Recent reports of the Comptroller and Auditor-General call attention to grave defects in the military system; but the reports are seldom noticed in Parliament, and are never discussed seriously. The same remark applies to the reports made to the House of Commons by the Public Accounts Committee. In its report issued last July, that Committee strongly condemns the Admiralty for spending in the previous year no less a sum than 160,000l. on the refit of vessels about to be sold as of no further use in the navy. It adds that this amount had not increased the value of the ships, because they are sold for breaking-up, and fetch little more than the price of old iron. 'Your Committee cannot too strongly condemn so extravagant a policy.' It is also pointed out that the actual expenditure on the navy in 1903-4 was 97,9501. beyond the budget and a supplementary estimate. Of this sum, 20,000l. were used in the extension of Chatham Dockyard—the total cost being 4,500,000l.—without being referred to the Accountant-General, and without the sanction of the Treasury. Your Committee are of opinion that the Admiralty were mistaken, and that they had no power to exceed the 50,000l. taken for the year. The Treasury and the Comptroller and Auditor-General concur in this view.'

Similar opinions have been repeatedly placed on record in former years, respecting both the Admiralty and the War Office; yet the condemned practice goes on. Viscount Esher, Admiral Sir John Fisher, and Sir G. Sydenham Clarke, sitting in 1904 as a committee to enquire into the financial methods of the War Office, wrote: 'They do not induce to economy in peace; they directly promote waste in war; and they tend, at all times, to combine the maximum of friction with the minimum of efficiency.' The newly-appointed Army Council has made important changes and devised new methods, the results of which must be awaited. One evil that needs abatement is the presenting of Supplementary Estimates. They amounted in the last financial year to 4,610,000l. against 655,1897. in 1894-5. Unforeseen contingencies may compel an occasional and limited resort to the practice; but it has come to be the rule, not the exception. After Parliament has approved of what professes to be a definitive budget for the year, it is asked at a later period to sanction further outlay of a rapidly-increasing amount. Allied to this is

the objectionable practice of asking for large votes of credit. Formerly these were limited both in extent and in time. The invariable usage was for ministers to ask, and for Parliament to grant, a sum of two or three or four millions, to provide for a month's extraordinary outlay, or sometimes for two months. Recently, sums of ten and even twenty millions have been so voted for periods extending over four or five months.

The control of the House of Commons over the national purse has been still further impaired by the growing practice of making expenditure a permanent charge on the Consolidated Fund, and by an increasing proportion of permanent revenue being levied under specific Acts of Parliament. The habit of withdrawing from annual discussion and revision about one half of the public revenue and expenditure is a striking instance of the manner in which parliamentary control has been weakened. It may be urged, in reply, that the annual Appropriation Act provides adequate security, inasmuch as every money grant is assigned to a specific purpose. The theory is that money voted for a particular object must not be diverted, and that no other sums than those actually voted shall be applied to any purpose whatever. But the practice is not in accordance with this theory. The Public Accounts and Charges Act, 1891, gives the Treasury power to authorise the application of receipts by the various departments, under the name of Appropriations-in-aid. These amounted in 1894-5 to 7,000,000l., and in 1904-5 to 13,000,000l. Moreover, a clause in the Appropriation Act enables the Treasury to authorise, in the case of the army and navy, the transference to other purposes of money voted for particular objects. The sums thus diverted in 1902-3, as shown by the Appropriation Act, 1904, exceeded 2,500,000l. It is true that the sanction of Parliament has to be obtained subsequently; but the condoning resolution is never submitted until twelve or more months have elapsed, and then usually at the close of a session, when many members have left, and those who remain are impatient to get away. This amounts to a virtual repeal of the Appropriation Act, by varying its provisions and permitting the substitution of a Treasury allocation, which may or may not be justifiable.

Standing Orders of the House of Commons are con

stantly being altered and expanded, as if with the design to lessen control over the public expenditure. One of the most recent of such orders limits discussion in supply to twenty-three days, after which any votes remaining are dealt with automatically. The complaint made was that time was wasted by quibbling criticism of petty details; but an effectual check could have been devised for this. A remedy was proposed in July 1903 by the Committee on National Expenditure, on a suggestion by Mr Gibson Bowles, that an Estimates Committee should be annually appointed to examine the four classes of money votes, and to report prior to the supply stage of procedure. It also recommended that an opportunity should be afforded every year for discussing the valuable reports of the Committee on Public Accounts, which are at present merely printed and left to fate or chance. Both these recommendations, though favourably received and constantly pressed, remain merely recommendations.

In the United States Congress, of which cabinet ministers cannot be members, official heads of the spending departments have to appear before the respective committees of the Senate and the House of Representatives, to present documentary evidence in support of appropriations, and to be subjected to rigid examination by way of proof. The only methods of restoring a financial equilibrium are a large reduction of expenditure, or the imposing of further taxation. The latter plan is practically impossible. Severe retrenchment by the spending departments, and rigid economy in every branch of the public service, with a stern resolve to incur no more financial obligations for a time, are imperatively demanded.

In addition to the national expenditure, that for local purposes amounted for 1902-3, the date of the last available return for the whole of the United Kingdom, to 152,291,3147. The figures of a decade previously are appended for comparison (see page 8). The grants-in-aid, being part of the estate-duty, and certain customs and excise allocations of beer and spirit duties and licences, are included in the Exchequer accounts in the present article, and must not therefore be again brought into the general total of the taxpayer's and ratepayer's burden. Local expenditure now exceeds national; a generation ago the former was less than half the latter.

The grave question of imperial and local indebtedness demands notice. During the past ten years the Sinking Fund has been suspended; new loans have been contracted; and the unfunded or floating debt has been enormously increased. Terminable annuities, Treasury bills, Exchequer bonds, temporary advances from the Bank of England, with other expedients, are resorted to. The items on March 31, 1905, were as follows:

This is almost identical with the amount in 1866796,913,1257.-since which time considerable reductions have been made by the Sinking Fund; and it is an increase of 130,000,000l. in ten years. The most serious matter, apart from the suspension of the Sinking Fund, is the unfunded debt, now amounting to 71,500,000l., or quadruple the amount of a decade ago. The funded debt has risen in the same period from 586,015,9197. to 635,682,8631., in addition to the 30,000,000l. of war stock and bonds, issued on the understanding that the Transvaal should contribute a like amount. Moreover, there were capital liabilities outstanding on March 31, 1905, for 41,000,000l. on account of barracks, naval and military works, telegraphs, the Uganda railway, and other obligations incurred under recent Acts of Parliament. There are also contingent or nominal liabilities in con

nexion with the Courts of Justice, unclaimed dividends, savings-banks, and other matters, amounting to 50,000,000l. more, and loans guaranteed by the British Government, including local loans, stock, and bonds, and Irish land purchase, which together come to 214,000,000l. Adding these items, and deducting assets of 32,974,9437., chiefly Suez Canal shares, and 7,500,000l. of cash in the Treasury, we find that the aggregate national liability exceeds 1,000,000,000l. Such figures give cause for reflection.

The effect on the national credit is seen in the fall in the price of Consols, from 114 in 1896, to 89 at the present time. During the interval they have been as low as 85, at which price bankers and other large holders now write them down as assets. Instead of the nominal two and a half per cent. to which the interest on Consols was reduced, the Treasury now has to pay a little over three per cent. for Treasury bills; and, in the event of a great and sudden disturbance of the money market, as in a European war, money would have to be raised on more stringent terms. In like manner, excessive colonial and local borrowing has done much to lessen credit and to restrict monetary facilities. Bankers do not view with favour the enormous indebtedness contracted on the security of rates. It is not surprising that financial authorities have sounded a note of warning, and that trustees and investors who have to consider the question of security have lost much of their former confidence in corporation stocks. In many places, municipal debts are twice or thrice the assessable value. They are fourfold in Bolton, Bradford, Leeds, Nottingham, Oldham, and Stockport; fivefold in Birmingham, Halifax, Manchester, and Rochdale; and six and a half times in Huddersfield. The time has surely arrived for calling a halt in the matter of loans, whether for national or local purposes. Nothing is easier than to borrow; but the day of reckoning is sure to arrive. The last published return of local indebtedness is for 1902-3, when the outstanding loans were as follows:→