing so much money when we have a considerable sum at the bank on the other hand? -These are the creditors I am speaking of.

103. But we have ample money to meet them if we owe them money?-(Mr. Mead Taylor.) I think this is the answer: the amount is large because it includes a very large sum that is in dispute in respect of which that appeal has been brought. They are disputed creditors.

104. Will the insurance on balance be something to the good?-The insurance fund has been a very great help. The profit on insurance was very considerable. Most of it has been taken in, and this is a balance left over.

105. That will really be a profit unless anything unforeseen happens now?-Yes.

106. There are two other items I should like you to explain. On page 153, there is: "Sundry reserves now written back, £74,000." What is that? (Sir Malcolm Ramsay.) They are charges which proved to be over reserved in previous accounts the principle item being £70,000 for outstanding administrative charges.

107. Might it prove the same with these bad debts which are reserved now?-(Mr. Coller.) No, I do not think it will.

108. You are making the account as bad as you can?-I think there will be some saving on the other side; but not on the bad debt side.

110. But what is the amount?-So far as we can estimate-we can only take it in terms of the result of the Award, if it is not altered on appeal; and in the circumstances it would perhaps be well not to have that on the Note.

111. Then with regard to page 156: how are these oil stocks, and so on, calculated; is it at market prices?Realised prices.

112. Then do you sell them to the Disposal Commission?-No, the Disposal Commission sold them.

113. They sold them and credited you? -Yes.

Mr. Gillett.

114. On page 155 there is a reference to £30,000 which was paid as compensation for loss of commission. What was the cause of the loss of commission; was a business given up or what; and who fixed the amount?-(Mr. Mead Taylor.) I have had a note made as to this, and if there is no objection I will read it. I am not aware of the facts first hand. In September, 1920, the Ministry of Food entered into contracts with Messrs. Vestey Brothers, Ltd., for the sale of the remainder of the beef purchased by the Board of Trade purchased in Australia and New Zealand. This meat, in the ordinary course, would have come to this country and would have been handed over to the nominated agents for disposal, under regulations agreed between them and the Board of Trade. The sale to Messrs. Vestey, therefore, deprived these agents of the disposal of the meat, and they claimed the sum of £42,500 in respect of their loss of commission, alleging that the arrangements made with the Board of Trade constituted an agreement entitling them to the sale of the meat. The case was considered by the Law Officers of the Crown, who considered that, though there had been no actual breach of contract, there was a breach of faith; also that the amount claimed was a reasonable one, and they further advised a settlement of the case. It should be pointed out that the amount of commission to which the agents would have been entitled on the meat in question under the Regulations referred to was, approximately, £100,000. The Treasury sanctioned a compromise for £35,000, and the Department got out of it for £30,000.

115. Why did they make the new contract if they had this other outstanding? -(Mr. Coller.) The ordinary methods

[Continued.

were inadequate to get rid of the meat, and there was an enormous stock of meat, half a million tons, and the ordinary agents could not deal with that.

116. Vestey's could not?-No, it was not Vestey's.

117. I thought this money was paid to Vestey's? No, it was Vestey's we sold the meat to; it was the meat transferred to the Board of Trade from the Ministry of Food. These were the ordinary Board of Trade agents, who had been dealing with the quantities of meat which came forward normally throughout the war, and it was thought that there was really a pledge on the part of the Government to pay them the commission on this meat, or some commission, notwithstanding the fact that they did not handle it.

118. Although they could not really do the work for you?-Although they could not do the work.

Mr. Gwynne.

119. Was this commission of £30,000 paid to a number of different firms; it appears as one firm?-It is a series of different firms.

120. Then this is not quite right, "to a firm." As regards the item above that, "Loss incurred on the realisation by the Ministry of Food of stocks of feeding stuffs, £140,000," that is referred to in the 1920-1921 Report on page 11. It says there that the Treasury "consider that the proceedings show a lamentable lack of precision"?-That is the one we have dealt with; it was raised before the Public Accounts Committee two years ago.

121. I should like to ask what happened in that case; were those gentlemen who were responsible for this lamentable lack of precision, as you call it, awarded the O.B.E. or simply reprimanded?-I do not think the lack of precision was intended to reflect on any particular officer. It really was the result of a conflict of interests between the Ministry of Agriculture, who wanted the stuff bought, and the Ministry of Food who did not want to buy it, because they knew they would lose should they buy it.

122. Are we to take it the Treasury did nothing at all except express their opinion in this Report? Was nothing done to bring it home to those people that they had landed us in this vast expenditure through their own carelessness or bad judgment?-On the general point

of expenditure, as the answer given to the Treasury stated, in the Board of Trade letter, which followed their letter 10 days afterwards, it was an alternative to a loss of £1,500,000 which would have been incurred if the Ministry of Food had bought the 300,000 tons originally required.

123. I feel a Committee like this ought to get down into the roots of a thing like this, and it is in cases like this that the responsibility ought to be put on someone. It is the great fault of Government Departments that you cannot put the responsibility on anyone; it shifts from one side to the other like moving sand. I want to know whether there were one, two, three or four people who were responsible for this. There must have been some head of Department responsible for this. Did you trace it to anybody at all? I am afraid if there is any responsibility it must be mine.

124. For not tracing it. I want to know who is responsible for this muddle; was it somebody in the Ministry of Food or somebody in the Ministry of Agriculture? I did not say anything about the Ministry of Agriculture because they took a definite view with which we did not altogether agree; but what the Treasury meant was really that it was a pity there was no note of the proceedings. (Mr. Fass.) May I say the lack of precision of which we complain was: that a deputation was received jointly by the Ministry of Food and the Ministry of Agriculture who left under the impression that the Wholesale Agricultural Society would be held harmless from any loss they sustained. There was a loss. Certain persons on the official side said there was no such undertaking, and certain other officials said there was such an undertaking; so there was no evidence on which we could rely to rebut the statement of the Wholesale Agricultural Society that they had received a definite undertaking from the Government that they would be held harmless in the event of their suffering loss; and the thing was left like that.

125. You say it is impossible to relieve the officers of the Ministry of Food of the responsibility. I want to know who those officers were whom you found it impossible to relieve?-(Mr. Coller.) That would mean the responsibility was mine.

126. Were you at the Ministry of Food then? I was at the Ministry of Food at all material times.