Chapter XIII · THE CONTROL OF THE PUBLIC PURSE

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Legislation is but one of the functions of Parliament. Equally if not more important is its control of taxation and the expenditure of the revenue derived from it. It was around taxation that in the past the battle of securities for good government and the liberty of the subject was fought and won. In the fresh field of political and social thought and action that was opened up in this country, after the World War, and into which the Legislature entered, swayed by new impulses and ideas, taxation occupies a position almost of even greater magnitude than legislation. Still more does it promise to be the engine by which momentous political changes and revolutions will be effected, or at least attempted, in the future.

The greater part of the national revenue is raised by permanent taxation, that is, by taxation which does not require to be annually reviewed and sanctioned by Parliament. This includes the proceeds accruing from the death duties, the land taxes, the stamp duties, the charges of the post office and telegraph services. They are fixed taxes, duties and charges. The taxation by which the remainder of the revenue is raised must be sanctioned every year by Parliament. In this section are included the income tax, and the duties on spirits, beer, tea and tobacco. All the revenue of the country is lodged by the Departments of the State charged with its collection in the Bank of England to the account of “His Majesty’s Exchequer,” and constitute what is called “The Consolidated Fund.” As into this fund flows the streams of revenue from all quarters, so out of it comes the money to meet every item of national and Imperial expenditure. Payments from it are divided into two classes—one for “Consolidated Fund Services” and the other for “Supply Services.” The “Consolidated Fund Services” consist of several charges of regular annual recurrence which have been authorized and made permanent by different Acts of Parliament, and are, therefore, paid out without receiving, every year, the sanction of the House of Commons. These charges include such items as the interest on the National Debt; the King’s privy purse; the annuities to the Queen and other members of the Royal Family; the emoluments of the Lord Lieutenant of Ireland; the salary of the Speaker of the House of Commons; the salaries and pensions of the Judges of the High Court. The House of Commons, by placing these charges on the Consolidated Fund, and thus making them permanent, has removed them beyond its own criticism, for the reason that the services they are intended to meet—and especially the personages associated with these services—ought not to be liable every year to discussion, and perhaps heated and undignified attack, which would be the case if the money necessary to defray them had to be voted annually by the House. But over the “Supply Services” the Commons exercise an annual supervision. They are divided into three classes—Army, Navy, and Civil Service.

In November and December the permanent officials of the various Departments are busy calculating the amount of money required for salaries and expenses during the coming financial year, which begins on April 1. These statements, setting out in detail the items of expenditure, with notes explanatory of new or increased charges, are called “Estimates,” and have to be approved in each case by the Minister, who is the political chief of the Department, on whom will fall the task of first getting the Cabinet to assent to them, and afterwards of expounding and justifying them in the House of Commons.

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But before the Estimates are submitted even to the Cabinet they come under the scrutiny of the Treasury, which is vested with the supervision or control of the other Departments in the spending of public money. What the Treasury aims at is the keeping of expenditure within bounds, consistently with the public good. And, by all accounts, it retains a tight hold, in the interest of the taxpayer, on the strings of the public purse. I heard a remarkable criticism of the Treasury in the House of Lords by Lord Salisbury, when he was Prime Minister, during the South African War. The Prime Minister did not go so far as to blame the Treasury for the deficiency in guns and stores which greatly hampered the operations of the Army in the first stages of that war, but he intimated that so parsimonious was its control over the spending Departments that it led to delay in action, and consequently to the weakening of the power of the Executive in a crisis. The position was certainly curious. Here was a Prime Minister, strong-willed personally, with a harmonious Cabinet, and a united Party supreme in the House of Commons, and yet on his own confession he was unable to assert his authority over “the system”—as he called it—of the Treasury. Salisbury’s speech seemed to indicate that the Treasury is possessed of a statutory or constitutional control over the Public Purse which enables it absolutely to disallow any item of departmental expenditure which may not meet with its approval, even though the political chief of the Department, and the Cabinet as a whole, declare the spending of the money to be essential to the national welfare. But it is difficult to accept this presentation of the Treasury as an authority independent of the Ministry. The Treasury officially rejoices in the high-sounding title of “The Board of Commissioners for executing the office of Treasurer of the Exchequer of Great Britain, and the Lord High Treasurer of Ireland”; and its directions to the spending Departments—or its ukases, according to Lord Salisbury—are issued in the awe-inspiring name of “My Lords of the Treasury.” But the power behind the Board of Treasury is really the Chancellor of the Exchequer, a Member of the Government, of course, and the chief henchman of the Prime Minister in all things concerned with finance. We may be sure that whatever is done by the Treasury in the way of revising and curtailing the Estimates is inspired by the Chancellor of the Exchequer, and that he has the Cabinet at his back.

Early in each session the Estimates are laid before the House of Commons, printed in three huge quarto volumes—“Army Estimates,” “Navy Estimates,” and “Civil Service Estimates”—each of them running to several hundred pages, crammed full of tabulated figures. It is upon these statements of departmental expenditure that the Chancellor of the Exchequer bases his reckoning of the total amount of money which he will have to raise by taxation to provide for the public services during the year. His object is to present a popular Budget, which means a Budget that proposes a decrease rather than an increase in taxation. With that end in view the Treasury endeavours to induce habits of economy in the Departments. But should any expenditure involve a question of policy, to which the Party in office is pledged, the Treasury’s craving for economy must remain unsatisfied. It is impossible to think of the Treasury arrogating to itself a general control over the policy of the Government; or that such a claim would for one moment stand unchallenged by the Cabinet. In fact, any strong Minister, one occupying a powerful position in popular favour, could easily impose his will on the Treasury, not to speak of the Government as a whole. With that qualification, the authority of the Treasury is final and complete over expenditure.

The Chancellor of the Exchequer has at the Treasury probably the strongest staff of any Minister in the Administration. He needs it. Without his staff even Gladstone would have collapsed under the attack of “Budgetitis,” so enormous is the rush of business as the time approaches for the annual financial statement. It is curious to read how Lord Althorp, who was Chancellor of the Exchequer in the early ’thirties of the nineteenth century, used to do all his Budget calculations, however complicated, alone in his closet. This system of working unaided in seclusion strikes the biographer of the noble lord as very admirable; and he contrasts with it the practice of William Pitt, who, as Chancellor of the Exchequer, used to take a Treasury Clerk into his confidence. Pitt himself tells us that he never had a private secretary, as he had no duties requiring such assistance; and Macaulay dwells in wonder on the fact that he could explain a Budget without notes. And his first Budget in 1784 was very complicated. It dealt with as many as 133 different taxes. In our times the Chancellor of the Exchequer unfolds his Budget to the House of Commons with the aid of a huge pile of typewritten documents. And the number of taxed commodities were greatly reduced long ago by Peel and Gladstone.

“Budget night” is awaited with intense interest throughout the Kingdom. It is one of the big occasions of the House of Commons—an occasion when the House is crowded to its utmost extent, and is most animated. There is much speculation in the newspapers beforehand as to what the Chancellor of the Exchequer proposes to do. The accounts of the Exchequer have already been published. It is therefore known whether the estimated revenue balances the estimated expenditure, or whether there will be a deficit—an excess of the estimated expenditure over the estimated revenue; or a surplus—an excess of the estimated revenue over the estimated expenditure. If there is a deficit, the Chancellor of the Exchequer must devise means to meet it. New taxes will have to be imposed, or existing taxes augmented. If, on the other hand, there is a prospective surplus, the Chancellor of the Exchequer chooses the particular imposts to be modified or abolished. Even if expenditure and revenue are evenly balanced, there is always the prospect of the Chancellor of the Exchequer announcing some readjustment of the public burdens—a transfer of taxation from one class of the community to another class, or from some commodities to other commodities. And as the financial secrets of the Government are never allowed to leak out until they are disclosed by the Chancellor of the Exchequer, “Budget Night” is usually, therefore, an interesting night, and, sometimes, a night of surprises.

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There are two Committees of the House of Commons for dealing with the national revenue and expenditure. One is called “Committee of Ways and Means,” and the other “Committee of Supply.” The Committee of Ways and Means deals with the proposals of the Government for obtaining the money it needs by loans, taxes, duties, and other imposts. In other words, it determines how the national revenue is to be raised. The Committee of Supply decides what sums shall be granted to meet the requirements of the various Departments. In other words, it settles how the national revenue is to be spent. The House, accordingly, goes into Committee of Ways and Means for the Budget statement of the Chancellor. It is an ancient constitutional rule that every demand for money on behalf of the Crown must originate in a resolution agreed to in Committee of Ways and Means. Therefore, when the Chancellor of the Exchequer has made his financial statement, he moves a series of resolutions providing for the continuance of such existing taxation, or for the imposition of such new taxation, as he thinks necessary, in order to balance income with outgo. These resolutions may be amended or rejected by the Committee, and even when they are approved by the Committee they still require confirmation by Act of Parliament. To put it in another way, the resolutions agreed to in Committee of Ways and Means are embodied in the Finance Bill, which has to pass through all the five stages prescribed for legislative measures—first reading, second reading, committee, report, and third reading. Accordingly, the House of Commons is found, long after “Budget Night,” discussing and discussing again the taxing proposals of the Budget, at one stage or another of the Finance Bill.

Yet any new duties on wines, spirits, beer, or tobacco, or increased duties, proposed by the Chancellor of the Exchequer, come into operation the morning after he opens his Budget in the House of Commons. In order to give these proceedings an anticipatory authority, the resolutions sanctioning these duties are passed by the Committee of Ways and Means before the adjournment of the House on Budget night, and instructions to begin levying them forthwith are posted to the Customs and Excise centres throughout the Kingdom. The imposts, however, are not legalized until the passing of the Finance Act. That alone can give them the force of law. If, therefore, a resolution to which anticipatory effect has been given is subsequently modified in the progress of the Finance Bill through the House of Commons, any money collected by the Customs or Excise authorities in excess of the amount to which legislative sanction is ultimately given would have to be refunded. Such readjustments became necessary in 1885, when the Liberal Government was defeated on the Budget, Childers being Chancellor of the Exchequer, after a resolution had been agreed to increasing the beer duty; and again in 1888, Goschen being Chancellor of the Exchequer, when a proposal to put an increased duty on all bottled wines was, before the passing of the Finance Bill, limited to sparkling wines only.

This practice of making all new taxes payable on the resolutions being agreed to in Committee of Ways and Means was instituted for the protection of the Revenue. If traders had notice of the increased duties it is assumed that they would forestall imports of wines, tea and tobacco, or withdraw spirits from bond, to such an extent as greatly to reduce the yield of the increased duties. For many years it was accepted that the resolutions of the Committee of Ways and Means were sufficient authority at law to enforce the payment of the taxes. Yet it depended all the time only on usage or custom. In 1912 Thomas Gibson Bowles—well known in his day both as a great economist and a great stickler for the constitutional proprieties—challenged in the Law Courts this provisional collection of new imposts, so far as it related to income tax. The judgment of Mr. Justice Parker was that as the statute of William and Mary, generally known as the Bill of Rights, remained unrepealed, there could be no taxation except under the provisions of an Act of Parliament; and accordingly he decided that a resolution of the House of Commons could give no authority to anyone to collect income tax until the tax had been imposed by an Act of Parliament. The Bank of England, which had deducted £52 10s. income tax on a dividend of £900 12s. 6d. interest on Government stock, had therefore to refund to Gibson Bowles the sum they had illegally retained.

Two remarkable traits of the British character, constitutional and political, are illustrated by this incident. The first is the extent to which the affairs of the country are controlled by compromises and understandings. When the House of Lords threw out Lloyd George’s Budget in 1909, and, as a consequence, no Finance Act at all was passed that year, it was feared not only that the finances of the country would be plunged into inextricable confusion, but that the ordinary machinery of Government would be brought to a standstill for want of revenue to keep it going. Neither of these gloomy anticipations were realized. By force of habit, and that innate respect for law and authority which is so characteristic of the British community, vast sums were paid in that year by the taxpayers on the mere faith of the resolutions of Committee of Ways and Means. The second trait is the personal sacrifice which strong political partisans are willing to endure in order to make things awkward for the Party in office to which they are opposed. Gibson Bowles confessed at the time that he bought £65,500 of Irish Land Stock specially to test the authority of the resolutions of Committee of Ways and Means. “Since I bought the stock,” said he, “it has depreciated nearly £3,000. But that I don’t mind.” And he had ultimately to repay the income tax that was returned to him.

The resources and power of Parliament were, of course, equal to getting over the difficulty raised by Gibson Bowles. The Chancellor of the Exchequer got passed the Provisional Collection of Taxes Act, which gives statutory effect to the resolutions in Committee of Ways and Means pending the passing of the Finance Act. Each resolution has had since then the following addendum: “And it is declared that it is expedient in the public interest that this resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.”

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The functions of the second committee for the transaction of financial business, that is the Committee of Supply, are entirely different from those of the Committee of Ways and Means. It considers the estimates of expenditure presented by the Ministers at the head of the various spending Departments. The first day the House of Commons resolves itself into Committee of Supply in a new Parliament the Chairman of Committees is appointed. He is an official almost as important, if much less conspicuous, than the Speaker, for he presides in Committee of Ways and Means when the Budget is opened and discussed, in Committee of Supply when the Estimates are under consideration, as well as in Committee on the clauses of Bills. Since 1858 he takes the chair as Deputy-Speaker in the absence of the Speaker. The office is held, like the Speakership, until the dissolution of Parliament, and carries a salary of £2,500 per annum (half that of the Speaker); but, unlike the Speakership, there is no official residence and no pension, though it is customary to reward him, after some years of service, with a peerage. The informality with which the Chairman is selected is in striking contrast to the ceremonial associated with the installation of the Speaker. The appointment rests, like the Speakership, with the House itself, but whereas the election to the Chair is regarded as non-political—the proposer and seconder never being Ministers or ex-Ministers—and is permanent, subject only to formal reappointment at the beginning of each new Parliament, the office of Chairman is admittedly political or Party in its character, being filled on the nomination of the Leader of the House of Commons, and terminating with the downfall or resignation of the Government. Directly the order “Supply” is read out for the first time by the Clerk, after the assembling of the new Parliament, the Speaker leaves the Chair, and the Leader of the House says: “I move that Mr. —— do take the Chair.” The motion is endorsed by a cheer from the Ministerial benches, and the Member nominated takes the Chair accordingly—not the Speaker’s Chair, but the place at the Table usually occupied by the Clerk, who leaves the Chamber when the House goes into Committee. The Chairman has no distinctive costume. He usually wears evening dress. There is also a Deputy-Chairman, appointed likewise by the Government at the commencement of a new Parliament, who in the absence of the Chairman presides in Committee, and acts also, when necessary, as Deputy-Speaker. He has a salary of £1,000 a year. Moreover, for the relief of the Chairman and Deputy-Chairman the Speaker nominates a panel of five Members, men of experience selected from all Parties, to act as temporary Chairmen of Committees.

In what a puzzled state of mind the stranger unacquainted with parliamentary procedure must be who is present in the gallery of the House of Commons for the first time on a night that the House is in Committee of Supply! He cranes his neck as far over the high barrier in front of him as those sharp-eyed, attendants in evening dress, with gilt-chains on their breasts, will permit him, and sees—what? Well, not much more than empty benches. He is surprised to observe that the Speaker’s Chair is empty. The Mace, too, is invisible, for that emblem lies on the Table only when the whole House is sitting and the Speaker is in the Chair. A gentleman in evening dress, or ordinary morning attire, sitting in the place of the Chief Clerk, with the Clerks-assistant by his side, is in control. Deserted and unpicturesque is the House on such nights, when the money of the taxpayers necessary to grease the wheels of that mammoth machine, the British Empire, and provide it with steam, is being voted by the “Faithful Commons.” The proceedings are often dull, but they are usually practical and businesslike.

The Chairman puts each vote to the Committee in the prescribed form. As an example: “The question is, that a sum not exceeding £—— be granted to his Majesty to defray the charge which will come in course of payment during the year ending the 31st day of March, for the salaries and expenses of the department of his Majesty’s Secretary of State for the Home Department.” On the Treasury Bench sits the Minister who represents the Department for which the vote under discussion is required. By his side is a small red oblong box, known as a “dispatch box,” filled with papers and memorandums of various kinds, to aid him in answering questions in relation to matters of administration for which he is responsible. But however efficient and industrious the Minister may be, it would be impossible for him to carry in his head, or even in his notes, all the details of the work of his Department. Seated close at hand, therefore, on a bench immediately behind the Speaker’s Chair are one or two of the permanent officials of his office—whom we have seen there previously when a Bill was in Committee—ready to supply him with any information he may lack. A Member rises and calls attention to some subject new or unexpected, though relating, of course, to the vote under discussion. Left to himself the Minister probably would be unable to make an adequate reply. But he slips behind the Speaker’s Chair, and, after a brief chat with his official advisers, returns to the Treasury Bench competent to tell the Member politely that he does not know what he is talking about.

It is these questions relating to small things, but of personal concern, rather than matters of policy, abstract or general, that contribute the element of entertainment—or, as some people would say, absurdity—to proceedings in Committee of Supply. Notwithstanding the changes which are being continuously made in the personnel of the Legislature by death, by resignation, and the ill-fortune of General Elections, there are always in the House a number of Members who delight to burrow into the three ponderous quarto volumes—each with its hundreds of pages crammed with figures—issued every year, containing the Estimates for the Army, Navy and Civil Service respectively; and passing by items of expenditure millions in amount, call attention, in Committee of Supply, to insignificant, but none the less interesting, demands on the public purse. The votes for the Civil Service afford the most opportunities for the display of this sort of futile industry in the interest of economy. For instance, when the Chairman informs the Committee in the usual form that a sum not exceeding £17,062 be granted to his Majesty for the maintenance and repair of the palaces in the personal occupation of his Majesty, a Member may rise and ask the First Commissioner of Works, to whose department this vote belongs, why it is the ancient office of rat-catcher to the Royal palaces is not abolished. The abolition of the office would mean a saving of only £18 a year to the State, £8 being paid to the rat-catcher of Buckingham Palace, and £10 to the rat-catcher of Windsor Palace, but I have seen this question debated for hours with the greatest interest, not to say excitement, by Radical Members when a Unionist Government was in office.

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“This House,” one of the Standing Orders declares, “will receive no petition for any sum relating to the public service, or proceed upon any motion for a grant or charge upon the public revenue, whether payable out of the Consolidated Fund or out of money to be provided by Parliament, unless recommended from the Crown.” In other words, the House of Commons can vote money only on the motion of a responsible Minister, in which, of course, is involved the sanction of the Cabinet. It follows, therefore, that unofficial Members are precluded from proposing the increase of any of the Estimates in Committee of Supply. This restriction not only provides a check to extravagance—though, perhaps, a small one—but, what is more important, makes impossible the spending of public money in the way of local expenditure in the constituencies which might be regarded as a form of political bribery. But if a Member cannot move to increase a vote, he may propose to reduce it. A motion to reduce a vote by a nominal sum is frequently moved in Committee of Supply; and it is done for the purpose of giving an additional emphasis to a complaint against the Minister—whose salary is covered by the vote—on account of some matter of departmental administration. Accordingly, Committee of Supply affords to the representatives of the people opportunities for calling attention to abuses and demanding the redress of grievances. In olden times, when executive authority was vested in the King, and Ministers appointed by him were responsible to him alone, the representatives of the people in Parliament insisted upon the righting of public wrongs before they granted the subsidy the King demanded, and now that executive and administrative authority is centred in the Ministry, all complaints and remonstrances are addressed to them in Committee of Supply.

Possibly the anticipation of criticism in Committee of Supply exercises a wholesome check on the actions of the Government, and tends to maintain honest and pure administration and expenditure by the Departments. If the motion for the reduction of the vote is pressed to a division, as it frequently is, when Members are dissatisfied with the explanation of the Minister, it is almost invariably rejected, being opposed by the supporters of the Government. The political policy of the Government is expressed as much in financial business as in legislation, in Estimates as in Bills. It follows that if a motion for the reduction of a vote or the reduction of the salary of a Minister were earned, it would mean the Committee’s disapproval of the policy for which the money is required, or imply discontent with the administration of the Minister; and as the responsibility of the Government is collective, what would ensue would be, not the downfall of the Minister specially attacked, but, if the matter in dispute was of real moment, the resignation of the Cabinet.

Yet it is by no means an uncommon thing for the Government to incur obligations involving the expenditure of public money without having first obtained the authority of Parliament. Is it that the House of Commons may always be relied on by the Government to give parliamentary recognition to accomplished facts? Or is it that the Government take care never to do anything in that way without making sure of the subsequent approval of their followers? In June 1920 it was announced the Army Council had decided to reclothe in the old scarlet the Army that was in khaki during the World War, at an estimated cost of £3,000,000. Protests against this unnecessary waste of public money, as it was called, was raised in Parliament and in the Press. The Chancellor of the Exchequer (Austen Chamberlain) explained that the change of uniform had not only been approved by the Government, but that steps had actually been taken to carry it into effect. “But suppose the House does not sanction the expenditure when it comes before us in Committee of Supply?” a Member asked. “In that case,” said the Chancellor of the Exchequer, “it would be for the successors of the present Government to decide the action to be taken.” In plain language, the Government would resign if the vote were rejected.

It used to be the custom to take Supply intermittently during the session. In 1895 new Standing Orders were adopted on the motion of Arthur Balfour, then Leader of the House, by which twenty days are allotted for the consideration of the Estimates, with three additional days at the option of the Government, if they can spare the time. When the debate on the King’s Speech has concluded, it is customary to put down Supply as the first “Order of the Day” on every Thursday. The votes to be taken on each of the allotted days are arranged by the Whips for the convenience of Members. What happens is that the Opposition, or any other section of the House, tell the Whips that they desire to discuss some particular matter, and the vote on which it can be raised is put down. This regular progress of Supply is intended to afford weekly opportunities throughout the session for the discussion of questions of public policy. But it happens at the end of every session that vast sums of public money are voted by the House without examination because no time was available to discuss them within the allotted days. At ten o’clock on the last but one of the allotted days in Committee of Supply the Chairman proceeds to put without discussion all the remaining Estimates, and at the same hour on the following night in the House the reports of the Estimates are disposed of in a similarly silent and summary fashion.

It must not be supposed, however, that the check of the House on departmental expenditure is thereby weakened to any great extent. Just as Estimates, in their original framing, are regulated by policy, and are big or little according to the political and social schemes of the Government, so, too, criticism and attack by the Opposition in Committee of Supply are mainly directed against policy and administration rather than against expenditure. It may be, indeed, that the aim of the Opposition is to have more money spent in particular cases.