CLASS VII, VOTE 5-contd.

to depositors and the expenses of management, the surplus is to be paid into the Exchequer after allowing such sum as the Treasury may determine to provide against depreciation of securities.

From 1912 to 1924 inclusive, one-half of the surplus was allowed for depreciation and one-half was paid into the Exchequer annually. The surplus for 1925 has been apportioned thus:

20 per cent. to provide against depreciation of securities

£ s. d

80 per cent. to the Exchequer

703,043 19 11 2,812,175 19 10

UNCLASSIFIED SERVICES, VOTE 2.-RELIEF OF UNEMPLOYMENT.

41. The expenditure out of this Vote on loans to Local and Poor Law Authorities in England and Scotland was 4,546,0337. 16s. 6d. as against 1,296,608/. 13s. in 1925-26, and the loans outstanding on 31 March 1927 were 9,102,9401. 9s. as against 4,856,940l. 5s. 10d. on 31 March 1926. The increases were due, in the main, to the expenditure entailed on Poor Law Authorities in the relief of distress caused by the general strike and the coal mines dispute. Included in the outstanding loans at 31 March 1927 are sums totalling 248,000l. which, under the terms on which the loans were originally advanced, should have been repaid during the year by certain English and Welsh Authorities. The Committee on Loans to Poor Law Authorities, etc., modified the original terms and allowed postponement of repayment. A doubt as to the legality of expenditure by Scottish Poor Law Authorities on the relief of dependants of persons directly involved in a trade dispute was removed by the Poor Law Emergency Provisions (Scotland) Act, 1927 (17 Geo. V, c. 3). This Act also authorized the payment from voted moneys of 40 per cent. of approved expenditure by Parish Councils in Scotland on the relief of such dependants between 30 April and 6 December 1926. Provision of 260,000l. for this purpose was made in Subhead G.10 of the Vote for the Scottish Board of Health, 1927, (Class V, Vote 14). Payments therefrom will be applied to the reduction of outstanding loans.

UNCLASSIFIED SERVICES, VOTE 4.-EXPORT CREDITS.

Export Credits Fund Account.

42. The Fund Account shows that during the year advances amounting to 8,4667., payments under guarantee amounting to 4,4097., and guarantee charges of 1,8021., have been written off under Treasury authority as irrecoverable.

UNCLASSIFIED SERVICES, VOTE 4-contd.

In addition to these losses, the advances and guarantee payments outstanding at 31 March 1927 include substantial sums where no further recoveries are anticipated, and I have asked that steps should be taken to clear from the books of the Department such balances as represent final losses in order that the Account may show the correct position. I understand that, as a result of discussion between the Department and the Treasury, schedules of such balances, with an explanation of the circumstances of each case, will be submitted to the Treasury at an early date for authority to write-off.

Polish Transactions.

43. The guarantee payments outstanding include appreciable sums in respect of certain shipments to Poland in 1921 and 1922 on which the Department had to implement its guarantee, although payment of the bills at maturity had been guaranteed by various Polish banks.

In most cases the Department had no recourse to the exporters, and the efforts to secure recoveries from the Polish importers, guaranteeing banks, and other sureties have necessitated long, complicated, and expensive lawsuits in Poland, during the course of which legal obstacles of all kinds have been encountered. In one case, as the result of the action taken, a lawyer who acts for the Department has obtained possession of a defaulting firm's mill, and is now carrying on business there. The financial result of these operations is not yet known, as the expenditure and receipts have not been brought to account.

I inquired of the Department whether Treasury sanction had been sought for these arrangements, and also, in view of the heavy legal costs, I suggested that the Treasury should be consulted before further expenditure was incurred. In reply, I was informed in October last that a memorandum was being prepared showing the present position of these transactions, and that, on its completion, it was intended to seek a discussion with the Treasury as to the future course of action.

UNCLASSIFIED SERVICES, VOTE 5.-SHIPPING LIQUIDATION.

44. Further progress has been made since the date of my last Report with the liquidation of the accounts with Shipping Companies and others. Apart from the outstanding claims against Allied and Foreign Governments which are being dealt with by the Treasury, the number of important claims now outstanding is small, and these are mainly the subject of litigation or arbitration.

The account under review is the last separate account for Shipping Liquidation, provision for this service in the current year being included in Miscellaneous (Expiring Services), Class IX, Vote 1.

UNCLASSIFIED SERVICES, VOTE 6.-RAILWAY (WAR) AGREEMENTS

LIQUIDATION.

45. The total expenditure to 31 March 1927 arising out of the Government possession of railways is shown on page 501. The transactions during the year consisted mainly of adjustments of periodical payments on account which had been made to the railway companies in earlier years in respect of deficiency of net receipts, etc., and the result of the adjustments was a net receipt of 728, 1941. 7s. 3d.

The net total of the grant, 1007., therefore falls to be surrendered to the Exchequer.

The adjustments consisted mainly of omnibus settlements of a character similar to those mentioned in my previous Reports, negotiated with the Companies with the approval of the Government Accountant and of the Treasury. The reports made by the representatives of the Ministry, who conducted the investigations of the Companies' claims, have been reviewed by my officers. I have no criticisms to offer in regard to these settlements.

Further adjustments, which are not capable of precise ascertainment at present, will be necessary, and a token sum only has been provided in the Vote for Railway (War) Agreements Liquidation for 1927 to meet the net expenditure for that year in connexion with claims outstanding on 31 March 1927.

UNCLASSIFIED SERVICES, VOTE 8.-COAL MINING INDUSTRY SUBVENTION.

46. This subvention was operative from 1 August 1925 to 30 April 1926, and to provide for it Votes have been taken of 19,000,000l. in 1925-26, 4,350,000l. in 1926, and a Revote of 80,000l. in 1927. The total net expenditure to 31 March 1927 was 23,199,084/. 19s. 2d.

The charge to this account includes certain advances (payments on account) in respect of subvention due. Any adjustment which may prove necessary in respect of these advances will be made in the accounts of later years.

In some cases the subvention due has not yet been finally determined. As shown in a note to the account, advances made in excess of subvention due, 1,1371. 15s. 7d., were written off, with Treasury authority, as irrecoverable.

UNCLASSIFIED Services, Vote 9.-EMERGENCY SERVICES.

47. For the reasons explained in paragraph 4 the total charge to this Vote, 320,070l. 2s. 8d., does not represent the total cost of emergency services. In addition, a considerable expenditure which can be definitely earmarked as due to the emergency remains charged to the normal Votes of various Civil Departments, and of the three Service Departments.

UNCLASSIFIED SERVICES, VOTE 9-contd.

There will be further charges in the accounts of later years in respect of certain liabilities outstanding on 31 March 1927.

I understand that the Treasury will present a statement, for the information of the Public Accounts Committee, of the total expenditure due to the emergency, and of the services for which the various departments were responsible in connexion with the emergency.

UNCLASSIFIED SERVICES, VOTE 10.-EMERGENCY SERVICES (IMPORTATION OF COAL).

48. Provision was made in the estimate for the purchase and importation of coal, including freight and demurrage, etc., and for the utilization of the receipts from sales of coal to make further purchases.

The sum of 1,500,000l. shown as expenditure in this account is the amount which it proved necessary to draw from the Exchequer to finance the original purchases of imported coal until receipts from the sale of the coal began to accrue, and does not represent the total amount expended in connexion with the importation of coal.

A complete account of the transactions relating to the importation and sale of coal is included in the volume of Trading Accounts and Balance Sheets, 1926.

SERVICES ORIGINALLY FINANCED OUT OF VOTE OF CREDIT.

Exchange Account.

49. I have referred in my previous Reports to the Exchange Account, which is now used almost entirely to finance transactions connected with the provision of funds to meet the liabilities of the Government in the United States.

The original capital provided in 1915-16 from the Vote of Credit was 53,075,0491., of which 20,000,000l. was repaid to the Exchequer in 1920-21.

From information as to the approximate assets and liabilities of the Exchange Account which has been furnished to me by the Treasury, it appears that the estimated value of the assets, which included a currency balance abroad, and various classes of securities, was at 31 March 1927 approximately 1,000,000l. less than the total liabilities, as compared with approximately 3,000,000l. at 31 March 1926.

Exchequer and Audit Department,

27 January 1928.

Malcolm G. Ramsay, Comptroller and Auditor General.