ROYAL COMMISSION UPON DECENTRALIZATION. 125
I hand in a tablet which shows the applications for
■additional grants that provincial Governments have
made during the last five years, including the current
financial year up to date. It omits two applications
which were recently made by Bombay and the Punjab,
and were refused solely on the ground that it was too
•early in the year to judge whether or not the anti-
cipated expenditure could probably be covered by the
•ordinary process of re-appropriation. In reality,
therefore, there have been only 18 requests for addi-
tional expenditure grants during the last five years ;
and all of these have been sanctioned by the Govern-
ment of India, though in several cases it was manifest
that the extra grants were not actually required. As
column 4 of the statement shows, eight of the applica-
tions were needless.
44865*. Is it desirable to relax further the control of
the Government of India over provincial budgets? —I
hope to have already shown that the control of the
Government of India over the provincial budgets is
neither unreasonable nor onerous ; and that its pres-
sure will be still further lightened by the arrangements
for discounting lapses which are now being introduced.
I have very carefully considered in what way the con-
trol might be still further relaxed, and I regret that I
-cannot put forward any practical proposition. The
only concrete suggestions which the Commission appear
to have received from Local Governments are :—
(а) that a Local Government should be invested
with larger powers of re-appropriation ;
(б) that it should be enabled to spend part of its
balances, up to a defined amount, without the
sanction of the Government of India ; and
(c) that longer time should be allowed for the
preparation and submission of the provincial
budget.
The first of these suggestions is not understood, as
Local Governments, already possess the unfettered
power of transferring allotments from one head of
expenditure (whether wholly provincial or divided) to
another. The second suggestion, in the form in which
it has been put forward by the Government of Madras,
simply amounts to this, that a Local Government
should have a reserve of expenditure for which it has
not budgeted, but which must be kept at its disposal
and may or may not be used. Now in the first place,
this is contrary to the accepted principles of the budget
system. The Government of India is not in the habit
of refusing to give a Local Government an extra grant
for inevitable expenditure which had not been fore-
seen. To provide, however, a standing reserve for
contingencies that may not arise is a direct incentive
to careless estimating, and probably also to extrava-
gance. In the second place, the suggestion is incom-
patible with the responsibility of the Imperial
■Government to provide the ways and means for the
whole administration of the country. A provincial
balance is not a separate fund locked up in a separate
provincial chest ; it is a part of the general balances on
which we operate daily, and which we have to econo-
mise to the best of our ability, just as any private
business firm economises in its till money or floating
cash. To give Local Governments throughout India
the facilities which this suggestion implies, would
mean a pro tanto increase of our cash balances without
any corresponding gain. The proposal has been for-
mulated in a somewhat different manner by the
■Government of Bengal, who suggest that they should
have power to increase their budgeted expenditure by
the amount that their actual revenue is in excess of
their budgeted revenue ; in other words, that they
should be at liberty to increase their expenditure pro-
vided their surplus is maintained at its budget figure.
There are not the same, objections to this as to the
Madras proposal; but in practice I doubt whether the
liberty which Bengal asks for would be found of much
value. It would be difficult to form any definite
assurance of an excess of revenue until a comparatively
late period in the year, when new schemes of expendi-
ture could not advantageously be undertaken. More-
over, an understanding of this sort is apt to lead to
incorrect estimating ; and finally, the Government of
India would be unlikely to make any difficulties in
allowing a Local Government to spend any windfall
which it obtains at a sufficiently early stage of the
financial year to be suitably utilized.
t Vide Appendix VIII.
The third of these suggestions is referred to in the
evidence which the Royal Commission took at Madras.
The proposal, as I take it, is that what is known as the
first edition of the budget should be dispensed with,
and that the Government of India should be satisfied
with the submission of the budget figures in the form
which is now laid before the Government of India in
the middle of February. This would give the Local
Government about three weeks longer than it has at
present for compiling its estimates. Having had four
years’ experience in compiling provincial estimates as
Financial Secretary to a Local Government, I cannot
agree that the present date for the submission of the
first edition of the budget figures is seriously incon-
venient. There is a considerable pressure of work on
the local Secretariat when the compiling is in hand ;
but I doubt if any advantage would be gained by
transferring that pressure from January to February ;
and I can certify from personal experience that it is
in no way comparable with the pressure in the Imperial
Secretariat, which would be enhanced by the acceptance
of this proposal. On the one hand, the provincial
Government, which now sends up its estimates with
the knowledge of what the actual figures have been
for the first eight months of the current year, would
not be likely to modify its proposals in any material
degree if it formulated them at the time when the
actual figures for nine months were known. On the
other hand, it is a great convenience for the Govern-
ment of India to work through the provincial budgets
and to refer back particular points about' which it is
doubtful, before the budgets of the big spending
departments (Public Works, Military, etc.) come into
the Secretariat for examination. If the departmental
budgets and the provincial budgets all arrived for the
first time in a mass at the beginning or middle of
February, I do not at present see how it would be
practicable to have the Financial Statement presented
to Council before the close of the financial year. The
proposal does not seem to me likely to afford any
appreciable measure of relief to Local Governments or
to lead to any decentralization. If it meant any reduc-
tion of work in the Government of India Secretariat,
I am sure we should all welcome it; but, as at present
advised, I am afraid that it would not make things
easier either for ourselves or for the provincial
Secretariats.
A proposal which has sometimes been discussed for
enhancing the liberty of disposal which Local Govern-
ments enjoy in regard to their budget allotments is
the following. The Local Government would report
its estimated expenditure in the gross, without any
details showing how the totals were arrived at. The
Government of India would pass the provision, with such
reductions as were considered necessary, and the Local
Government would then be free to distribute the total
in any manner it chose. The only care of the Govern-
ment of India would be to see that the estimate was a
probable one, and that it was within the limits of the
revenue assigned to the province. The Local Govern-
ment would be trusted not to budget for a revenue
which it knew it could not collect, or for expenditure
which was not administratively approved. This is
virtually the plan which was followed from 1872 to
1879, but was then abandoned. In the present
expansion of provincial finance, and so long as the
Government of India are responsible for the whole of
the public expenditure to the Secretary of State, I do
not think that a revival of the scheme is practicable.
It is impossible for a Local Government to frame a
correct estimate in the lump. It must be built up
from the detailed provisions, and we ought to be in a
position to see that these are reasonable. We must
incorporate the budgeted expenditure of the provinces
on the recognised administrative services in our annual
Financial Statement ; to show merely the gross outlay
on all the services entrusted to Local Governments
would not be a sufficient compliance with our duty to
the Secretary of State and, through him, to Parlia-
ment. From a statistical point of view, it would be a
retrograde measure ; and it would justly be resented
by all who study our Indian administration. If, how-
ever, this objection were met by the Local Govern-
ments providing us with the constituent figures of
their total expenditure by major heads, I hardly think
the plan with this modification would be found to
differ materially from our present practice. It is true
that we examine the major head figures in considerable
detail at present ; but, as I have shown above, we do
Mr. J. S.
' Meston.
6 Apr., 1908.
I hand in a tablet which shows the applications for
■additional grants that provincial Governments have
made during the last five years, including the current
financial year up to date. It omits two applications
which were recently made by Bombay and the Punjab,
and were refused solely on the ground that it was too
•early in the year to judge whether or not the anti-
cipated expenditure could probably be covered by the
•ordinary process of re-appropriation. In reality,
therefore, there have been only 18 requests for addi-
tional expenditure grants during the last five years ;
and all of these have been sanctioned by the Govern-
ment of India, though in several cases it was manifest
that the extra grants were not actually required. As
column 4 of the statement shows, eight of the applica-
tions were needless.
44865*. Is it desirable to relax further the control of
the Government of India over provincial budgets? —I
hope to have already shown that the control of the
Government of India over the provincial budgets is
neither unreasonable nor onerous ; and that its pres-
sure will be still further lightened by the arrangements
for discounting lapses which are now being introduced.
I have very carefully considered in what way the con-
trol might be still further relaxed, and I regret that I
-cannot put forward any practical proposition. The
only concrete suggestions which the Commission appear
to have received from Local Governments are :—
(а) that a Local Government should be invested
with larger powers of re-appropriation ;
(б) that it should be enabled to spend part of its
balances, up to a defined amount, without the
sanction of the Government of India ; and
(c) that longer time should be allowed for the
preparation and submission of the provincial
budget.
The first of these suggestions is not understood, as
Local Governments, already possess the unfettered
power of transferring allotments from one head of
expenditure (whether wholly provincial or divided) to
another. The second suggestion, in the form in which
it has been put forward by the Government of Madras,
simply amounts to this, that a Local Government
should have a reserve of expenditure for which it has
not budgeted, but which must be kept at its disposal
and may or may not be used. Now in the first place,
this is contrary to the accepted principles of the budget
system. The Government of India is not in the habit
of refusing to give a Local Government an extra grant
for inevitable expenditure which had not been fore-
seen. To provide, however, a standing reserve for
contingencies that may not arise is a direct incentive
to careless estimating, and probably also to extrava-
gance. In the second place, the suggestion is incom-
patible with the responsibility of the Imperial
■Government to provide the ways and means for the
whole administration of the country. A provincial
balance is not a separate fund locked up in a separate
provincial chest ; it is a part of the general balances on
which we operate daily, and which we have to econo-
mise to the best of our ability, just as any private
business firm economises in its till money or floating
cash. To give Local Governments throughout India
the facilities which this suggestion implies, would
mean a pro tanto increase of our cash balances without
any corresponding gain. The proposal has been for-
mulated in a somewhat different manner by the
■Government of Bengal, who suggest that they should
have power to increase their budgeted expenditure by
the amount that their actual revenue is in excess of
their budgeted revenue ; in other words, that they
should be at liberty to increase their expenditure pro-
vided their surplus is maintained at its budget figure.
There are not the same, objections to this as to the
Madras proposal; but in practice I doubt whether the
liberty which Bengal asks for would be found of much
value. It would be difficult to form any definite
assurance of an excess of revenue until a comparatively
late period in the year, when new schemes of expendi-
ture could not advantageously be undertaken. More-
over, an understanding of this sort is apt to lead to
incorrect estimating ; and finally, the Government of
India would be unlikely to make any difficulties in
allowing a Local Government to spend any windfall
which it obtains at a sufficiently early stage of the
financial year to be suitably utilized.
t Vide Appendix VIII.
The third of these suggestions is referred to in the
evidence which the Royal Commission took at Madras.
The proposal, as I take it, is that what is known as the
first edition of the budget should be dispensed with,
and that the Government of India should be satisfied
with the submission of the budget figures in the form
which is now laid before the Government of India in
the middle of February. This would give the Local
Government about three weeks longer than it has at
present for compiling its estimates. Having had four
years’ experience in compiling provincial estimates as
Financial Secretary to a Local Government, I cannot
agree that the present date for the submission of the
first edition of the budget figures is seriously incon-
venient. There is a considerable pressure of work on
the local Secretariat when the compiling is in hand ;
but I doubt if any advantage would be gained by
transferring that pressure from January to February ;
and I can certify from personal experience that it is
in no way comparable with the pressure in the Imperial
Secretariat, which would be enhanced by the acceptance
of this proposal. On the one hand, the provincial
Government, which now sends up its estimates with
the knowledge of what the actual figures have been
for the first eight months of the current year, would
not be likely to modify its proposals in any material
degree if it formulated them at the time when the
actual figures for nine months were known. On the
other hand, it is a great convenience for the Govern-
ment of India to work through the provincial budgets
and to refer back particular points about' which it is
doubtful, before the budgets of the big spending
departments (Public Works, Military, etc.) come into
the Secretariat for examination. If the departmental
budgets and the provincial budgets all arrived for the
first time in a mass at the beginning or middle of
February, I do not at present see how it would be
practicable to have the Financial Statement presented
to Council before the close of the financial year. The
proposal does not seem to me likely to afford any
appreciable measure of relief to Local Governments or
to lead to any decentralization. If it meant any reduc-
tion of work in the Government of India Secretariat,
I am sure we should all welcome it; but, as at present
advised, I am afraid that it would not make things
easier either for ourselves or for the provincial
Secretariats.
A proposal which has sometimes been discussed for
enhancing the liberty of disposal which Local Govern-
ments enjoy in regard to their budget allotments is
the following. The Local Government would report
its estimated expenditure in the gross, without any
details showing how the totals were arrived at. The
Government of India would pass the provision, with such
reductions as were considered necessary, and the Local
Government would then be free to distribute the total
in any manner it chose. The only care of the Govern-
ment of India would be to see that the estimate was a
probable one, and that it was within the limits of the
revenue assigned to the province. The Local Govern-
ment would be trusted not to budget for a revenue
which it knew it could not collect, or for expenditure
which was not administratively approved. This is
virtually the plan which was followed from 1872 to
1879, but was then abandoned. In the present
expansion of provincial finance, and so long as the
Government of India are responsible for the whole of
the public expenditure to the Secretary of State, I do
not think that a revival of the scheme is practicable.
It is impossible for a Local Government to frame a
correct estimate in the lump. It must be built up
from the detailed provisions, and we ought to be in a
position to see that these are reasonable. We must
incorporate the budgeted expenditure of the provinces
on the recognised administrative services in our annual
Financial Statement ; to show merely the gross outlay
on all the services entrusted to Local Governments
would not be a sufficient compliance with our duty to
the Secretary of State and, through him, to Parlia-
ment. From a statistical point of view, it would be a
retrograde measure ; and it would justly be resented
by all who study our Indian administration. If, how-
ever, this objection were met by the Local Govern-
ments providing us with the constituent figures of
their total expenditure by major heads, I hardly think
the plan with this modification would be found to
differ materially from our present practice. It is true
that we examine the major head figures in considerable
detail at present ; but, as I have shown above, we do
Mr. J. S.
' Meston.
6 Apr., 1908.