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5 April, 1927.]

Mr. M. F. HEADLAM, C.B.

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the Controller of the National Debt Office and representatives of the Treasury, Admiralty, War Office, and Ministry of Pensions. They meet once a month and the cases are put up to them, the cases having been previously examined by the medical officers employed by the Board.

Sir Robert Hamilton.

2128. Can you give the personnel under Item A? In April, 1926, there were 64. 2129. Has there been any material alteration in that figure in recent years? -On 1st August, 1914, the number of the staff was 46; in 1922 the number was 63; and in 1923 the number was 66. The number varies. The number has gone up since the War. Since the War the amount of money dealt with has naturally largely increased.

2130. What is approximately the difference in the amount that is dealt with by the Office?-The figure corresponding to that mentioned by the Comptroller and Auditor General of £800,000,000 was £247,000,000 on the 1st March, 1914.

Major Salmon.

2131. Do not the Army, Navy, and Air Force do all the detailed work in connection with the pension commutations?They recommend the officer who wishes to commute his pension, and fill up certain details of medical history and service, and so on. Then that comes to the official of the Pensions Commutation Board who sends a form to the officer and makes an appointment with him to see the doctor, and if the doctor passes him, the case goes forward, to the Board. Then if the Board approves the pension is commuted on the basis of a table which was, I think, settled in 1926.

2132 I was always under the impression that the Pensions Ministry really settled the commutation?-These officers of the Army and Navy. Are you referring to the rank and file?

are

2133. Yes? This is only dealing with officers of the Army and Navy, and memhers of the Royal Irish Constabulary.

2134. The men are dealt with by the Pensions Ministry?—Yes.

2135. What is the idea of having a line of demarcation between officers and men in settling pensions commutation?— The Pensions Commutation Board is a statutory authority which was created by the Act of 34 and 35 Victoria, c. 36.

2136. Before there was a Pensions Ministry? Long before there was a Pensions Department.

2137. There is similar work being done by the Pensions Department on a larger scale than is being done under this section in connection with the Army, Navy and Air Force?-I have no knowledge of that.

2138. I put it to the Treasury. Perhaps they could answer the question?(Mr. Phillips.) I am not very well acquainted with the Department dealing with the commutation of pensions to men. I was not aware that it had reached any big scale. The reason why this particular work goes to the National Debt Office is because they provide the capital from which the commuted sum is paid, and that is replaced by an annuity for a period of years charged on the Vote of the Department concerned, the Army, the Navy, or whatever service the man comes from.

2139. How does it apply when it is a case of a man and not an officer?-(Sir Malcolm Ramsay.) Is it not the case that men are not allowed to commute their pensions because the amounts are SO small?

Chairman.] No. The position is that there are certain rules affecting the commutation of pensions arising from the Great War. They are allowed to commute on a certain basis, but not, I think, below a certain amount. That is the position regarding commutation.

Major Salmon.] My point was rather this. If in one case it is good enough for the department to see it through, why should not whichever department it originates from see it through in the case of officers also? If they do it for men, why not for officers? I can quite understand that when it originally started it was never thought in those days of having a pensions department. But now that another organisation exists it seems as if we are keeping on with the old organisation while we have also built up a new organisation. Is it necessary to have both? I do not say which is the best one to deal with it. That is the point that occurs to me.

Chairman.

2140. I think what Major Salmon probably has in his mind is the centralisation of the pensions work. Will you, Mr. Headlam, give a reply on that, if

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you can?-(Mr. Headlam.) I do not think the National Debt Office has ever been consulted about the pensions of men, but the subject is entirely new to me. I find the Pensions Commutation Board dealing with a very large number of officers and calculating the annuities which have to be set up to repay the amount paid in commutation to be something like £470,000.

Major Salmon.

2141. I understood you to say that there were five officers employed in this piece of work?—Yes.

2142. How many were employed before the War on that piece of work? I think three only. You see, the number of applications for commutation in 1913 was 166, while in the year under review the number was 1,058. That is less than has been the case in the last few years, of

course.

2143. There were more previously?— They are going down now with the decrease in the size of the Army, but, of course, there are many more than before the War.

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2144. I notice that you have an item in the account "Total Ordinary Receipts amounting to £19,500. Where do you get your ordinary receipts from? -They come from various sources. A large proportion comes from the fees paid by the officers who commute. Then there are the expenses of management of the savings bank life annuities, and the expenses of management of the Post Office Savings Bank fund, and the proportion of commission or savings bank investment transactions.

2145. It is all inter-departmental?— Inter-departmental in what sense?

2146. In the sense that credit is given to you for certain work that you do for another department?-Yes, certainly, except the fees.

2147. The men pay a certain fee for commutation?—Yes. And there are one

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Sir Fredric Wise.

2150. Do the National Debt Commissioners come under you?-I am their

servant.

2151. There is a National Debt Commission?-It consists of the various people nominated by Act of Parliament.

2152. How many are there?—There are seven. The Speaker of the House of Commons, the Chancellor of the Exchequer, the Master of the Rolls, the Lord Chief Justice, the PaymasterGeneral, the Governor and DeputyGovernor of the Bank of England.

2153. I do not know what their salaries were in pre-War days?—They are unpaid.

2154. I have before me a list of appointments in the public service carrying remuneration of £2,000 a year and upwards, and I notice that there are three National Debt Commissioners with £2,000 a year or upwards, while there were none in the year 1914?-My predecessor had formerly been Secretary to the Treasury, and he carried with him his Treasury salary which was, I think, £2,000, or £2,500 a year.

2155. I am not complaining. I only wanted to know the fact?-That is the only explanation I can think of.

2156. Is there anybody else?-No The Commissioners are unpaid.

Chairman.

2157. The appointments in this list obviously refer to permanent Civil Servants. I should think they are not the Commissioners to whom Mr. Headlam is referring? (Sir Malcolm Ramsay.) I think the explanation is that the list is badly printed, and that the second and third posts are in the Overseas Trade Department and the Pensions Ministry.

2158. It is plain that these appointments refer to the appointments of permanent Civil Servants? I think so. (Mr. Phillips.) At the time of that return I think there was one post over £2,000 in this Department. Now there are none. (Mr. Headlam.) Yes, that was it. That was my explanation.

2159. Sir Malcolm, the question was asked a minute or two ago about the commutation of pensions. I am afraid that I misled the Committee, because I had in mind the pensions for wounds

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Chairman.

LOCAL LOANS FUND ACCOUNT.

WHITE PAPER No. 102 OF 1926.

2164. Sir Malcolm, you have a report on page 11, which is largely narrative, I think?-(Sir Malcolm Ramsay.) It is purely narrative. The second paragraph explains the point. There is an apparent inconsistency between two parts of this return, but it is not in fact any real inconsistency, and I do rot think I need detain the Committee by explaining it.

2165. Mr. Headlam, have you any comment on the report?-(Mr. Headlam.) No. I have explained the point about the delay in rendering the

account.

2166. Have the Treasury anything to say? (Mr. Phillips.) Except that the arrears by the Irish Free State have now all been cleared up.

Sir Fredric Wise.

2167. Did the Irish Free State charge commission for collecting this money?— (Mr. Headlam.) Yes.

2168. What was the percentage?-They charged the actual out of pocket expenses, I understand.

2169. What percentage did it work out at?-Between 1 and 2 per cent. it

works out. It was only for these two years.

2170. There is a big difference between 1 and 2 per cent. ?-It was an interim arrangement. You know that after the Free State was set up they were allowed to collect the annuities and charge what they said was the cost of collection. As the cost of collection did not appear to be excessive apparently it was accepted for these two years on the basis that that arrangement would soon stop. I suggest that that is the explanation.

2171. You say it is 1 to 2 per cent. ?It has worked out at about £20,000 a year upon £1,200,000.

2172. Is that still going on?-That has stopped now with the arrangement made under the White Paper which was discussed on the Public Works Bill this year.

2173. There is no commission now?No.

Mr. Cyril Lloyd.

2178. Is there any writing off of bad debts in this account during the year?On the Local Loans Fund?

2179. Yes.-The Public Works Loan Board comes to Parliament every year in

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connection with that. This year they have written off £200 in connection with Eyemouth Harbour.

2180. Is that really all the loans which are in peril?-I do not think the National Debt Commissioners know much about that. The Public Works Loan Commissioners are the people who make the loans, and are presumably satisfied with the security.

2181. Do we have any opportunity of asking their view?

Chairman.] I think 1 am correct in saying that it really arises on this account which is before us dealing with the Local Loans Fund. Questions for example of policy, as in the issue of a discount and so on, have been raised in past years. Now is the time, I think, Mr. Lloyd, to ask questions about the matter.

Mr. Cyril Lloyd.

2182. What I want to ascertain is whether there is any yearly inspection of the security for these loans?-Oh, yes, certainly.

2183. And whether there is any reserve made in cases where the security appears to be inadequate?-I know as a matter of fact, not in my official capacity but privately, that they go through these outstanding loans and assess the possibilities. They have to have Parliamentary authority for the actual writing off of any loan, and they naturally do not go to Parliament unless the thing is quite hopeless.

Chairman.

2184. It may help Mr. Lloyd if I put this to you, Mr. Headlam. You write off the amount that would be included in the Annual Bill which you put through the House of Commons?-Exactly.

2185. In point of fact, looking a long way back, your writing off has been infinitesimal?-It is very satisfactory over a long period of years. (Mr. Phillips.) Since 1888 the total loans written off have been £407,000. When you compare that with the total loans outstanding amounting to £220,000,000, you will see the position.

Mr. Cyril Lloyd.

2186. Are there none that are in default in respect of any interest?-The last paragraph of Sir Malcolm's report shows how much is in arrear. At the

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31st March, 1925, there was £319,000 principal and £237,000 interest in arrear. I certainly would not say that that is all good money. I think we might lose something over that.

2187. Does that include the South Staffordshire Mine Drainage Commission? That is the main item. But it does not stop paying. They are still paying a little. (Sir Malcolm Ramsay.) No reserve is set up against bad debts, because under the Act which set up the Local Loans Fund it is provided that any assets written off have to be made good by Act of Parliament. Therefore, there is no reserve against bad or doubtful debts.

Mr. Cyril Lloyd.] What strikes me, Mr. Chairman, is that we have no warning as to when any loans maturing are going bad, so to speak.

Chairman.

2188. What you have, Mr. Lloyd, as I understand it, is the constant review of the Public Works Loan Board. Is not that correct, Mr. Phillips?—(Mr. Phillips.) There is a full statement of arrears in the Public Works Loan Commissioners Annual Report, with explanation.

Mr. Cyril Lloyd.

2189. We can assume, you think, that there are no others in jeopardy?-The South Staffordshire Mine Drainage Commission and a number of small harbours round the coast are the only ones which are presumably in jeopardy.

Major Salmon.

2190. Have we any means of seeing that if there has been some arrear in either paying capital or interest it is carried forward year by year, so that we can see what it comes to until it has actually been paid off? (Mr. Headlam.) That is shown in Supplementary Statement III on page 8 of the account we are discussing.

2191. So that we have outstanding loans made by the Public Works Loan Commissioners, if I understand these figures correctly, which are £319,000 in arrear as regards principal. Is that correct?— That is right.

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2192. And the Irish Free State are in addition in to the extent arrear £234,000?--That is now settled.

2193. Then there is only £319,000 which is in arrear. In next year's account, if that has been increased or decreased, will that be brought forward?-Certainly.

2194. Is there anything to show for how long the £319,000 has been outstanding on the account before us?-Not on this account, but I imagine that is in the report of the Public Works Loan Commissioners. You mean to say, how can you identify that money? Here is the whole detail of it in the report of the Public Works Loan Commissioners.

2195. In presenting these reports, would it not be as well if we had a note to say how long the £319,000 had been in arrear. We do not know if it is one year's accumulation or five years' accumulation. We do not know how many years it has been accumulating.

Chairman.] That is a Treasury point really.

Major Salmon.

2196. Can the Treasury show us any way in which we can get over this?-(Sir Malcolm Ramsay.) As a matter of fact our Department keeps the arrears under review, and if there is anything abnormal we would call the attention of the Committee to it. In the year they have fallen a good deal. The previous year, the arrears of principal owing through the Public Works Loan Commission were £360,000 at the 31st March, and they have now come down to £319,000.

2197. Of course I quite understand when we are dealing with hundreds of millions of pounds, £300,000 does not sound much, but I suggest the moral effect would be something. It migh have a desirable effect on those who borrow money and know it has been reviewed from time to time by Parliament? -(Mr. Phillips.) There might be a cross reference put in to the report of the Public Works Loan Commissioners, but it would be rather repetition. In this publication it covers about six pages. 2198. Does it tell you the dates from which these arrears run?-It gives you enough information by which to guess that. It shows the amount of principal

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outstanding, the amount of the loan, and the rate of interest, which I think ought to form a guide as to how long it has been in arrear.

2199. Does it give the total, or has one to calculate it? What I would like to press is the point I originally raised, and that is this. Is it not possible, even in this Annual Report, to have a statement as to how long the arrears have been outstanding?-It is quite possible. We will request the Public Works Loan Board that this should be done.

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2202. Mr. Headlam, I suppose you are responsible for the issues of Local Loan stock?-Subject to the Treasury.

2203. Your statutory power is to issue them on a 3 per cent. basis, is it not?-These local loans.

2204. Have you ever considered altering that?—I do not think so. That would not be for the National Debt Commissioners.

2205. May I ask the Treasury about that? (Mr. Phillips.) That is rather a question of general National Debt policy, if I may say, so. The statutory power is not limited to issuing at 3 per cent. have power to vary that rate.

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2206. Have you power to do that?Yes.

2207. With regard to redemption, do you ever redeem local loans stock?-(Mr. Headlam.) Not in recent years.

2208. Are you certain?-It is redeemable, of course, in theory, by a decision of Parliament.

2209. Only by a decision of Parliament? (Mr. Phillips.) Yes, it is redeemable by decision of Parliament at any time, but as the stock is far below the redemption price it is obvious that Parliament will not redeem.

Sir John Marriott.

2210. With reference to Sir Malcolm's report on page 11, there is no relation

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