In 1873, before the Select Committee on Civil Services Expenditure, Sir William H. Stephenson, Chairman of the Commissioners of Inland Revenue, illustrated the working of this system with the statement that in 1873-74, the salaries paid in the Inland Revenue Department would aggregate $4,808,580. An additional $683,160 would be required for pensions; and a further $234,175 would be required on account of the abolition terms given to men who had been reorganized out of the Inland Revenue Department. Thus the “non-effective,” or non-revenue producing, charges of the department were equivalent to 19 per cent. of the effective, or revenue producing, charges.[271]
In 1888 the Royal Commission appointed to inquire into the Civil Establishments reported that the burden on the State for pensions was equivalent to 12 per cent. to 15 per cent. of the working salaries, and that the payment of the abolition terms raised the percentage in question to 20 per cent. of the working salaries. Sir Reginald E. Welby, Secretary to the Treasury, stated before the Commission, that even the past liberal expenditure on account of pro rata pensions with abolition terms, had not enabled the State to get rid of “inefficient and incapable men.” The Chairman of the Royal Commission spoke of the abolition terms as amounting “almost to a scandal.” Sir R. E. Welby and Lord Lingen, a former Secretary to the Treasury, contrasted the State’s system of pensions with the system of the London and North Western Railway. The Railway’s pension system was maintained out of a fund raised by a 2.5 per cent. reduction from the salaries of the employees, and a 2.5 per cent. contribution from the treasury of the railway.
Sir R. E. Welby, Secretary to the Treasury, and other witnesses, spoke of the abolition terms often acting as a premium on inefficiency. Mr. Robert Giffen, the eminent statistician and political economist, who also was an officer of the Board of Trade, said: “When a man is reorganized out of the service, as a rule he gets so many years’ service added [to his actual service], that is to say, at 50 years, if he has served 30 years, he may have 7 or 10 years’ service added, and thus get two-thirds of his salary as a pension; and he begins to get his pension at once, instead of waiting until he is 60 years of age. A man who thus gets a pension at 50 years, really gets more than double what he would get if he waited until 60 years of age. The present value of $100 a year, beginning at once at the age of 50 years, is a good deal more than double the present value of $100 a year to be paid to a man when he reaches 60 years. The difference in favor of the man who is reorganized out of the service, as against the man who remains until he is 60 years of age, is simply overwhelming to my mind.”
Sir Algernon E. West, Chairman of the Inland Revenue Commissioners, illustrated the working of the practice of getting rid of inefficient men by reorganizing an office, by citing the following instance of “successful” reorganization. Sir Algernon West had retired 39 upper division clerks, permanently reducing the number of the staff by 39. He had thus effected a saving in salaries of $70,000 a year. But he had incurred an annual expenditure of $44,160 on account of pensions, and an annual expenditure of $10,000 on account of abolition terms. Therefore his net saving was not $70,000 but only $15,840. Yet Sir Algernon West denominated his reorganization successful.
In the course of this reorganization, Sir Algernon West had increased the hours of work from 6 hours to 7 hours. The reorganization, also, had necessitated certain promotions. Sir Algernon had made it a condition of promotion, that the man promoted should consent to work 7 hours a day. Men not promoted he gave $150 a year “as a personal allowance in consideration of the extra hour they were called to serve.” One man, aged 34 years, declined to work more than 6 hours on any terms, saying that the Government had made a contract with him for six hours’ work a day. In order to get rid of this man, Sir Algernon West gave him a pension on the basis of 10 years’ service. Legally, of course, the man had no claim to any pension or abolition allowance whatever, for he was in reality dismissed for refusing to perform the duties demanded of him.[272]
FOOTNOTES:
[250] Third Report from the Select Committee on Civil Services Expenditure, 1873; q. 4,283 to 4,288.
[251] Third Report from the Select Committee on Civil Services Expenditure, 1873; q. 4,270 to 4,282, 4,146 and following, and 4,198 to 4,210.
[252] Third Report from the Select Committee on Civil Services Expenditure, 1873; q. 4,937.