CHAPTER V

[88:1]See Hammond, "The Adventures of a Paper in the Foreign Office." Rep. of Sel. Com. on Trade, Com. Papers, 1864, VII., 279, Q. 1384.

[88:2]Colonial Office List, 1907, XIII.

[89:1]Three of the members may, however, be appointed for life, and any other member may be reappointed for five years. Ilbert, "Government of India," 112.

[89:2]Ibid., 152-55.

[91:1]Report of Comrs. on Admn. of Naval and Mil. Depts., Com. Papers, 1890, XIX., 1, pp. viii-ix.

[91:2]2-3 Will. IV., c. 40, § 1.

[91:3]Lord Charles Beresford was a Naval Lord and a member of the House of Commons from 1886 to 1888.

[92:1]Rep. of Comrs. on Admn. of Naval and Mil. Depts., Com. Papers, 1890, XIX., 1, p. viii.

[92:2]Ibid., p. x.

[93:1]Return on the Distribution of Business between the Members of the Admiralty Board, Com. Papers, 1890, XLIV., 605.

[93:2]Rep. of Comrs. on Admn. of Naval and Mil. Depts., Com. Papers, 1890, XIX., 1, p. ix.

[93:3]Todd, II., 767et seq.

[93:4]The military forces consist of the regular army (with the reserves, that is, the men who have served their time but are liable to be recalled in case of war); and of the militia, yeomanry and volunteers. The militia are a little more like regular troops than the volunteers. They are formally enlisted and their period of training is longer. None of the auxiliary forces can be ordered out of the United Kingdom; but while the volunteers are intended solely to support the regular army in defending the country in case of invasion, the militia have always offered their services in time of war, and have often been used for garrison duty both at home and abroad, and even for field service abroad. The yeomanry are a body of cavalry forming part of the militia. A royal commission on the militia and volunteers reported in 1904 that both of these forces were unfit to take the field against a regular army; that the period of training ought to be increased in each case; and that a home defence army, capable of protecting the United Kingdom in the absence of the greater part of the regular army could be raised only by universal compulsory military service. (Com. Papers, 1904, XXX., 175, pp. 6, 9, 11, 15-16.) This last suggestion was received with general disfavour.

[94:1]For the History of the War Office up to this time, see Clode, "Military Forces of the Crown."

[95:1]Order in Council, June 4, 1870, Com. Papers, XLII., 683.

[95:2]Com. Papers, 1890, XIX., 1.

[95:3]By virtue of Orders in Council of Dec. 29, 1887, and Feb. 21, 1888.Ibid., App. viii.

[96:1]On account of a vote at the close of the same debate in which this change was announced.

[96:2]Com. Papers, 1896, LI., 483.

[97:1]Rep. of Com. on War Office Organisation, Com. Papers, 1901, XL., 179, p. 21; Rep. of Com. on the War in South Africa, Com. Papers, 1904, XL., 1, pp. 138-42.

[98:1]Com. Papers, 1901, XXXIX., 243.

[98:2]Ibid., 1902, LVIII., 717.

[98:3]Hans., 4 Ser. XC., 327et seq.; XCI., 6et seq.

[98:4]6 Anne, c. 7, § 28. (In the Rev. Sts. it is c. 41, § 27.)

[99:1]Rep. in Com. Papers, 1904, XL., 1, pp. 28, 30.

[99:2]Ibid., p. 89.

[99:3]Ibid., p. 87.

[99:4]Ibid., p. 94.

[99:5]Ibid., pp. 94-96.

[99:6]Ibid., pp. 94-95.

[99:7]Ibid., pp. 86-87.

[99:8]Ibid., pp. 93-94.

[100:1]Com. Papers, 1904, VIII., 101.

[100:2]Cf.Orders in Council of Aug. 10, 1904, Com. Papers, 1905, XLVI., 291, 295, 299.

[100:3]Rep. of Com. on War in South Africa, Com. Papers, 1904, XL., 1, pp. 52-56.

[101:1]Rep. of Com. on War Office Organisation, Com. Papers, 1901, XL., 179, p. 2.

[101:2]Rep. of Com. on War in South Africa, Com. Papers, 1904, XL., 1, pp. 52-56.

[102:1]The recent Committee on Military Education evidently approved of that object. Com. Papers, 1902, X., 193, p. 24.

[102:2]The Committee on Military Education were impressed by the widespread dissatisfaction with the education of army officers, and in Sandhurst, especially, much was found to criticise. The education of the junior officers after leaving the military academies was reported to be in a most unsatisfactory state. They were said to be lamentably wanting in military knowledge, and in the desire to study the science and master the art of their profession; while the examinations for promotion encouraged "the customs of idleness with a brief period of cram." Com. Papers, 1902, X., 193. There may well be some exaggeration in the criticism of the moment, due to a natural revulsion from the military self-complacency that preceded the war.

[103:1]Rep. of Com. on Training and Examination of Junior Naval Officers, Com. Papers, 1901, XLII., 621, p. 15.

[104:1]Memorandum, Com. Papers, 1902, LXI., 675. Since this was written another change has been made dividing naval officers into a sea-faring and fighting branch and an engineer branch.

[104:2]Com. Papers, 1890, XIX., 1, pp. vi-viii.

[105:1]Lord Charles Beresford, Hans., 4 Ser. CXII., 1146, 1147.

[105:2]Rep. of Com. on War in South Africa, Com. Papers, 1904, XL., 1, pp. 135-36. Hans., 4 Ser. CXVIII., 291.

[106:1]The "City" of London is an oasis with its own police force.

[106:2]Glen on Public Health, 12 Ed., 443, 1169, 1341.

[107:1]Rep. Com. on Nat. Expend., Com. Papers, 1902, VII., 15, Q. 1425.

[107:2]14-15 Vic., c. 42, §§ 16, 17.

[109:1]In 1873 the settlement of railway controversies was transferred to a judicial body, the Railway and Canal Commission.

[109:2]In the case of light railways the orders are made by the Light Railway Commission and confirmed by the Board of Trade, the members of the Commission being appointed by the President of the Board. 59-60 Vic., c. 48; 1 Edw. VII., c. 36.

[109:3]Rep. of Com. on Municipal Trading, Com. Papers, 1900, VII., 183.

[110:1]"English Const.," 1 Ed., 228-30.

[112:1]62-63 Vic., c. 33, §§ 1-4.

[112:2]This does not, of course, apply to special establishments, like the naval and military schools, which are managed by other departments.

[112:3]Throughout this chapter statements relating to local government must be understood not to apply to Scotland or Ireland; but in this case Wales, with Monmouthshire, is also excluded because, by the Welsh Intermediate Education Act of 1889, a special board chosen by the local authorities inspects the secondary schools there.

[113:1]"Law and Custom of the Constitution," II., 184.

[113:2]It may be observed that for many years after 1868 the Postmaster General was rarely in the cabinet, and hence he has not acquired the authority possessed by a regular cabinet minister. He has, however, now been in the cabinet continuously since 1892.

The most important of all the departments, and the one that exhibits in the highest degree the merits of the English government, is the Treasury. It is the central department of the administration, which keeps in touch with all the others, and maintains a constant financial control over them. But before considering how that is done it may be well to explain the process by which money flows in and out of the national purse. The part played by Parliament in the imposition of taxes, and the authorisation of expenditure by means of appropriations, will be described inchapter XIV, and we are concerned here only with the machinery for collecting those taxes, and giving effect to the appropriations.[115:1]

The Consolidated Fund and the Bank of England.

Until the Commonwealth, taxes were, as a rule, granted to the King, who used the proceeds to carry on the government as he saw fit; but under Charles II. Parliament began to appropriate parts of the revenue for specific purposes, and after the revolution of 1688 this developed into a comprehensive system, so that the whole revenue was appropriated, to be used only for the objects, and in the sums, designated by Parliament.[115:2]It was the custom, however, to appropriate for specific objects the proceeds of particular taxes, a practice that made the public accounts needlessly complex. In 1787 William Pitt, following earlier partial experiments, simplified matters by creating a singleConsolidated Fund into which all revenues from every source were turned, and from which all payments were made.[116:1]The Consolidated Fund is deposited in the Bank of England and the Bank of Ireland, which have a right to use it like any other deposit, and perform, in fact, for the government much the same service that an ordinary bank does for a merchant. This method of dealing with the national finances continued substantially intact until a few years ago,[116:2]when it was complicated by two innovations, one of which allows a department to use incidental revenues, under the name of "appropriations in aid," to defray expenses, and the other sets aside certain parts of the national income to supplement local taxation, in each case without passing through the Consolidated Fund.[116:3]The second of these exceptions is due to the great increase of local expenditure, and the narrow range of local taxation, which have caused a demand for national subventions, and have resulted in setting apart for the purpose the proceeds of specific sources of revenue. In this way the income from the local taxation licenses, and a portion of the income from the death duties and the duties on spirits and beer, are now collected by the central government and paid directly into the Local Taxation Account.[116:4]But saving these cases, all the national receiptsare paid into, and all the disbursements are made from, the Consolidated Fund.

Method of Getting Money into the Consolidated Fund.

The Sources of Revenue.

The financial procedure of the Treasury is now regulated by the Exchequer and Audit Departments Act of 1866,[117:1]and the Public Accounts and Charges Act of 1891.[117:2]By these acts the gross revenue—after making the deductions already mentioned—is paid into the "account of His Majesty's Exchequer," at the Banks of England and Ireland, to be used as a single fund. The three chief collectors of revenue are the Commissioners of Customs, the Commissioners of Inland Revenue and the Post Office. With the growth of the principles of free trade the customs duties became confined to coffee, chicory, cocoa, dried fruit, tea, tobacco, wine, and a number of articles, such as spirits, on which duties are laid to countervail the excise upon similar articles produced at home. To these were added at the time of the South African War an export duty on coal, and import duties on sugar and grain, the last being again dropped in 1903, while the coal duty was repealed in 1906. Under normal fiscal conditions in times of peace, the customs duties yield about one fifth of the total revenue, the receipts being mainly from tobacco, tea and spirits. The gross receipts from the Post Office (including the telegraphs) form about one seventh of the revenue, but this is really misleading, because three quarters of those receipts are paid out again for the expenses of the department. All but a very small fraction of the remaining receipts come through the Commissioners of Inland Revenue, and their sources of income are of a miscellaneous character. The largest item is the excise, mainly on beer and spirits, which yields more than a quarter of the total national revenue.[117:3]The next largest is the income tax, which varies very much from time to time, and has produced during the last score of years from one seventh to one quarter of the total revenue. Then there are the death duties, aprogressive tax on property passing at death, which yield one tenth of the revenue. The ancient land-tax, and the inhabited-house duty produce comparatively small sums; and, finally, there are the stamp duties on all kinds of transactions, articles and licenses which yield all together about one twelfth of the revenue. Some of the license fees collected under the head of excise are so small as to appear rather vexatious than productive, such as one guinea for the display of armorial bearings not used upon a carriage, fifteen shillings for a license to have a manservant, or keep a carriage with less than four wheels, and fourpence a day for the privilege of occasionally selling tobacco.[118:1]

Permanent and Annual Taxes.

Neither the expenditure nor the proceeds of taxes being absolutely constant, it is necessary, in order to maintain a close balance between them, to adjust the sources of revenue to some extent from year to year, and this is done by means of a small number of variable charges. Most of the taxes are imposed by permanent statutes, changed only at long intervals, but the rates of assessment under the tea duty and the income tax are fixed each year in the annual Finance Act; and since 1894 certain additional duties on beer and spirits have also been laid for a year at a time.

Accuracy of the Budget.

It has been the aim of English statesmen to make the revenue and expenditure of each year balance one another as closely as possible, and their skill in doing so has been extraordinary. While the South African War was raging such a result was naturally impossible, but during the preceding twenty-five years the difference between receipts and expenditures (including payments on account of the debt) was never more than about four per cent, and in fifteen of those years it did not exceed one and a half per cent. The taxes are, indeed, of such a character that it is possible to forecast their proceeds with great accuracy. The Chancellor of the Exchequer intends to make his calculations so as toleave a margin of safety, and yet during the period under consideration the difference between the estimated and actual receipts was never more than about three and a half per cent.[119:1]

Accurate fiscal administration is very much promoted by the rule that any part of an appropriation unexpended at the end of the financial year in which it is voted shall lapse, and cannot afterwards be used unless it is granted afresh by Parliament.[119:2]The rule has been thought to lead to wastefulness by provoking improvident haste in spending the whole appropriation before March 31.[119:3]But such an evil is surely far smaller than that of allowing the appropriations to run on, with the result, well known in France, for example, that the annual accounts cannot be finally made up, and the extent of the deficit determined, until several years have passed.

Like all other excellent things devised by men, the English system of finance is not without its drawbacks. If it promotes careful administration, and rivets attention upon any increase in the budget, it also makes the revenue inelastic in emergencies. A great deal has been said in Parliament of late about broadening the basis of taxation, but that is a very difficult thing to do suddenly, without dislocating the commercial as well as the fiscal system; and while the existing taxes are elastic up to a certain point, an attempt to raise them too much would diminish rather than increase their productiveness.

Method of Getting Money out of the Consolidated Fund.

Just as there are two kinds of taxes, one permanent and the other annual, so there are two classes of expenditure, one regulated by standing laws, and the other by annual appropriations. All the ordinary expenses of the government require parliamentary sanction every year, both on the theory that the money collected from the nation ought not to be spent without the consent of its representatives, and also in order that Parliament may be able to oversee the administration and criticise it in every session. But there are certain matters that ought to be kept aloof from current politics, and ought not to be brought in question in the heat of party conflict. The principal charges that have been regarded in this light are the interest on the national debt, the Civil List or personal provision for the King, annuities for the royal family, certain pensions, and the salaries of the judges, of the Comptroller and Auditor General, of the Speaker, and of a few officers of lesser importance. These charges amount to nearly one quarter of the total expenditures; and they are called Consolidated Fund charges, because by statute they are paid directly out of the Consolidated Fund without the need of any further action by Parliament. The other expenditures are for what are known as the supply services, because the appropriations for them are voted by the House of Commons in Committee of Supply.

The administrative procedure for getting money out of the Consolidated Fund to pay the Consolidated Fund charges and the supply services is not precisely the same. In the case of the supply services a royal order for the amounts appropriated by Parliament is made under the King's sign manual, countersigned by two of the Commissioners of the Treasury. The Treasury then requires the Comptroller and Auditor General to grant credits at the Banks of England and Ireland for those amounts, and if satisfied that the authority from Parliament is complete, he makes an order on the banks granting the credits. From time to time the Treasury requests the banks to transfer to thevarious supply accounts, for disbursement, sums of money not exceeding the credits so granted.[121:1]The procedure in the case of Consolidated Fund charges differs from this only in the fact that a royal order is not needed, and the Comptroller and Auditor General, on the requisition of the Treasury, grants quarterly credits for the amounts prescribed by statute.[121:2]By this process a highly effective security is provided that no money shall be spent without the authority of Parliament. The Consolidated Fund is deposited in the banks of England and Ireland, which are liable if any of it is withdrawn without an order from the Comptroller and Auditor General, while that officer is given the same independence as the judges. Like them he is appointed during good behaviour, with a salary charged upon the Consolidated Fund. The security is not absolutely perfect, for there are some moneys, such as the appropriations in aid, that do not pass through the Consolidated Fund; and as no foresight can be unfailing, the government is given a limited power to meet unforeseen contingencies, and to cover expenses that have inevitably proved larger than was anticipated.[121:3]But all matters of this kind are fully reported to Parliament by the Comptroller and Auditor General.

Audit of the Accounts.

The Treasury lays before Parliament annually the Finance Accounts of the preceding year, while the Comptroller and Auditor General submits at a later date a separate report. Therein he examines the Consolidated Fund charges, and makes for the supply services more elaborate statements, called the Appropriation Accounts, in three volumes, relating to the Army, the Navy and the civil service. The accounts are rendered to him by the several departments, and after auditing them he transmits them to the House of Commons with his comments.[121:4]

The money granted by Parliament is divided into votes, of which there are in all about one hundred and forty.[122:1]In the estimates these votes are subdivided into subheads and items; but the votes would appear to be the only limitation expressly placed by Parliament upon expenditure; for the Annual Appropriation Act provides that the sums granted shall be deemed to be appropriated "for the services and purposes expressed in Schedule (B) annexed" thereto, and that schedule gives a list of the votes, but not of the subheads or items. Nevertheless, the Comptroller and Auditor General is enjoined by the Exchequer and Audit Departments Act of 1866 to ascertain whether the money expended has been applied to the purpose or purposes for which each grant was intended to provide,[122:2]and hence the reports that he submits note the excess or saving with the reasons therefor, under each subhead, and sometimes, as in the case of votes for the construction of new buildings, under each item. He adds, also, his own comments wherever it seems to him necessary to do so. All this is done, even where the saving under one subhead more than counterbalances the excess under another in the same vote. When that happens, however, no action by Parliament is required; but if the total amount of a vote has been overspent, the excess is entirely unauthorised, and must be covered by a deficiency appropriation, which Parliament grants upon the reports of the Comptroller and Auditor General and the Committee on Accounts of the House of Commons. To the last rule there is one exception. In order to facilitatethe administration of the Army and Navy, the Annual Appropriation Act declares that the Treasury may authorise expenditure, not provided for, to be defrayed temporarily out of any surplus effected upon other votes in each of those departments; and the Act goes on to recite and sanction the transfers of surplus so authorised by the Treasury in the last year for which the accounts are complete.[123:1]This brings us to another important question, that of the financial control of the Treasury over the other branches of the administration.

Treasury Control over Other Departments.

Control over Estimates.

There has been a great deal of discussion about Treasury control over the receipt and expenditure of public money. In the case of the receipts it is a simple matter, for the financial control over the Post Office has already been described, and the other great revenue departments are, as will shortly be explained, virtually subordinate to the Treasury. The question of control over expenditure is far more complicated. Committees of the House of Commons have, at different times, collected evidence on the subject,[123:2]but the statements made have often been vague, and tend to confuse the control of the Treasury over the estimates, with its control over expenditure after the appropriations have been voted by Parliament. The control over the estimates has been discussed in the preceding chapter. It is only necessary here to repeat that such a control is by no means absolute, because any important question of expenditure becomes a question of policy to be decided, in case of disagreement, by the Prime Minister or the cabinet; and to point out that the departments supported by their political chiefs are usually too strong for the Treasury to resist.[123:3]

Control over Expenditure.

It might be supposed that after the appropriations had been voted the departments would be free in expending them, subject only to their responsibility to Parliament; but this is not altogether true. In the first place a statute sometimes requires that the expenses of a department shall be sanctioned by the Treasury.[124:1]Then it is not infrequently provided that the salaries shall be fixed by the Treasury, or that alterations in the establishment shall require its consent. Moreover, the salaries of certain grades of clerks are regulated by Orders in Council,[124:2]which are changed only on the advice of the Treasury. Apart, however, from statutes and Orders in Council there is a general customary principle forbidding any increase in the civil establishment of a department,—that is, any increase in the number or salary of permanent officials,—without the approval of the Treasury; and this although the appropriations would not be exceeded.[124:3]

Transfer of a Surplus.

Over certain departments the control is even more extensive, for not only do the contracts made by the Post Office require its approval, but contracts entered into by the Board of Works are also the subject of discussion between the Treasury and the First Commissioner.[124:4]In the case of the Army and Navy the fact that the Treasury can authorise atransfer of the surplus under one vote to cover a deficiency under another gives it a certain authority; and, indeed, its sanction is to some extent sought even for transfers between subheads of the same vote. This last is, of course, a matter of custom rather than of law, and practice differs in the two services. The Admiralty, which always plays the part of the good boy, comes very frequently to the Treasury for permission to make transfers between subheads before it acts; while the Army, save in exceptional cases, comes only at the end of the year for a formal approval.[125:1]The exceptional cases are, however, numerous. They sometimes extend even to separate items, and are regulated by a code of rules made by the Treasury and the department.[125:2]Every excess, for example, of a certain size in an item for a new building, the payment of any excess to a contractor, the discharge of a loss, or the insertion of a new item, require the sanction of the Treasury; and in fact the Appropriation Accounts of the Army and Navy are followed by many pages of correspondence on matters of this kind between the Treasury and the department. In the case of the civil services, where the Treasury has no authority to sanction transfers between votes, the system is less elaborate and the correspondence is not printed in full. Still there are frequent references in the accounts to Treasury letters sanctioning expenditures under subheads or items, especially in relation to such matters as salaries, the purchase of land, large excesses over estimates for construction, the abandonment of claims, and unforeseen expenditures.[125:3]

Effect of Treasury Control.

The control by the Treasury is sometimes vexatious in small matters,[126:1]but it does not seriously hamper the administration, or impair the efficiency of the service;[126:2]and while it can hardly prevent an expenditure on which a department is seriously determined,[126:3]the very need of consultation can hardly fail to act as a restraint upon extravagance.[126:4]

In addition to its control over the application of the sums voted by Parliament, and its authority to permit the use of appropriations for purposes not contemplated in the estimates, the Treasury has a limited power to open the national purse in case of necessity when no grant has been made by Parliament. For this purpose it has three sources of supply at its disposal: the Treasury Chest Fund, limited to £1,000,000, may be used to make temporary advances for carrying on the public service, to be repaid out of sums afterwards appropriated; the Civil Contingencies Fund, limited to £120,000, is available on similar terms for unforeseen contingencies and deficiencies; and, finally, any incidental receipts, not granted by Parliament as appropriations in aid, may be used as such under the authority of a Treasury minute to be laid before the Houses.[126:5]

The Organisation of the Treasury.

In the remarks on the history of the Treasury Board, at the beginning of the last chapter, it was pointed outthat the board no longer meets. The Treasury minutes are still drawn up in the name of "My Lords," but this is merely the survival of a form, and all the members of the board, except the Chancellor of the Exchequer, have ceased to take part in directing the financial administration. The three junior lords have at times some small departmental duties, but their real functions are to act as assistants to the Parliamentary or Patronage Secretary, who is the chief government whip in the House of Commons. All the four whips receive salaries from the state on the theory that it is their duty to keep a House, or in other words to insure the presence of a quorum, while the supplies are being voted. But in fact they are officers, not of the state, but of the party in power, and it is their business to see that whenever a vote is taken in which the ministry is interested, their partisans are present in greater force than those of the Opposition. The relation of the First Lord to the Treasury is anomalous. He is usually the Prime Minister, and as such is supposed to keep a general supervision upon all branches of the administration, and to act as a sort of umpire between the different ministers, and, therefore, between the Treasury and the other departments. But whether he is Prime Minister or not he has a real connection with the Treasury. The functions of that office cover a much wider field than its name would imply, including subjects of a most miscellaneous character; and while the finances are entirely under the charge of the Chancellor of the Exchequer,—who is, in fact, the Minister of Finance, with the Financial Secretary of the Treasury as his parliamentary under-secretary,—the First Lord may be said, speaking very roughly, to be at the head of the outlying departments which are not concerned with financial affairs.

Back to Index Next