THE SELECT COMMITTEE appointed to inquire into the Receipt, Issue, and Audit of PUBLIC MONIES in the EXCHEQUER, the PAY OFFICE, and the AUDIT DEPARTMENT, and who were empowered to Report their Observations thereupon to The House ; HAVE considered the Matters to them referred, and have agreed to the following REPORT:
YOUR Committee have considered the evidence and documents collected by the Select Committee on Public Monies in 1856, which have been referred to them, as well as further important papers laid before them, which will be found in the Appendix ; and they have agreed to submit the following recommendations to The House :
1. Exchequer Issues and Paymasters’ Payments.
Your Committee are satisfied, from the evidence taken before them, that the consolidation of the Pay Departments has been attended with public benefit ; that it has diminished the balances left in the hands of the public accountants to the Crown ; that it has increased the security of the public money, and promoted economy ; and that the regulation which requires the Paymaster-general to make all his payments from a single cash balance has been attended with beneficial results.
As the issue of money from the Exchequer in amounts sufficient to maintain a constant balance in the hands of the Paymaster, on each separate grant or head of service, over and above the balances in the Exchequer at the credit of such grants and services, would entirely defeat these objects, Your Committee recommend that issues from the Exchequer shall be made in order to adjust the payments under every head of service, by placing each incredit in the books of the Paymaster as frequently as possible, consistently with retaining the smallest cash balance, and that such an adjustment shall be completely made at least at the. close of every month ; that the Paymaster should be required to make up for the Commissioners of Audit accounts to the end of every month, showing the balances for or against every head Of service ; and that any provision of the Exchequer Regulation Act of 1834 which may appear to be at variance with this mode of conducting the public payments should be repealed.
Your Committee are of opinion that the Paymaster-general should cease to be a political officer, discharging his duties by deputy ; and that he should become the acting and efficient head of the Pay-office, performing his duties in person.
2. Payments of the gross Revenue to the Exchequer.
During the progress of the inquiries of the Committee of 1856, an Act was passed (19 & 20 Vict., cap. 59) for removing from the gross revenues certain superannuations and other charges which had remained payable out of those revenues after the passing of the Act 17 & 18 Vict., cap. 94, under which the charges of collecting the revenue and various other expenses were transferred to the Annual Estimates, or placed on the Consolidated Fund.
With the exception of the charges on the Land Revenues of the Crown, the net receipts of which are only payable to the Consolidated Fund under the Act 10 Geo. IV, cap. 50, sec. 113, and under the Act 1 & 2 Vict., for the settlement of the Civil List, the only payments which can now be legally charged upon the public revenues, are drawbacks, bounties, repayments, and discounts. Although Your Committee have no reason for believing that any expenses have been defrayed out of those revenues in their progress to the Exchequer which were not legally chargeable thereon, they are nevertheless of opinion that it is essential to a proper Parliamentary control of the public money that the law should distinctly require that the whole revenue, after providing for those charges, should be paid to the Consolidated Fund, from which it cannot be issued without Parliamentary sanction ; and with regard to the charges on the Land Revenues, the Committee are of opinion, unless some constitutional difficulty should be involved in the change, these charges should be brought under the same Parliamentary control, and under the system of votes for expenditure, as the charges respecting the other branches of public revenue.
They recommend that the payments of revenue should, as far as practicable, be paid direct into the Exchequer, and that those payments made into the Pay-office should be transferred to the Exchequer Account with as little delay as may be consistent with the public service.
They further recommend that monies in deposit in the Pay-office should be carried to a separate account at the Bank, as they neither form part of the public revenue, nor are voted by Parliament as Ways and Means. The payments may still be made through the general drawing account.
A statement of the receipts and payments included in this deposit account ought annually to be laid before Parliament.
3. Deficiency Bills.
In the present state of the law (57 Geo. 3, c. 48), it is necessary that Exchequer Bills (Deficiency) should be issued to the full extent of the deficiency which may appear on making up the account of the income and charge of the Consolidated Fund to the close of the quarter, although it constantly happens that the growing produce of that fund for the subsequent quarter is sufficient to meet all charges without the aid of Deficiency Bills. Under such circumstances, the Exchequer Bills are issued to the Bank, and are paid off on the same day ; but although this practice obviates the charge for interest on these advances, the money is, nevertheless, borrowed from the bank when the public service does not require the loan.
Your Committee, therefore, recommend, that whenever the deficiency of the Consolidated Fund for the quarter, or any part thereof, can be directly provided for out of the growing produce of the fund for the following quarter, the issue should be made directly out of the public balance without the aid of a loan, nominal or otherwise, from the Bank.
Your Committee further recommend, that when actual advances by the Bank become necessary, either for Consolidated Fund services, or for Supply services, the amount should be placed to the Exchequer Account without an issue of Exchequer Bills, but upon a requisition to the Bank by the Comptroller of the Exchequer, and that it be issued from the Exchequer account by the Exchequer to the public service, as at present; also that the advances should be treated as book debts, and be subject to all the existing provisions of the law as to redemption.
In calculating the interest to be paid on Deficiency Bills, Your Committee observe that the amount of Exchequer credits undrawn, and the balance at the Bank to the Paymaster’s account, are not taken into consideration : it would be of advantage. if these sums were considered, as well as the Exchequer account; but Your Committee abstain from making any positive recommendation on the subject, as the arrangements subsisting between the Bank of England and the Government must necessarily come into consideration in connexion with the Bank Act of 1844, now under the review of Parliament.
4. Exchequer Bills (Supply).
A Vote in Supply is taken every year to pay off all outstanding Exchequer Bills ; and Ways and Means in Exchequer Bills are granted to provide for such payment. The effect of this arrangement is, that the Bills of the current year are issued to pay off the Bills of the past year, except in those cases in which holders demand payment in money. It has been shown to the Committee that this annual renewal of Exchequer Bills is attended with trouble and inconvenience to holders, and with expense and risk to the public; and moreover, that the payment of Exchequer Bills in money out of the Ways and Means granted for Army, Navy, and other Supply services, leads to complicated adjustments between the Money grants and the Exchequer Bill grants of Ways and Means which it appears desirable to avoid. As a security to holders, Exchequer Bills charged on aids or supplies may, after the expiration of 12 months from their respective dates, be tendered in payment of any of the public revenues, aids, taxes, or supplies—a regulation which has the effect of applying revenue in its progress to the Exchequer to the payment of debt. Your Committee are of opinion that the law, as regards these Exchequer Bills, may be greatly simplified ; they have, therefore, to propose—
- That the principal of Exchequer Bills be redeemable out of the Consolidated Fund in those cases in which the holders can demand payment of their Bills in money, or pay them in for taxes under existing regulations ; and that the interest be payable also out of the Consolidated Fund.
- That the Government be empowered, as at present, to issue new Bills in lieu of those which may be paid off in money, the proceeds of such Bills, however, to be placed to the credit of the Consolidated Fund.
- That the annual renewal of Exchequer Bills be discontinued, the Bills running on from year to year, with the consent of the holders, until called in for renewal; that the rate of interest be advertised annually ; and that the Bills be issued with coupons for the annual interest.
5. System upon which the Public Accounts should be kept.
Your Committee consider that it is the necessary groundwork of any really important improvement that the whole of the public accounts should be kept on an efficient, and, as far as practicable, uniform system. The evidence given before them by competent witnesses has satisfied them that the commercial system of bookkeeping by double entry, wherever it has been applied in the public departments, has materially aided in introducing order and regularity in their financial transactions, has facilitated the audit of the accounts, and has promoted correct appropriation. The Inspector of the Audit Office appointed to check the appropriation of the naval and military expenditure, has borne testimony to the efficiency of the system of account in operation in the Naval Department, to the successful manner in which it has stood the test of great expansion during the late war, to the punctuality with which the annual accounts of receipt and expenditure have been presented to Parliament, and to the facilities which the system has afforded in conducting the concurrent audit of the Naval expenditure.
Your Committee therefore earnestly recommend the extension of that system to the accounts of the Public Departments in which it has not yet been adopted, and the provision of a security, through the control of the Treasury, for the maintenance of the system, on a principle of uniformity, when it shall have been generally established. Your Committee feel assured that whatever new securities may be devised for the faithful appropriation of the public money, they will be. incomplete unless they are accompanied by a system of public accounts founded on the principles they have suggested.
6. Extension of the Appropriation Check, and Presentation of Audited Accounts to Parliament.
The concurrent audit, or appropriation check, first applied to the expenditure of the Grants for Naval Services in 1832, and subsequently extended to the several Army Grants, was a new security introduced for ensuring the strict appropriation of the Grants of Parliament. It was not intended to limit the discretion of the responsible departments of the Executive Government in which it was established, but to secure a revision of their accounts by an independent authority, invested with sufficient powers of investigation to detect any misapplication of the Votes, or any deviation from the appropriation sanctioned by Parliament. This check now applies to the Naval and Military Expenditure, and is regulated by the provisions of an Act (9 & 10 Vict. c. 92) passed in 1846 ; also to the expenditure of the Offices of Woods and Forests, and Public Works ; and the Commissioners of Audit transmit annually to the Treasury, for presentation to the House of Commons, accounts of Naval and Military Expenditure, compared with the Grants, accompanied by Reports, in which they direct attention to every departure from the provisions of the Appropriation Act. Your Committee recommend that this important check upon the application of the public money be extended to the accounts of the Income and Expenditure kept at the Treasury, to the accounts of the Revenue Departments, and to the various accounts comprising the expenditure of the Votes for Civil Services, including Civil Contingencies. For the latter service two accounts should be presented ; one showing the final payments charged against the Vote for Civil Contingencies, and the other showing a balanced account of the transactions of the year, including the outstanding advances at the close of the year, and the balance unissued brought down to the following year. These accounts to be presented for the past year along with the estimate for Civil Contingencies for the current year. Your Committee are also of opinion that the whole of these accounts, finally audited, should be presented to Parliament before the close of the year succeeding that to which they relate.
In order to strengthen the check upon the Government in regard to issues of money, for any service whatever in excess of the sum voted by Parliament, Your Committee recommend that all payments of the Paymaster-general shall be checked from day to day, in the departments in which they are authorised or made, by an officer to be appointed by the Commissioners of Audit ; it will be the duty of this officer to follow from day to day the appropriation of every payment to its proper account, and to report immediately to the Commissioners any excess of the Vote sanctioned by Parliament, or other irregularity.
And Your Committee further recommend that these audited accounts be annually submitted to the revision of a Committee of the House of Commons, to be nominated by the Speaker. It is desirable that an annual account of all guaranteed loans, including the payments made, and the arrears, if any, due to the Consolidated Fund, shall be presented to this Committee, and that they do report thereon specially to The House.
Your Committee suggest that the Audit Board should no longer transmit through the Treasury those accounts which they are bound to lay before Parliament, but should communicate them direct, and that the appropriation and inspection of Army and Navy Accounts, the selection of officers for the respective duties, their removal or dismissal, should rest entirely with the Audit Board.
Your Committee has recommended a large extension of the duties and powers of the Board of Audit. If these suggestions be adopted, it will be necessary that the composition and relative position of this Board, as a great department of the State, should be reconsidered by the Executive Government. The Board of Audit is responsible to Parliament alone, and the station and emoluments of the person at the head of it should be equal to the importance of the duties to be performed, and not second in rank to any of the permanent officers presiding over other principal departments.
7. Principle upon which the Votes for Civil Services should be taken.
The difficulty which has hitherto prevented the extension of the principles of Account and Appropriation check applied to the Naval and Military Accounts to the Accounts of Expenditure for Civil Services, has arisen from the delay which takes place in Parliament in voting the Estimates for Civil Services. These Votes being passed generally late in the Session, it has been considered impossible to adopt the principle applied to the Naval and Military grants, of providing only for the payments to be made in the financial year. Your Committee are of opinion that this difficulty may be overcome by taking one aggregate Vote, upon account, for such Civil Services as have already been sanctioned by Parliament in the previous Session ; and in order to facilitate this practice, it is recommended that all salaries for the last quarter shall be payable on the 31st of March in each year. The amounts thus made applicable to each separate Vote for Civil Services should be stated in a schedule, and deducted from the amounts to be voted to complete the grants for the year.
A course similar to this has been adopted in the present year, except that the Votes have not been limited to the provision required for meeting the payments to be made in the year.
Under this arrangement, the accounts could be closed soon after the termination of the year for all home services ; and as regards payments made abroad, immediately on receipt of the accounts of payments made up to the 31st March, all unexpended balances should be surrendered; and grants unapplied, but required for the completion of the services to which they had been appropriated, should be re-voted.
8. The Annual Accounts of Income and Expenditure to be founded on actual Receipts and Payments.
It is provided by the Act 10 Geo. 4, c. 27, that, for the purpose of ascertaining the annual amount of surplus revenue, the Treasury shall cause to be prepared. after the expiration of each quarter, an annual account, showing the actual revenue and expenditure of the United Kingdom, in the four quarters for the whole year immediately preceding such quarter-days respectively, according to the actual receipt and issue of moneys at the Exchequer ; and the 24th section of the Exchequer Act (4 Will. 4, c. 15) requires that the expenditure in such account, so far as it relates to Great Britain, shall be made up from the credits granted by the Exchequer. Your Committee are satisfied, from the evidence taken before them, that an account of Exchequer credits cannot represent a true account of expenditure ; they therefore recommend that the basis of the account should be the actual payments of the several Paymasters to whom those credits are granted.
9. Regulation of the Treasury Chest Fund.
Full information as to the nature of this fund, and the steps taken to bring it under proper regulations, will be found in the Appendix, No. 3, to the Report of the Committee in 1856, pp. 589 to 613. This fund was formerly known as “Army Extraordinaries,” and subsequently as the “Commissariat Chest Fund.” The object of the fund is to provide the means of carrying on the public service abroad. Under existing regulations, a Royal Warrant defines the objects for which it is to be employed, and prescribes that accounts shall be prepared annually by the Commissioners of Audit, showing the sums paid into and out of the fund in the financial year, and the assets and liabilities of the fund at the close of the year. These accounts have been regularly laid before the House of Commons since the 1st April 1846.
Your Committee concur in the propriety of the regulations under which this fund is administered, and the accounts are prepared; but they recommend, that instead of relying on the security of a Royal Warrant for the maintenance of those regulations, they should be confirmed by an Act of Parliament: The objects to which legislation should be directed in regard to this fund are the following:
- To limit the amount of the balance to be retained at the credit of the fund, and to provide that if it shall at any time exceed the limit fixed by law, the surplus shall be paid to the Consolidated Fund.
- To provide that no final expenditure shall be charged upon the fund.
- To provide that the fund shall only be employed for the legitimate banking operations of the Treasury Chests, and for advances for public and colonial services, repayable out of Votes of Parliament, or other funds applicable thereto.
- To provide that accounts shall be laid before Parliament every year, showing the cash operations of the fund at home and abroad during the financial year, and the assets and liabilities of the fund at the close of such year.
Your Committee are aware that the important and extensive changes which they have suggested cannot all be immediately carried into effect ; but they believe that the continued attention of Parliament and of the Executive Government to the subject will secure, at no distant date, all the objects embraced in their recommendations.
18 August 1857.
Select Committee on Public Monies. ‘Report with Proceedings: 279-Sess. 2’. Reports from Committees: 30 April - 28 August, vol. 9, British Parliamentary Papers, 1857, pp. 495–502