moved that the three Reports of the Public Accounts Committee be now taken into consideration. He said he wished to thank the Government for affording them an opportunity of discussing the Reports. It was the opinion on all sides of the House that some discussion on the Reports would be of considerable value not only to the House but to the Departments concerned. He hoped that the precedent set by the Leader of the Opposition when he was responsible for the business of the House would always be followed and that an opportunity for discussing the Reports would become a permanent feature in their financial procedure. In the Reports the Committee had endeavoured to give a clear and comprehensive account of all matters which they had dealt with, and he would therefore confine his remarks to matters of principle rather than of detail. The Committee had done its best in an extremely arduous session to deal with an immense number of subjects. The Committee had sat on a greater number of days than ever before. He wished to thank colleagues for the support and consideration they had given him, especially in the somewhat peculiar position he was holding, for the accounts they had considered in the last two years referred mainly to matters for which the late Government was responsible and in which he himself was personally concerned. He reminded the House that although he did not enter into all the details mentioned in the Reports, these details would not entirely disappear from view, because in some cases they would be the subject later on of Treasury Minutes in connection with the various Departments, and when the Committee met again next year there would be an opportunity of seeing how far the recommendations of the Committee had been carried out. In paragraph 15 of the second Report there was a statement that a disallowance which was recommended by the Committee last year had been carried out, and that a sum of money had been placed in the Estimates this year by which the Suspense Account had been wiped out. The first question to which he wished to direct attention was that referred to in the second paragraph of the first Report, namely, appropriations in aid. This matter had already been before the House in one form or another, and he did not propose to go into it at any length. If irregularity had been committed it was an irregularity fr which several Chancellors of the Exchequer bad been jointly responsible. It was one which certainly required to be adjusted. Ho thought the House had reason to be grateful for the line which the Government had taken in having the necessary alteration made in the Appropriation Bill. The result would be that the practice which had been in operation for several years would be discontinued, and that the new method would be regular and thoroughly in order. He was confident, however, that the expression the Committee used in their Report, that the total expenditure authorised by Parliament had in no case been exceeded, was strictly correct. He wished to take this opportunity of thanking the Chancellor of the Exchequer for having submitted to them the draft of the Amendment to the Appropriation Bill before it was embodied in the Bill. He did not know whether there was any precedent for that, but it was thoroughly in accordance with the spirit of the relationship existing between the Administration of the day and the Public Accounts Committee that such proposals should be placed before them. The next question to which he wished to direct attention was possibly the most important of all the questions which the Committee had had before them. It would be found in the second paragraph of the second Report, dealing with the variations between the forecasts of expenditure and the actual outcome. In paragraph 2 of this Report they stated that "the surplus, which would have been larger by £245,000 but for the additional expenditure sanctioned by the Treasury on the rearmament of the artillery, is nearly twice as large as any that has occurred in Army Votes for the last twenty years, and is considerably in excess of the surplus on the combined Votes of the Navy and Civil Services and Revenue Departments in the year under review, where an expenditure of £82,000,000 was involved." In dealing with this question, he hoped the House would keep in view the evidence which was given by the Accountant-General of the Army. It would be admitted on all sides that the state of affairs disclosed in that paragraph was far from satisfactory. This matter had been the subject of correspondence between the War Office and the Treasury, and he would like to remind the House that necessarily there must be a considerable amount of difficulty before the new organisation of the War Office could be fully effected. This represented almost the first year of the new system which was the result of the Esher Committee. He ventured to suggest to the House that they should not endeavour to blame any of those who might seem to have been responsible for what had occurred, and that they should rather endeavour to find a system by which these discrepancies could be avoided in future. He was bound to confess, from the evidence of the Accountant-General of the Army, that he was afraid the outlook was by no means promising. One of the Reports of the Committee contained the following statement on that subject—

"As regards the future, they are without assurance that a more satisfactory result may be expected. For it has been explained to them that the military directors (who now frame Estimates and control the progress of expenditure) 'are transient officers who come to their post with very expensive notions, and only get to know their work thoroughly by the time they have got to go;' and that, as was admitted by the representatives of the War Office, the financial shortcomings now under notice may be repeated again, possibly periodically."

said that in referring to War Office finance it would only be fair that the right hon. Member should give the opinion of the Accountant-General as expressed in his evidence in chief in answer to Question 3225. The Accountant-General said—

"I should like to say, and I think I am voicing the whole civil side of the office when I say, that it is extraordinary how had these men have worked and how well they have succeeded in the difficult pos-itions which they occupy,and what an extraordinarily economical spirit they have shown."

said it was quite fair that that side of the case should be considered also. They were not now dealing with individuals but with the system under which they were appointed. The Committee admitted that there had been difficulties, but what they were anxious to do was, instead of imputing blame for what had occurred, to endeavour to see that these difficulties did not occur in future. He reminded the House that the Estimates for the Navy and Army had necessarily been prepared in November or December in one year for the year ending 31st March, not of the following year, but of the year following that. Therefore, those responsible for drawing up the Estimates a considerable time prior to the time when the actual expenditure would take place made provision on the safe side, with the view of avoiding the necessity for Supplementary Estimates. The Public Accounts Committee, in approaching this question, were fully aware of the difficulties in which the War Office were placed, but the importance of the matter could not be over-estimated. Every effort should he made to arrive at as accurate a forecast as possible. The next point was one which concerned both the War Office and the Admiralty, and was connected with the question of pensions and gratuities for wounds. In their previous year's Report the Committee called attention to this matter in the following paragraph—

"Your Committee have ascertained that under existing regulations 'wound pensions' can he drawn by officers who are able to resume military duty and to earn full pay. Exception has been taken by the Treasury to the continuance of this practice on the ground (1) That it constitutes a class distinction, seeing that the ordinary soldier does not participate in this benefit. (2) That it contravenes the practice in civil life, where no compensation is given for injuries which do not impair earning power. While recognising that on retirement from service the permanent effects of a wound or injury may warrant increased rates of retired pay both for officers and non-commissioned officers and men, your Committee are of opinion that the above practice of issuing wound pensions concurrently with full pay should cease, and that when an officer has recovered, and can resume military duty, no further grant should be made to him in respect of his injury until he retires from the service."

Further evidence was taken on the subject this year. The Committee were informed by the Admiralty and the War Office that they were unable to concur in the recommendation which had been made. He was bound to state on behalf of the Committee that, in view of the evidence which they had received and the correspondence which had taken place, they had not been induced to alter the opinion they expressed in their Report last year. Certainly there was no suggestion that an officer should be deprived of a wound pension; the Committee only recommended that when he was still drawing full pay he should not be in receipt of extra pay concurrently. During temporary disablement from wounds the officer should get practically his full pension, but if he returned to duty on full pay he should receive the full pay as before, and the whole question of pension should be renewed on his retirement. The next point to which he wished to draw attention, because it had given rise this year and last year to considerable discussion, was where contracts had been given without competition, and where contractors had been allowed by means of taking comparatively small contracts to increase them by a considerable amount. For instance, there was the case of a contract for mounted infantry barracks. The original contract was £28,150, but the new contract amounted to £42,000. Parliament had devised a regular procedure by which cases of special urgency could be dealt with, and the Committee strongly recommended that if such cases were found to be necessary the question should be considered before the contract was entered into and the sanction of the Treasury received, so that the subject could be brought before Parliament at the earliest opportunity. There had been cases during the year under review, but they had risen before the issue of the Report of 1906, and the Committee understood that their recommendation had been brought to the notice of the various Departments concerned. A point in connection with the Army and the Navy was the cost of the staff in relation to the work that had been carried out. He admitted that there was a certain amount of difficulty in arriving at what might be called the correct figure, but he hoped that through the recommendation in the Report of this year it might be possible to furnish the Committee in succeeding year s with some statement showing the cost which was involved on the part of the staff in carrying out the work. The Department need not be apprehensive of the figure being a high one. What the Committee were really anxious to find out was whether there was a variation from year to year between the cost of the staff, and also the effect of the comparisons between similar services. Another point was that of triennial contracts. This subject was now engaging the attention of the War Office, and he hoped they would consider the evidence which the Committee had brought before them. Any new work costing not more than £400 might be included under these contracts. The original limit was placed at £400; it had now been raised to £1,000. Though no definite opinion had been expressed by the Committee on the point, it was clearly indicated by them that the limit of £1,000 should not be exceeded. This contract system had been on the whole economical and useful, and had worked well. It was regrettable to add in respect of the military statement that there had been a loss of public money incurred through constant changes of policy. He was prepared to take as much blame as any one on this head, because he was a member of that Government that had to deal with the housing of the Army and the provision of accommodation for them. He hoped that statement set out by the Committee might act as an inducement to the House not to be always making changes in Army policy. He expressed the hope also that they were reaching finality in the form of Army administration, and that they would not be constantly making those variations which, whether received well by the Army or not, could not be achieved without cost. A considerable amount of satisfaction was felt by the Committee in dealing withpersonnel in relation to their review of the accounts. This year the only case of irregularity was not one which had been committed for the purposes of fraud or by which public money had been lost. The irregularity in fact had been committed by a public servant actuated by an almost excessive zeal to wind up his accounts. He understood that a strongly worded circular had been sent out, and he was confident that when this matter had been brought to the notice of all concerned, they might look forward to amendment. The Committee was, from the nature of the case, essentially a critical committee. They had to detect, if they could, what they considered practices involving the spending of money contrary to the expressed opinion of the House. Though the system of investigation might be slow and cumbrous, it was at any rate effective and efficient. Hon. Members who perused the Reports and noted the ultimate destination of the money voted would find that on the whole it passed smoothly in the direction in which Parliament intended. It was practically certain that any departure from the expressed intention of the House would sooner or later be brought to the attention of Parliament. Some might be disposed to allege that the system savoured a good deal of red tape; but it could be confidently said, at any rate, that it was effective in seeing that the deliberate intentions of Parliament were carried out. The Committee as well as the House owed a debt of gratitude to the distinguished servants, high and low, who had been actuated by the highest motives to carry out what they believed to be the direct intentions of Parliament in a smooth, efficient, and economical way. He thanked the Government for giving an opportunity to raise these questions, and he hoped that in future years the precedent now established would never be departed from. Motion made, and Question proposed, "That the Report of the Public Accounts Committee be now taken into consideration."—(Mr. Victor Cavendish.)

said the first Report of the Public Accounts Committee was issued on the 24th June, the second on the 23rd July, and the third on the 27th July in this year, while the evidence was issued on 15th August, and it occurred to him that these Reports should have been issued with the evidence on which they were based so that hon. Members might be enabled to keep in touch with the proceedings of the Committee and have the whole matter before them. The result of the present system was that the discussion of the whole matter was driven off to the second or third week in August when they were drawing near the end of their proceedings. That not only meant that the opportunity for discussion was very limited indeed, but also that they had had very little time owing to the manner in which the House had been sitting early and late to go through the evidence and sift it as it ought to be sifted. Unless the House was given an opportunity of considering the evidence it reduced the whole proceedings to an absurdity. The first paragraph he wished to refer to was paragraph eighteen of the first Report ordered by the House of Commons to be printed on the 24th June, which related to balances irrecoverable and claims abandoned, and had special reference to the defective rudder casting for H.M.S. "King Ed- ward VII." He had put a Question on this subject to the Admiralty, and he was bound to say that he received a very unsatisfactory reply, from which it seemed that the object of the Department was to give as little information as they could, so that he was driven to make inquiries on his own account. Luckily he came across a man who had been employed in the Ayrshire Foundry Company at the time of the casting of the defective rudder, and he gave him a detailed account of the whole process attending its manufacture. He said, "The Ayrshire Foundry Co., Ltd., held a Government contract for a period of three years to construct marine castings to Admiralty patterns and specifications and subject to inspection by Admiralty inspectors at the rate of thirty shillings per cwt. Castings condemned to be a dead loss to the foundry. In the autumn of 1904, orders were received to make the rudder frame for H.M.S. 'King Edward' and the work was forthwith commenced, William Brown, foreman moulder, being responsible for the moulding, and Thomas Muirhead, foreman smelter, for the quality of the metal. So far as was humanly possible the moulding was done in a tradesmanlike manner. Brown was a trained steel moulder of large experience and in every way fitted for the job. As for the quality of the metal I cannot express an expert opinion. But I should think if it was good it was so by accident. Muirhead called himself a tradesman, but the general opinion of trained workers in the foundry was adverse to him, and complaints of the quality of metal by moulders and dressers were of daily occurrence. Moreover, he was entirely ignorant of chemistry, and had to judge his furnaces by appearances alone, being unable to check appearances by chemical tests."

What was the date of that?

I do not know the date, but it formed the subject of part of the Report of the Public Accounts Committee.

said he had understood his hon. friend to give some date for this occurrence.

said he did not know the date, and continued the reading of the document, as follows: "The cast took place and after cooling the mould was dismantled and the casting raised. A crowd of dressers now set to work on it with a couple of electric welders in attendance. Any flaw revealed by the dressers was at once tackled by the welders and, well—I will say obliterated. On turning the casting to continue dressing on the underside a large hole was discovered at the neck of the rudder stock. The casting was at once removed from the foundry to the engineering shop and work suspended for a couple of days."

inquired as a point of order whether it was quite fair to read an anonymous letter involving serious accusations against individuals.

said the hon. Member who was addressing the House was acting on his own responsibility. He could not compel him to give the name of his correspondent and he must use his own discretion in the matter.

said that in answer to the hon. Member he might point out that not only was he referring to the Report of the Public Accounts Committee but that that Committee described this incident as a fraudulent matter and expressed surprise that criminal proceedings had not been taken against the company. No one had been prosecuted, but one of the directors had been knighted. The workman of the company who had brought the subject to the attention of the Government had, however, not received any reward whatever. Therefore he thought he was justified in bringing this matter before the attention of the House, and in trying to get the information which he could not get from the Admiralty officials. The letter continued:—"Frequent consultations were held by the works-manager, foremen, and managing director. The first-mentioned, Mr. Livingstone, declined point blank to have anything to do with the casting and condemned it utterly. The others less independent were swayed by the managing director, and it was decided to electrically weld the flaw or, in plain language, `fake' the casting. To do this the hole was filled with steel borings (it took about two pailsful) well rammed down and a powerful current of electricity passed over it. To enable you to understand how electric welding works I may explain that a negative wire is attached to the casting while the welder applies a carbon connected to the positive pole of a dynamo. This simple application has no effect further than charging the casting with electricity, but the welder, after touching the casting, raises the carbon, say, half an inch, and the current still flows in a released state and being concentrated on a given point generates the most intense heat. This heat immediately liquefies anything in the shape of metal it comes in contact with, but only at the point of contact, because after contact the current becomes different and loses power through non-concentration. The melting power of the current does not extend beyond half a inch from the point of contact, but the welder by rapidly moving the carbon from side to side can keep a comparatively large surface in a fluid state, but that surface, be it large or small, is never deeper than about half an inch. You will see by this process a skin can be formed over any flaw, and such was the method adopted in the case of the 'King Edward.' The borings beneath the half-inch skin would retain their normal condition. Mr. Marshall, the managing director of the Ayrshire Foundry Company, is a boiler maker by trade and has risen from the ranks by his own exertions. In a financial sense be has been a success, but in any other sense 'the less said the better.' He it was who suggested the 'faking' and accompanied the inspectors. The rudder was duly weighed (about fifteen tons) dispatched by special train to Glasgow, thence per steamer to Devonport." On the 22nd of July he asked the Civil Lord of the Admiralty a question as to why tese people were not prosecuted, and the hon. Gentleman said, "I am informed that the Memorial submitted to the Scottish Law Officers in 1904 contained no imputation whatever against any director of this company except Mr. Marshall, the managing director, and that in his case the accusation was made by one person and denied by three. No criminal prosecution appears to have been considered expedient in 1904, and in the opinion of the Lord Advocate it would be out of the question now." He submitted that if the Admiralty had been anxious to do its duty by setting the Law Officers of the Crown and the Public Prosecutor to work they could have obtained plenty of evidence on which to base a criminal charge against this Mr. Marshall, the managing director. His informant went on to state, "I may mention all castings at Ayrshire Foundry previous to inspection were painted with a solution of sal-ammoniac which quickly forms a heavy coating of rust and effectually conceals any marks of hammer, chisel, or carbon." Large castings were also submitted to a sound test, that is, a man struck them here and there with a forge hammer in presence of the inspector, but, alas, the hammer-man was an employee of the foundry. The scene was rehearsed, and the man was careful to strike only where the casting would ring true. This was the worst feature of all, but yet the Law Officers of the Crown and the Admiralty had not taken any steps in the matter, although this battleship cost us over £1,000,000 and carried 800 men. Had "King Edward VII." come into action and had this rudder given way at a critical moment the valuable vessel and 800 lives might have been lost, but the man who had exposed this and brought it to the attention of the Admiralty had received no reward and no honour, while one of the directors of the company, as he had already said, had been knighted. As this Ayrshire Foundry Company had been supplying castings for several years, he thought there might be some other cases of defect, and so he wrote to his correspondent for particulars, who replied that the ships that he knew contained castings from the Ayrshire Foundry Company in regard to which he had a perfect recollection were the "Hindustan," the "Argyll," the "Roxburgh," the "Duke of Edinburgh," and the "Dominion," these being in addition to the "King Edward VII." In another letter his correspondent said that he had mentioned castings supplied to H.M.S. "Argyll." He said he selected these for the reason that he remembered them as being very badly torn in the cooling process and he was on duty during the night when the electric welders were employed on them—in other words, when they were "faked." Upon that statement he (Mr. Lea) asked a question of the Secretary to the Admiralty requesting him to furnish the names of His Majesty's ships at present on the active list containing castings supplied by the Ayrshire Foundry Company prior to the delivery of the rudder for the "King Edward VII.," and he also asked that the information might be given with special reference to the castings supplied to H.M.S. "Argyll." The Secretary to the Admiralty informed him that to furnish the information asked for would involve a great amount of labour which, in the opinion of the Admiralty, would not be justified by the results. That he could not believe. Moreover, the Secretary to the Admiralty said that the castings had stood the test of actual service for some years without exhibiting defects. His correspondent wrote that the castings supplied to the ships he mentioned were all stem or stern frames with one exception, and that was a rudder similar to that of the "King Edward." He could not recall for which vessel it was intended. The writer enclosed a rough pencil sketch to scale of the worst tears marked as they showed and according to that some of the tears would be in the "Argyll's " case 15 inches deep. The other castings were torn in a like manner, but not so badly as the "Argyll's." His correspondent added, "Please understand that I consider that so long as these castings are not subjected to strain, such as would be caused by violent weather, or touching the ground, they are safe enough, but should the 'Argyll' be unlucky enough to encounter what I may call a legitimate storm or to touch the ground aft, the chances are ten to one the stern frame would simply buckle up. May I draw your attention to the latter half of Mr. Robertson's reply to your question in which he stated that the castings supplied to the 'Argyll' have stood the test of active service for some years. The 'Argyll' was only completed in January, 1906, so I think Mr. Robertson has rather a vague (perhaps a naval one) idea of what is generally understood by the word 'some.'" It appeared from the letters he had read that the ships for which these castings were supplied by this firm were the "Hindustan," the "Argyll," the "Roxburgh," the "Duke of Edinburgh," the "Dominion," and the "King Edward VII.," but the officials of the Admiralty, in their crass stupidity and ignorance of the elementary facts of technical work of foundries, had allowed these defective castings to he built into the ships, and if anything happened they and they alone would be responsible. When the armorial device of this honourable knight of the Ayrshire foundry was prepared, he hoped that a rotten stern post would be a prominent feature of it. He had put Questions with regard to these matters to the Secretary to the Admiralty but had been hold off until that day. He hoped they would now be gone into, because they were of great public interest. As to the Army Esti- mates, the chief discrepancy was that between the official forecast of the 22nd of March and the actual result nine days later, the amount being between £600,000 and £700,000. The officials of the War Office saw no likelihood of the matter being remedied in the future. Then in regard to paragraph 5 he would like to know what the garrison institutes mentioned were because he believed they were exclusively used by officers. The Committee recommended that the institutes should be pressed for the repayment of £9,294 for the rent of premises hired. Coming to paragraph 6, it appeared that £4,649 was issued by the Army Council without the sanction of the Treasury in regard to the attendance of Volunteers at the Royal Review at Edinburgh. If that could be done what safeguards had they? The Report of the Public Accounts Committee also in paragraph 9 called attention to the contract for a water supply to the troops at Standerton, which bound the War Office to pay at an absurd rate for twenty years, although the troops might be withdrawn at any time. He wished to know how many troops had been there, how many were there now, and how many were likely to be there in future. Then there was the remount depot in South Africa, for which a farm was bought, and to which a branch line was constructed on an undertaking to bear the capital charges in perpetuity. When all this was done it was found that the depot was useless because of the absence of a water supply. Paragraph No. 18 which dealt with this matter read like a chapter from "Alice in Wonderland." From paragraph 22 it appeared that at Aldershot a balloon factory was built at the cost of thousands of pounds in order to construct an elongated balloon, but the work was so slowly done that other buildings sprang up all round the factory, with the result that the balloon could not be got out of the factory. Poor people living on a few shillings a week had to pay the money that was being wasted by these fools in the public Departments. He hoped the man responsible for this elongated balloon factory would be cleared out of the service. Paragraph 23 referred to the increased cost of the headquarters staff, expressing disappointment that the reductions foreshadowed by the Esher Committee had not taken place. He hoped the right hon. Gentleman would see that they were effected as soon as possible. With regard to paragraph 26, this was only a small matter probably, but still in one sense it was important, as it set up a class distinction. When an officer died and left a widow and she received a pension she forfeited it if she married again, but if her second husband died then she could claim the pension again. That provision did not apply in the case of non-comissioned and warrant officers and men. Again, no pensions for wounds were given to non-commissioned officers and men as in the case of officers, and he did not see why such a distinction should be drawn. The latter half of paragraph 29 really raised a most important point in connection with the Report of the Committee, although it only came out in a very indirect manner. It was an instance of expenditure the explanation of which by the responsible officer was not satisfactory. The Director-General of Army Finance entered a written objection which had come before bite Army Council, and the point was decided by the majority of the Council, who were not answerable to the House of Commons. He wanted to see the Secretary for War in the position of being the only man in a position to override the protest of the accounting officer, for he would be responsible to the House. With regard to paragraph 36, it dealt with a small technical irregularity, and he hoped they would have an assurance that the recommendation of the Committee would be carried into effect. In paragraph 39, attention was drawn to the fact that one of the recommendations of the Committee with regard to putting tenders out to competition had hitherto been disregarded; while paragraph 40 spoke of the waste of money at East Bulford, a waste due to the policy of the late Government, which in one instance only had cost the country £140,000. Then, in Ireland, at a place called Moor Park, it was decided to start a mounted infantry school, and an estate of 840 acres was purchased at a cost of £35,000. When that had been done it was found that the school was no longer necessary, and they now had this Fermoy estate on their hands. He hoped it would be disposed of as soon as possible and the money appropriated for the relief of expenditure this year. Paragraph 42 dealt with the case of falsification of accounts by an officer. He asked for the officer's name and rank, where he was now employed, and why ho was not court-martialled. Had he been a civilian clerk in the War Office or in the employ of an ordinary private firm he would have been "fired" at once, but he supposed this office] had before him still a brilliant military career with many opportunities of squan- dering public money. He hoped the right hon. Gentleman would give a detailed reply to every question he had put to him.

said he interrupted the last speaker because he thought that it was a little unfair of the hon. Member to bring in names mentioned in the course of an anonymous letter reflecting on private characters. The House of Commons was not a Court of Law, and what was said within its walls was not actionable; and therefore every hon. Member ought to be particularly careful what he said. He wished to thank the Public Accounts Committee for the valuable work they had done. There was no other Committee of the House that did such great service; their reports were of immense value.

said he would as far as possible specifically reply to the demand of the hon. Member for East St. Pancras for information, but in the first place he wished to say that he associated himself without reserve with what the hon. Member for Preston had said as to the work of the Public Accounts Committee. The financial system of the country had its disadvantages and difficulties; but in his experience, extending over eighteen months, they were outweighed by the advantages. Obviously a system which gave the House of Commons a complete check on the issue and application of all public money must be rigid and give rise to some difficulty. It was not always convenient that every item of expenditure should be earmarked, and therestraint of individual initiative, while it might prevent the misapplication of public money, did not always lead to economy. The Departments were often blamed for what was the result of having to conform to a rigid system. Many of the accusations of "red tape" were founded on that. He had been blamed for not getting on faster with the placing of the contracts for the new stables at Tidworth. A private firm would have saved at least three weeks; but he had to observe the rule that all contracts must be put up to competition. On the balance, he believed that the present system of Parliamentary control was advantageous. The right hon. Gentleman took a gloomy view of the evidence of the Director-General of Finance at the War Office; but it was not justified. Sir Fleetwood Wilson had said that they were saving money, and were now in touch with military policy. When he came into office in December, 1905, he of course found that a great many of these matters had been already settled, and ho had to deal with the Estimates on very short notice. The directors were new and the system was new. It was a valuable system which the late Government had introduced, but it had not then got into working order. It was natural that the directors, who did not wish to be found under-estimating, should be very cautious. They took margins which he thought people who knew the work would consider they were justified in taking. The result was, with the rigid economy which was practised during the year following, that they saved a considerable sum of money on these Estimates. It was a large sum of money, but he thought it would be most unjust to blame the directors for what was really the outcome of prudence on their part in their want of experience of an entirely new system. As to what had been said about nine days, he did not blame the hon. Gentleman for having brought that forward, but it rested on a sheer misunderstanding. It was not true that it was only nine days from the end of the financial year when the Estimate was made. Many of the accounts did not come in until six months later, so that it was not nine days but something like six months. The discrepancy was inevitable, because they did not know how matters stood. The financial management of the War Office was not like that of the Admiralty. They had to deal with units and not with ships about which they knew everything. They had to deal with matters that were carried on thousands of miles away, and the directors had to control operations in almost every part of the globe. It was impossible for them to get in their accounts or know what was going on, and months had elapsed before the detailed information came forward. It was therefore quite a mistake to compare that system with the system at the Admiralty; and nine days was not the actual time; the real time was six months, and not less, before all the information could be got in from distant stations. As regarded the future, he thought it would be found that this year, with twelve months more experience, that they had estimated very closely. They had now something approaching to a settled system. They had made a reduction of £2,000,000 in the expenditure, and he thought it would be found that the close survey to which they had subjected everything, and the experience which the directors had gained, had brought them a much nearer result than had been the case in the last two or three years during which the new system at the War Office had been in operation. He agreed with the criticism of the Public Accounts Committee upon much of that system. He believed that it was very difficult for military directors to deal with these financial matters as satisfactorily as was the case under the old system of finance. When he used the word "satisfactorily," he meant satisfactorily from the point of view of finance, and that alone. Why had the re-organisation taken place? The reason was plain. It was because the old system had broken down completely in the South African War. The Report of the Farwell Commission swept away altogether the old system. They had waste in the field, waste in the stores, and waste in the making of contracts, and they had every kind of financial abuse. Why? Because it was not possible for civilians, who thoroughly understood matters, to get into the field to do the business. Some of the work had to be done almost under fire, and, it became evident that, if they were to have an efficient business system for the Army and a proper plan of accounting, they must base their preparations and everything else upon a war and not upon a peace footing. The old system of keeping everything upon a peace footing broke down, like every system based on peace when tried in the field. What they wanted was a system which prepared for war, yet preserved the checks and financial control and other things which were requisite in order to make the system thorough. He did not think they had got that completely up to this time. He said again that he entirely accepted the advantages of Parliamentary control, and he did not want by a hair's breadth to go back from that. He wanted to adopt it, and at the same time to bring the military mind and the financial mind closer together. They had been working hard at this problem during the last few months, and he hoped that they had devised means by which they would be able to satisfy the requisition which had been made upon them, and he thought justly made upon them, by the Public Accounts Committee, that there should not be that divorce between civilian and soldier which there had been up to this time. By their arrangement they had managed to get the soldier to accept much more financial advice than had been the case in the past, and they proposed to give him yet more. This would disturb nothing, and it would work harmoniously with the principle of Parliamentary control; it would put at the soldier's elbow every advice, so as to enable him to submit his accounts for review to the financial authorities at the War Office, and ultimately to appear on the Estimates. He thought the outlook, therefore, was not one that was without hope. He would not put it higher; but they had got a long way on with their preparations and he thought he saw his way to working out an efficient business system based on preparation for war while maintaining those checks and financial control to which allusion had been made. The other points which had been raised were much more difficult to meet. There was one, he thought, heavy criticism which the Public Accounts Committee had levelled against the history of the War Office. Of course, he was not merely speaking for himself in this matter, he was speaking of the past, and of the loss of money which had been caused by changes in the past. That loss was deplorable in this matter, but looking back upon it it was very difficult to blame anybody. It was thought that the Six Army Corps Scheme would be the salvation of the country, and there was all the enthusiasm of people who felt that there had been a breakdown of the War Office under the existing system, and that the Six Army Corps system had been adopted. It broke down, and really he did not blame in the least those who had advised it and ill whose hands it broke down. Under the old system at the War Office they had not got a machine to work out the calculations on which any system could be based that they had to-day. The old system was a very bad one for reform. The plan under which they had a Commander-in-Chief and a Secretary of State side by side, neither quite sure of the functions of the other, but each anxious, he suspected, to make the most of his rights, was a system which led to confusion. They had got rid of all that, and Parliament, much more directly than before, controlled the policy of the War Office. He must confess to having made changes in the policy of his predecessors. He had done that because he was forced by military and financial opinion behind him—forced by the outcome of organisation at headquarters. Of course, he felt the responsibilityery much of making these changes. They had formed four mounted infantry schools which were taking away more men from the battalion than they could afford. They had worked out a cavalry policy and had ascertained their requirements, and they had settled the number of mounted infantry required consistently with maintaining the strength of the line battalions from which the men could come. The result of that was that they found that one mounted infantry school was sufficient, and they did not want more. They wanted one cavalry school, and he looked about with his hon. friend to see how they could provide it economically. They had a large estimate, something like £60,000 or £70,000 for Bulford, and they felt it was capable of adaptation to their purpose at a cost of £8,000 or £9,000. The transference of themateriel was effected during the winter months, and the new mounted infantry school had been established economically and, he thought, efficiently. When they came to the recent Army organisation scheme, which extended not only to the Regulars but to the Auxiliaries on a very large scale, the Government had been met by the Opposition in what he thought he might say was a very handsome fashion. There had been controversies between them at the beginning, but when they came to work the thing out they saw that there ought not to be party questions raised about military matters further than it was possible to avoid. When one party or the other came into power, and there was change of policy, then the period would come when, as the result, there would be a flow of expenditure. He thought that had justified them in making friendly overtures to the other side, and those overtures had been responded to. He thought he might say, after what they had done, that they had good hope of continuity of policy, which they had not had for a very long time in the history of the Army. The responsibility for the present policy of course rested with the Government. If it failed, nobody on the other side of the House would be responsible. On various matters, like that of the Militia, the other side had met the Government, and they had been able to meet and to work out something together, which he thought was accepted in both Houses, and which was sufficient to give them at least a hope that there would be some chance of continuity. How the scheme succeeded depended on how it was worked out. If it did not succeed, he thought there was no disposition to overturn merely for the sake of overturning. He, therefore, looked to the future with some degree of hope, just as he looked to the future in finance with some degree of hope—the new methods they were working out, of bringing the military and civilian minds closer together, while retaining the policy of preparing for war in time of peace. Certain other matters had been raised. There was the apportionment of the charges betweeen the loans and Votes. That, of course, was a serious matter, but he was glad to say that it was getting to be more and more academic. The House had abolished the loan system and he was sure no more satisfactory steps had been taken. It might be that for a year or two there would be an increase in the Estimates, but it would not be a real increase, because there had always been an expenditure of one or two millions which did not appear in the Estimates but was included in these loans. The result would be that three years from now the loan charges would begin to fall off and the sum of £1,200,000 which the War Office had to pay for interest and instalments of principal would drop first by £300,000 and then by larger amounts, so that the Estimates would be automatically relieved of charges which did not make for fighting efficiency but referred only to past expenditure amounting to over £1,000,000. That was the economy they would get if they adhered to this method of paying their way as they went along instead of charging it on loan. In regard to officers' wounds pensions there seemed to be a natural tendency to cut down officers' emoluments because the pay of the men had gone up enormously within the last few years. The pay of the officers had not been raised at all and the Army was in this difficulty, that there was a tendency to think that officers were necessarily rich men, and ought to accept payment much less than an equivalent for their services. That was thoroughly bad for the Army. He did not want to raise this question of the increase of officers' pay unduly. They had done something this year, for they had increased the pay of battalion commanders of cavalry regiments by £100 a year. Step by step he trusted they would get to a state of things in which it would no longer be necessary to be a rich man in order to become an officer in the British Army. He was reluctant to cut down even a small thing which seemed to be extra remuneration at the present time. That was the reason for his reluctance, and it was not any wish to differentiate between officers and men. The differentiation had been all in favour of the men during the last decade. With the general criticism of the right hon. Gentleman he was in accord. It was most important that they should keep the control of Parliament over this expenditure, and keep it completely and attain even to his own ideal, which had given rise to some suspicion, of saving the Army from being overwhelmed by red tape. It was not true that red tape and Parliamentary control were convertible terms. Now he came to the formidable questions raised by the hon. Member for St. Pancras, who asked him about the South African garrison institutes, for whom they were demanding £9,294. The hon. Member had asked for the amounts claimed against each. Those institutes were created during the war for non-commissioned officers and men. The claim was not against any individual institute, but against the Committee as a whole who were responsible for their management. The next question put to him was in regard to £4,649 paid in respect of a review in Scotland in 1904, for which Treasury sanction was not obtained. He believed that the paper which should have gone to the Treasury was put into the drawer of a distinguished General who should have sent it to the officials of the Treasury, but it was overlooked. But the review went on all the same. His hon. and gallant friend near him agreed that it was a most successful review. There was no doubt that in those days, in the mood and mind the Treasury and Parliament were in, they would have sanctioned that expenditure. Therefore he thought it was merely a technical omission, and the Public Accounts Committee took that view and recommended that the item be passed.

Has anybody been reprimanded for that irregularity?

said some very nasty letters were written. His hon. friend had asked some questions about the Standerton water supply. That contract was entered into under peculiar circumstances. After the war it was thought that a very large garrison would have to be kept in South Africa for a long time to look after the Boers. All that had completely changed and it was now more a matter of the Boers looking after the garrison than the garrison looking after the Boers. The old distribution was not now necessary, and at Standerton they had not as many troops as they used to have and they might have less in the future. After the war some £2,000,000 was placed at the disposal of the general officers to arrange all these things, and this contract for a water supply at Standerton was made with the approval of the military authorities in South Africa. There was no necessity to send that contract over here for review, and they did not do so. That was the conclusion he had come to after looking up the papers, although the matter did not occur in his time at the War Office. The contract was made with the municipality of Standerton and the people of that town had got a lower water rate in consequence of the advantageous arrangement they made with the British Army. As for the farm which had been alluded to, it was abandoned no only because of the failure of the water but because it became saturated with horse disease and the loss would have been so enormous that it was considered wholly inexpedient to maintain it. He had been asked why there had not been that diminution in the expenditure which the Esher Committee had forecasted. There had been a diminution on one side, but it had been overbalanced by an increase on the other side. The expense in other departments of the district staff alone had been reduced by about £21,000 a year. The increase with regard to the general staff was due to the fact that there was no general staff before and one had to be created. It might have been started in a somewhat expensive fashion, but they were making inquiries with a view to seeing if the cost in this and other particulars might be cut down. He wanted to point out that there had been a reduction in the general cost of the district staff, and the increase was due to the fact that for the first time in the history of the Army it had got what the German, French, and Japanese armies had had for a long time and to which they owed their efficiency; namely, a General Staff. It was the new General Staff coming into existence that had produced this increase and not any failure to follow out the recommendations of the Esher Committee. With regard to the elongated balloon factory, it was said that after building the shed it was found that other buildings had been put up alongside which made it impossible to put the balloon there. That was stated in the Report of the Public Accounts Committee, but it was not a fact. The balloon had not been made at that time. The witness who gave the evidence had not the knowledge at the moment and was under a wrong impression that this balloon had been built a long time. The shed was not built specially for this elongated balloon and it was now being used for other purposes. The building became available for military workshops and was being used now for that purpose. Therefore, this balloon question was full of the inflammable and dubious material which sometimes raised these questions. Reference had been made to the way in which an officer had dealt with his accounts. That was not a case of malversation, but a case in which instructions had been sent to an officer to complete his accounts by a certain time. He could not finish them, not having the materials. He therefore took a shot, and put in the figures and made his total exactly right, though what he did was quite wrong. He had been censured, but they had sent out a circular saying that that sort of thing was never to be done in future.

said he did not mean to follow the hon. Member for East St. Pancras into the question of the behaviour of individuals. That was a question of detail rather than of policy. What he wished was the adoption of a policy which would obviate future risk to His Majesty's ships from defects of the kind which had been referred to. He was very grateful to the Admiralty for the steps which had already been taken to obviate the possibility of such defects in future. He had been informed in answer to a question that instructions had been issued that all castings should in future be inspected in the rough, and before they had been treated in any way, and, secondly, that instructions had been issued to prevent the smudging of castings. He did not think these directions went quite far enough. He would suggest that, when vacancies occurred on the inspecting staff, practical moulders should be appointed as inspectors. In connection with many branches of the shipbuilding trade practical men were appointed as inspectors, but moulders were not appointed. He did not think he was exaggerating the case when he said that there was no branch of shipbuilding in which there was greater necessity for proper inspection than that of castings and mouldings. A great mass of correspondence had reached him from a variety of quarters, and he was convinced that it was very easy for any practical moulder to detect defects, however great the efforts might have been to "fake" and conceal them. He did not suggest that faking often occurred, but one instance had been brought to their notice by the Public Accounts Committee, and there might be many others. He thought they should endeavour to prevent their recurrence. When His Majesty's ship "Inflexible" was being built by Messrs. John Brown & Co., of Clydebank, it was found that a defective cast had been used, and its removal involved a delay of about a month in the launching of the ship. He mentioned that to show that these things might occur with the best regulated firms. They were all agreed that Messrs. John Brown and Co. ranked with the very first of the kind, and that there could not be the slightest suspicion in their case that any effort would be made to hide defects, or use anything but the very best material.

said he wished to discuss a question which was before the Public Accounts Committee during the past year, namely, the subsidy granted to the London & North Western Railway Company for carrying the mails between London and Ireland.

Does this arise on the reports of the Public Accounts Committee?

submitted that it certainly did arise as there was a reference to it in the evidence to which he was going refer.

Will the hon. Gentleman give me the reference to the page in which it occurs?

Page 513.

We are now dealing with the Reports of the Public Accounts Committee.

Mr. Speaker earlier in the debate allowed references to be made to the evidence in regard to other matters, and I submit that I am fully entitled to discuss this matter.

The point is this. The Motion before the House is that the Reports of the Public Accounts Committee be now taken into consideration. The evidence on which discussion has been allowed has reference to matters dealt with in the Reports. I do not suppose that there is any reference in the Reports to the question raised by the hon. Member.

If I am to be precluded from discussing the evidence I will not pursue the subject. It seems to me curious that while the War Office and the Admiralty are only too anxious to have a discussion, the Financial Secretary to the Treasury should try to stop discussion on a matter affecting his Department.

I must tell the hon. Gentleman that it has nothing to do with the Financial Secretary. I have made inquiry as to what has been done before.

All I can say is that the point was not raised until the Financial Secretary had consulted you.

I did not consult the Chair. if any communications passed, they were certainly not on my initiative.

May I not discuss the omission of something from the Reports which is included in the evidence given before the Committee.

If it is not referred to in the Reports, it is not in order to refer to it on the present occasion.

referred to the fact that the Bluebook containing the reports of the Committee also contained a vast amount of evidence which had been given at an inquiry in regard to the way in which departmental accounts were kept. That examination had been conducted in a very effective manner, and in cross examination the members of the Committee displayed a variety of practical knowledge of the subjects in hand and were able to elicit valuable information. Another interesting point in connection with the work of the Public Accounts Committee was that there was nothing political either in the composition of the Committee or in their course of action. The members were actuated only by an honest desire to obtain bare facts in relation to public accounts, and to call the attention of the House to any points with respect to which changes might with advantage be made. Referring to what had fallen from the Secretary of State for War on the subject of pensions, he suggested that it would be better to pay officers what they deserved instead of following the practice which had been commented upon. A suggestion was made some time ago by the Select Commitee which inquired into national expenditure that the Estimates prepared by Departments should be examined by a Committee before they were brought before the House. That, he thought, would be an improvement in the financial system. Although it was all very well for the Public Accounts Committee to investigate accounts after expenditure had been incurred, it should be remembered that their investigations often referred to expenditure of a year or two before. That was a long interval and it was sometimes difficult to get full information. If there was a Committee to examine Estimates before they came before the House, that would have the effect, he believed, of reducing expenditure, because the Departments would be more careful in drawing up their reports.

thanked the Government for the opportunity of discussing this Report. Since 1862, when the Public Accounts Committee was appointed this was only the second occasion when such an opportunity had been afforded. He earnestly hoped that it might now be regarded as a settled precedent which would he followed every year. The importance of the work of the Committee in ensuring the control of that House over expenditure was great and increasing. The totals of our national expenditure were greater year by year, while the effective control over them of the House of Commons under the present conditions governing discussion in Supply was visibly decreasing. Increasing grants were increasingly unconsidered; and, under the Supply Sessional Order of 28th April, 1902, vast sums were appropriated to expenditure without any consideration in the House at all. Moreover, even that appropriation was constantly defeated in respect of large sums without any reference to Parliament and by the mere motion of the Treasury, as shown for instance, in paragraph 17 of the Committee's Second Report this year. This power ofvirement had just been further extended to include extra departmental receipts never contemplated by Parliament at all; and it was clear that, unless the control of Parliament was in future to be limited to making block grants within which the Departments might have an absolutely free hand, the kind of scrutiny now exercised on its behalf by the Public Accounts Committee was an absolute and increasing necessity. He entirely agreed with his his hon. friend opposite that the scrutiny of the Public Accounts Committee was of the highest value to this House, but, after all, it was only apost mortem examination; they had been considering this year the expenditure which took place in the year 1905-6. The Committee on National Expenditure, which, reported in 1903, made a recommendation that the scrutiny of the Public Accounts Committee should be supplemented by that of an Estimates Committee which should be appointed continuously, and with the same power as the Public Accounts Committee. To that Committee should be referred each year one branch at least of the Estimates before they were agreed to in Committee of Supply. He hoped that that recommendation would be taken into the very serious consideration of the Government, because he thought it would certainly increase the effective control of the House of Commons over expenditure. To his mind the outstanding feature of the Reports of the Public Accounts Committee this year was the striking contrast between the financial administration of the two great spending Departments—the Admiralty and the War Office. On March 22nd, only nine days before the end of the financial year, the War Office made a forecast of a surplus of£691,000. As a matter of fact they had a surplus of £1,334,000. In other words the War Office on the 22nd of March made a mistake involving the unnecessary issue from the Exchequer of no less than £643,000. Owing to this and similar errors, upwards of £800,000 in excess of the amount required for Army expenditure was issued from the Exchequer and quite unnecessarily withdrawn from the old Sinking Fund and the extinction of Debt. The Secretary for War now informed the House that this was quite inevitable.

said that although the accounts closed at the end of the year the amounts were not ascertained until six months later. Moreover, £200,000 of the error was made at the express request of the Treasury itself. The War Office would have been £2000,000 nearer the true figures had they not listened to the advice of the Treasury.

said if it were true that from whatever cause—it did not matter two pins what the reason was—the system of financial administration at the War Office was such as to make these errors and discrepancies inevitable, that was a grave defect, and required the serious consideration, not alone of the Public Accounts Committee, but of the House. Why did these enormous discrepancies and mistakes never occur at the Admiralty?

said that they were dealing with a wholly new system, and he had good hope that they had seen the last of these big blunders.

said he was glad to hear that. They were told in the Public Accounts Committee by the Accounting Officer that this was the first year after enormous departmental changes had been made in the War Office. It was the fact that the civilian element had no voice in the War Office such as it had at the Admiralty and other great Departments of the State that was the cause of the blunder which the right hon. Gentleman the Secretary for War did not extenuate, because he could not extenuate. The Director General of Army Finance said that under the system of the War Office there was no real security that this blunder might not occur again. He agreed with the right hon. Gentleman that it was necessary to emancipate the War Office from the appalling amount of red tape which surrounded the administration of that Department. But the complete maintenance of the present powers and duties of the Accounting and sub-Accounting officers, and above all of their independence of purely military control, was essential, and if that was preserved and the more the right hon. Gentleman abolished red tape, which was an abomination, the better.

Hear, hear!

said he hoped that the right hon. Gentleman would not lend himself to any scheme which would reduce the control of the civilian element, which really meant the control of the House of Commons, in the administration of the War Office finances. He wished to call attention to one matter which although small in itself, was important. It had been referred to by the right hon. Gentleman—he meant the expenses incurred for the review in Edinburgh in 1905. In that review, which took place on the 18th September, both Army and Navy were represented. It was arranged in August that they should take part in it ; and on the 26th August the Admiralty wrote to the Treasury asking their santion to the expenditure of money for this purpose, which, of course, had not been included in the Admiralty Vote. How very different was the procedure of the War Office! On the 3rd of August the Army Council met. It was an informal meeting; and he understood that three generals and the right hon. Gentleman constituted an Army Council such as that. It was then decided that the expenses of the review were to be met out of public funds, and the Army Council at once, without any application to anyone and of their own mere motion, caused a letter to be sent on the same day to the General Officer Commanding in Scotland, telling him that he might spend £4,000 on railway fares. It was not until two days after the review had taken place that the Treasury heard anything from the War Office about the proposed expenditure, and, therefore, it was not surprising that the Treasury refused to sanction the grant. It was not enough for the Army Council to say that some papers had been lost or had been put in a drawer and had been forgotten. The point was that, in writing that letter of the 3rd August, the Army Council assumed a discretion over the expenditure of Army funds, which if conceded, would strike at the root of all Parliamentary control. It was a significant example of the spirit which appeared to animate the Army Council in financial matters-a spirit which did not exist and had never existed in any other Department of State. If brought out in the clearest and strongest contrast the different notions held at the War Office and the Admiralty. He hoped that the Secretary for War would allow no suggestion or scheme for ridding the War Office of red tape to lead him into the way of decreasing the civilian or House of Commons control over War Office expenditure.

said that, of course, they at the Admiralty were very grateful for the hon. gentleman's commendations of their methods of finance. The right hon. Gentleman the Chairman of the Public Accounts Committee was criticising the action of two years ago. The right hon. Gentleman, therefore, was a prosecuting counsel or critic of his own administration in this matter; but he felt it to be his duty and privilege to defend the action of the Department with which he was connected although it took place in the time of the late Government. He thought the House must be gratified to know that in the years 1904-5 and 1905-6, although £35,000,000 to £40,000,000 a year had been spent by the Admiralty, no charge of malversation or corruption had been found against a single official; and if errors had been made they had been honestly made. There had been no taint of personal gain. The Admiralty welcomed intelligent criticism, arid if they could be shown how money could be more profitably spent in the service of the State they would gladly avail themselves of any suggestion or information placed at their disposal by hon. Members. The main criticism of the Admiralty had been in reference to the "King Edward VII.'s" rudder, in regard to which the hon. member for St. Pancras had accused the Admiralty officials of cross stupidity.

Hear, hear!

said he would pass that cheer by. The hon. Gentleman apparently thought he could get no information from the Admiralty and therefore he had got it for himself. He did not know from what source the hon. Gentleman had obtained his information, nor did he much care. The hon. Gentleman began by asserting that the date of this occurrence was in 1904. As a matter of fact it was in 1902. That was the first comment he had to make on the accuracy of the hon. Member's informant. The history of this defective rudder casting was as follows. In 1902 this casting, was ordered from the Ayrshire Foundry Company. The casting was cast in August, 1902, and it was found to be defective. The works manager, on a Sunday morning, called the attention of the managing director to this defective casting, and against the works manager's advice the managing director of this company ordered the works manager electrically to weld the casting so that the defect would be concealed. The Admiralty got no information of this transaction until they received it from the works manager himself, who had assisted at the transaction on this Sunday morning.

Under protest.

agreed that it was under protest. He would read to the House a statement which had been made by this works manager, and he hoped the House would forgive him if he omitted all names, for they were not really material. He would read the statement so far as it was applicable to this particular matter. This statement was sent to the Admiralty in, October, 1903, some fourteen months after the transaction. The works manager said:— "The welding would take place, as far as I remember, about the month of August, 1902.…I had no dispute or difference"—this was by way of explaining why he gave the information to the Admiralty—"with the managing director in reference to any personal question until January, 1903. It was some months after the rudder frame was delivered to the Admiralty. He led me to expect a rise of salary, but it was delayed, and not granted. I did not press it. Another foreman engineer was, however, taken on. He was put under me, but he was to receive the same salary as I did. I thereupon threw up my job. I obtained from the managing director a certificate of character, dated January 22nd, 1903. Immediately on receipt of this certificate I wrote to the managing director a letter, of which the following is an extract:— 'Now I am no longer in your employment and not bound by any ties whatever, I propose to communicate with the following firms and individuals and see, after due explanation, if they do not arrive at the same conclusion as I do regarding your promises and good faith—(1) the Director of Navy Contracts concerning the various jobs that have been foisted on to them as sound, viz.:— "King Edward VII." rudder, Broadfoot Door,and the various jobs lying at Ayshire Foundry at present. I have my mind made up to interview this gentleman if at all possible, and will, if necessary, go to London for that purpose.'" He wanted the House particularly to note the next passage he was going to read, "'And also,'" said the works manager, "'I will send a copy of this letter to every director of the Ayrshire board, together with my personal views on some transactions which may be of general interest to them.'" That paragraph proved that the directors other than the managing director had no knowledge whatever of these transactions.

Then they were not doing their duty to their shareholders.

said that interruption only exposed the hon. Member to the charge which he bad levelied against the Admiralty officials. All the insinuations which the hon. Member had made against these gentlemen were utterly unfounded. He would not characterise the hon. Member's action; the House had its own opinion in these matters. The first concern of the Admiralty was the safety of the "King Edward VII." which had this alleged defective rudder. The rudder had been built into the ship at Devonport, and there was no dock at Devonport big enough for the "King Edward VII." to be docked in order that the rudder could be taken out. Directions were given that the vessel should be cautiously taken to Portsmouth, where, upon this information only, the rudder was unshipped and a new rudder was put in. That, he thought, cleared the Admiralty of any charge of weakness in caring for the safety of the vessel. The primary consideration was the safety of the ship, and he did not think anybody could say that the Admiralty did not safeguard it in every possible way. They had been asked why the managing director of this company was not prosecuted. The Admiralty sent all these facts to the Law Officers of the Crown. They considered the matter, and advised the Admiralty on January 30th, 1904, that the question of pressing a criminal prosecution in Scotland is not one for the Admiralty, but for the Lord Advocate as Public Prosecutor. The Admiralty placed the matter in the hands of the Lord Advocate, and he decided to take no steps. Therefore the Admiralty could go no further in the matter. What influenced the legal mind it was impossible for him to fathom. The Lord Advocate decided against any prosecution. The hon. Gentlemen asked why no reward was given to the works manager who informed. The works manager performed this transaction, under protest, in August, 1902, but he did not give information until fourteen months afterwards. The Admiralty could not reward him for that belated action. He thought he had satisfied every reasonable mind in the House that the Admiralty had taken the utmost precaution they could for the safety of "King Edward VII.," and that they had placed the matter in the hands of the proper authorities so that a prosecution, if possible, should ensue. In the matter of the "Argyll," the rudder had been tested with great severity, the vessel had been in commission for a considerable time, and the Admiralty had no reason to believe that the rudder was other than satisfactory. With regard to the suggestion that the Admiralty should employ practical moulders as inspectors, he said the inspectors at present employed were extremely competent men; there was no fault to find with them, but in the case of these castings it was impossible to see inside. In the case of the "King Edward VII." the castings were electrically welded on a Sunday morning, in the absence of the inspector. Of course, if people tried to deceive, sometimes that deception would succeed. He was also informed that to detect this electrical welding it would be necessary to bore into the casting, and chemically analyse the bores.

asked the hon. Gentleman whether he had expert information to prove that the rudder was a bad rudder, becauselectrical welding was a well-known and recognised process of remedying deficiencies. So far as any statements to which he had listened had gone, the rudder might be so bad that the man responsible for delivering it to the Admiralty ought to be hung. On the other hand, it seemed quite likely that by means of the system of electric welding it had been made into a perfectly good and sound rudder, fit for any work.

said that as far as he was informed—of course, he was not a technical expert—electrical welding could be usefully performed in small flaws, but if there was a large flaw, then the welding did not weld with the casting, and in such case the casting was weakened without its being perceived. The Admiralty were most anxious that these castings should be effectively inspected. With regard to the case of the "Inflexible," at Messrs. John Brown & Co.'s works, there again it was impossible that the flaw could have been discovered until machinery had been used to grind into the casting for the purpose of fitting. Scientific methods were not yet so perfected that they could depend upon all castings being perfectly sound all the way through, and as the whole of Messrs. John Brown & Co.'s officials did not find out the defect, it was not surprising it had not been discovered by the Admiralty inspector. The Admiralty were anxious for the safety of His Majesty's ships, and any reasoned criticism they were glad to have. Some of the criticism to-day had not been quite reasoned; but anything that would add to the stability of His Majesty's ships, and ensure that the public money was spent to the best advantage, the Admiralty would always gladly welcome.

said he was glad even at this late stage of the session they should have the opportunity of reviewing the work of the Public Accounts Committee. What he was sorry for, however, and in this he agreed with hon. Members who had spoken, was that that Committee did not look into the appropriation accounts before they were paid. However, the Public Accounts Committee did some of the best work which was done in the House of Commons, and he was delighted to acknowledge it. The public officials did not, however, let the Public Accounts Committee know too much. In fact, the amount of information they gave them was the minimum. He was a member of the Public Accounts Committee in 1894, but he understood in 1895 that they did not want him reappointed because he made too many inquiries. On that occasion he overcame that opposition, but they had kept him off the Committee during the present Parliament, and he could not induce the Government to put him on again, because he supposed th objection again was that he made too many inquiries. Nevertheless, the work of the Public Accounts Committee was more necessary now than ever before, as the bulk of the Estimates were systematically guillotined. There was bound to be some red tape in our Government Departments, but members of the Government Bench seemed to be alarmed when hon. Members carried on inquiries. He regretted that prosecutions had not been instituted in the cases referred to. The letting off these people was most deplorable. The bigger the people who were prosecuted the better he would be pleased. The letting of them off offered a premium to other people to carry on the like fraudulent business. They had been told about a balloon, and he thought it would do a great deal of good if some of these officials were sent up in one. About the rudder of the "King Edward VII."; the hon. Gentleman was in rather a bad temper with regard to the criticisms of the hon. Member for East St. Pancras, but he thought they ought to have a better response to those criticisms. There was, he considered, a case for further inquiry, and he thought they were indebted to the hon. Member for East St. Pancras for bringing the matter before the House, although he no doubt did it rather roughly. The report of the Public Accounts Committee was very clear and so entirely upset the statement of the Civil Lord of the Admiralty that he was afraid he had not read it. The Admiralty only discovered the matter in consequence of an expenditure of £48—a very small sum. It appeared that twelve months after the rudder was received the the Admiralty was informed by a retired employee of the company that on a certain Sunday the management collected certain hands and filled in the flaws. An examination showed that such defects did exist. The firm offered to replace it but the second rudder was as defective as the first, and ultimately it was decided to have another rudder made in Vie Government dockyards. Not only did this firm act fraudulently, but they lied; that was proved when the machinery was opened up. But his hon. friend endeavoured to whitewash all these people and tried to censure the hon. Member for East St. Pancras for the statements he had made, and repudiated them all, although they were confirmed by the Public Accounts Committee. He told the House that they had taken the law officers' opinion on the case, and read a portion of it; therefore he presumed that opinion would be laid before the House. The hon. Member had told them that the law officers stated that it was the duty of the Lord Advocate to prosecute. But he might remind the hon. Gentleman that in Scotland the Admiralty could prosecute themselves if they got the Lord Advocate's sanction to do so. Why did not they do that when they found the Lord Advocate would do nothing? Why was not this firm or the somebody connected with it who was guilty prosecuted? He might be told that one director who probably knew nothing of the matter had at least seen sufficiently punished by being knighted. He was not going to discuss that because these honours came from the sovereign, but what he regretted was that the Sovereign was not informed of the state of things before he conferred this honour. They still wanted to know why a prosecution was not instituted. It was no use saying that the law officers were against it, because no sensible persons allowed their legal adviser to advise such a thing as that: they simply said "take action." The Government should have said to the law officers "go on and prosecute." A prosecution should have taken place even though the Government knew they were going to fail, because if no prosecution took place other people would -not be deterred from perpetrating these frauds. It was admitted that had this vessel been caught in a heavy storm or had accidentally grounded 800 or 1,000 valuable lives would have been endangered owing to this flaw in the rudder. He still hoped some further explanation would be given, because at the present moment the Admiralty were simply whitewashing these persons, who were acknowledged to be guilty. It was no use saying that all this was twelve months ago, because time did not run against the Crown in this case. Such people as these ought to be punished otherwise honest contractors had not a chance. Contractors who would do this work conscientiously had no opportunity, because men like these came in and underbid them, having no intention when they did so of doing the work properly. There was one word he would like to say with regard to these contracts. They had heard of contracts being given out with regard to which there had been no competition. A case was mentioned recently where a contract was given to a contractor at double the amount of the original contract, without any other tenders whatever being asked for. In public as well as private affairs—as was well known—the only chance of getting these matters criticised and considered by contractors was by advertising for tenders, and by so doing getting an honest contractor to do the work properly. He thought if they could have another Committee like that of Public Accounts to consider these accounts before they were paid, they would make a great advance in the direction of getting the national accounts in still better order than they were at present. He made no complaint against the Public Accounts Committee nor against the Comptroller and Auditor-General, who had done their work as well as the officials of the Departments would let them, and had done it in an exceedingly effective manner. After all, the principal duty of this House was to look after the breeches pocket, the people's money. Although this money was not their own the Department should consider it, and regard the expenditure of it in the same way as though they were spending their own money. He hoped next year the Government would give the House an opportunity of considering these matters earlier in the session, and not at the end of August after the Appropriation Act had been passed and when most Members had left town, and it was not likely to receive adequate discussion.

in appealing to the House to bring the debate to a close, acknowledged that the discussion had been a fruitful one, and said he thought that the innovation of setting apart a day for the consideration of the Report of the Public Accounts Committee was a valuable precedent, and one which he hoped would be followed in the future. On behalf of the Treasury he recognised the admirable assistance which the Treasury received, in controlling the other Departments of the State which were responsible for the expenditure of public money, from the rigid scrutiny of the Public Accounts Committee, and, further, he thought it was not sufficiently borne in mind by the House, the enormous obligation which they were under to the Comptroller and Auditor-General, who was not a servant of any Department, but solely of this House. He suggested that the House ought not to pass away from the discussion without a unanimous acknowledgment of the Comptroller and Auditor-General's services. He hoped that with this expression of opinion the House might now be allowed to pass to the orders of the day. Question put, and agreed to.