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of course between the principal and interest in the table in paragraph 4?— (Mr. Headlam.) You mean to say that is not the interest on that amount of capital.

2211. The interest refers to one thing and the principal to another, obviously? -Yes.

2212. What I want to ask you about is this. How does it come about that the interest is so very large as compared with the principal. Why is the interest so much more in arrear than the principal relatively? Perhaps Sir Malcolm could answer that?-(Sir Malcolm Ramsay.) There are a variety of causes. The common practice is to repay a loan by a fixed annuity covering principal and interest combined. If by any chance in the early years the debtor falls into arrear, then of course the portion of the annuity which represents principal is much smaller than that which represents interest, and conversely at the end of the term. At the end of the term an annuity would be mostly principal and there would be very little interest left in it.

2213. Therefore you would not expect this enormous disparity between these figures? It depends at what stage the debtor defaults. If he defaults in the

early years on an instalment of, say, £50,000, the greater part of that would be interest, and that would swell the interest in arrear. If he defaulted in the last five years of his term, then out of his £50,000 perhaps £45,000 would be principal and the rest interest.

2214. Then are we to assume from that answer that most of the debtors default in the early years?-Oh, no. I cannot tell you about it in detail; but that is one factor.

2215. That factor would not account for the whole of the disparity?—No, that is only one factor. But I would gladly look up the matter. (Mr. Headlam.) Possibly the answer is that most of the loans have been made in recent years, and they have not had a very long time to go, and therefore the proportion of the principal is small

2216. But why is the interest large? I do not mind the principal being small? -What I meant was that the instalment is made up of a larger proportion of interest than principal.

2217. That was Sir Malcolm's answer? -(Sir Malcolm Ramsay.) I am informed that my suggestion was right: that the Local Loans Fund have advanced a great


deal in recent years, and that in current defaults the proportion of interest in the annuities that are not paid is much bigger than the principal. There have been some defaults in the earlier years, so that your deduction from my explanation is broadly correct.

2218. Is the default in interest on any particular form of loan? For example, is it largely represented by the Housing of the Working Classes Acts (page 7 of the account)?-(Mr. Phillips.) No. Apart from one big drainage scheme in South Staffordshire, it is almost exclusively on harbour loans.

2219. The default in interest is largely on harbour loans?-Yes.

2220. Where is that shown?-You would not find them except in the Annual Report of the Public Works Loan Commissioners.

2221. It is not shown in this account? -No.

Major Salmon.] Would not that point be covered if we had that Report circulated?


2222. Speaking from recollection only, I should rather think that Report does not appear among Parliamentary Papers? -I expect it is a Stationery Office publication.

2223. In that case Members would have to apply for it?-There would be no trouble in obtaining it and circulating it to the Committee.

Sir Fredric Wise.

2224. Is not that the Eyemouth Harbour only? The Harbours are Mevagissey, Mousehole, Balintore, Buckie, Fraserburgh, Peterhead, Ross, Stonehaven and some others.

Sir John Marriott.

2225. Does the fact that the harbours are particularly prone to be in default have any effect on the decision of the Public Works Loan Commissioners?-Oh, yes. The reason in Scotland is obvious. It is a question of the export trade in herrings.

2226. That is not quite my point. My point is, does it influence the Public Works Loan Commissioners in the future? -Oh, certainly.

2227. Then in recent years not much money has been advanced to harbours?

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Is that the case?-No new money from the local loans fund, I fancy.

2228. For how long has that been so?I could not go into quite such detail. I should have to look up the point.

2229. I think we should like to know about that? I can easily let you have a statement if you wish it.

2230. Perhaps you will hand that in to the Committee?—Yes.*

Sir Robert Hamilton.

2231. Is it not a fact that the works were carried out when expenses were unduly high?—I do not think so. I should have to verify that. (Sir Malcolm Ramsay.) I think the general reason with re


gard to East Coast harbours is that periodically there comes a fierce storm and the whole harbour is silted up and becomes perfectly useless unless it is dredged, and the Treasury have consented, though with a great deal of reluctance, to make harbour loans to keep the harbours going generally. Unless the harbour is to disappear the Public Works Loan Commissioners are forced to lend money.

Sir John Marriott.

2232. You do not suggest that they are throwing good money after bad?—No, I do not suggest that. It might be a matter of opinion.



2233. Sir Malcolm, there is a Report of yours on page 15. That is narrative. Perhaps it may be noticed that on pages 3, 4 and 5 there is an explanatory note giving a summary of the Irish Land Purchase Fund. Is there anything you wish to say on the Report, Sir Malcolm, on page 15? (Sir Malcolm Ramsay.) No. It is merely narrative. It summarises the principal features of the account.

Sir Fredric Wise.

2234. Your last issue was on a 4 per cent. basis, was it not?-(Mr. Headlam.) That is Northern Ireland.

2235. Not the Irish Free State?-The Irish Free State issue their own. It does not appear in this account. That was the price of the Northern Ireland issue. This account only relates to the earlier Acts of 1903 and 1909.

2236. Where does the 4 per cent. come? This account is dated October, 1926. The last two paragraphs of the memorandum at the beginning show what has now, as a matter of fact, taken place, but which had not happened at the date of this Report.

2237. But it does not affect this Report at all?--No.

Mr. Cyril Lloyd.

2238. Is there any overdue payment in this Report? (Sir Malcolm Ramsay.) The answer is no.

"The date of the last advance by the Public Works Loan Board to any of the harbours was May, 1914.-F. P.”

Sir Robert Hamilton.

2239. Can you say the extent of the obligation of the Fund? The last paragraph of the Report on page 5 says that the obligation of the Fund to finance further advances is confined to

the implementing of such purchase agreements as were lodged on or before 12th February, 1923-(Mr. Headlam.) On page 13 is shown the outstanding amount to be accumulated with sinking fund payments.

2240. I took it as relating to further advances?-(Sir Malcolm Ramsay.) About £340,000 was required to finish off those pending agreements.

Sir John Marriott.

2241. I notice that the reference in

this explanatory note goes back no

further than the Act of 1903. Does that mean that all the obligations have been wiped out under the Ashburnham Act? (Mr. Headlam.) No, they come under the Local Loans Fund.

2242. It comes back to the Wyndham Act?-The earlier ones are in the account you have been looking at of the Local Loans Fund.

2243. Why does not that come under the Irish Land Purchase, Fund?-(Sir Malcolm Ramsay.) The Irish Land Purchase Fund was first established by the Act of 1903.

2244. Was there not any fund established under the Ashburnham Act, 1885?

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1885 wiped out or not?-I think everything that is going to be lost in the Local Loans Fund under that Act has been lost already and been written off.

2247. Can you state as a fact what it was?--No, I should have to look that up.

2248. Would you mind putting in the amount of loans under the previous Act prior to 1903?-Yes, certainly.*


WHITE PAPER No. 82 OF 1926.

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to give an exact answer. The Depreciation Fund may be anything from nothing to over £30,000,000.

2257. But the 5 per cent. has not a Depreciation Fund. now? The 4 per cent. tax free has the same Depreciation Fund. This £7,500,000 is for the 4 per cent. tax free loan.

2258. Then why do they put in 5 per cent. War Loan? You do not depreciate the 5 per cent. War Loan if it is above 95? That is right, but there is one Depreciation Fund for both?

2259. I was anxious to have the exact amount if possible? (Mr. Headlam.) I could give you the exact amount in the year if I worked it out.

2260. I only want it for a year.

Colonel Henderson.] Are not the first five items the ones which would more or less answer Sir Fredric's question?


2261. I thought so, but what I wanted to ask Mr. Headlam and the Treasury was to put in under Item No. (2) the precise figure that Sir Fredric Wise requests. There will be no difficulty in doing that. I imagine that means broadly the exclusion, unless I am wrong, of the last three items. Is that correct, Mr. Phillips? Is it the case that the first four sub-items are your specific allocations, so to speak, attaching to these particular loans? (Mr. Phillips.) The first five sub-items, because in Item No. (1) you have the American Sinking Fund of £4,953,566.

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2263. Why does it not include subitem (e)? The first five items include so much of the specific Sinking Funds as can be estimated in the ordinary sense. It is obvious what item (e) is. Under the prospectuses, Victory Bonds carried a privilege that they could be presented in payment of death duties. When they are presented they are bought out of the Sinking Fund. That is to say, the National Debt Commissioners buy them and hand the cash to the Inland Revenue, and it comes in as death duties.

2264. And you hold those until they are drawn? That is so.

2265. What is the position of sub-item (g)? With regard to (g) the position is that whenever the 4 per cent. War Loan is below the issue price, par, we have to apply a Sinking Fund of one-eighth of 1 per cent. monthly calculated on the original total of the 5 per cent. and 4 per cent. loans.

2266. So that that would come in as well, would it not?-Yes, but it is pure accident how much comes in in one year. The stock is one time below par, and a week or two afterwards it is above it.

2267. So that that would be six subitems altogether. Are there any other items?-(Sir Malcolm Ramsay.) If the price is below 90 sub-item (d) would come into operation, the Sinking Fund for Conversion Loan.


2268. Can you put in a statement with regard to that?-(Mr. Phillips.) Yes, 1 will do so.* It is simply a question of defining terms. There is no dispute about the facts.

Colonel Henderson.

2269. Mr. Headlam, what is sub-item (f)? (Mr. Headlam.) Sub-item (f) is other securities surrendered for death duties. Certain other War securities, such as the 5 per cent. War Stock, are accepted by the Inland Revenue Commissioners under prospectus terms in payment of death duties at the prices stated. That is to say, War Stock at 95, 4 per cent. War Bonds at par, 5 per cent. National War Bonds at par.

"A comprehensive statement of all specific Sinking Funds, with figures for 1925-26, will be found in the Report of the Committee on National Debt and Taxation (Cmd. 2800, pp. 68-70).-F. P."


But they are cancelled at once; they are not kept like the others.

2270. That is why I wanted to know what this was. No one would do that now? This is a very small amount.

2271. I was surprised to find that there was any amount at all?-As they are entitled to do this it has to come into the account.

Sir John Marriott.


2272. Are there any other securities other than those specified on page 5 which are accepted for death duties, because the Treasury has told us of securities handed over in payment of income tax, and lists have been put in. have frequently brought up before this Committee a list of very questionable securities surrendered for income tax, have you not?-(Mr. Phillips.) That is a matter for the Inland Revenue. When they cannot get cash out of a taxpayer they take paper in some cases. They may do the same thing as regards death duties, but I should think that is very improbable.

2273. I want to know whether they do that? I should think it is very improbable, but I will make a statement and put it in if you wish.

2274. Why should it be done in one case and not in the other?-Well, I never heard of it, but that practice may exist to a small extent.

2275. But the Inland Revenue do as a fact accept all sorts of securities in lieu of income tax payments?-Yes, in special cases when they can get nothing better.

2276. Do they not do that where they can get nothing better in case of death duties? I should not think that often arises. It is easier to get cash.

2277. But it must sometimes arise, I should have thought. However, there is one other point I want to get clear on page 2 in relation to the question asked by Sir Fredric Wise. I think, Mr. Phillips, you want to amend your answer to some question, do you not? You want to include sub-items (a), (b), (c), (d), (e), and part of (g), I understand?—All (g), provided it is clearly understood that (g) is not a fixed amount.

2278. But you want to include (g)?-Yes, I think you could include that under the title of " Compulsory Sinking Fund."

"It has been ascertained from the Inland Revenue that the question has not arisen in the case of Death Duties.-F. P."

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2280. Sir Malcolm, you have no report on the Mint account itself, but there is a report later on in the Trading Account? -(Sir Malcolm Ramsay.) That is so.

Sir Robert Hamilton.

2281. Can you tell us what the personnel of the office is under Item A?(Colonel Johnson.) That, of course, varies according to the amount of work being done. Part of the staff is established permanent staff, and part of it is temporary staff.

2282. Could you give us the number of the established staff?-The established staff numbered 250 in that year. The peak figure of the total number employed was 456, of whom 250 are permanent staff.

2283. Then does the permanent staff remain approximately the same?-It must, of course, with slight variation.

2284. With very slight variation?—


2285. The explanatory note to Item J refers to payments to the Bank of England for the distribution of silver coin. Will you explain that?-The Bank take a commission for doing the business of distributing the coin. They act as


the agents of the Government for distributing the coin all over the country as required.


2286. That is to say, the new coin when coined goes to the Bank England? Yes.

2287. What commission do they charge? -The commission varies. I think it is 7s. 6d. per £100. But that subhead does not merely include that commission, because there is railway freight, and so on, for bronze coin, &c., that we are sending ourselves. That is included in this item. This item is not only the payment of commission to the Bank of England.

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2291. Sir Malcolm, paragraph 14 in your report on page vii deals with the Production and Bullion Accounts?-(Sir Malcolm Ramsay.) Yes.

2292. I propose to put to the Committee also paragraph 3 on page iii be

cause that paragraph raises the question of percentages of the amounts in relation to the total of the account. It may be easier to take the account itself, which is to be found on pages 114 and 115, since Members will find an illustration of the percentages in the last column on those pages, as discussed in paragraph 3

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