23 February, 1926.] Sir HENRY BUNBURY, K.C.B. [Continued. the correct rates from the 1st of April next. 51. I think it is plain on this that it has been decided to leave the overpayments undisturbed; so to speak, they are beyond recall?-(Mr. Phillips.) That is so. 52. The aggregate amount has been made plain in the case of the Post Office by Sir Henry Bunbury, I think, at £2,000? (Sir Henry Bunbury.) That is so, as an estimate. Mr. Pethick-Lawrence. 53. I do not know whether these are Salaries paid weekly, if they are, what is the maximum weekly excess for one individual; is it a matter of shillings, or what is it? I cannot give you the maximum, but the average is a little under £4 a year, and I should doubt if the maximum over-payment would be more than £7 or £8 a year; these are all people with very small pensions. Chairman. 54. We will turn to paragraph 12 to 16, commencing on page 6. Paragraph 12, I think, refers to claims for liquidated damages for delay-that is really penalties for delay in the fulfilment of contracts. (Sir Malcolm Ramsay.) It is not a penalty, that is the difficulty. 55. I see, it is the abandonment of claims? This paragraph attempts to explain why, at this late date, a large number of claims, amounting to £170,000 in one group, and £5,000 in another, are written off in the Account. There have been discussions going on for a number of years, since 1921 at any rate, as to the powers of the Post Office to deal with these matters, and the principle on which the liabilities should be calculated; but now the Treasury have given their sanction to writing off the liquidated damages accrued under the old contracts. They were told by their legal advisers the contracts were not enforceable at law, because the liquidated damages payable under the contract were wholly disproportionate to any actual loss the State incurred. To round off the story, they have now got a new clause which it is hoped will avoid the difficult questions which came up under the old form of contract. Sir Robert Hamilton. 56. Can we know what this new form of clause is to which Sir Malcolm Ramsay has referred?-(Sir Henry Bunbury.) I could put it in, but I have not it with me. 57. There has always been a difficulty between penalty and liquidated damages, and it would be interesting to know how it could be got over?-(Mr. Phillips.) I have a copy here, but it is two pages long, now the lawyers have done with it. The essence of it is that you provide beforehand in the contract that if delay occurs the Contractor will be liable for so many pounds a week on that contract for the period of delay. (Sir Henry Bunbury.) If I may add to what Mr. Phillips has just said, that feature was also found in the old clause. The new main difference between the clause and the old clause is, first, that it provides for varying the amount of the penalty according to what would be a fair pre-estimate of the damage likely to be suffered by delay; and, secondly, it provides more amply than the previous clause did for extensions of time being allowed to contractors when they desire an extension owing to circumstances not within their own control. 58. That has not been tested in a Court yet, I suppose?-No. 59. (Sir Henry Craik.) It is quite clear that here there are two considerations that tend in opposite directions first of all the amount of damage that would be caused to the public interest by the delay, and, what is quite a different thing, the amount of loss that might be caused to the contractor by circumstances outside his control. Those two considerations would not run parallel at all, but probably in opposite directions? -The contractor is made liable, and I think rightly made liable, for any damage which is caused to the other contracting party by reason of failure to complete the contract by the contract date. That is the prima facie position, and that is the basis of the contract. 60. And the measure of that would be the injury done to the party?-The injury suffered by the contracting party; for instance a delay in completing the laying of a telephone cable might cause a serious loss of net revenue to the Post Office. In practice you find that these delays are frequently due to causes which were out of the control of the contractor, and 65. Is it a fact that firms hesitate to contract for work for Government Departments because the conditions are so onerous, or so uncommercial, that they do not tender, and therefore you do not get as much competition as you would get if you made your tenders in such a form as is more commonly used in large businesses?—I should expect to find that where the industry in question is very busy, and does not particularly want Government contracts. At other times 1 56645 [Continued. think there is an advantage in being able to call yourself a Government contractor. We have found that in the past. 66. I understood you to say just now in answer to a question that there is not as much competition as one would think. What did that signify?-In connection with telephone cables, for instance, it is I think, a matter of common knowledge that there is a pretty close and effective ring. In other kinds of electrical equipment we find, in practice, from time to time that competition is Somenot what you might call keen. times you get the appearance of competition, perhaps without very much reality behind it; at other times you do not even get the appearance. There is one other factor which enters into these works contracts, and that is the somewhat onerous conditions as to re-instatement which are made by local authorities. The Post Office finds that public works contractors in many cases are rather reluctant to undertake this sort of work unless they happen to be wanting work badly. 23 February, 1926.] Sir HENRY BUNBURY, K.C.B. [Continued. 74. But it is coming down, do I understand? It has been falling for the last three or four years. Sir John Marriott. 75. What was the peak? What was it up to ?-11·6d. Major Salmon. 76. What is the percentage of labour to the whole figure of 11.6d. ?-It is nearly all labour, including the commission which is paid to the sub-postmasters. 77. Does the increase in wages make them double what they were?-I should say about double for this class of labour. 78. You have not any more personnel on, for doing the same quantity of work, then?-Oh, no; if anything it is rather the contrary. 79. How do you hope to save money? By the fall in the cost of living?—Mainly in the fall of the cost-of-living bonus, and, to a less extent, by economies in the methods of operation. I have the figure now for 1924; it is 9.01d. per transaction, so that it is less than double. Mr. Pethick-Lawrence. 80. Have you any corresponding figure for the Municipal Bank of Birmingham? -No. 81. My impression is that it is very much less than that.-I can give now the amount of that 9d. which represents wages; it would be about 8d. Eightpence is wages and the rest is accommodation, postage, electric light, stationery, and so forth. Sir Fredric Wise. 82. That is for 1924?-1924. Chairman. an 83. Have you, for comparison, any figures from the Trustees Savings Bank, that is not so big as your own, but at all events it is big enough to make effective comparison?-No; the only comparison I have heard is from information which was obtained in a more or less private way, with the cost per transaction of Joint Stock Banks; and on that comparison, for what the figures given us were worth, the Post Office Savings Bank came out very favourably; and I believe it is true that, as compared with the Joint Stock Banks, or any undertaking of that sort, the cost is not high. Mr. Baker. 84. Is not the cost increased, in the case of the Post Office Savings Bank, because of the centralisation, and the fact that each transaction is handled by a larger number of persons than would be the case in the comparable Joint Stock Banks? That is a difficult question to answer off-hand; it really needs an analysis to see whether that would be so or not. 85. I was suggesting that that is an explanation. I think it is the explanation, and it has an important bearing on the actual figures.-If the depositor had to pay in his deposits and withdraw his deposits at one Post Office only, and was not allowed to use any other Post Office, and his accounts were kept at that Post Office, I should expect to find that would be a cheaper system. 86. A great deal cheaper, I should suggest. I could not dogmatise on that without the facts. Mr. Briggs. 87. You made a comparison just now with a Joint Stock Bank. It is hardly comparable, is it; because the value of cost in the one instance is very much greater than the value of the cost in the Savings Bank?—We are speaking not of the cost per £, but of the cost per transaction. 88. That is what I am saying; therefore you could not make a comparison with a joint stock bank?-I should have thought the comparison was quite relevant. A transaction is the same whether you pay your money into the Post Office and have it entered in your book and so forth, or whether you pay it over the counter at a bank; and the same with withdrawal. 89. I was not suggesting it as a satisfactory financial transaction?-You mean that whereas a joint stock bank can afford a higher cost the Post Office Savings Bank cannot. 90. Yes? The answer is that the Post Office Savings Bank can. 91. Can what?-Afford this transaction cost. Sir John Marriott. 92. Because of its large profits?-Yes. Mr. Briggs. 93. Have they therefore, knowing they can afford it, entered upon a rather reck less expenditure?—I think certainly not. The working costs and expenses of the Post Office Savings Bank are very closely watched and controlled. Major Salmon. 94. What proportion of the Post Office premises are charged against the Post Office Savings Bank Account? When you speak of a comparison between private banks and yours, you must bear in mind that the premises of a private bank are wholly for the purposes of an individual transaction, whereas the work done in a Post Office for the general public and the allocation of how much should be debited to the Accounts of the Post Office Savings Bank is surely quite a different proposition; it scarcely bears any comparison I should suggest?-The Post Office conducts at any given Post Office a considerable variety of business, perhaps more variety than a joint stock bank does, but I do not know that you could infer from that that the accommodation cost is materially cheaper per transaction at a Post Office than it is at a joint stock bank. In any case the total costs, other than wages, are only 1d. out of the 9d. 95. Could you tell us what percentage of the cost of premises and the upkeep of premises is charged to the account of the Post Office Savings Bank?-I cannot give you the figure off-hand, but the apportionment is designed to throw on to the Savings Bank Fund its fair share of the Post Office accommodation which is used for Savings Bank purposes. 96. Could the Committee be furnished with that information?-It would not be a large proportion, because the Savings Bank work is done almost entirely over the counter; so that the large sorting offices and parcels offices, and of course the telephone exchanges and the telegraph instrument rooms, scarcely come into the Savings Bank Account at all. At head offices, that is offices other than shops and branch offices, the accommodation percentage is 18 per cent. on salaries and wages. That is to say, you ascertain the time spent on Savings Bank work; you ascertain the salary or wage cost of that time, and you calculate the accommodation cost as 18 per cent. on the salary or wage cost. Chairman. 97. Paragraph 14 refers to the pension liability for Savings Bank staff employed on other than Savings Bank management [Continued. duties. I think I am right in saying on this paragraph that this is the conclusion of this story, am I not, Sir Malcolm? (Sir Malcolm Ramsay.) Yes; this is a matter which has been before the Committee in previous years, but it is now settled, subject to very slight adjustments. 98. Would you like to add anything, Mr. Phillips, on the last point, about correspondence with the Treasury?(Mr. Phillips.) The matter is concluded for the time being. It may be that if a convenient opportunity for legislation arose we might perhaps get a better system than the one we have at present; but until that happens the matter is settled. 99. Paragraph 15 deals with frauds on Post Office Savings Banks, Sir Malcolm, and I think the Committee would like a word from you as to how far this check is complete? (Sir Malcolm Ramsay.) It has just been reinstated, and I could not say. You will remember this matter came up before the Committee, who suggested that the special check should be reinstated, and the Post Office have acted in anticipation, really, of your wishes. As it has only just started again, I am afraid we cannot express any opinion as to its working. 100. By its complete character I mean; what would be the scope of it; how far will they attempt to carry these tests?Perhaps Sir Henry can answer that as to the details better than I. (Sir Henry Bunbury.) I should prefer not to say much about it. It is a calling up of depositors' pass books and special steps taken to obtain them, and we do not wish to disclose, if we can help it, the extent of that. Major Salmon. 101. How long has it been in operation? I think from last July. 102. You are not in a position yet to report that you have found anything wrong?-No. 103. You will develop that later on? — That is so. Sir Fredric Wise. 104. It is only dealing with their deposit books?-That is so. Chairman. 105. Paragraph 16, I think, is a matter of rather greater importance, Sir Malcolm, because of the use of these Post Office balances; more particularly what you mention at the top of page 9. It looks as if they were partly financing the Unemployment Fund out of these Is that the state of floating balances. affairs? (Sir Malcolm Ramsay.) That is broadly the case. The floating balances on all kinds of accounts in the Post Office were, if I am right, used to finance the Unemployment Fund to the extent of very nearly £1,000,000 at one period, and so saved the Unemployment Fund the interest which they would otherwise have had to pay. 106. Have you anything to add to the paragraph, Sir Malcolm?-No, Sir, the only question I would like to be satisfied on is whether the Post Office would agree that it is improper to use these floating balances in that way, and, if so, whether the same sort of thing is likely to recur. 107. I was about to ask the Treasury what view they take?-I should perhaps add that, according to my information, this was quite an abnormal situation over a short period. They discovered in about a month how the thing was, and then they got the position regularised. (Mr. Phillips.) If things had gone on for any long period we should have thought it was rather serious, but in fact it was detected within, I think, two months and a half or two months; the Post Office Of then asked for interest and got it. course, it was quite wrong to have any large sum of that kind outstanding. Sir Henry Craik. 108. In normal cases your sale of unemployment stamps covers your expenditure? (Sir Henry Bunbury.) Yes, considerably more. 109. More?-Oh, yes. 110. I am very glad to hear that, because Sir Malcolm Ramsay only puts it "is sufficient to cover the expenditure "; you say it is more?-The balance is normally sufficient to cover the payments which we make on behalf of the Ministry of Labour. The bulk of the money received from the sale of unemployment insurance stamps is paid over week by week to the What the CompMinistry of Labour. troller and Auditor General is referring to here is the balance remaining from day to day. 111. Then it is no loss to you, but rather a profit, in ordinary cases?-It is very difficult to say, because it depends on the extent to which the Post Office use the money locally. under [Continued. abnormal circum 112. Then stances, by the provisions of a certain section, that balance became adverse to you? That is so. money that you the 113. Would advanced in this temporary way have Was it a material been at any use? loss to you that you had, for a short time, in abnormal circumstances, to advance £920,000?--The state of the Post Office balances during this period has been analysed, and the only conclusion which can be drawn from the figures is that the money would probably have remained in the Post Office tills; that is, that the payments were made out of balances which had not to be replenished or kept up for that purpose. 114. It would probably not otherwise have been of much serious use?-That appears to be so. May I put it in another way; we were not behind on any other account by reason of these payments for the Ministry of Labour. 115. Let me put it this way; you have an arrangement which works very fairly, and in ordinary and normal circumstances rather to the advantage of the Post Office?-Yes, that is so. in abnormal circum116. Because stances you have, for a great national purpose like this of the Insurance Fund, to advance some money which would not otherwise be used, is it very unfair to ask that this temporary advance should be permitted? Is it doing any great wrong to the public purse?—I should agree that it did no wrong to the public purse, but I could not maintain that it was strictly regular. 117. But if you are going to begin to be very regular and say that every penny that you advance to them shall pay "Very well, interest may not they say, in other circumstances we will take care when we are advancing in certain cases a little more that you shall account to us." It seems to me looking all round, that, as this is a great public purpose, public insurance, and there is no loss a broad accruing to the public purse, adjustment of these accounts is the To be too fairest thing on both sides. meticulous in your balances may lead you into just as much trouble as it has led the Insurance Department?-I think the answer to that would be, if I may, as it were, state the case against the Post Office, that the Post Office has no power, nor would it be justified in lending money to other Departments or |