LEAVE FIRST READING. (Hansard, 11 February 1870)

§ THE CHANCELLOR OF THE EXCHEQUER

Sir, the House is aware that the Government have now for many years received, the deposits of the savings banks, and have paid interest to the savings banks for their deposits, coming under obligations to restore those deposits in solido when called upon to do so, being allowed to invest those deposits in certain securities in order to enable them to pay the amount of interest. The rate of interest the Government now pay to the savings banks is. £3 5s. per cent, and the object of the measure which I ask leave to introduce is to reduce that rate of interest by 5s., so that it shall henceforth be £3 per cent. The reasons for that are extremely simple, and, I think, extremely cogent. The Government paying this £3 5s. percent interest to the savings bank is very much in the position a banker would occupy who should receive money on deposit and pay to the depositor a rate of interest equal to what he obtained for the discounting of bills. Such a banker would obviously be a loser in the business, because, in addition to having to pay for his whole establishment, he would lose the interest on the amount he was obliged to keep in his till to meet demands, and would have no margin to cover any deficiency on the realization of his engagements. That is honestly the case of the Government. The interest the Government receives does not protect it from having loss by these transactions. The National Debt Commissioners must keep a considerable balance to answer demands, and it is of the nature of the business they carry on with the savings banks that the money comes in when securities are high and they sell out when securities are low. Therefore it is evident there is an element of loss in these transactions. The only thing to counterbalance it is the rate of interest they receive, and that rate of 190 interest is not sufficient to counterbalance it. Now, I think it is a perfectly obvious principle that, though it be the undoubted duty of the Government to take care of these funds and allow a reasonable interest on them, it is not right that the general taxpayer should be heavily burdened in order to make good the deficiency actually occasioned. It is quite enough if we take care of the deposits, that we should give absolute security to restore them in full and pay whatever interest we agree upon, without putting our hands into the public purse and spending large sums of money in order to make up the deficiency. There is an element of socialism in this that ought to be excluded. That is no imaginary case, as I may show by reference to a Parliamentary Paper which gives an account of what was due at the closing of the accounts to the savings banks in November, 1868. It appears that on the 20th of November, 1868, the savings banks were entitled to receive from the Commissioners of the National Debt Office £37,177,000; and the securities held by the Commissioners, according to the estimated price on that day had they been realized, would have produced £34,399,000, so that there was a deficiency of £2,778,000. But that by no means exhausts the whole deficiency, for there had been large losses or deficiencies before that. I think the case very simple, but very clear. Though bound to give the savings banks as good interest as we fairly can, we ought not to give such interest as would involve loss to the taxpayer; and, therefore, I hope the House will allow me to introduce this Bill. There are plenty of precedents for the course I now propose. From 1817 to 1828 the savings banks were receiving £4 11s. 3d. per cent from the Government. From 1828 to 1844 the Government paid the reduced sum of £3 16s. 0½d. percent. And from 1844 up to the present time Government has only paid at the rate of £3 5s. per cent. I now propose to reduce the interest to £3 per cent. The right hon. Gentleman concluded by moving for leave to bring in a Bill to amend the Law relating to Savings Banks.