May 11 PLEASE YOUR LORDSHIPS. 
1.—We have examined the questions referred to us by Your 
Lordships’ Minute of 8rd February, 1927. We have held 14 
meetings and have heard evidence from one or more witnesses 
from the undermentioned Departments :— 
Treasury. 
Admiralty. 
War Office. 
Air Ministry. 
India Office. 
General Post Office. 
Office of Works. 
Stationery Office. 
Government Actuary’s Department. 
We have obtained from the above-named Departments and 
also from the Ministries of Transport and Pensions, the Boards 
of Inland Revenue and Customs and Excise, and the Royal 
Mint such further detailed information as we have required; 
and we now beg to submit the following report. 
2.—By our reference we were directed 
(1) To consider the principles on which charges for 
services (other than ordinary allied services) rendered inter- 
departmentally, where it is desirable that they should be 
made, should be assessed and to make recommendations ; 
(2) to consider and make recommendations also as to the 
principles on which charges for similar services rendered 
extra-departmentally should’ be calculated. 
In this reference a distinction is drawn between services 
tendered ‘* inter-departmentally ’ and extra-depart- 
mentally * respectively, and it is necessary at the outset 
to consider how these terms are to be defined. 
On the one hand we are obviously concerned with transactions 
between two Departments financed in the ordinary way from 
the Exchequer, and at the sole cost of the Exchequer, by annual 
votes of Parliament to which the expenditure of the Department 
is directly charged. In such cases it makes no difference to 
the burden on the taxpayer how the charge, assuming it 1s to 
be incurred in any case, is distributed. Once it has been settled 
that the Department primarily concerned with a particular task 
cannot undertake it so economically as a second Department, 
which therefore is chosen to perform it as agent, it is clear that 
no financial transaction between the Departments can alter the 
total cost. For a given charge the net result to the Budget 
is the same whether the Department which receives the service 
repays the agent Department the whole or part or none of 
the cost involved. 
In sharp contrast to transactions of this type must be 
set the caees where a Government Devartment renders services 
A2ROD