upon the cost of the output. As an illustration of the use to which such figures could be put, he mentioned that, when the output of a certain shop or section of a shop was noted the following morning, it was possible for the superintendent or the works manager immediately to put his finger upon the fact that perhaps the flow of raw materials had failed, or that owing to congestion of the arsenal railways the output could not be got rid of, and the inefficiency could be checked. Such hitches in the daily work of a factory could only be avoided and minimised by a most complete system of statistical control; and that had been instituted at Woolwich.

The point to which I should like to direct the special attention of the taxpayer is that it was only after the introduction of business men of high standing on the organisation of the Ministry of Munitions, and the placing of Woolwich under the control of a business man, that a statistical record of output was introduced. How many other Departments of the Government are still without a complete system of statistical control, such as has been found indispensable in the conduct of our great mercantile undertakings? And how much public money has been and is being wasted through the neglect of the Government to institute such systems of statistical control in all the great spending Departments years ago?

The Auditor-General's report on the Army Appropriation Account for 1914-15, which covers the first eight months of the war, affords many instances of loss and waste of public funds in connexion with army administration. The report describes as 'an unnecessary outlay of public funds' the grant of extra duty pay, up to March 1915, to retired officers employed on recruiting duties only. It also directs attention to the amount (1007.) of the outfit allowance originally made to officers, 'with the result that the grant became in many cases a source of profit.' The accounts of the regimental paymasters revealed the fact that the number of men discharged with less than three months' service on account of medical unfitness was disproportionately high. Each of the men received a gratuity on discharge; and, when to such expenditure is added the cost of pay and maintenance while in the army, it is evident that a very large loss to the public was involved. About 9,000,000l. was

expended in 1914-15 in providing hutments for the troops. The provision of hutments in the Home Commands was carried out mainly by firms who acted as agents for the War Office and by competitive contract. The remuneration of the principal firm under the first arrangement was fixed at a commission of 5 per cent. on the total cost for labour and material, plus a commission of 1 per cent. to cover establishment charges. In other cases the rate of commission was reduced to 4 per cent. Expenditure largely exceeded anticipations and involved a very large liability for commission. Contracts for several camps were made on varying dates, but the huts were to be ready for occupation about Nov. 15, 1914. Certain of the huts were occupied in that month, but in consequence of the leaky state of the roofs and bad conditions generally the troops were removed into billets, involving heavy additional expenditure; and it was not until March 1915 that the huts were again occupied. As a result, billeting on an extensive scale continued throughout the winter, the total expenditure under this head down to March 31, 1915, being 6,250,000l. The report deals with certain unsatisfactory features with regard to the purchase and transport of horses. The instructions issued to the purchasing officers indicated that 70l. was considered a reasonable sum for an officer's charger. 'It was noticed in the accounts of one Command that in three cases 2007. per horse was paid, in addition to about twenty cases varying from 110l. to 1607.' In the Irish Command, owing to the purchase of unsuitable horses which had to be re-sold, there was a loss of 52,6937.

As the Retrenchment Committee has not been permitted to review our War Expenditure, all the nation can rely upon at the moment is departmental control. This has been proved to be wholly inadequate. The Treasury is just now, perhaps, the most overworked department of the Government; and it is unreasonable to expect a Ministry, which has been designed to control an expenditure of about 200,000,000l., to deal adequately with an outlay at the rate of 1,825,000,000l. per annum. There is urgent need for the creation of a powerful Department of War Finance which should be independent of Cabinet control, and should be entrusted with all problems arising in connexion with the raising and

expenditure of war funds. It should consist of a small number of expert business men of high standing and wide financial experience, who should be appointed by Parliament in the same manner as the Speaker; and it should be endowed with unlimited powers to investigate and report to Parliament upon every feature of our war expenditure which deserves consideration.

One matter which specially calls for the attention of such a body is that of the war pensions and the separation allowances. In November 1914 the Treasury issued a White Paper which contained an actuarial estimate worked out on various bases. Series II, which provided for 2,000,000 men, a duration of war of one year only, 10 per cent. of deaths and 12 per cent. of disablements, total and partial, showed a total amount to be disbursed, during the currency of the Pensions and Allowances, of 178,000,000l. At the beginning of February 1915 it was announced that an amended scheme on a much more generous scale had been adopted and would come into operation on March 1, 1915. My own personal conviction is that we shall be doing very well if the total capital cost does not exceed 500,000,000l. The pensions paid by the Federal Government of the United States afford a glaring example of the abuses which may arise if due care is not exercised from the outset as to the conditions under which pensions are granted.

Our greatest hope of retrenchment on a large scale lies in the reduction of consumption by private individuals. On the basis of the figures furnished above, the average cost of living, etc., works out at 40l. per head. We have permitted ourselves to become so dependent upon external supplies of foodstuffs that it is difficult to believe that, with the growing shortage of shipping, our expenditure upon food can be cut down materially, unless the entire population voluntarily reduces its consumption of food. The freight on wheat coming from New York to Liverpool was 6s. per ton before the war; at the end of December 1915 it was 70s. per ton, an increase of 1060 per cent. With regard to drink there should be a substantial saving. The restrictions which have been placed upon certain areas have resulted in a decrease of consumption; and, when these restrictions have been

universally applied and made more rigorous, further savings may be looked for. In spite of the economies which have already been effected by well-to-do people, it is doubtful whether the expenditure upon dress will be much curtailed. There has been a very large increase in the cost of cotton and woollen manufactures and leather goods; but, here again, if our people are really in earnest, material savings can be effected. There does not appear to be much prospect of the expenditure on house-rent being reduced. The cost of coal, gas and electricity has advanced, so that, unless the most rigorous economy is practised by all, any savings from reduced consumption will probably be offset by the increased charges.

With regard to miscellaneous expenditure, any large reduction of the outlay upon education would be dangerous. Motoring is still being indulged in to an unduly large extent. The pressure of public opinion is having an appreciable effect in this matter, and considerable further savings may be anticipated under this heading. Railway travelling for pleasure has been considerably reduced, but some further economies should be practicable in this direction. The cost of distribution is likely to increase rather than decline. The advance in the cost of labour, coal, rubber and petroleum for commercial motors, as well as the advance in crosschannel and other freights, renders it highly improbable that any savings can be effected. The cost of professional services-Barristers, Lawyers, Accountants, Stockbrokers, etc.-has been reduced in a most drastic fashion. There has been a general reduction in domestic service, but further economies may still be looked for here.

On the whole, it is quite clear that, if the British people are prepared to make the necessary sacrifices, they can cut down their outlay to a very considerable extent; and it should be a matter of comparative ease for them to reduce their expenditure by at least 15 per cent. all round without endangering efficiency and the public health. On a total civilian expenditure of 1,943,000,000Z., this would mean a saving of nearly 292,000,000l. per annum. If at the same time the Government could effect an all-round saving of 15 per cent. on our war expenditure, the deficiency for the year to March 31, 1917, should not exceed an amount between 250,000,000/.

and 300,000,000l., a sum which, in view of our accumulated wealth, should not create excessive financial embarrassment. But there must be no misapprehension as to the urgency of the need for public and private retrenchment.

The least satisfactory feature of our financial position is the enormous excess of imports over exports. In the five years 1909-13 the excess of imports over exports averaged 140,000,000l. per annum. The returns for the year to Dec. 31, 1915, show imports of commodities to the value of 853,756,000l., and exports to the value of 483,444,000l., leaving an excess of imports to the value of 370,312,000l. The question of the adjustment of our trade balance has therefore become one the first importance. In ordinary times the excess of imports over exports is met by the interest earned on our foreign investments, the earnings of our banking and insurance houses, and the profits of our carrying trade. The credits from these sources are not only sufficient for this purpose in normal years, but they have provided a fund of about 200,000,000l. per annum for investment abroad. The ordinary investment of capital abroad has been practically suspended during the war, but its place has been fully taken by the loans which we have been called upon to make to the Overseas Dominions and to our Allies. After making all adjustments, it may be estimated that the year 1915 closed with a deficit of about 450,000,000l. so far as our foreign trade was concerned.

There are five methods by which such a deficiency can be met: (1) by reducing imports, (2) by increasing exports, (3) by the export of gold, (4) by the raising of loans abroad, and (5) by the sale abroad of our foreign and colonial investments. There are certain indications which point to the conclusion that all these methods, with the exception of reduction of imports, have been brought into operation for the purpose of adjusting our trade balance. But as to the future, it is difficult to see how the volume of our exports can be greatly augmented in view of the demands of the Army, unless there is an enormous speeding-up of production by the workers who remain. The export of gold has already assumed large dimensions; and our stock of the precious metal is not