and Your Committee have been informed that as at that date further borrowings ceased.

17. As has been indicated in previous Reports of the Public Accounts Committee, the rents or annuities payable by the tenants settled on the land are insufficient to cover the sums required by the Board of Agriculture to repay capital and interest due on the advances made by the Public Works Loan Commissioners. The cash deficit thus arising falls to be paid out of monies provided by Parliament, and the cash so required for the year 1924-25, being the loss in terms of Section 26 (3) of the Land Settlement (Scotland) Act, 1919, was £85,528, as against £64,394 for the previous year. Your Committee were informed that the corresponding figure for 1925-26 will be in the neighbourhood of £110,000.

18. The cash loss mentioned in the preceding paragraph differs materially from the aggregate loss calculated on an ordinary commercial basis. On this basis the loss on the Small Holdings Colonies for the year ending March 31st, 1925, was £252,817, including loss on re-valuation, £150,638. The aggregate loss on all holdings at March 31st, 1925, similarly calculated, was £750,000 (see Trading Accounts and Balance Sheets, pages 95 to 98).

POLICE, ENGLAND AND WALES.

19. Metropolitan Police Fund.-The attention of Your Committee has been drawn to a case in which the salary of an officer in the Department of the Receiver of Metropolitan Police was revised retrospectively on the eve of his retirement, and his retiring pension was calculated on the full amount of salary of which he was in actual receipt on the date of his retirement.

20. This case gives rise to two questions. The first relates to the ante-dating of the officer's salary, and the second is whether civil officers in the Department of the Metropolitan Police should be subjected to the rules laid down under the Civil Superannuation Acts, which require in certain circumstances that the pension of an officer whose emoluments have been increased within three years of his retirement should be calculated on the average amount of his receipts for those three years.

21. As regards the first point, Your Committee have been assured that the revision of this officer's salary was recommended before the date of his retirement had been fixed, and was agreed to on grounds unrelated to his retirement.

22. As regards the second point, Your Committee note with satisfaction that the Home Office has now decided that all Treasury rulings in regard to the Civil Superannuation Acts shall be applied to civil officers in the service of the Metropolitan Police Department, and that the Treasury will be consulted in doubtful cases.

COUNTY COURTS.

23. Appropriations in Aid: Fees payable by suitors, fines and other receipts. The accounts of County Courts are examined, not by the Comptroller and Auditor General, but by officers specially appointed under the County Courts Act, 1888, as amended by the County Courts Act, 1924.

24. The evidence laid before Your Committee in connection with serious irregularities at a County Court, which were recently revealed by the examination, for which since 1924 the Lord Chancellor's Department has been responsible, shows that the system of financial control and supervision has in the past left much to be desired. Within the last two years all the arrangements of the County Courts Department for accounting and supervision have been over-hauled by a Committee

instituted by the Lord Chancellor, and drastic steps have been taken to improve the system of control. Your Committee trust that the measures taken will prove, as time passes, effective in preventing the recurrence of irregularities and in impressing upon the Registrars and all other officers of the Courts their financial responsibilities. Arrangements have been made under which the periodic reports of the Departmental auditors shall be submitted to the officers of the Comptroller and Auditor General. In these circumstances Your Committee agree that the practice approved by the Public Accounts Committee in 1895 may be continued, under which the Comptroller and Auditor General does not conduct any independent examination of the receipts appropriated in aid of the County Courts Vote, but accepts them as correct on accounts certified by the officers of the Lord Chancellor.

BOARD OF EDUCATION.

25. Grants to Local Education Authorities: District Auditor's Certificates. As is well known, the grants for public education are, to a very large extent, calculated as a certain percentage of the expenditure on education incurred by the Local Education Authorities. The expenditure of these Authorities is examined and certified by the District Auditors of the Ministry of Health, and the question was raised by the Comptroller and Auditor General how far the Board of Education, in determining the amount of Education Grant, accept the certificate of the District Auditor as conclusive for purposes of grant. Your Committee were informed that the Board of Education accept the certificate of the District Auditor as conclusive in regard to the following points:

(a) the fact that a particular payment has been made;

(b) that the payment is legal, i.e., it is a payment which the authorities were empowered by law to make;

(c) that the payment is a proper charge against the Education account of the authority and not appropriate to some other account, e.g., the Health account.

26. These matters having been established by the certificate of the District Auditor, the duty then lies upon the Board of Education to exercise their discretion in determining whether the expenditure in question should be recognised under the terms of the Education Acts as expenditure in aid of which Parliamentary grants should be payable. Your Committee have received this assurance with satisfaction.

DIPLOMATIC AND CONSULAR SERVICES.

27. Compassionate Gratuities.-These gratuities have no statutory authority, but are given on a scale which has been explained to and approved by the Public Accounts Committee. In these circumstances, it has been the practice to append to the Appropriation Account a note of the payments made, in order that Your Committee may keep the exercise of this administrative authority under review. In recent years the note has given particulars of each separate award. It would, however, be sufficient for the purpose in view if the note was replaced by a summary of the gratuities classified simply by reference to their amounts.

28. Consular Accounts.-In recent years much has been done to improve and systematise the keeping of the accounts of His Majesty's Consular posts. One matter was, however, brought to the notice of Your Committee, which calls for mention.

29. A number of salaried consular officers undertake transactions not only on behalf of the Foreign Office, but of other Home Departments also. In regard to transactions of the latter class, it has been the practice that

the consular officer should account direct to the Department primarily concerned, and the statements of account and balance-sheets furnished to the Foreign Office have omitted any reference to these other transactions which are often considerable in magnitude. Your Committee consider it important that the balance-sheet rendered to the Foreign Office should show the cash balances held on each separate account, and, further, that as far as possible all accounts operated on by a Consul should be kept at one bank, and that a certificate from the Bank showing all the balances of the separate accounts on the same day should be rendered to the Foreign Office with the quarterly account. Your Committee were glad to be assured that instructions would be issued to this effect.

COLONIAL SERVICES.

30. Imperial Institute Bulletin.-The Comptroller and Auditor General has raised the question whether certain sums which had been paid by the publishers of the Imperial Institute Bulletin to the Director of the Imperial Institute as his share of the profits under a contract which covered the years 1913-1924 were to be regarded as personal remuneration, or whether they should have been accounted for as receipts belonging to the Imperial Institute.

31. On enquiry into this matter, Your Committee find that there is a conflict of evidence how far the arrangements made with the publisher were known to and approved in detail by the Managing Committee of the Institute at that time, but however this may be, they consider that the Director was justified in treating the sums in question as personal remuneration for his own services as Editor, for the reason that a similar arrangement had been explicitly approved by the Secretary of State for the Colonies in 1910 in an analogous case. Your Committee wish, however, to place on record their view that officers holding whole-time public positions should not receive extra remuneration in respect of services rendered in virtue of their official position, except with the express and written sanction of the authority to whom they are responsible.

OLD AGE PENSIONS.

32. Incorrect Baptismal Certificates.-The attention of your Committee has been called to a series of cases in which Old Age Pensions were granted and over-payments of pension made in a certain district in Scotland on the strength of baptismal certificates accepted in proof of age, which were subsequently discovered to have been forged. So far as Scotland is concerned, there appears to be no danger of loss to the public from the recurrence of fraud of this type, as seventy years have now elapsed since the registration of births first became compulsory. But in England it is possible that baptismal certificates may continue to be produced in support of claims for some twelve years. Your Committee are glad to learn that baptismal certificates so produced will be subjected to a test check.

MINISTRY OF PENSIONS.

33. Payments to Imperial Pensioners in Canada and the United States. -Under an agreement made between the Canadian Government and the Ministry of Pensions in 1919, the Canadian Department of Soldiers' Civil Re-establishment and the Canadian Board of Pension Commissioners undertook, as agents of the Ministry, the responsibility both in the Dominion of Canada and in the United States, for arranging medical examinations and for the assessment and payment of pensions to Imperial pensioners living in the Dominion or in the United States. The Auditor General of Canada was good enough to examine, on behalf of the Comptroller and Auditor General and Your Committee, the payments made under these arrangements.

34. The agreement between the Canadian Government and the Ministry of Pensions expired on March 31st, 1926, and, as at that date, in view of the great complexity of the work, the Ministry, with the concurrence of the Treasury and of the Canadian Government, established a SubDepartment in Ottawa to administer War Pensions of Imperial pensioners resident in Canada and the United States. As a necessary consequence of this alteration, the Comptroller and Auditor General has arranged that the accounts of this Department of the Ministry shall be examined by his own officers in the same way as the operations of Area and Issue offices in Great Britain.

35. Your Committee wish to call attention to the good offices of the Government of the Dominion in this matter, and to express their most cordial acknowledgments of the assistance which the Auditor General of Canada and his officers have given to the Comptroller and Auditor General.

INLAND REVENUE.

36. Over-repayment of Excess Profits Duty.-In March, 1922, owing to a Departmental oversight, an erroneous re-payment of £8,000 was made in respect of Excess Profits Duty, and the charge was met out of current revenue. It is, however, a recognised rule that losses due to Departmental error should be made good by a charge against the Vote for Inland Revenue, a procedure which secures that all such payments come automatically under the cognisance of the Public Accounts Committee, and the Comptroller and Auditor General has represented that this procedure should have been followed as regards this particular case. Your Committee were glad to be assured on behalf of the Department that they accept the view of the Comptroller.

37. Frauds by Collectors of Income Tax.-Your Committee are concerned at the progressive increase in losses arising from the defalcations of collectors of Income Tax, who are in most cases part-time officials and are appointed by the District Commissioner. The losses appear to have increased since the introduction of half-yearly, and in some cases of quarterly, payments of Income Tax, and to be attributable in part to defects of system, which made it difficult to identify payments of Income Tax relating to particular years, and to defective supervision. Your Committee are informed that, in the view of the Commissioners of Inland Revenue, supervision is now adequate, and that changes of system have been introduced which will simplify the accounts and give less opportunity for error or fraud. It remains to be seen whether the measures taken will adequately protect the public revenue for the future, but Your Committee must draw attention to the fact that, in the view of the Commissioners of Inland Revenue, the position will not be completely safeguarded unless the recommendations on this particular point made by the Royal Commission in 1919 are adopted. In the Revenue Bill presented to the House of Commons in 1921, and not proceeded with, clauses were introduced to give effect to the recommendations of the Commissioners, contained in paragraph 390 of their Report, which would have brought about this particular, and, as it seems, desirable, reform. Your Committee suggest that this matter might again be considered with a view to the introduction of fresh legislation.

TRADING ACCOUNTS.

STATIONERY OFFICE.

38. Sale Offices.-The accounts show that the year's working of the offices at Manchester, Cardiff, Abingdon Street, and Edinburgh resulted in losses aggregating £2,367 6s. 7d. offset by profit on other sale offices in London of £2,950 19s. 4d., making a net profit of £583 12s. 9d. on a

total turnover of £140,498. Your Committee are informed that it has been decided to close the office at Abingdon Street. They suggest that consideration be given to the possibility of effecting economy as regards other offices, whether by closing down or otherwise.

POST OFFICE.

39. Commercial Accounts; Interest Charges.-The capital required by the Post Office for the development of the Telegraph and Telephone undertakings-of which the bulk has been required for the Telephone Service has been raised in one or other of three ways:

1. Loans under the Telegraph Acts.

2. Exchequer Bonds.

3. Advances provided by the Exchequer out of Voted moneys. In the Commercial Accounts the respective undertakings are debited with interest on the whole of the capital so raised. No difficulty arises as regards classes (1) and (2), where the Services are debited with the interest actually paid to the lenders.

40. But as regards the third class, interest is not paid in cash, and the charge debited in the account is a hypothetical one. In previous accounts the charge for such advances subsequent to April 1st, 1912, has been calculated at the average bank rate for the year in which the advances were made; in some cases as high as 7 per cent. It was, however, felt that this arrangement was unduly onerous, inasmuch as the capital in question had been invested in more or less permanent assets, and might appropriately have been borrowed on annuities for terms of years at a lower rate.

41. Accordingly, in August, 1924, the Treasury agreed to the balance of the advances made between April 1st, 1912, and March 31st, 1924, being charged as from April 1st, 1924, at 43 per cent. the minimum rate ruling for loans from the Local Loans Fund on March 31st, 1924. The Post Office Commercial Accounts are thus relieved of the heavy interest charges consequent on the high Bank rates prevailing between 1920 and 1922.

Your Committee see no objection to the course adopted.

NAVY.

42. Sale and re-purchase of surplus stocks of explosives.-Your Committee have investigated carefully two cases brought to their notice by the Comptroller and Auditor General, in which the Admiralty have repurchased from contractors large quantities of T.N.T. and picric acid which had been sold to those contractors in 1923 by the Disposal and Liquidation Commission at prices much lower than those which the Admiralty were called on to pay on re-purchase. In both cases the stocks had been stored, under the terms of the original sale contracts, in the magazines of the Commission, without additional cost to the purchasers. Your Committee have taken evidence on the subject both from the Admiralty and from the Commission.

43. With one exception the magazines of the Commission were held under the Defence of the Realm Acts, and it was necessary that they should be evacuated by June 30th, 1923, in order that the buildings might be disposed of and the land surrendered by August 31st, 1923. To secure this end the Commission, on January 30th, 1923, requested the Admiralty, the War Office and the Air Ministry to decide finally what explosives held by the Commission they desired to retain, and to give an assurance that such explosives would be removed to service magazines not later than June 30th, 1923. The Admiralty complied with this request by taking all the explosives that they could store in their own magazines.