IOR/L/AG/7

In 1900 the Royal (Welby) commission on Indian Expenditure recommended that, instead of the cost of the India Office being met wholly from Indian revenues, a grant-in-aid of £50,000 a year should be made from the UK Exchequer. Three measures were adopted to produce an indirect contribution of that sum:

(a) the British government grant towards the military cost of Aden was increased from £72,000 to £100,000 a year

(b) India's contribution of £12,500 a year towards the cost of consulates in China was waived

(c) India's contribution of £10,000 a year to the cost of the Zanzibar-Mauritius cable was waived.

The overall sum was reduced to £40,000 a year in 1913, when the cable subsidy terminated.

This position continued until 1919, when the British Government decided to adopt the recommendation in the Report of the Committee appointed to consider the Home Administration of Indian Affairs in relation to the scheme of Indian constitutional reforms (Cmd 207 of 1919). The Committee reached the general conclusion that the salary of the Secretary of State for India, like that of other Ministers, should be met from United Kingdom revenues, and that charges incidental to the political and administrative duties of the Secretary of State, acting as a Minister, should be met from the same source, while the cost of agency business conducted by the India Office on behalf of the Indian authorities should continue to be borne by India.

The statutory authority necessary to give effect to those recommendations was Section 30 of the Government of India Act 1919, which provided that the salary of the Secretary of State should in future be met from monies provided by Parliament, and enable any part of the expenses of the India Office to be so met. As the result of further consideration during the passage of the Bill through Parliament, the Act also provided that the salary of the Parliamentary Under Secretary of State should be met from the same monies.

Provision in a Parliamentary Vote for which the India Office was responsibility was first made in 1920-21 under the Vote entitled "India Office", in Class II of Civil Estimates (see IOR/V/7/255). From 1920/21 to 1936/37, the basis of the contribution towards expenses was a fixed annual amount for a period of years, subject to minor adjustments in each year. From 1933 awards an annual grant of £1.5 million should be paid from the Vote as a contribution towards military expenditure which was being met from Indian Revenues.

The Government of India Act, 1935 and the Government of Burma Act, 1935 came into force on 1 April 1937. Section 280 of the Government of India Act provided that the salary of the Secretary of State and the expenses of his Department, including the salaries and remuneration of his staff, should to be paid out of monies provided by Parliament, but the Indian Revenues should repay to the Exchequer so much of the expenses of the India Office as were attributable to the functions performed by it on behalf of the Government of India. Section 141 of the The Government of Burma Act contained similar provisions for the Burma Office.

The salaries applicable to each department and appointment in the India Office were analysed and divided proportionately to the work performed for each Government. The overall proportion arrived at was also used for showing the cost of common services (postage, telephones, stationery, lighting and heating etc).

During the Second World war some of the expenditure which would normally have been met from the Parliamentary Vote was provided by Votes of Credit, the regular method of finance being resumes in 1946/7.