the new form of account, the control by account can, in a large measure, replace control by regulation. The total expenditure will form a protective barrier and, within such limits and subject to such control as may be deemed advisable, subordinates can be allowed initiative and freedom of action.

Important as the question of economy is, it is subordinate to those high considerations of training and education. It requires no great intelligence to seek authority for some given action within the pages of some book of regulations. It calls for an effort of thought and imagination to have to make a decision on the facts in question and to be responsible for the results. The former produces a legal, the latter a creative type. There can be no question which, in an emergency, is more valuable to the State. Economy, however, in its higher and better sense, will also be served by greater executive freedom and less regulation. If economy is merely held to mean spending so much and no more, this can be equally effected by either method. If, on the other hand, economy is held to mean good value for money spent, the responsible expert who understands will surely give better value than the distant official who but imperfectly understands and merely regulates. In time of peace, control by regulation working through a system of cash account will, to outward appearances, work perfectly well. It is only when emergency arises and control must go by the board that the evils will be apparent, and they will be apparent in the most serious form, that of a human element, unused and untrained to all sense of financial value.

Failure to appreciate this truth was brought home very forcibly to the nation during the Great War and no doubt contributed largely to the appointment in 1918 of a Select Committee on National Expenditure which, under the chairmanship of Sir Herbert Samuel, examined thoroughly the whole matter of our public economy. The form of our public accounts received special examination and was dealt with exclusively in the seventh report of the Committee. This report is the genesis of recent reforms which have now culminated in the present controversy.

The Committee received evidence at length from most of the high Treasury and departmental officials on the subject of the form of parliamentary estimates and the resulting accounts. Special enquiry was directed to ascertain whether the form of estimate and account was drawn so as to show the total cost of various services and thus afford a method of control and scrutiny analogous to that appertaining in business affairs. In other words the Committee was at pains to discover whether the form of account had any bearing upon the economics of administration.

Sir John (now Lord) Bradbury, then Secretary to the Treasury, said :

In criticising the scheme of appropriation of Parliamentary grants [in other words the national accounts] it must be borne in mind that the control of expenditure, in the sense of securing that the various services are efficiently administered at a reasonable cost, was no part of the object which the framers of the system had in view.

Sir Charles Harris, Financial Secretary to the War Office, stated:The accounts, as accounts, are valueless for any purpose but to demonstrate true appropriation (i.e., adherence to estimate) and honesty in disbursement. It fails to provide any true control of expenditure. Sir Sigmund Dannreuther, a Treasury official, at the moment of the enquiry Financial Secretary to the Ministry of Munitions, said:

In general, my view is I do not think estimates as furnished in the past to Parliament are worth the paper they are written on from the point of view of Parliamentary control.

Yet the estimates, and the accounts consequent upon them, still continue to be rendered in this useless form.

The Committee reported that estimates should in future be presented on an income and expenditure basis, that is, in proper accounting form as already described; that the accounts of all departments should include the cost of services rendered by other departments; that the accounts should be grouped to show the objects rather than the subjects of expenditure; and that the account for each department should be a comprehensive account and not merely a partial account supplemented by footnotes and appendices. There also appeared as an appendix to the report a pro forma set of accounts, which had been prepared by Colonel Grimwood, a professional accountant, and was handed in by Sir Charles Harris.

The Committee, realising that a reform of such magnitude and trenching upon so many old customs and vested interests should be gradually introduced, recommended that a trial should be first made in the army on the model accounts submitted. This was done, but even within the army itself the reform had to be gradually introduced. I was myself a member of the committee entrusted with the early stages of the work. We began the new accounts in a number of detached units, both combatant and administrative, merely to test the mechanism before attempting

to impose a general and comprehensive account. The early venture succeeded, the scope was enlarged, first to embrace a whole command, then the whole army at home, and finally the whole army at home and abroad.

These model accounts were prepared on the lines already discussed, so as to show complete costs by groups of executive responsibility. They may be called organic accounts, or accounts interpreting realities as distinct from accounts showing merely the cash spent on certain classes of commodities. They have also been described as accounts to show expenditure by objects instead of by subjects. They set out cost in the following main groups :Head I. Maintenance of Standing Army.

Head II. Working Expenses of Hospitals, Depôts, Factories, and Cost of Educational Establishments.

Head III. War Office Staff and Commands.

Head IV. Capital Accounts.

Head V. Half Pay, Retired Pay and Pensions.

The account of each separate unit of command or entity of responsibility was so dissected as to show the cost in a number of headings roughly corresponding to the old cash votes of pay, clothing, food, etc., etc. The effect of this was that items of costtotal cost, not merely cash outlay-were made known to each responsible administrator instead of, as previously, being known in terms of cash only to the War Office directors. The possession of facts is essential to the exercise of any local control. Previously the War Office alone knew, and it alone could control. It did so by means of rigid, all-pervading regulations. Under the new system the commanding officer got the necessary information. He could see incipient tendencies and variations from month to month; he was thus enabled to apply the corrective that his commonsense and faculty for contrivance suggested, not what some distant regulation-maker prescribed.

But the utility of these accounts did not begin and end in the unit of primary responsibility. Units of cost-true cost as a business knows it, not merely estimated cost-were for the first time available. It was known that an infantryman cost £182 a year, an artilleryman £226; that it cost £453 gross to educate a cadet at Woolwich, and £392 at Sandhurst; that 17s. 10d. was the average cost per day for each hospital patient; that the average cost of the electricity generated was 4.7d. per unit.

The costs of each establishment were, of course, obtainable separately.

Thus equipped and illumined, control assumed a totally different aspect. It was no longer a question of the sanctity of regulation it was a question of results. There was a continuous purpose running all through the organization-a striving to better one's record and a means to justify the outcome. If the Army Council wanted to increase or to diminish, they knew in actual fact, not by estimate, the financial effect involved. If a change in personnel, great or small, was contemplated, it could be tested on a small scale and its financial reaction ascertained before general adoption. If an inventive commander had an idea, the account enabled him to prove its money-worth by a limited trial, and if successful the expense of this extension would be justified. This was a live and convincing method as contrasted with that which it replaced, where, without the mirror of an account, an idea had to be put on paper and to be entrusted to the ordeal of minutes and endless abstract argument.

Apart altogether from the dominating mental and psychological benefit, this new system has secured practical reforms. Since War Office telegrams were charged against the spending departments their cost has been reduced by half. The officials may say it is no saving because the Post Office staffs are not reduced in consequence. This argument is a foretaste of the future socialistic State, where there will be no competition and all will live sleepily on a dead level of mediocrity. To take another example: temporary barracks in Iraq, estimated, on a cash basis, at £30,000, actually cost £299,682, when all stores used and departmental services were charged. In another case, a sudden rise in the cost of gas in a certain barrack revealed leaks of long-standing, which were mended. Again, by costing horse transport it was discovered that after giving credit at commercial rates for work done, the nett cost-what in a business would be the loss amounted in 1922-23 to £99,534, and in 1923-24 to £73,466.

All these investigations have naturally upset the even tenour of the old régime. They have caused a "rout-out" in many quarters, and a complete change in mental outlook and procedure. They have much perturbed those old-established offices, where matters of detail are decided leisurely on paper only after a full

review of precedents and protracted enquiry. To those who were accustomed so to work-and they were many-this new system of allowing limited latitude to subordinates, and of trusting and judging by the account was a dangerous heresy. Apart from any personal repercussion it was unorthodox, new-fangled, with its own technique and its revolutionary tendencies. It was therefore opposed from the start.

It is difficult to say to what extent the opposition-amounting sometimes to obstruction-was the outcome of ignorance; how much the outcome of laxness; and how much was due to the natural instinct for self-preservation. They all did their share, and in my opinion mental laxness, inertia, the dislike of change, played the chief part. Ever since their introduction these new proposals have been beset by difficulties and met by a spirit of passive resistance and non-co-operation, the power of which those unfamiliar with the official type of mind can never appreciate. By subtle propaganda every artifice has been used to wreck the reform. The Ordnance Department made wholly unreasonable difficulties about pricing vouchers, or in simple language sending bills for the goods they supplied to other departments. The old system of cash votes was kept in existence concurrently with the new accounts, because of the reluctance to let go of control at the top and trust those lower down in the scale of command. The cost of the new work was widely proclaimed as waste, amounting, as it does, to £220,000, or about one-half per cent. of the total Army vote. The various branches, whose mission was to control by regulation, became increasingly inquisitorial, as if to emphasise their value and prolong their existence.

All this opposition and the problems it created came in the last resort for settlement to the Secretary of State who, torn between the rival factions, is much to be pitied. The majority of his councillors were soldiers of high standing. They had been brought up as outdoor men of action, and their natural inclination would be to regard accounts as the ruling classes regarded trade fifty years ago as an occupation for a class other than their own. Sir Laming Worthington-Evans, himself not unfamiliar with business ways, when forced to decide between the warring elements, would not unnaturally be perplexed. The path of reform was certainly the path of most resistance, and resistance in official circles is never a line to be lightly embarked upon. He