The First Lordship and the Junior
Lordships are purely political offices. The office
of First Lord is honorary and is usually held by
the Prime Minister. To the junior lordships are
appointed those who are to act as party " whips "
in Parliament. The office of Parliamentary Secre-
tary is also wholly political : to that is appointed
the member of Parliament who is to act as Chief
Whip. First and Junior Lords have nothing to do
with the administrative work of the office, except
that they are useful to sign documents. It is the
Chancellor of the! Exchequer who is the executive
head of the department, with the Financial Secretary
as his assistant in the work, both in Parliament and
in the office. The Exchequer of which he is called
Chancellor, as will be seen, has now no real
existence. It is as head of the Treasury, which is
the central financial department, that he is in
substance the Minister of Finance.

The Treasury is a co-ordinating department in
the organisation of the civil service. It is in com-
munication with every other government office, and
almost all its work consists of considering applica-
tions from other departments. For this purpose
it is organised in six divisions, over each of which
presides a principal clerk who is a functionary of



PRELIMINARIES 15

standing and importance. Above the principal
clerks the hierarchy of permanent officials culmi-
nates in the Permanent Secretary, an office not
infrequently held jointly by two. Each of the six
divisions deals with a special department or group of
departments of the civil service. Under its principal
clerk each is in constant communication, personal
and otherwise, with its group, and learns to under-
stand the ways and needs of its charge, to rejoice
in its joys, to sympathise with its sorrows, and to
act as a financial guide, philosopher, and friend. In
addition to this regular organisation of principal
clerks and their groups, the Treasury keeps a flying
squadron of financial advisers. It consists of two
civil servants called " Treasury Officers of Account."
Their business is to assist and advise the other
officers in the preparation of their accounts, as
experts on technical matters of account-keeping.

Thus the Treasury is in touch with every other
department ; but as the centre of financial adminis-
tration it keeps certain departments, the work of
which is principally financial, especially close under
its wing. Directly subordinate to the Treasury
are, in particular, the great Revenue offices.
They are two in number, one governed by
the Board of Commissioners of Inland Revenue,
and one by the Board of Commissioners of
Customs and Excise. The first lives in that fine
house which stands upon the site of the one-
time palace of the Dukes of Somerset on the
Embankment. Its work is to collect the direct
taxes, the taxes that are assessed upon the general
taxpayer and collected from him directly. Taxes
are mutable things : both their bases and their



16 NATIONAL FINANCE

rates may and do change from year to year, and
it is not within the scope of this book to give a
detailed account of their nature. But for clearness*
sake we may catalogue the principal direct taxes
collected by the Board of Inland Revenue. They
are the income-tax and its super-tax ; the estate,
probate and account, legacy, succession, and
corporation duties; stamp duties, land tax,
inhabited house duty, and duties on land values.
Existing taxes may be changed or abolished, or new
ones added, but whatever direct taxation has to be
collected, it is this Board that collects it. At the
head of the Department there is a Chairman, a
permanent civil servant of high standing, and often
one who has been transplanted to Somerset House
from the Treasury. To help him there is a Deputy
Chairman and several commissioners. Under these,
who are the Board, there are various sectional sub-
divisions, of which we need notice only a special
financial sub-division, the office of the Accountant
and Comptroller General under an officer bearing
that title.

The office of the Commissioners of Customs
and Excise is at the vast warren of the Custom
House in Lower Thames Street. A strong and
universal smell of tobacco bears witness there to
the nature of its work : it is to collect the indirect
taxes, which are the customs' duties levied on
goods brought into the country and excise duties
levied on goods produced within the country.
Until April i, 1909, the collection of excise duties
was in the hands of the Board of Inland Revenue.
Only since then have the Commissioners of Customs
been Commissioners of Excise also. The collectors



nf thp <



PRELIMINARIES 17



of the department still collect a very large amount
of revenue for the Board of Inland Revenue, more
than half the total amount which the Board of
Inland Revenue receives; but that is collected by
them as agents, as it were, and for convenience'
sake. The specific task for which the department
is responsible is the collection of indirect taxes.
Of them, as of direct taxes, we need give here no
detailed account. Whatever the customs and excise
duties may be, it is for this department to collect
them. But to give an idea of the nature of its
work, mention may be made of the articles at
present subject to customs' duty on import into
this country. In 1842 there were about 1200;
fortunately for our space, and owing to Peel's and
Gladstone's simplification of the list, there are now
less than twenty. The principal are spirits, wine,
and beer; tea, coffee, cocoa, and chicory; sugar,
and its substitutes, glucose and saccharine ; and,
by far the most productive, tobacco. These are
the most important, but duties are also levied on
dried fruit and motor spirit and a few other minor
commodities. Under our fiscal systems articles
liable to customs' duties when imported are liable
also to excise duties when manufactured here : so
the articles mentioned above, with patent medicine
labels and playing cards thrown in, are the chief
subjects of excise duty also, with beer and spirits
as their triumphant chiefs as a source of revenue.
The department collects also the excise license
duties imposed on various traders, such as brewers
and retailers of spirits, a big affair, and a club duty
and a railway passenger duty, very small ones.
Besides these it has a variety of miscellaneous

c



i8 NATIONAL FINANCE

tasks to perform which have been left to it at
various times because of its widespread net of local
officers. Of these the local administration of the
Old Age Pensions Act is the most laborious ; but
such activities are not strictly connected with the
special function of the department in the financial
organism, which is that of a collector of revenue.
The organisation of the office is similar to that
of the Board of Inland Revenue. There is a
permanent civil servant of high standing at its
head as Chairman, and part of the domestic
organisation is a financial department under an
Accountant and Comptroller-General. Another
part of its organisation is a Statistical Office,
which records and prepares for publication the
statistics of exports and imports, shipping, and so
on. It has an important financial function to per-
form in the preparation of estimates of revenue.

It is to the Treasury that the two great
revenue-collecting departments report. They are
responsible to it and subject to its authority. 1
They have no ministers or parliamentary repre-
sentatives of their own : the Chancellor of the
Exchequer and the Financial Secretary of the
Treasury, and on minor matters always the latter,
speak for them in the House of Commons. In the
same position are several other and smaller depart-
ments, whose work is much concerned with the
collection of revenue or other financial affairs. A
revenue collector and something more besides is
the office of the Commissioners ot Woods, Forests,
and Land Revenues, which has a modern building
to itself in Whitehall. It manages the lands of the
1 Customs Consolidation Act, 1876 (39 & 40 Viet. C. 36), i.



PRELIMINARIES 19

Crown, which are now treated, not as the Crown's
private property, but as the lands of the state.
It collects the rents, provides for upkeep and
repairs and so on, and pays in as revenue the profit-
balance, amounting to about half a million a year. So
the office represents the state as landlord. There
are three commissioners, of whom the first as a rule
is the President of the Board of Agriculture, a
member of Parliament and a Minister. The other
two commissioners are paid and permanent civil
servants.

There is another great revenue-collecting office,
the Post Office, making four in all; but that is
not under the Treasury. Next in the list of the
Treasury's connection we come to an office with
high and independent functions to perform in
the financial organism, which is nevertheless in
specially close touch with the central financial
department. It is the Exchequer and Audit
Department, presided over by the Comptroller
and Auditor General. With its functions, which
are the control of Exchequer issues and the audit
of public accounts, we shall be much concerned
hereafter. It is enough here to mention that the
organisation of the office is a simple one, with a
Deputy who is the chief assistant of the head of
the office, and a staff of expert and experienced
clerks and examiners. The department has intimate
relations with the Treasury, whose ally it is in
the supervision of expenditure. But its head is
wholly independent. He is not subordinate to the
Chancellor of the Exchequer: he is an officer of
the House of Commons and answerable to that
alone.



20 NATIONAL FINANCE

The Royal Mint is another of the Treasury's
immediate dependents in the financial organism.
It is the national coin-factory. In its sombre and
ancient quarters by the Tower of London it coins
gold and silver and copper to meet our needs for
cash, under the immediate control of Treasury
Chambers. The Chancellor of the Exchequer is
its Master, and its figure-head. In everyday life
it is under the control of his principal Deputy
Master on Tower Hill, and others at the branch
mints at Sydney, Melbourne, Perth, and Ottawa.

An office of great importance in the financial
scheme which is within the Treasury's immediate
sphere of influence is the National Debt Office,
which is the office of the National Debt Commis-
sioners. It does not manage the National Debt ;
that is the work of the Bank of England. Its
function is to carry on the business of buying and
selling Government stocks for Sinking Funds and
for the various Government departments, such as
the Post Office, which have funds to invest. So it
is the Treasury's representative in the City, and it
is in the City that it has its quarters, in old Jewry,
next door to the Bank, where the Bank has pro-
vided it with premises which are up to the City's
standard of magnificence. The Commissioners
exist only in name. The office in practice is
directed by a Comptroller General, who is a per-
manent civil servant. Last in the list of the
/Treasury's special charges may be mentioned the
/ Office of Works and the Stationery Office. They
are under the Treasury's direct control, but they
have no special or peculiar functions to perform in
he financial organism, beyond spending money




PRELIMINARIES 21

like every other Government office, and so they
need not delay us.

We will pass on to the great spenders, the pipes
through which the public money runs back into
use after it has been pumped out of use through
the Revenue departments. They are the War
Office and the Admiralty, and here we emerge
from the region of the Treasury's suzerainty. The
new and expensive cupolas of the War Office in
Whitehall Gardens and the tall red ranges of the
Admiralty on the Horse Guards' Parade owe no
allegiance to Treasury Chambers at their feet.
We need not burden ourselves with a detailed
account of the elaborate organisation of these
great emptiers of the nation's purse. One circum-
stance only needs emphasis; that each has within
it a special financial organisation, more or less
independent of its executive organisation. The
War Office contains within it a financial depart-
ment called the Department of the Finance Member
of the Army Council. That finance member is the
Financial Secretary of the War Office, who is a
politician and a member of the Ministry. Under
him the permanent head of his department is the
Assistant Financial Secretary, a civil servant who
presides over the labours of three Directors, of
Contracts, Army Accounts, and Financial Services,
and many Principals, Accountants, Paymasters, and
Clerks, all engaged on financial business. The
Admiralty has also a parliamentary Financial
Secretary, with a Permanent Assistant Secretary
for Finance Duties. The accounting work of the
office is under a permanent official who bears the
title of Accountant General.



22 NATIONAL FINANCE

Finally and to complete this sketch of the
groups of officials who carry on the nation's
financial business, there must be mentioned an
office which, little heard of by the public, dis-
charges nevertheless functions of the first impor-
tance ; it is the Pay Office ; in full, the office of His
Majesty's Paymaster General.

Neither the great spending departments, the
Admiralty and the War Office, nor the small ones,
the Civil Service departments (with an important
exception to be mentioned) are makers of their
own payments. Payments are made for them by
the Pay Office. Over it presides a high dignitary,
the Paymaster General, but he is a roi faineant.
A political and unpaid officer, he has fulfilled all
the duties which he ever does fulfil when he has
signed an authority for an assistant to act for him.
The Assistant Paymaster General, the real head of
the office, like the Deputy Master of the Mint and
the Comptroller of the National Debt Office, is
under the direct control of the Treasury.

Such are the men by whom the financial affairs
of the state are conducted. They fall into three
groups : the collectors, the spenders, and the
Treasury (with its auxiliary the Exchequer and
Audit Department and its subsidiary the Pay Office)
which watches, advises, checks, and co-ordinates the
whole. At the root of the system of organisation
a certain parallelism may be seen, not designed,
but the result of a slow evolution adapting the
machinery to meet its needs. It is a parallelism
between executive control and specialised financial
control. Parallel with the executive departments
is the financial control of the Treasury. Within




PRELIMINARIES 23

each great department, again, which has financial
functions to perform, whether getting or spend-
ing, parallel with the executive staff there is the
financial staff and the accountants' department.
That illustrates what may be described as the first
principle of good financial administration, that all
executive officers who have financial duties to
perform, and above all the spenders, need an inde-
pendent officer to watch them whose business it is
to enforce economy. It may not be obvious that it
is so in theory ; our system is a living witness of
its great desirability in practice.

The executive officer who is not a mere sluggard,
the man who has work to do and wants to do it,
must always be thinking of how to widen the
sphere of his influence and activities, how to get as
much as possible to do, and how to get it done
most completely and quickly. It is asking too
much of human nature to expect him to put
economy first, when that might narrow his sphere
of influence, take the polish off his products, or
cost him time and trouble. But economy is a
necessity, however tedious and however un-
popular. It must be enforced at every stage,
because extravagance in one department must
ultimately prejudice its own work or that of some
other, and extravagance in all departments must
reduce the total amount of work which the state
can do. If the work of enforcing economy is to be
done with efficiency, human nature being what it
is, it cannot be left to those whose power and
reputation depend upon spending; it must be
given to somebody else to do, whose whole work
it will be and whose power and reputation will



24 NATIONAL FINANCE

depend upon his efficiency in economising. Hence
the need for a division of functions and for an
independence as great as possible in the position
of the economiser. In an ideal administrative
system every executive department would have its
financial side, dependent only upon the head of the
office, armed with full powers to examine, advise,
and remonstrate, and empowered to communicate
through its sectional chief with the departmental
chief. We have that for the civil service as a whole
in the Treasury. We have it for the Admiralty,
War Office, and Revenue Offices, in different
degrees which will need more particular attention
hereafter, in their special financial branches. In
other offices we lack any such check, but other offices
are of less financial importance. The Treasury can
do the work of financial critic well enough for all
but the great spending departments. In their vast,
complex, and growing organisations, the most
effective agent for economy must be one domestic,
ever-present, and well-versed in the internal affairs
of the office. In the case of the Admiralt}' and
War Office, the independent financial side within
the office is the best and only guarantee of a rigid
economy in details, and it is in details that money
is wasted. Rather is it, perhaps, a guarantee
that the supreme head of the department has at
any rate the opportunity of enforcing economy in
details, because unless, of course, the Minister is
an economist at heart his departmental watchman
waketh but in vain.

To maintain and increase the independence of
those independent yet domestic financial sections
should be the care of the good administrator.




PRELIMINARIES 25

Complete independence, it may be admitted, they
cannot have. The work of the offices has to get
itself done, and it would be demoralised were the
chief financial officer of the department to have a
power of absolute veto. He must be subordinate
to the parliamentary head of the office ; but it is
enough if he be that. He should be subordinate to
no one else therein. His staff, moreover, should
be in direct contact with the executive staff, helping
with its financial knowledge, advising, admonishing,
and carrying high questions of economy forward
to the head of the office through the financial head.
It is only thus that it can be of much real use.
As a body of mere accountants and recorders the
value of its work is less, because it is done after
the event, when the money is spent or the nation
is committed to spending it. To get the full
benefit of a financial staff it should be in a direct,
active, and constant touch with the executive,
locking stable doors while the contents are still in
the stalls. The importance of that will become
more clear when we come to consider the prepara-
tion of estimates. Here we need only observe that
the work of administration always has two aspects ;
the aspect of efficiency and the aspect of economy.
It is impossible, even if it were desirable, to get
anybody steadily to contemplate both at once; so
that, in a perfect system, at the elbow of every
executive officer there should be an equal and
opposite economising officer. Our existing system
is at least a rudimentary approximation to that ideal.