My Lords, I should like to ask a question of the Leader of the House—namely, whether he can give us any information as to the probable time at which the Tithe Bill will reach this House?

My Lords, I understand from inquiries that I have made, that there is a certain chance of both the Tithe Bill and the Criminal Justice Bill being read a third time in the House of Commons to-morrow. I am very anxious indeed to get these Bills printed and circulated, so that your Lordships may have that interval which I know you like to have before the Second Reading takes place. Although that is not so necessary, as we have already said in conversation across the floor, in the case of the Criminal Justice Bill, it is very necessary in the case of the Tithe Bill; and if your Lordships would consent to a formal sitting on Friday—I should be very reluctant on such a day to have more than a formal sitting, but I think that would be quite recognised as necessary in the interests of public business—the two Bills could be read a first time on Friday. Then I would ask your Lordships to take the Second Reading of the Criminal Justice Bill on Tuesday in next week and of the Tithe Bill on the Thursday in next week. If that would suit your Lordships, the arrangement would give a fair interval, after the Tithe Bill was printed and circulated, before it had to be discussed. As I have already said, I have received an intimation from your Lordships generally that in the case of the Criminal Justice Bill a short interval would not be objected to, because the Bill is a very old friend and really comes to us in almost the same shape as that in which it left us on the last occasion.

My Lords, I rise to call attention to the proceedings in the Assembly and the Council at Geneva; and to move for Papers; and in order that there may be no mistake I ask that the Motion for Papers be put. Whether it will be necessary to follow that up afterwards will depend very much upon the reply which I have from the noble Viscount opposite (Lord Cecil of Chelwood). The difficulty which I had when I came to deal with my Question arose from the multiplicity of subjects, but (as I like to do in these cases) I sent through the ordinary channels information as to the special points to which I should direct my attention this afternoon, in order that the noble Viscount might be fortified with any Papers which he might desire to have, although his knowledge of these matters is so great that I think he does not want much fortifying either with Papers or in any other way.

Since the War the League of Nations, as we know, has been very rapidly developing in many directions. I think it is not too much to say that the centre of interest in international affairs, whether political, social or economic, has gradually gravitated towards Geneva. Indeed, as it has been put, Europe has become merged in the world but Geneva, in Europe, has been placed and is maintained as a centre in all international matters. I think that this tendency is the result of two influences, pointing in the same direction. First of all, there is the fact that the League of Nations has been constituted as a central international society, entrusted with far-reaching powers and duties in the common interest of the constituent bodies and for their common good. It does not constitute anything in the nature of the super-State, but it does constitute an international community with very specific duties and very considerable powers. The second point is that contemporaneously with—or, perhaps, rather earlier than—the constitution of the League of Nations, the outlook and orientation in international affairs has so altered that it has become such that, even if the League of Nations had not been instituted, it would have been necessary to invent some such body in order to deal with modern international problems.

Prior to the War the old diplomacy was generally supposed to be in the hands of the eight great Powers, and I think it has been reckoned that there are sixteen other Powers of a lesser character who took some part in these diplomatic matters. But what is the difference now? At the present time in the League of Nations there are between fifty and sixty constituent Members claiming, as they are entitled to claim, an equality in treatment and consideration under the terms of the Covenant of the League of Nations. Equality among these countries in force or military equipment is, of course, impossible, and so comes forward the necessity of introducing a system of impartial and just judgment in international affairs and, in that respect, making the relationship between nations similar to the relationship between citizens in a well-organised community.

This afternoon I propose to refer specially to one or two matters. Two subjects arose both in the debates in the Assembly and in the discussions in the Council. One of those, although it is an old topic, requires further discussion—disarmament; and the other is the question of arbitration. No one has done more in one sense to promote the cause of disarmament than the noble Viscount opposite. At an early stage he realised—and no one has ever doubted the truth of his prevision since—that there must be a very intimate relationship between security and disarmament. What that relationship should be has given rise to a certain difference of opinion, to which I desire to call attention, but he will not differ from me when I say that to ensure a period of permanent peace, in which international disputes may be decided by peaceful means, a measure of general reduction of armaments, so that they shall no longer be maintained at an aggressive level, is absolutely necessary. He has denounced, I think, as often as I have myself, aggressive warfare. In the Protocol we denounce it to the extent of calling it an international crime, but so long as armaments are maintained at a level which admits of aggressive warfare there is no guarantee whatever that front time to time aggressive warfare will not take place.

It is known, of course, that one of the leading obligations on Members of the League is that in the settlement of international disputes the nations undertake, by solemn treaty obligations, not to resort to war. The same obligation is to be found in the Locarno Pact which we discussed here only yesterday. But I doubt whether it is really understood how this matter stands so far as the League of Nations is concerned. In the first place, there is, as your Lordships know, already an obligation in Article 8 of the Covenant of the League to reduce armaments generally to a defensive level. I use the words "a defensive level," although it is actually said that they should be reduced to the level necessary for national use as against international aggression, or so far as they may be wanted to enforce the verdicts and judgments of the League of Nations itself.

What I think has not been sufficiently realised—I want to mention this before coming to a specific question—is the danger of the present conditions, which were never contemplated as continuing for any length of time—namely, the juxtaposition on adjacent frontiers of armed and disarmed countries. It is clear that this was never contemplated in the Treaty of Versailles, and I want to quote two passages (as being the shortest way of enforcing my argument) from Part V of the Versailles Treaty which deals with various naval, military and air clauses. It says that—

"In order to render possible the initiation of a general limitation of the armaments of all nations, Germany undertakes"

to reduce her armaments. It is clear that what was contemplated there was not a unilateral disarmament on one side; but some measure of general disarmament which should be initiated by the disarmament of Germany. Although I want to put the question in another form I should like the noble Viscount to have this in mind. He knows as well as I know and as all of us know who have been interested in the League and the Council of the League, that after a time the supervision of armaments in disarmed countries passes from the Allied Powers to the League itself. While I was the representative of Great Britain on the League the question arose as to whether a form of supervision should be instituted applicable not only to Bulgaria, Hungary and Austria, but also to Germany. That was desired by most of the Powers, and Great Britain certainly assented. Perhaps the noble Viscount will tell us presently whether the Commission, as I will call it, which it was then contemplated would be formed in order to enforce the authority of the Council of the League of Nations, has, in fact, been formed. It was felt that if you were to have general disarmament after the immediate friction had passed, you might have the same form of regulation of the armaments of all countries when the new spirit had arisen and the difference between the victorious and defeated countries was no longer to the front

When it came to the signing of the Treaty of Versailles Germany protested, in the first instance, against the proposals for disarmament. Upon that the Allied and Associated Powers gave her this undertaking:

"They recognise that the acceptance by Germany of the terms laid down for her own disarmament will facilitate and hasten the accomplishment of a general reduction of armaments;"—

I am quoting the actual words—

"and they intend to open negotiations immediately"—

Is this from the letter written by M. Clemenceau?

I think it is. It is signed on behalf of the Allied and Associated Powers. I am quoting from the actual words in order that there may be no mistake—

"and they intend to open negotiations immediately with a view to the eventual adoption of a scheme of such general reduction."

I do not care to go back into the past and it is not necessary for me to do so, but, whatever the cause, although that promise was made about opening negotiations immediately with a view to the reduction of armaments, nothing has been done so far as I know in the sense of actual disarmament. One realises perfectly well that it has undoubtedly been a source of possible friction in German politics, that whereas they were said to be in default for not reducing their armaments to the required level, the other parties to an equally solemn engagement had not, apparently, taken any steps at all in that direction; and, so far as I am aware, no steps of a practical kind have been taken in that direction up to the present moment. I do not think there has been any disarmament in that sense. I have in mind, of course, the Washington Conference; but that applied only to naval and not to military matters. I do not want to underrate the importance of that Conference, which was largely brought about by the intervention of the ministers of the Churches in America, to whom President Harding himself ascribed the merit of helping him to bring it about.

If the noble Viscount will look at the White Paper in which the proceedings of the Thirty-fifth Session of the Council of the League have been published, he will see, at the bottom of page 17, a paragraph referring to the reduction of armaments. That paragraph begins with three words, with which the noble Viscount is very well acquainted and as to which I want to say a word in a moment under another head. Those words are: "Arbitration, security and disarmament." It is in that order that these three matters have always been placed by the League and the Council of the League. The desire of the Council is that on remission to them from the League Assembly certain steps shall be taken as soon as possible, in order that in the interval between the September and the December sessions—we are getting near to the December session—something of a practical kind shall be done to forward the interests of disarmament. I want to ask the noble Viscount this question. A special Committee of the Council was appointed to examine what had been said in the Assembly as to the constitution and working of the Co-ordination Committee, which is a Committee to which this subject matter was relegated. They were to examine different matters connected with the Coordination Committee—the composition, name and status of its different members, and its procedure. Can the noble Viscount, when he comes to answer my question, give us any assurance that progress has been made as regards the appointment of the Co-ordination Committee and how, in accordance with those words, the Co-ordination Committee has been appointed.

There is a further step. It is to make the necessary studies for determining the questions which should be submitted to preparatory examination, with a view to a possible Conference on the reduction and limitation of armaments. I think it would be a very admirable outcome of the true spirit which we are told has followed the Locarno Pact if real progress is being made by the appointment of this Committee, and if they are really inquiring into a practical method of progress in order that the matter may be really considered. In addition, under the same heading, we come to another matter with which the noble Viscount is very familiar. It is the private manufacture of arms, munitions, and implements of war. What is suggested here is that you may get at the information which will enable you to submit this question to an international Conference to be convened, if possible, before the next Assembly. Therefore I will ask the noble Viscount under this head, as well as under the previous head, if be will tell us—I am sure he will know—what has been done, not only as regards a general reduction of armaments, but also in reference to the private manufacture of arms, munitions, and implements of war.

The next question is germane, in one sense, to the question that I have already asked, but in a wider sense it is a distinct question. It is this: Will he tell us how, in his view, the matter of compulsory arbitration stands at Geneva either in the Council or in the Assembly? We know that the Locarno Pact is based on compulsory arbitration. We know, too, that as regards what are called the respective rights of the parties—the juridical questions—they agree to submit them cither to an arbitral tribunal or to the Court at The Hague for decision. It takes away, on those questions, the right of the parties concerned to be judges in their own interests. Under the Locarno Pact, for instance, every matter of the respective rights between France and Germany which are within the limits of the arrangement will go to what is called a judicial decision—although that includes an arbitral decision—in order that the matter may be definitely settled by an impartial third party, which, of course, is the real way of avoiding friction and trouble.

When the Foreign Minister was at Geneva on an earlier occasion, in March—I do not think I am putting it too high, I am very anxious not to do so—he stated that the view of Great Britain was to oppose all forms of compulsory arbitration. It is a matter for comment that what we think is not right for ourselves we guarantee in the Locarno Pact to be undertaken by others. Still that was the view which he insisted upon. Secondly, as regards juridical questions, in answer to a memorandum sent; to him lately in this country, he wrote that he could not consent to the compulsory reference of juridical questions to the Court of The Hague. I think he, was not quite accurate in saying that the alternative was arbitral decision—it is not so—the alternative is no decision, and leaving open an ultimate appeal to war, which I think is a great misfortune. Lastly, when Switzerland offered an all-inclusive compulsory arbitration to settle disputes between Switzerland and Great Britain, he intimated that Great Britain would not be prepared to consider a proposal of that kind.

Let me see what the position of the Council of the League is upon this point. I do not know that I am unduly prejudiced. I dare say I am prejudiced in favour of the provisions of the Geneva Protocol, which, of course, intended to include all matters for decision—not for consultation, but for decision—under some form of arbitral tribunal. The Papers have not yet been issued, but I have read carefully the official journal that I had sent to me, which gives a sufficient report of what goes on in the Assembly to enable one to understand the spirit which animates it. It is not quite as complete as the OFFICIAL REPORT of Parliament, but it goes a long way in allowing any reader to understand what the real facts are. I think the noble Viscount will not differ from this, that there are a very large number of speeches—do not let me talk about minority and majority—in favour of compulsory arbitration, as a basis of security, to be followed by dis- armament. The noble Viscount, I know, in his speech, expressed the contrary opinion. He expressed the view that arbitration might follow disarmament. With all submission to his wisdom in these matters I think that is a difficult, if not an impossible, position.

But what I want to say for the moment is something different. It is that at every stage, and on every occasion, when this matter was discussed at the Assembly, speech after speech was made in favour of the principle in the Protocol of compulsory arbitration as a first step in the bringing about of such security as would enable the question of a reduction of armaments to be approached. No one supposes that we can suddenly settle such a question as the reduction of armaments. All you can do is to prepare the way for a Conference. I recollect M. Herriot—I had the misfortune of having to speak after him at Geneva; he is a great speaker—laying down the principle that so far as France was concerned they were not going to a tower of Babel discussion on the question of disarmament, but they must have, first, security through the accepted method of compulsory arbitration.

I have taken three quotations which appear to me fairly to represent what the view of the Assembly was upon this last September. The noble Viscount will tell us whether, in his opinion, they in any way go too far. The first quotation is from M. Rolin, who was a Belgian representative. I quote him—I will quote M. Jouvenal afterwards—because, as regards the Locarno Pact and the general position of Belgium, his opinion is of great importance, and we know it is supported by the Foreign Minister himself, M. Vandervelde. M. Rolin said that—

"the principal fact emerging from the speeches in which reservations or criticisms had been made concerning the Protocol was that last year the problem had been correctly stated."—

That is to say that the principles of the Protocol are accurate—

"It had been decided that there could be no disarmament without security, and no security without arbitration"—

That is the point—"no security without arbitration." He is dealing, of course, with compulsory arbitration. He goes on—

"and that in all cases a war of aggression as a means for the settlement of disputes must be excluded."

I do not want to go back into what has always been rather a difficult matter, the definition of aggression, but one definition which holds water is that if you have a system of compulsory arbitration, then any one who goes to war instead of going to arbitration for an impartial decision shall be regarded as an aggressor. M. Jouvenal said:

"The Protocol was not dead. It was so much alive that it conferred life on the special Treaties which sooner or later, whether they succeeded or failed, would come back to the Protocol. The very spirit of the Protocol was to be applied to the most threatened part of the Continent of Europe. If the League had not succeeded in putting the Protocol into force, it would at least create a general scheme to which henceforth all diplomacy would be subject."

As I read the discussions at Geneva, there was a very general acceptance of the principles which underlie the whole of the Protocol—those of compulsory arbitration—and there was practically given to the Assembly at Geneva, I will not call it an undertaking, for that would be the wrong word, but a notice that in the Pact of Locarno these principles would not be disregarded. As a matter of fact, they are the very basis of the Locarno Pact.

I have one quotation to make from Dr. Benes who, as we all know, has taken such a great interest in the matter. Dr. Benes says:

"The positive results of the present Assembly were a new and solemn acceptance and consolidation of the three great principles, arbitration, security and disarmament, round which the political activities of the League of Nations would for the next few years inevitably circle."

What I want to ask is this. Has there been any change in the views expressed on the subject of compulsory arbitration, particularly as regards juridical matters, since the negotiations which were brought to a successful end at Locarno? Are we prepared to undertake obligations, which we guarantee that other countries shall observe, in order that all disputes between them may be open to settlement by peaceful means?

I should like now to turn more especially to the work of the Council. The matter which has chiefly occupied the Council on the political side—I will not go into the various administrative and social matters—is the frontier between Turkey and Iraq. I want to be very precise in what I say on this point, because it happens that this question originated while I was the Delegate of Great Britain. When I say "originated" I mean originated so far as the League of Nations is concerned. It originated in another sense, of course, at Lausanne, and, quite apart from the League of Nations or the Council of the League being consulted in any way, the duty of arbitrating on this question was sent from Lausanne to Geneva. When we were discussing this matter, not this year but a year ago, I certainly represented on behalf of Great Britain that we regarded the reference to Geneva as a reference for arbitration and decision. I made that as clear as I could, and I based my argument on the terms of the Treaty at Lausanne and what had passed in relation to it.

This year the question arose as to whether the matter had been referred for decision or for conciliation and inquiry, that is to say, whether it had been referred under Article 13 of the Covenant of the League of Nations or under Article 15. As the noble Viscount knows, there is a great distinction between the two cases. Am I right that the International Court, to whom the matter in my opinion was most properly referred, decided that the reference was for decision and not for arbitration terms? That is a very important matter; in fact, it goes to the whole root of the jurisdiction of the Council one way or the other. And secondly, while I was the representative of Great Britain at Geneva, the question was raised as to whether, in giving their decision, the Council must be unanimous, not counting for this purpose the parties actually concerned. I do not know whether the Report is right, but it says that on this point the International Court gave a decision that the Council must be unanimous in coming to their determination.

Let me suppose that these points are properly determined, then I come to this question. We were prepared to submit this matter to arbitration for decision. Then I say that our only duty, if we care for arbitration at all, is to obey that decision and comply with it when it is given. The time has really passed for discussion as regards views and policies which we might have undertaken if we had had a free hand. We agreed to refer the matter for decision, and as an honourable country I have no doubt we shall abide by the agreement in that direction. There has been, perhaps, a misapprehension on one point. In order to obtain the information on which to base their decision, M. Branting, whose loss we all deplore, and who was then at Brussels, determined, also at the request of Great Britain, to appoint a Commission and that Commission was appointed in the ordinary way by the President of the Council. As to whether the Council will accept the Report of that Commission, and what determination they will give upon it, we know nothing at the present moment. It very lightly determined what its jurisdiction was, but undoubtedly there has been a great deal of discussion as to the terms of recommendation to the Commission appointed by the Council. It appears to me, although there has been this discussion, that the attitude of this country must be, as it always has been, that, having submitted a matter to arbitration for decision, we should abide by the result.

Many people will recollect the discussions in the Alabama case. They ended, of course, in our full acceptance of a determination which was by no means desired by the mass of the people in this country, and I think that the resolve of Great Britain so to act has been the basis ever since of the great friendliness between this country and the United States of America. The noble Viscount will tell me if he agrees with the view that I have ventured to suggest. I should not venture for a moment to discuss the rights and wrongs of this matter, more particularly as in the old days I was concerned, on behalf of Great Britain, in attempting to settle the question.

There are three other matters concerning which I desire to ask a question of the noble Viscount. On page 22 of the White Paper (Cmd. 2528) is a reference to what is called the "Greek Refugees Settlement Commission," referring specially to Grecian emigrants. I happened to be the Chairman of the Sub-Committee which dealt with that point when I was a member of the Council, and I recollect very well the great work done by Mr. Morgenthau, formerly American Ambassador in Constantinople, and the fact that this country, through the Governor of the Bank of England, provided the very large sum of £10,000,000 or £11,000,000 that was necessary. A little time ago some question arose between the officials of the body which was distributing relief and the Greek Government. That, of course, was very unfortunate, but, if I understand aright, those difficulties have been removed and are not likely to recur. I think that this is a very important point.

Another question is that of minorities. I doubt if any more difficult topic comes before the Council of the League of Nations. Minorities are a constant source of friction which may lead to ill will between nations. What I want to ask the noble Viscount is this. He will have, seen, no doubt, in the papers that the so-called optants whom it was threatened to expel, either German optants from Poland or Polish optants from Germany, are no longer liable to expulsion. The whole matter has been settled in a friendly spirit. That is a very important result, if the report was accurate, of the Pact of Locarno. When we had to deal with this matter a year ago we had the assistance of the noble and learned Lord, Lord Phillimore, and everything, I think, was done that could be done by arrangement and settlement. But something more is needed in this question of minorities. However excellent the arrangements and settlements may be, you cannot get a satisfactory solution unless you get it in a friendly spirit. The matter is not capable of solution in any other spirit. It is not only a question of what the central Governments say that they will do, but it is necessary to consider neighbours and local administrations in order that these foreign minorities may have fair treatment in every respect.

I am glad to say that I am now coming to my last topic, but it is a very important one. I wish to congratulate the noble Viscount on the work that he did on the Slavery Convention. I think that, perhaps, it was the best piece of work that was done on behalf of Great Britain at Geneva this year. On many points, unfortunately, we had to take a rather obstructive and difficult attitude, but I communicated with the officials concerned and they have kindly sent to me the Convention which, I understand, is the formal Convention that has the approval of the noble Viscount. I find that in this formal Convention the principle of what is called "forced labour" is not dealt with from what appears to me to be a satisfactory point of view, the point of view that I think has been urged on behalf of Great Britain in the meetings of the, Council or the Assembly. It recognises the use of forced labour for private purposes. I agree with what was said by Lord Cromer, and has been said by other great statesmen, that there is no difference whatever between what we call slavery and forced labour for private purposes. I admit that in one case or the other you may have palliations and you may make regulations, but, when you come to the actual service itself, compulsion is the common element, and compulsion is the same in forced labour as it is in slavery. I am not now, of course, discussing the terms on which the labour is given. You may have better terms of payment, and so on, in one case than in the other. That depends upon circumstances. But in reality, when you come down to bedrock, I agree, as I say, with Lord Cromer and others that you can draw no distinction, and I very much regret that the British view should in any way give any countenance whatever to any form of forced labour for the purpose of private gain.

It is only fair to remind the noble Viscount that it is fenced round, but, as I have said, fencing round is only a palliation and does not go to the root of the evil. It is laid down that in territories in which compulsory or forced labour for other than public purposes still survives, the High Contracting Parties shall endeavour progressively and as soon as possible to put an end to the practice. Why should it not be put an end to in the same way as slavery? Why not deal with it on the same basis? I think that this exploiting of labour by the white man—and I think it is nearly always coloured labour—is really a disaster, a thing which ought to be put an and to on the same basis as slavery itself. I know as well as the noble Viscount knows how the difficulty arises and the country from which it comes. I quite realise that and I certainly do not intend to mention any names. It would be invidious to mention the names of particular countries. I go further. I want the thing itself to be destroyed and ren- dered as far as possible illegal, and I hope that in subsequently dealing with this case the noble Viscount will make every effort in that direction.

I am sorry to have detained your Lordships for some time, but, as I said at the outset, the body of business in the Assembly and in the Council is constantly growing, and it really is essential, if possible, that what is done at Geneva should be known in this country. There is a danger both ways. There may be danger of going too far in one direction, or too far in the other direction, and I hope everything will be done which can be done. I am sure the noble Viscount will agree that everything should be done that can be done to give information on which a sound judgment can be formed. The Convention, which I will hand to the noble Viscount, was kindly sent to me from official sources. The matters which I have mentioned are those which I desire to ask about. There are a large number of other matters, but it is impossible to comprise them in one question. I desire to move the Resolution for Papers which stands in my name, although I quite admit that it may be unnecessary to press it after hearing what the noble Viscount has to say.

My Lords, I certainly have no complaint to make, on behalf of the Government, that the noble Lord should have desired to raise this question. I agree with him that the more the actual work of the League is understood in this country, and the more it is realised what an immense amount of work is being done at Geneva, the better it is for humanity and for the League itself. I am not going to follow him in the interesting disquisition with which he began his observations, as to the general character of the League. The League is now a great fact. It was striking to me, returning to Geneva after an absence of two years, to find the very great advance which the League had actually made in reputation and smoothness of working. The fact is—it is brought out in a very interesting disquisition on the subject, published by the League of Nations Union and prepared by Mr. Wilson Harris—that half-a-dozen Prime Ministers and sixteen European Foreign Ministers attended the recent meeting of the League. That shows the great importance which is now attached in all parts of the world to the work and deliberations of the League.

The noble Lord finished his observations by a reference to the question of slavery. I have been informed that the noble Earl, Lord Buxton, intends to raise this question at a rather later stage in the Session, and I am sure that the noble Lord opposite will not think me guilty of disrespect if I say that I feel that Earl Buxton has a very special hereditary right to raise this question, and that I shall only say a very few words in answer to the noble Lord opposite. I think he has not given quite a fair account of the provisions of the Convention which is now under the consideration of the Government, with regard to forced labour. If he had read the whole of the phrase I think he would have seen that in substance forced labour for private purposes is dealt with in exactly the same way as slavery is dealt with in the Convention. The provision with regard to slavery is that the High Contracting Parties undertake to bring about progressively, as soon as possible, the disappearance of slavery in every form. The provision with regard to forced labour is that in principle compulsory or forced labour may only be exacted for public purposes. In territories in which compulsory or forced labour still survives the High Contracting Parties shall endeavour progressively and as soon as possible to put an end to the practice. The words are the same practically in each case, and the desire of the High Contracting Parties is to bring about the disappearance of forced labour for private purposes as soon as possible.

It is quite true that as an additional precaution certain alleviations are agreed to, so that the worst abuses of forced labour are put an end to immediately, but I do not think it is fair to say that there is anything which can be called a recognition of forced labour for private purposes. Its legitimacy is not recognised in principle, and it can only be exacted for public purposes. And you have, of course, to consider in all these matters not only what we should desire to see enacted if we were the only country in the world, but what is practically possible when you are dealing with a large number of States, and have to take steps which, while they may not satisfy one's own aspirations and sentiments, will be most practically useful in order to carry out the objects we have in view. I am satisfied that a prodigious advance has been made in regard to forced labour and an advance which, if it is fully observed by those who have at any rate given provisional assent to it, will mean an immense saving in human misery, which it is almost impossible to exaggerate. I think the noble Lord and others in making criticisms of this Article should remember that it is the first time that this question has been dealt with at all, and that in making this first step it is a very much larger step than we had any right to hope for or expect. However, I will deal with the subject more fully when I deal with it specifically on the Question to be put by Earl Buxton later.

With regard to the other matters raised by the noble Lord, there was the question of minorities, and he wanted to know whether it was true that the expulsion of the optants had been abandoned. I think it is only right to say that when Count Skrzynski returned to Poland, almost the first thing he seems to have done with regard to Locarno was to put an end to that expulsion, and his gesture was replied to by the German Government, who made a similar provision with regard to the Polish optants in their country. I quite agree with the noble Lord that it was a most valuable result of what has been called the spirit of Locarno, and I think it does augur well for the effective fulfilment of the undertakings and agreements which were arrived at between Poland and Germany on that occasion. I agree with him also as to the broad difficulties which beset this question of minorities. They are enormous, and I think it is right to say that you must recognise not only the difficulties of the minorities but the difficulties of the majorities—of the governing forces in the State.

It is quite true that there have been, and I am afraid still are, cases of oppression of minorities, but it is also true that many States have the greatest difficulty in dealing with these questions because the minorities, partly from historical reasons, partly, it may be, as a consequence of misgovernment, very often constitute a very highly disaffected section of the population, and it is a position of great difficulty to say to a State: "You are not to treat these minorities in the least differently from other citizens," when they reply to you in effect: "Well, we are quite ready not to treat them differently, provided they do not behave differently." The two sides have to be considered. It is most important that minorities should receive fair and just treatment, but it is also right to say that we must never forget the immense difficulties that beset the Governments of some of these countries in dealing with this situation.

Then the noble Lord asked me whether the difficulties that had arisen between the officials of the Refugees Commission in Greece and the Greek Government had been settled. I understand they have been settled completely, and I think that we may anticipate that there will be no recrudescence of that difficulty. He paid a very well deserved compliment to the work of Mr. Morgenthau, while he was Chairman of that Commission. I think it right to add that we have been exceedingly fortunate in securing another Chairman of that Commission, Mr. Howland, also an American, whose work is as admirable as that of his predecessor.

With regard to the Mosul question I have not yet seen the full report of the decision of the Permanent Court of International Justice, but I understand that the substance of it is this, that they have decided that the Council in dealing with the Mosul question will deal with it as an arbitral decision. They will deal with it as the Council of the League, but as an arbitral decision. The position is a little complicated, it must be admitted. If the matter had been referred to the members of the Council as arbitrators—that would have been a perfectly possible thing to do—then they would have acted as arbitrators, and their decision would have been by a majority. But the reference was to the Council, and the Court has decided, I understand, that, though they will act as arbitrators and will give an actual decision, and not a mere mediatory recommendation, yet they must act as a Council, they must act unanimously—apart, of course, from the votes of the interested parties. His Majesty's Government will, of course, attend at Geneva whenever the matter comes up before the Council—it meets on December 7—and will have to hear what the Council decide to do in execution of the power which the Court have decided that they have got.

The noble Lord said, and said quite truly, that he was sure that the British Government would accept the decision of the Council. I cannot imagine any British Government who, having gone to a body which has been decided to be an arbitral body, in accordance with their own contention—because they have always contended that it was an arbitral body—should then turn round and say that they were not prepared to accept the decision of that body. Evidently they must be prepared to accept the decision of the body, just as they must be prepared to accept, and will of course accept, the decision of the Permanent Court of International Justice. I also find myself in agreement with the noble Lord in thinking that it is far better in these circumstances not to discuss the merits of the matter which will have to be discussed before the Council at Geneva. The noble Lord for that reason did not invite me, and I thank him for not inviting me, to enter upon any question as to the merits of that discussion. Geneva is the only proper place where that should be discussed now.

I now come to the more weighty part of the noble Lord's speech, which was concerned with disarmament and arbitration. He began by pointing out that in the Geneva Protocol aggressive war had been described as an international crime. That particular provision was taken from the Draft Treaty of Mutual Assistance and adopted in the Protocol. I am very glad that at Geneva this year the Assembly unanimously reaffirmed that principle, and I think now, as far as anything can be made international law by anything that the League does, it may be regarded as international law in the sense that aggressive war is an international crime. That, I agree with him, is a very important advance, and a reversal, as I understand it, of what was the law, and what I suppose in a sense still is the law, apart from the League, in international matters.

He said, and said truly, repeating what the noble Viscount, Lord Grey, said with great force and lucidity yesterday, that it was essential if you were really to make that prohibition effective to proceed to the reduction and limitation of armaments. I agree. I have always thought, and the Government think, that disarmament is an essential part of the pacification of the world. That is true, but it is also true that there are very great difficulties in the way of disarmament, and the Assembly this year were convinced that before any practical step in that direction could now be taken you must have a thorough investigation of the principles on which disarmament should proceed. I am sure that is right. It is no use merely calling a Conference for disarmament unless you know something of the basis on which that Conference is to proceed. A really careful examination will have to be made of what can be done, and, as the noble Lord pointed out, the Assembly suggested, and the Council agreed, that there should be summoned a Committee of the Council which should recommend to the Council at its next meeting what should be the body which should make that investigation—whether it should be the Co-ordination Committee, as it is called, or some other body, or some modification of that body, and what should be the programme which should be set before that body. The Committee which is to advise the Council on those two points is to meet on December 3, and His Majesty's Government have asked me to attend as their representative on that Committee. We shall have to advise the Council as to what is to be the nature of the investigation and to draw up a programme I can assure the noble Lord, although it would be obviously improper for me to so further, that the Government are taking that matter extremely seriously. They will be prepared with their own proposals when the time comes, and I can assure the noble Lord that there is no intention whatever of in any way obstructing, or even neglecting, the duties which fall upon the League in that matter.

I do not need to go into the argument which the noble Lord presented to your Lordships as to the international position of disarmament. I agree with him, there is no doubt whatever that there was a most specific undertaking that German disarmament should be followed by general disarmament. That is not only in the Treaty of Versailles, but, as he pointed out, was repeated in rather more precise terms in the correspondence that preceded the initialling of the Treaty of Locarno, and he will not forget that in the Locarno Protocol itself that has been reasserted in the most definite terms. The document signed by the representatives of Germany, Belgium, France, Great Britain, Italy, Poland and CzechoSlovakia says that they undertake to give their sincere co-operation to the work relating to disarmament already undertaken by the League of Nations and to seek the realisation thereof in a general agreement. Therefore, there is no doubt at all about the international position and I need not say any more about it than that.

If the noble Lord will allow me to say so, I think he went a little far in stating that nothing has been done for disarmament since the League was formed. We have done a great deal practically in disarming this country. We have reduced our armaments, as the noble and learned Lord knows, apart from the question of air armament, to a good deal below what they were before the War; and they were not unduly high even then. If the noble and learned Lord will look into the figures he will agree, I think, that there has been a considerable reduction of armaments in the last year or so, taking Europe as a whole. There are also the Washington Treaties. It is true that apart from the Washington Treaties there has been, to use the words of the Covenant, no scheme formulated for the reduction of armaments. It is that duty which the League has still to discharge. But even there the League has not been idle. At every Assembly, I think, since its formation this matter has been under consideration. The difficulties immediately after the War were overwhelming and it was absurd to talk of disarmament for the first year or so after the War. But since that time a great deal of consideration and thought has been given to it, and I do not think it would be fair to say that nothing has been done. At the same time, as I have already said, we recognise most fully our duty to carry this policy to its successful conclusion so far as we can possibly do so, and the steps we are taking are, I think, an earnest of our good intentions in that respect.

The noble and learned Lord asked me about the position of the question of the private manufacture of arms. The position, as I understand it, is that when the Co-ordination Committee met last summer they drew up a questionnaire, or directed a questionnaire dealing with this question to be drawn up and addressed to the Governments. It was then submitted to the technical committees of the League—the Financial Committee, the Economic Committee, and so on; and I believe that is now on the point of being issued. It has not, I think, been actually issued. Of course that is the first step that will have to be taken and then, no doubt, the Assembly will urge very strongly that, if possible, a conference should be held before the next Assembly to deal with this question. At the same time, I do not want the noble and learned Lord to forget that by the acceptance of the Traffic in Arms Convention, which was perfected last summer, I will not say the whole case has been met because it has not, but a considerable part of the case about private manufacture has been dealt with. We shall at any rate know what is going on—at least we hope so—in regard to the sale and traffic in arms. It does not meet the whole case; I do not say it does; but it meets, and has always been considered to meet, a certain part of the case.

The noble and learned Lord also asked me something about the substitution of the League for the other agencies of disarmament of ex-enemy countries. So far as I understand that matter, it is still under the consideration of the Council and I do not know that there is anything I can usefully say to your Lordships upon the subject.

With regard to the other matter, compulsory arbitration, the noble and learned Lord asked me a specific question. I took it down as nearly as I could and he will correct me if my version is substantially inaccurate. He asked: "Has there been any change in views on the part of the Government as to arbitration since Locarno?"

As to compulsory arbitration. Arbitration generally is a different matter.

—"as to compulsory arbitration since Locarno?" I was not able to get down the exact wording of the second question, but roughly it was: "Will we apply to ourselves the principles by which the Locarno Agreements are to be applied as between Germany, France, and so on?"

That is right.

I do not think I can say there has been any change of view by the Government as to their general attitude towards arbitration, compulsory or voluntary, since Locarno. Our position has always been the same, as I understand it—that we are strongly in favour of arbitration; that we would rejoice to see arbitration the normal way of settling international disputes, and that we are very anxious to take any steps that can be taken which we are satisfied will be useful for the purpose. The only question between us is as to what is the best and surest method of achieving that end. What the noble and learned Lord said is perfectly true, and I will not deny it for one moment: there is a very strong feeling in all the speeches made at the Assembly in favour of arbitration.

In favour of compulsory arbitration.

Well, yes—in favour of compulsory arbitration. In favour of arbitration also, and in favour of compulsory arbitration. There is no doubt that this is a very general feeling. At the same time I sometimes ask myself, when I listen to those eloquent periods, whether the speakers have fully envisaged what would be the actual consequences of the sentiments they are announcing if they were immediately put into effect. I am afraid there is a danger in some minds of treating arbitration as almost in the nature of a charm. It is not that. It is the alternative to war. You must somehow arrive at a position in which war will not be adopted and then arbitration certainly will be adopted. But if you think you can do that by accepting verbal arbitration without fully realising what it really means and what it really intends, you are not really making any advance. There is a danger that, if there were provisions for compulsory arbitration which were not fulfilled, a terrific blow would be struck at the whole principle of the pacific settlement of international disputes. Considerations of that kind and not the fear of arbitration, not a dislike of it, but a desire to move surely and certainly in the direction of progress, have really moved not this Government only but almost every Government that has considered it, in dealing with this question.

Let me point out one other thing, it must never be forgotten, in dealing with this question of arbitration, what a very large measure of arbitration, and even compulsory arbitration, has been provided for by the Covenant of the League itself. There are not only those provisions of Articles 13 and 14 that deal with arbitration in what are called "justiciable disputes," which are, I admit, voluntary, but there is the immensely important jurisprudence which is growing up by which the Council refers questions that are brought before it for the advice of the International Court. That really is, in substance, compulsory arbitration. Where this operates, the dispute comes before the Council so far as it is capable of being dealt with judicially. The Council is adopting more and more the practice of asking the advice of the Court. The parties are invited to go to that Court, and present their case. If they do not go the case goes on as though they were there. That happened in the Mosul case the other day. The Government of Turkey did not think it right to appear before the Permanent Court, but the Court none the less entertained the question, gave its advice to the Council, and—of course I cannot prejudge anything the Council will do in the future—so far the Council has always accepted and acted upon the advice of the Court.

Therefore, there is a very large measure of arbitration, and even of compulsory arbitration, under the provisions of the Covenant, and it is to be observed that whereas the causes contemplated under Articles 13 and 14 are mainly questions, if I may so put it, of a minor character between countries—I do not say exclusively so, but those are the main questions contemplated under those Articles—these questions which are referred by the Council to the Court are questions which arise in the most serious disputes that can take place between nations. I venture, therefore, to say to the noble Lord, do not be impatient. Arbitration is progressing, and compulsory arbitra- tion is progressing. Locarno has given it a tremendous advance, and I am satisfied that it is going to grow and will grow in the future. I have myself always believed that before you can get such a normal and usual method of dealing with international disputes you must get a real feeling of international security, and it is worth observing that in the Græco-Bulgarian dispute, which has just taken place, you first stop the fighting, you first require each country to withdraw its troops from the other country, and then arbitration follows as a matter of course. I believe that to be, I will not say the only way in which arbitration will be established, but the normal, usual and healthy way in which it will be established.

I believe most fully, as the noble Lord believes, and as Mr. Chamberlain announced that he accepted at the Assembly most fully, that those three principles of arbitration, security and disarmanent must progress pari passu together. You cannot deal with any one of them without dealing with the others. You will begin by getting, as it were, a little security. That will lead to a little disarmament, and accompanying that you will get an advance in the direction of compulsory arbitration. I believe that the advance on this three-fold route is the way in which advance can really most successfully be made, and I venture to say there is nothing that we need regard with depression, but that we must regard with exhilaration everything about the present course of international events. The only danger, as it seems to me—I say it very seriously—that is at all likely to interfere with international advance at this moment will come if we abandon or palter with sincerity and reality in dealing with these questions, if we substitute for a real effort to make solid advance eloquent speeches and perorations, appeals to the highest sentiment, without exactly knowing how we are going to carry those sentiments into effect. That is a real danger, and the only danger that I see as likely to interfere with the magnificent work which in my judgment is being done, and has been done, in the last two years at Geneva.

My Lords, there is only one point upon which I should like to say a few words in answer to the noble Viscount, and that is with regard to his very interesting views about compulsory arbitration. It appears to me that those views carry very much farther than I had understood them before the views of the present Government as regards compulsion in arbitration matters. I do not want to take any advantage of the words, but so they appear to me. I may remind the noble Viscount that under the terms of Articles 13 and 14 of the Covenant, as he knows very well, there is no compulsion of any kind. They are so framed that any one can keep outside arbitration altogether.

So I said.

Yes. And when we come to the question of conciliation, as it is called, under the subsequent Article, Article 15, the only case in which you may say there can be compulsion—and there may be compulsion on all matters—is one in which ultimately you have a unanimous Council. It all depends upon that. It was to stop that loophole, as it is called, that special provision was introduced into the Protocol, but it was only partly introduced, and that loophole has been cut down in the terms of the Locarno Pact. I do not wish to say more now except to thank the noble Viscount. I acknowledge how excellent his own work has been at the League of Nations, and I agree with him that sincerity and frankness are the basis of all good work, not only of the League but everywhere else. As to the question of forced labour there will be a subsequent opportunity for pursuing that matter, if necessary. I ask your Lordships' leave to withdraw my Motion.

had given Notice to call attention to the announced proposal of the Army Council to revert to the form of Army accounts superseded in the year 1920; and to move for Papers. The noble Lord said: My Lords, the matter to which I desire to invite the attention of your Lordships' House, and to endeavour to obtain some explanation from the Government upon, is one of very far- reaching public importance, in two definite directions. The first direction is that of the efficiency of Army administration; the second is that of the general efficiency of the administration of public finance. I must confess it is from that point of view that I have been myself heretofore most familiar with the questions involved, and so far as the question of the efficiency of Army administration is concerned I only came into contact with it when the two streams of interest coalesced, about five years ago, through the adoption of the recommendation of a Select Committee of the House of Commons with regard to the form of Army accounts. But the movement out of which the alteration of the Army accounts arose, so far as it concerned Army administration, was one that had been going on for many years.

Do I understand that Sir Charles Harris, after experience, approves of the system?

Certainly he does. He approves it entirely. It was only after Sir Charles Harris was retired from the War Office that the counter-current began to set in. I can assure the noble Lord personally that that is so. I have had the most explicit letters from Sir Charles Harris on this subject again and again. The answer goes on—

"It is therefore proposed"—

that is, because there was one dissentient and because the point on which there was dissent, devolution to the unit, was not accepted—

"It is therefore proposed, subject to the approval of the Committee of Public Accounts, to discontinue the cost accounts of combatant units, retaining only those of productive and other establishments of which such accounts have proved of value. It is also proposed to return to the cash form of Army Estimates and Accounts presented to this House."

An extraordinary non sequitur. Why "therefore"? Why, because a particular proposal for devolving responsibility as far as the unit is negatived, are you to scrap the whole of this admirable system of accounts, which has again and again been endorsed and approved by the strongest possible War Office Committees? What is the sequence of argument? "It is therefore proposed" to return to a system of cash accounts which Sir Charles Harris and the Committee on National Expenditure, on which Lord Banbury sat, said was not a system of accounts but simply a cash statement.

Why should you return to that simply because the financial people consider that you cannot devolve the responsibility as far as the unit, which is the only thing that there was dissent upon? They give a reason. They say:—

"The maintenance of the present system would demand a greater expense on account keeping that we can afford in the present circumstances of financial stringency."

It is obvious that what the present Secretary of State for War, when he was in Opposition, feared, has come to pass. The Chancellor of the Exchequer has come down and said: "Here is an expenditure of £200,000 involved because you have got a double staff. Either you scrap that double staff or you scrap a battalion." He is threatened, I assume, with cutting down his Estimate. And, curiously enough, instead of adopting the recommendations of the Lawrence Committee and pulling out the old tooth because the new tooth was growing up beside it, it is proposed to pull out the new tooth, which is obviously the more efficient tooth, on the plea that it is drawing more sustenance from the system than the old tooth is doing. That seems extraordinary when the Lawrence Committee has shown to you that by carrying out this amalgamation you can save your £200,000.

I can guess why that is not being done. Because, as was pointed out, there are a good many officers in the Pay Department who might have to be displaced, and it may have been an instruction to the Committee who considered the matter that they were not to bring in any proposal which would involve an addition, to non-effective services. There may have been an obstruction of that sort. But surely, having regard to the future, and to the acknowledgedly admirable advantages of this system, it is better to face the trouble of carrying out the transition, and maintain your efficient instrument of accounting and control, with its advantage of being able to give Commanding Officers at any rate information as to what their work is costing, even though you cannot devolve authority as far as the Lawrence Committee recommended. But they propose to return to the cash form of the Estimates, while at the same time furnishing supplementary information as to the full cost of the various parts of the Army.

I ask, what does that mean? When you have destroyed the present system of accounts, which do enable you to give the cost of particular Divisions of the Army, and when you have returned to a cash account, from which you cannot possibly get that information, how are you going to furnish to Parliament the full cost of various parts of the Army? You cannot do it. You never could do it until this new system was introduced. You never could tell what was the cost of a battalion, or of a hospital, or of any service. The only services as to which you could account for the cost were those particular services which were called the manufacturing services—the Ordnance factories and one or two others of that sort—in which proper commercial accounts were kept. It is idle to tell Parliament, whether the other House or this House, that you can tell the cost of any part of the Army if you return to the system of cash accounts, because I can assure your Lordships, and everybody who is an adept in public accounts will agree, that you cannot do it and you never will be able to do it. Therefore, that is misleading. We shall have to go without that information, Parliament will have to give up the privilege of knowing what it is paying for and will have to go back to the old system of voting cash only.

That is a very dangerous and mischievous system. In the first place, it has the broad and obvious fault of not telling you what you are spending or the purposes for which you are spending money at all. There is this further great danger—and here I come to the general financial danger, on broader financial grounds—that it goes back to a system of accounts under which real expenditure could constantly be incurred without the House of Commons or any one else ever knowing anything about it. There is a particular phrase in the Report of the Lawrence Committee which I should like to quote to your Lordships. They say that the maintenance of the distinction between cash and other expenditure not only adds to the difficulties of the responsible administrator, but also tends to a continuance of the idea fostered by the old system of accounts, that the consumption of stocks is not expenditure. You have Army stocks in existence with a valuation of about £103,000,000. Those at present stand in a balance sheet and nothing can be expended out of those stocks unless the outgoing appears as an expenditure in the accounts and is charged against the particular unit for which the stocks are used. But under the old system, which was abolished in 1919 and which obtains in all other Departments of the public service until this day—the Office of Works, the Stationery Office, the Admiralty, though the Admiralty have a separate? system of cost accounts—when you had bought stocks or stores of any kind, you charged the expenditure to the Vote and no account appeared against that purchase in any of the Departmental Accounts to Parliament. They are not kept on charge as a value in the balance sheet, and as showing that they are part of the working capital account. The consequence is that your real expenditure—for expenditure is a parting with values and not merely the drawing of cheques on your banker—was continually concealed under the old system and will be concealed if and when it is reintroduced.

Since the War the War Department has used up out of stocks about £43,000,000 worth of stores which would never have appeared in the old accounts at all, because they had already been charged for as expenditure. They were stocks, which were charged as expenditure in former years and had been bought out of the Vote of Credit. Under the old system those things would never have appeared as part of the cost of the Army at all.

During the past four years, under the new system of accounting, they have appeared as part of the cost of the Army—that is to say, what you are spending in cash and value upon the Army. That is what is done by the present system of accounts.

During and after the War the old system of cash accounting cost the country an enormous sum, first of all indirectly by losing track of the value of part of the stores, because in previous years they had been charged to expenditure. It also led to some extraordinary transactions in the Public Accounts, some of which I would like to instance to your Lordships. One of the most extraordinary transactions in the Public Accounts to which this system gave rise was this. In May, 1919, His Majesty's Government thought it right to send assistance to General Denikin in South Russia, by giving him Army stores and ordering Army Contractors to send stores to him. I say nothing about the policy of those transactions. It may have been a reasonable policy for His Majesty's Government to pursue, and had His Majesty's Government asked for the consent of Parliament nothing more need have been heard about it. As a matter of fact, it was not until about two years afterwards that the whole facts of the case were elicited, and upon the facts as they then appeared the Public Accounts Committee of the House of Commons expressed their opinion that it did not seem to them to be quite clear that stores which had been bought for General Denikin's Army could properly have been said to be stores bought for the purposes of the British Army. They said also that if such a gift was made during a war to an Allied Power that might be reasonably done without consulting Parliament; but for this act long after the Armistice the consent of Parliament ought, in their opinion, to have been asked.

Under the present system of accounts, those stores not having been already charged to expenditure, but being live values for which the accounting officer had to account in his Parliamentary Vote, neither he nor the Minister could possibly have handed over property which cost £65,000,000 to any foreign friend without coming to Parliament and asking whether Parliament consented. That is one of the direct results of the old cash system of accounting, by which you spent money and the accounting officer had no further responsibility to Parliament for stores in his account.

During the War an enormous mass of property of all sorts was bought—stores, stocks and material of all kind. After the War those were disposed of by the Ministry of Munitions and the Surplus Disposal Board. All that property was bought out of borrowed money on Votes of Credit and, strictly speaking, it was working capital. It was in hand and had not been disposed of. It was the property of the Government, which had not been expended. And this fallacious idea that stores which had been bought and not disposed of can be got rid of without incurring expenditure worked in this way. As these stores were not tied up to any capital account and did not stand in any accounting officer's balance sheet, they could be brought back into account as appropriations-in-aid. Any railway accountant who had stores undisposed of and sold his surplus stores and deducted the proceeds from his expenditure, would at once upset his balance sheet, and if our accounts were kept in a manner which would cause any Judge in Bankruptcy to refrain from censuring them if they were brought before him by a. business man, and prevent him saying: "You have confused your accounts; you have mixed up your expenditure account with your capital account," and could have been worked honestly as only the War Office accounts now can under the new system, those receipts would automatically have gone back into the Consolidated Fund and have gone to the reduction of the Debt and the nation would have faced the matter. They either would have raised fresh taxation or they would frankly have had to re-borrow the money, because they were living on borrowed money.

Nevertheless, such is the disguising effect of our old cash system of administration that our Chancellors of the Exchequer went about boasting that they were not as other people, but were paying their way out of income. Whereas, of course, they were not paying their way out. of income. They were paying their way out of the proceeds of borrowed money. Those are examples of the confusing effect of the old cash system of accountancy, and if you return to that system you must abandon any idea of controlling expenditure on the system recommended by the Committee of the House of Commons in 1918. That decision has been staggering and depressing to those who have sympathised with the effort to get a bettor form of public accounts.

I do hope that His Majesty's Government will be able to give us some kind of consistent and cogent explanation of this extraordinary change of view. I hope that the Secretary of State for War can give us some real substantial reasons for rejecting the suggestion of the Lawrence Committee in regard to the amalgamation of staffs. I am moving for Papers, and I would put it to the noble Lord that the Papers I move for are any correspondence that has passed between the Army Council and the Treasury giving the reasons of the Army Council and the replies of the Treasury upon this subject. I also ask whether he can lay before the House the Report of the subsequent Committee—the Committee under Mr. Crosland, which was appointed to consider the recommendations of the Lawrence Committee, and in consequence of which I apprehend the action of the Army Council, the Treasury and the Government have been taken. I to move.

My Lords, before the noble Earl answers the questions which have been put to him there is one question, or perhaps two, which I should like to add. I am not going further into the matters which have been spoken of with so great a wealth of knowledge by my noble friend Lord Olivier, who has put before your Lordships the whole situation. Mine is a much more homely and simple question. What I want to know is whether the Government propose to continue the system of accounting to Parliament which was in force when I was War Minister. I was Secretary of State for War for six and a-half years. I will tell the House the form in which I brought my Estimates before the House of Commons, and then I will ask the House whether it was even a decent form. I was not free in the matter. I was held down by the tradition of that most conservative body, the House of Commons, and also by the traditions of the Treasury.

But now I will tell your Lordships how it was done. It is very simple. What is cost accounting of which we have heard so much to-day? I will tell your Lordships what it is not. When I wanted money for the Army I brought in the Estimate in the spring. I used to bring in the Estimates under a number of heads and sub-heads—there were many of them. I used to ask for so much money under each, and I used to get that because the Estimates had been approved by the Cabinet, and they were backed by the full force of the Government. I should have had to resign if the Estimates had 'been refused, and they never were refused. What did they consist of? The Vote for the pay of the men, the Vote for stores, the Vote for horses, the Vote for medical' services, including the hospitals, and so on.

Now when Parliament voted that money, which it only did after a great debate upon the Estimates, it voted the money with wholly insufficient knowledge. Take, for instance, hospitals. That is a case which conies into my head. I asked for so much money for hospitals, but I did not tell the House of Commons what the hospitals were. There were hospitals in the Aldershot Command, and there were hospitals in the Northern Command. There was so much put down for hospitals, but there was nothing to show the House of Commons whether the hospitals in each Command were being economically run. For anything that appeared to the contrary the beds might be empty in one Command and full in another. Yet the sum of money asked for was the same. One set of beds might be more extravagantly maintained than another set, yet there was nothing in the Estimates to throw any light on this point. It was the same with all the Estimates. Parliament voted the money, and afterwards the Accounts Committee went into the matter to see if I had complied with the instructions of Parliament. The instructions were: "We give you so much money, and you are not to expend it on anything except what we have told you." I did not tell them very much.

When the matter came before the Public Accounts Committee the Accounting Officer of the Army attended and showed that the money had all been spent

under these heads. That is all that Parliament asked. It did not know whether we had been wasting money on hospitals. It did not know whether we had been wasting money on pay. It did not know whether we had neglected this, or attended to that, because it had no details before it. In other words the House of Commons did not know what it was doing in voting that money. That was an old custom. There was no cost accounting. That is to say there was no accounting which showed the House of Commons what the cost under each head was.

There has been a good deal of obscurity introduced in the discussions in the newspapers and in the House on this subject. What is cost accounting? You can only get it clear into your mind if you remember that what you are dealing with is a system under which the Estimates are brought into the House of Commons. When you have that in your mind you see at once that there is no account of cost given to the House of Commons which is of the slightest use to enable the ordinary Member to form a judgment on the matter. Of course there is accounting. When you go down to the Command there is somebody who keeps account. You send the money down to the General Officer to expend, but you send him down a block of money. He has never been told about this, that, or the other thing. No doubt he could be controlled, but Parliament has given no instructions that he should be controlled. All Parliament has said is: "Here is so much money to throw at the heads of the various Generals in the Commands. If you have not spent it by March 31 then you must bring it back and put it into the pot again."

Suppose your Lordships tried to manage your households on that footing. Suppose you assembled your butlers, your valets, your cooks, your housekeepers and your coachmen, and suppose you said—I am assuming you are in an opulent state of mind—" We have got such and such an income, it is pretty good, and we are going to spend a third of it on the kitchen, a tenth of it on the tailor, so much on the wine merchant, and so on. There is so much money which has to be spent, and remember if yon do not spend it you will have to bring it back." What would happen? Why, your Lordships' households would be run even more extravagantly than they are to-day. There would be no accounting, there would be no looking into details, there would be no opportunity given to you to say: "I will not buy this, that and the other thing because it is too dear. I will see whether it cannot be got cheaper, or whether a less quantity will not suffice."

Did the noble Viscount acquiesce in this vicious and dangerous system for six and a-half years?

I will tell the noble Viscount at once. That is the system. It has been established with the authority of Parliament, and from which Parliament will permit no departure. That is the system which had been approved by the Treasury, and to which the Government, as I understand it, to-day is going back after having got rid of it. I was going to tell the noble Viscount; that the House of Commons should Vie very dissatisfied, and the reason is that this system had gone on into the War and through the War, and had attained to the magnitude of a scandal, but after the War was over some active young members of the House of Commons —I do not know whether the noble Viscount was one of them, I think he was in the House of Commons in those days, I am talking about 1919?

No. I was not there then.

Then you have not the merit I was going to ascribe to you. Some of these young members set to work and said: "We will not have this. We will not have these Army Accounts kept in tins way. We will have a system of cost accounting." Sir Herbert Samuel's Committee insisted upon that, and then that very able man, whose financial knowledge is unrivalled—and I very much regret that he has left the public service now—Sir Charles Harris, set himself to work. I had the advantage of Sir Charles Harris's services and when I was free I took the fullest advantage of them. There was a set of Estimates which we considered too high, and I had to get them down. I could not, because I had not proper accounts. But we set to work, and Sir Charles Harris detailed financial experts to each head of Departments in the War Office with the result that before any one spent any money it was estimated to him in sovereigns. Thus he became very careful before spending. We got something like £3,000,000 off in the first year by the application of this method and the way in which the Generals pushed it through.

I say very emphatically that if you want economy in the Service, in the Army, you will only get it through the soldier. It is ridiculous to suppose that your Treasury officials or your business men can get economy. They do not understand it enough, they cannot go into the details that a soldier can, and if you treat a soldier properly he is just as keen an economist as anybody. If you go to a General in charge and say to him: "It is your duty to the State to keep your expenditure at the lowest," he will scrape in order to do that as nobody else will scrape. That is the system which ardent spirits wish to see applied outside the War Office. I could only do it in the War Office, and ask that whenever any money went down to the Commands out of the Votes it should be spent not only on good financial advice but on the advice of experts who should be on the staff of the General, or at any rate close to his ear, who would be able to tell him what each proposed item of expenditure would cost in money. That was very necessary. I remember a case—it was not; in my time—in which a very expensive building, no doubt a useful building, was to be put up, but it did not occur to the other branch of the Service, to ascertain the tenure of the land on which the building was to bi-erected: and it was built on a lease which had only four years to run. Naturally the country did not profit by that transaction. But that is not the fault of the soldier; it is because you will not give him proper advice and assistance when he is spending your money.

The whole object of Sir Henry Lawrence's Committee was to secure that to him, to see that the money Parliament voted should not be spent with an absence of control, which is the case to-day, but that those who have to spend the money should have at their elbow people who would be able to tell them what the amount would be. It means, of course, some staff; but look at the other side. I have no doubt you would have got large economies if the system had been in practice. There is a good deal of money to be saved in connection with Army Intimates. But what has been done? Sir Henry Lawrence's Committee recommended, and the Report was approved, the system which had begun to be set up. But the Government has abolished the system and reverted to the old system under which I worked; and one of the questions I desire to ask is: Will the noble Lord tell us now in what respect the system they have reverted to differs from that old system? Under what supervision by Parliament is the money spent which is voted in the Votes and the annual Estimates presented for the year? Is the Public Accounts Committee in possession of more details now which enable it to be satisfied not only that the money en bloc has not been spent outside the purposes for which it was appropriated, but that it has been spent to the best advantage and with full advice given in connection with each item to the General who is responsible for what has been done?

I have, in a very superficial way, put before you a state of things which I consider is very bad, and I hope to hear that the Government are taking vigorous steps to get rid of the old defective system and set up in its place another system which will be as great a reality as Sir Henry Lawrence's Committee proposed to make it.

My Lords, I have no theoretical knowledge of accounts, but I should like to give your Lordships one or two instances as to how this system, so belauded by the noble and learned Viscount opposite, actually works in practice. From what I can learn, so far from saving any money for the taxpayer it is in many cases costing him more. Let me take one case. There were certain officers who, finding it cost them £3 a day for Government transport, hired civilian transport at £2 5s. and saved themselves 15s. a day. But they cost the taxpayer £2 5s. in cash. I am told it is now impossible for a regimental pioneer to mend a broken window, because when you add together the cost of the pioneer's pay, his rations, his clothing and his equipment, it becomes much cheaper to call in a civilian. At Easter this year the battalion for which I am responsible was attached to a Regular unit, and it was arranged that the cooks of the Regular unit should cook the rations of my men. In accordance with the law of accountancy it was necessary that the number of hours worked by the cooks should be computed and a proportion of their pay for those hours should be costed against my unit and credited to the unit to which the men belonged. They did not receive, of course, a penny more pay and the taxpayer did not pay one penny less. So far as I can make out the whole Army has been engaged in playing a sort of game of battledore and shuttlecock with figures like this. I congratulate the Government on having taken a step in the right direction, a step which will ensure that the money which is spent on the Army will be spent in a way which will increase the efficiency of the fighting men.

My Lords, I had some personal experience during the War of this system of costing accounts. I was in charge of a considerable number of horses, from 5,000 to 6,000, and great expense was, of course, incurred for forage. The whole question was gone into very carefully and in the interests of economy we were allowed to keep very accurate accounts. Comparisons were called for with the big railway companies who keep large studs of horses, and by having that information we were able to reduce our own costs considerably. There was also this incentive, that in many cases the Commanding Officer was allowed a certain proportion of what might be made by the sale of manure and fats from the cookhouse; and in this way great savings were made. What I want to say to your Lordships is that, if an inducement is given us in the shape of a block grant per unit to make savings so that some of the profit derived is given to the unit, you will effect great economies.

In regard to the remarks of my noble friend behind me, the question of costing accounts can, of course, be carried to an absurdity, but I do think that the new system was a great improvement. I quite agree with that which the noble Viscount opposite said regarding the Public Accounts Committee in the House of Commons. I think it is a pity to have to scrap all this unless something equally efficient is going to be put in its place, and when the noble Earl replies on behalf of the Government I hope he will assure us that something is going to be done to help units and at the same time to make for greater efficiency in the administration of the cost of the fighting Services.

My Lords, I am sure that the House will regret that my noble friend Lord Onslow, owing to reasons of ill health, is unable- to be present to-day (o deal with the many questions that have been put. I am afraid that I can lay no claim, like noble Lords opposite, to great financial knowledge nor, since I was never a member of the- Army Council, can I claim any intimate knowledge of the method by which the War Office presents its accounts. Consequently, when I find myself having to deal with the points raised by two such great authorities as the noble Lords opposite on those two particular subjects. I am afraid that your Lordships will feel that I am not likely to present as good an argument as the case really deserves.

The noble and learned Viscount opposite dealt briefly with the method in which the country receives its Estimates and accounts. I confess that I was disappointed that the noble Lord who initiated this debate did not take us somewhat further in his description of the Lawrence Committee's recommendations than he actually did. He reached the middle of paragraph 50, and I was waiting to hear him say something about paragraph 51, speaking with his knowledge, of Treasury matters and being himself an old Treasury official. Paragraph 51 is really the foundation of the Lawrence Report. It lays down that, quite obviously, there would have to be a very material change in the control by Parliament and by the Treasury of financial affairs, that the Accounting Officer of the War Office would have to be relieved of his responsibility to a very largo extent and that the Public Accounts Committee would have to amend the regulation which he will find quoted at the bottom of page 21 in the middle of that paragraph.

I think the House will hardly have understood exactly how this new form of accounts came into operation. The noble Lord did tell your Lordships that the Select Committee on National Expenditure recommended various very drastic and material changes in the whole form of public accounts, but, so far from having been accepted in another place or by the Government of the day, I understand that those proposals never really received any general discussion in another place, and that neither the Government of that day nor any of its successors, including that of which the noble Lord himself formed a part, have really put the major proposals of that Committee into operation. As regards the Army, certain proposals were made to the Committee to which he referred, over which Sir Herbert Samuel presided, making agreed proposals for a change in the form of presenting Army Estimates and accounts and, as an experimental measure, the Government of that day brought in the accounts in the form in which they have stood up to the present time—that is to say, from 1919–20 until the present year. But, so far as I have been able to discover, neither the Public Accounts Committee nor another place asked for the accounts to be submitted in that way nor did they approve it until after the accounts had been produced in the new form. They were never approved before they were' brought in, and only to some extent afterwards, by the Public Accounts Committee.

As a result of experience, two grave objections have been found to the form of the new accounts. In the first place, it did not displace the cash accounting system. It merely produced another system on top of it and. as the noble Lord himself, I think, has said, the result has been a large increase in the number of officials and great complications in getting the so-called costing account system find the cash system to correspond and tally. The cash system still continued to be necessary in order to present the accounts in a form over which the Auditor-General and another place could exercise their control. As regards the second objection, I think the noble Lord also admitted that the new system really failed to produce any scheme of cost accountancy as it is known in business and commercial circles. As regards the first point—the Parliamentary audit—since the cash account had to be continued in the same way, the paymasters continued—I give this as an example—to show in their cash accounts for fuel the money which was actually paid to coal merchants: but the Army Service Corps got from the quartermasters of each battalion receipts for so many tons of coal without any reference whatever to its market price. As regards the new system not being cost accounting, in the first place, to take the instance which I have just given, you have to authorise the Commanding Officer of a unit to go wherever he pleases in order to get his coal at a price that he thinks suitable, and you might, in point of fact, get competition between units and a good many complications of that kind.

But there are far graver objections than that. A Commanding Officer is ordered to take his battalion, let us say, to the new Wellington Barracks and, if he is going to be charged an economic rent for those buildings, he will find that his unit is charged a very high price indeed. Similarly, another battalion is ordered to go to barracks at Warley, where the rent is low. Consequently, when you begin to compare the cost of those two units, one with the privilege of going to Wellington Barracks and the other with the privilege of going to Warley Barracks, you get two entirely different costs. But the Commanding Officer obviously has no say whatever as to which place he is likely to go, and the result is that, as regards rent, the- figures have had to be "cooked," if I may use such an expression. The figures have had to be cooked.

Why should they be? The object of accounts is to know what things are costing you.

Surely the object was to provide economy in units and know what each unit was costing?

You do not provide economy by pretending that you are spending less than you are.

The object was to encourage commanding officers to effect economy and compare one unit with another. Supposing Parliament had said to a Commanding Officer: "Here is a definite sum of money; go on and maintain your unit for that sum, and at the end of a given period you will produce an account of how you have spent the money." I think many of your Lordships will agree that that is a system which has many advantages. It is obviously the old system under which the Army was raised originally, when actually the Commanding Officers not only raised the men but paid them and provided them with arms and ammunition, and did the whole thing from the beginning to the end. You can hardly do that now. I can imagine a rather astute Commanding Officer saying to would-be recruits, officers and men: "If you want the privilege of serving in my unit you should pay an entrance fee." It would re-introduce the old system of purchase. Further, you might get Commanding Officers—you undoubtedly would at first—who, having been given a definite sum to last till March 31, would discover somewhere about January 31 that they had run through the whole of the money. They would have to come to the War Office and say: "We must have more money in order to pay our men. We must have enough money to buy food and to keep them going for the next few months." You would have the War Office having again to come to Parliament with a Supplementary Estimate.

I am speaking entirely from recollection, but I had the impression that some years before the War, when I was a member of a County Territorial Association, there was a moment when my county happened to be one of the very few associations which were solvent on the question of clothing. Had there been a cost-accounting system at that time, I am not sure that the admirable scheme of the noble and learned Viscount opposite would not have been brought to an abrupt and early close.

We left them free.

They were not on cost-accounting?

Just the same.

I understand the noble Viscount to claim that the system which was then in existence was the right system, and not the system which has existed since 1919–20.

There was nothing inconsistent. The Territorial Associations did not account directly to Parliament. There was a Vote for the Territorial Associations, but we left them free. They had to keep careful account, but they did not come directly to Parliament

That is exactly my point. The units, and so on, would not come directly to Parliament, and the War Office would therefore get more freedom to deal with things in the way desired. However, that is really a minor point, and is only according to my recollection. The result of this system has been this. As the noble Lord who initiated the debate knows well, it has not been popular in the Army, and for this reason, that such a very large proportion of the cost of any particular unit is expenditure entirely outside the control of the Commanding Officer. Actually I think the pay and fixed allowances alone are well over one half of the cost of the battalion, which amounts to £125,000, and are outside the control of the Commanding Officer altogether. Discretionary power has been given to the Commanding Officers with regard to provisions and clothing.

And forage?

I cannot answer that off-hand. I think some discretionary power with regard to clothing was given during the time when the noble and learned Viscount was Secretary of State for War. It is hoped that further elasticity can be allowed in these directions. It is true that the admirable Report of the Lawrence Committee received the general approval both of the War Office at the time and of the Treasury, and that they were in favour of an extension of cost accounting, but it was only subject to further consideration with regard to expense. I think the noble Lord opposite was 'hardly fair in the quotations he made from, an answer given by the Secretary of State for War in another place. I understand he represented to the House that the reason why this new form of account is to be discontinued was solely on account of the difficulties of mobilisation. If noble Lords refer to the answer given in another place they will find that the answer refers, first of all, to various serious disadvantages and merely gives as an example the difficulties of mobilisation.

I read this answer as referring to the system advocated by a majority of the Committee. There was only one point on which there was a majority. On the rest they were unanimous.

Well, my Lords, I understand that the Army Council now propose to bring in. accounts exactly in accordance with the principle on which they were brought in before by the noble and learned Viscount, and others, but, that they will give more material information on various subjects than they used to do in past days. It is proposed that, although cost accounting should disappear as regards combatant units, nevertheless it should be maintained for a great many other services of great importance.

Could the noble Lord give us the particulars?

I was about to do so. I understand that operating accounts with regard to the clothing factory, electricity supply stations, bakeries, laundries, and such like, which stand obviously on an entirely different footing from those of combatant units, will still have cost accounts produced, and they will still have the advantage of skilled accountants, who will keep ton oh with their activities, and be able to report on how far their services have been given with efficiency and economy. Already, as a result of having these cost accounting officers in these particular establishments, very material improvements have been effected in their method of operation, and it is therefore proposed that such institutions should still have the advantage of that expert advice. Moreover, it is proposed that a certain number of officers now serving in the Corps of Military Accountants shall be at the disposal of General Officers Commanding, who will be available for undertaking any detailed accounting investigation of any Army services, whether normally costed or not; that is to say, a General Officer will be able to turn his specialised accounting officers to any particular direction in which he thinks it would be of advantage to get detailed accounts.

I understand that the Army Estimates will have a sort of interleaved information, much in the same form possibly as the Admiralty accounts, as they are now presented to Parliament. Personally, I am inclined to wonder whether that is an advantage. I understand that a certain well known Member of Parliament said the other day that this new form of Army Accounts was entirely unintelligible to him, and he wished to Heaven that the Army produced its accounts like the Admiralty. As a result of that I have been more inclined to favour the system of cost accounting, in order, possibly, to evade a certain amount of Parliamentary criticism than I would otherwise. Therefore, whether the Army is entirely wise to produce so much information for the benefit of Parliament, and for discussion and criticism in another place, remains to be proved. The cost of this scheme of Army accountancy at the present time is £250,000, and, if you make allowance for pension charges, and so on, it would work out at £300,000. If you had gone further and had put the whole scheme of the Lawrence Committee's recommendations into force the cost of accountancy would have come to £400,000.

On the Estimates for the current year I see the cost for military accountancy is £220,000. Last year it was £250,000.

I accept the correction of my noble friend. The War Office have now, as the noble Lord knows, with the approval of the Treasury, recommended to the Public Accounts Committee that the Army Accounts should revert to a simpler form than they are in now. So far I understand that no answer has been received from the Public Accounts Committee, but, in anticipation of approval, steps have already been taken to reduce the number of personnel engaged in accounting, and in preparing accounts for next year, and it is hoped that eventually, if the scheme is approved, the cost of this accountancy will come to well under £100,000, as against £400,000 which would have been spent if the whole of the Lawrence Report had been put into operation. I think your Lordships will agree that that is an economy which is well worth making.

Yes if you get it on the other side of the account.

Like the noble Viscount, I trust the Army officers to be as economical as possible, and I think they will be so, whether this accounting is going on or not. As regards Papers, I have only to say that the Report of the Committee presided over by Sir F. S. Robb—all the relevant parts of it—have already appeared in the Lawrence Committee's Report, which has been published, and therefore there does not appear to be any real object in producing a Report of which the main part has already been produced. As regards the Crosland Committee's report, that was a Departmental Committee which was appointed solely to work out details of the Lawrence scheme and to report to the Army Council, and I understand that it is very unusual for the Report of a Departmental Committee to be published, and the Army Council do not propose to do so in this instance. Inter-Departmental correspondence between the War Office and the Treasury in regard to this or any other scheme is confidential, and obviously it would be very inadvisable from any point of view to make public correspondence of that kind. As the noble Lord knows, it is practically never done. Therefore I am afraid that there are no Papers really which can be produced, and I understand that probably the noble Lord will not press his demands, because he probably knows that already as well as I do.

My Lords, I confess that I generally look at any accounts or balance sheets with a good deal of suspicion, because it is known that there are such things as balance sheets which are published in order to conceal the real facts of the case, and they are apt sometimes to leave me in a state of some confusion. I am not quite sure that my mind is not on this occasion in a state of some confusion as to the exact merits of the case. I am very much impressed by what was said in the course of the discussion, both by Lord Raglan from his personal experience and by Lord Stanhope. I do not think that your Lordships have suffered from the absence of the noble Earl, Lord Onslow, as the case could not have been better presented than it was by Lord Stanhope. But there is this to be said, that the whole system of accountancy has changed a great deal during the last twenty or twenty-five years, and people expect accounts to be on a different system from what they used to be. Therefore what was suitable twenty or twenty-five years ago is not necessarily suitable to-day, and in connection with the Army and the Navy we want accounts made up in the same way as accounts are made up for other big businesses which have no connection with the State.

I understand that under the old system anybody going down to a hospital anywhere who asked the responsible general: "What does your hospital cost you altogether?" would have found that that officer was quite unable to give him any answer. You cannot, under the old system, say what is the cost of a hospital, and for this reason, that the expenses of the staff are charged with those of the other members of the Royal Army Medical Corps to the Army Agent in London. The accounts for orderlies would go to the Paymaster at Waking, for the head offices are there; the accounts for food, fuel, and water you would find mixed up with the other accounts of the Army Service Corps, whose headquarters are at Aldershot; medicine would have been mixed up with all the other medicine of the other hospitals and the only accounts existing would be at the War Office; and, finally, bedding and furniture accounts would have been found in the Barracks Department. That cannot be an economic way of running hospitals, and we want something a great deal more up to date in order that we may know at once what is the cost of a hospital. Then it is possible, by seeing how many patients have been in that hospital, to compare it with hospitals outside. But more modern and up-to-date accounts are, I think, quite clearly necessary in eases of that character.

Really, I suppose the method in which our accounts have been presented has had a two-fold object. One is to prevent theft, and the other is to make it perfectly certain that money meant for one object is not spent for another purpose altogether. With that in mind, I do not think anything better could be devised than the form of accounts now existing in the Army. We have gone rather beyond that now, and the time has come when we want accounts to help in other directions. It is not only a case of preventing over-expenditure on a particular item, or of preventing the responsible officer spending more on "A" than he ought to spend. We want now to find out the exact total cost of one particular service so as to see whether any economy is possible in regard to it. A little has been done in that direction. The Treasury ordered some of the Departments to pay for their own telegrams and to return those telegrams in their expenditure. The result was that in 1922 the number of telegrams was reduced by something like fifty per cent, and the number of words was also reduced; so that there was a very considerable saving in that one item.

I see that the Lawrence Committee thinks that by a proper system of accounting economies at present quite unrealised could be effected. I realise that a system of this kind must be expensive. But there is, indeed, the question as to whether some of the other accounts might not go by the board if this system of cost accounts proves successful. In that way economies might be effected which will cover this expense. I think it was open to the noble Earl, although he did not do so, to say that those who were anxious for this change were amongst those economists who always want economies in this respect, but never in any respect in which they are interested themselves. The reply to that might be that if you abolished accounting altogether you might succeed on paper in effecting certain economies, but it is obvious that in every other direction you would have a great deal of expenditure. There is the question whether this system of cost accounting might not, in the same way, produce very real economies.

May I say, in passing, that being an ardent economist, I look forward to supporting His Majesty's Government' in any discussion regarding the economies they suggest at Rosyth; indeed, I shall urge them to go a- great deal further if the matter is raised in your Lordships' House. Those remodelled Estimates have not yet, I think, been pronounced upon by the Public Accounts Committee. I am not sure what the procedure may be, but would it be possible to make available for public information the reply ultimately received from the Public Accounts Committee? I believe they have been asked by the Treasury their opinion of this, and it would be interesting to know whether they approve of the change in the system of accounting suggested by His Majesty's Government. Let me mention what was said by Sir Herbert Samuel, a great authority upon these subjects, in the introduction which he wrote to a work on Parliament and the taxpayer. He said that, so far as the direct control of Parliament in these matters was concerned, Estimates might just as well not be submitted to Parliament at all. I have noticed that only this month the Chambers of Commerce, in the course of an interview with the Chancellor of the Exchequer, urged that His Majesty's Government should continue these accounts because they thought there was real importance in the reforms of the National Expenditure Committee.

The noble Earl has given an explanation of the intentions of His Majesty's Government. I heartily welcome the declaration that they will not return entirely to the bad old system, but that they propose to add to the former accounts certain explanatory figures. I confess I had it in mind to ask His Majesty's Government whether they would not consider the question of submitting this form of accounts to some independent authority. It is obvious that there are very good and very sound authorities for this system of cost accounting; but I think His Majesty's Government would have been supported in their action had they sought the advice of some competent Committee before it was initiated. For the moment, in view of the action which His Majesty's Government proposes to take in regard to the Army Estimates, I will not press that, though it might be necessary on a future occasion to do so. But we shall certainly watch with very great interest the form in which the Estimates are presented on this occasion, and if we find they are not satisfactory we shall probably raise the matter again and press His Majesty's Government to take some action, possibly in the direction of getting from some independent Committee an authoritative expression of opinion as to the best form in which the accounts should be presented.

My Lords, I noted with great satisfaction the statement of the noble Earl, Lord Beauchamp, that when some of the suggested economies, whether at Rosyth or elsewhere, come before your Lordships' House for discussion they will receive his full support. I am going to enlist his support, if I may, on further occasions, because I can assure him that the economies proposed by His Majesty's Government will not stop short at Rosyth, or other dockyards, but will spread, I hope, to the general field of administrative expenditure.

I am sorry that the noble and learned Viscount, Lord Haldane, is not in his place because I wanted to know whether he was reassured upon the point he made. He seemed to be under the impression, and to be anxious about it, that the system of accounts now being established was in all respects the old system, or, as he called it, the bad system of accounts under which he suffered for six and a-half years when he was Secretary of State for War, but to whose evil influence he was not awake, I think, during the time he filled that office, though he became conscious of it after ten or twelve years of further experience in other Departments. I think my noble friend Lord Stanhope has made it clear that the system proposed is not what might be called simply a return to the old system which then prevailed, but that the House of Commons will be given a great deal of useful information as to the costs of different units or different businesses, like the electric system, where that is carried out, and so on, which, any how, will enable the House to offer criticisms of far more value and with far more knowledge than was the case when the accounts were solely presented in the old fashion.

But the noble Earl, Lord Beauchamp, with that passion for economy which he has displayed on this as on other occasions, told us that he thought that by the costing system of accounts as fully applied—and I wish to say a word on that in a moment—economies could really be obtained. You may be able to obtain economies, but you have to find out what is the value of those economies. You have, as I think the noble and learned Viscount said to find out what is the expenditure on the other side to enable you to secure those economies. That is really very largely the point in the system of costing accounts, because, as my noble friend Lord Stanhope has pointed out, the area within which Commanding Officers of units, whether cavalry regiments or battalions of infantry, can effect these economies, is extremely limited. I have heard it said that there is about ninety per cent. of the expenditure which the Commanding Officer cannel control in any way at all. Therefore, you have to ask what he might be able to do within the very limited area in which it would be possible for him to effect economies.

As against that, you have to set the whole of the very large cost of these military accountants, who have to produce a very large amount of very elaborate accounts in order that hypothetically, perhaps, you may save a small sum of money on some units. That has to be considered. But the real root of the trouble is that if you were really going to establish complete authority in the hands of Commanding Officers, and so on, of units to carry out all these economies which have been suggested, you would really have to revert to the eighteenth century system. You would have to carry out a form of decentralisation which would practically smash up the organisation as built up in the War. Take, for instance, the question of the recruiting organisation. You would have to abolish that, I suppose, and each Commanding Officer would be his own recruiter, competing against all the other units all over the Kingdom. You would have to do more than that, I think. Take the different directors at the War Office. There are fourteen or fifteen directors there, and the chiefs of the Army Council under whom they are grouped. Everybody, I suppose, would suggest that in any sensible system you would hardly allow Commanding Officers to make all their contracts. The contracts would still have to be made by the directors, but these gentlemen and their corresponding chiefs would have their character entirely altered. They would become not controllers of expenditure, but they would become mere purveyors, suppliers, as it were, of different quantities of fuel and food and what not.

The fact is a complete system of decentralisation of that kind would not really be compatible with central control by the War Office, and with the responsibility of the War Office to Parliament. That, of course, has been felt during the last few years in the War Office itself. The system has not been fully carried out, and the reason is that it could not be fully carried out. You want to have both systems. You want to have a cash account system, and you want also to have a costing account system. Obviously, if you are to have both systems of account going on you are bound to have a considerable expenditure, and the economies that you are to secure by your change may easily be wired out by the expense of this double system of accounting. Then you say to yourself: "Can I have one system? Can I do away with the cash system entirely, and introduce wholly the other system?" You cannot do it, because of the profound alterations you would have in the whole organisation of the Army. In these circumstances surely it is better I will not say to revert to the old system, but to keep to the cash account system, which is understood by Parliament. The alterations to which my noble friend has referred will make it possible for the House of Commons to understand the Estimates perhaps better than they did before, and perhaps enable Members to make more informed criticisms than they did before.

I think a good deal of misconception has run through portion of the speech of the noble Lord opposite, because he has always been comparing the Army to a business undertaking, and he has drawn from it certain analogies. In a business undertaking you may have a very careful system of cost accounting to find out what the production of every article that you make costs. Take, for instance, the making of shells. You could compare the cost of a shell made in one undertaking with its cost in another, and see whether one was more expensive than the other. But commercial undertakings, it is hardly worth while pointing out, exist in order to make profit. No such test can be applied to the Army. The Army does not exist to make a profit, but, I suppose, to produce a fighting force. Therefore all the standards and all the analogies that may be drawn from a business are really inapplicable when you come to the consideration of an Army. What the noble Lord opposite really wishes to recall is, I will not say a discredited but an ancient system, and the only way in which he can attain his ideal is to abolish the cash system and rely solely upon the accounting system, which has never been carried out. That would be to return to a system which was prevalent, perhaps, in the eighteenth century, but would be wholly incom- patible with the organisation of the Army to-day, and withthe proper control of Parliament over the expenditure which is understood by members of the House of Commons, and which, I hope, will be assisted by those changes that my noble friend has said will be carried out.

My Lords, it would take longer than I could venture to trespass upon your time to remove the misapprehensions that exist between the noble Viscount, Lord Peel, and myself as to the foundations of my argument, and therefore I will not deal with them. I will simply say that nothing was further from my mind than to compare the work of the Army with that of a commercial business. My purpose has been simply to deal with the institution of a system by means of which we could get the best service out of the Army with the utmost public economy. I should like to deal with one point that was touched upon by the noble Lord, Lord Raglan, and also with a remark that fell from the noble Earl, Lord Stanhope, as to the objections to the tiresome character of this costing system. Lord Raglan said that it was very irritating to be charged £3 a day by the motor transport people when he could get a mechanical lorry for £2 5s. He would, of course, choose the lorry at £2 5s. May I point out that the object of this costing system is to see just how much your services are costing For the mechanical transport arm of the Army about £650,000 is provided in the year, and I see that the cost of that mechanical transport per day appears in the Army Estimates for this year as £2 3s., compared with £2 2s. last year. I do not know why any particular transport officer should charge a Commanding Officer £3 for a lorry. He ought to have been able to supply it at £2 5s. The noble Lord has misconceived the purpose of the accounting. Your mechanical transport is not simply for daily service. You have to have a considerable reserve, and you have to have a fixed establishment to deal with cases of emergency. The result of having a costing system of this kind is that when a mechanical transport officer charges a Commanding Officer £3 for a day's work, the Commanding Officer at once kicks and says: "Look here, this man is charging me too much."

He has no power to alter the charge.

You see the cost, and you ask why he did it.

In that case you would be hauled over the coals for doing it.

Yes. But he says: "Do you not see your mechanical transport is costing you too much? It is being run too expensively." The purpose of this accounting is to show exactly what the mechanical transport is costing, and it enables you to tell whether £3 a day is not too expensive. If a railway director sees, from his system of accounting, that his train mileage is costing him too much he finds out where he has wagons standing about sidings, and whether something cannot be done to bring them into use. The value of a system of accounting such as I have in mind brings to your notice at once whether transport is being uneconomically worked. You discover whether you have too many motor lorries in active service, and whether you can take some of them out of active service. That is the value of these accounts. They are of real and substantial value to any person desiring to administer his funds to the best advantage.

Take another case. The noble Earl said that you could not charge rents for buildings because some buildings are much more expensive than others. That is no reason for not seeing what your buildings cost you. The object of a Parliamentary Estimate is to show Parliament what the Army is costing it under these various divisions. If you have a set of barracks at a higher rent than another, then you simply allow a larger grant. There is the case raised in the Report of the Auditor-General, who said he found that a hospital in Iraq cost more than a hospital in Hounslow, and that he was told it was more expensive to run the hospital in Iraq than in Hounslow. Therefore the cost account is useful in finding that some institutions are more expensive than others, and, speaking as an administrator, it is very interesting to have the point brought out that one institution is costing more than another. You can then inquire into it and if there is good reason for it you get to know it; if there is no good reason then you bring the cost down. During the War Sir A. Keogh called in Sir Charles Harris to help him to control the expenditure on war hospitals. Some were expensive and some were not, and by doing this the medical directors were able to compare one hospital with another, and make allowances where the conditions were different. That is the value of this cost account; it enables an administrator to enforce economy where it is necessary.

I do not wish to detain the House too long, but there is one other point to which I desire to refer. The noble Earl made me the jejune offer that the accounts of certain Departments should be presented in a manner which would show their cost. The bakeries, the electricity supply stations, the pumping stations, the Royal Army clothing factory, the gas generating stations—all these only come to £664,000 a year, which is about one per cent of your total turnover. I do not think that magnificent addition to the cash accounts is much worth having. We had the accounts of the Ordnance factories and the Army clothing factory appended as riders to the accounts. We have been told that we shall have the accounts presented showing in an interesting form what are the costs of the divisions of the Army. But if you are going to revert to a cash system, how are you going to show the cost of the different parts of the Army? You cannot do it. Those persons outside who make these vague offers do not understand that it cannot be done unles3 you abstract and divide and then "cost." The testimony of the War Office Financial Branch was that the system of "Vote heads" had been useful for the purpose of economy, and it is admitted that the present proposals will only cut off £100,000 from the Corps of Military Accountants. That corps only costs about three farthings in the £ of the whole Army annual turnover, and the experience of any one accustomed to financial control is that the value of having a system of accounts, which a cash accounting system is not, is much more than three farthings in the £. You propose to save about three-eighths of a penny in the £ by your proposal, and you sacrifice the whole of the advantages you get under the present system. I cannot carry it any further now.

There is the question of the Papers. I agree there is not much use in laying the Robb Committee Report on the Table. The noble Earl said he could not lay the Crosland Committee's Report on the Table of the House because it is a Departmental Report. I do not press him on that point, but at; regards the correspondence between the Army Council and the Treasury that, of course, will be made public because it comes before the Public Accounts Committee, and is published in their Report. I thank the noble Earl, Lord Beauchamp, for his suggestion that this matter should be referred to an independent Committee. I could wish that had been done, but the Goverment know that all the great professional accountants in the country, all the business concerns in the country, such as the Associated Chambers of Commerce, will snap their fingers at the scheme of cash accounting to which the Government propose to revert. They will say it is not worth the paper it is written on, and that is what any expert Committee will say again. That is why there is no prospect of the noble Earl's suggestion being considered. I beg to withdraw the Motion I made for Papers.