§ (1) Section two of the Savings Bank Act, 1920, shall have effect as though for the words "two pounds fifteen shillings per centum per annum and not exceeding two pounds seventeen shillings and sixpence" there were substituted the words "three pounds five shillings per centum per annum and not exceeding three pounds seven shillings and sixpence": and Section five of the National Debt (Supplemental) Act. 1888, shall have effect as though for the words "two pounds ton shillings" there were substituted the words "three pounds."
§ (2) Section seven of the Post Office Savings Bank Act, 1861, shall have effect as though for the words "two pounds ten shillings." there were substituted the words "three pounds."—[Mr. Pethick-Lawrence.]
§ Brought up, and read the First time.
§ Mr. PETHICK-LAWRENCEI beg to move "That the Clause be read a Second time."
9.0 p.m.
The effect of the Clause would be to raise the rate of interest in the country savings banks and in the Post Office Savings Bank from £2 10s. to £3 per cent. Owing to a technicality, it was not possible to move this Amendment in Committee, therefore, it has not been possible to discuss the question. It is notorious that the rates of interest paid by the Post Office in their savings bank are exceptionally low. It is a constant complaint up and down the country that the rate is below what can be got in other institutions, and for a long time there has been a great deal of legitimate grumbling. The rate paid to depositors in the joint stock banks is 3½ per cent. and in the Birmingham Municipal Bank the deposit rate is 3½ per cent. It is 2369 fixed at that amount and can be as much as 3½ per cent. by law at the present time. In the new Clause we are not proposing to raise the deposit rate for the trustee savings bank or the Post Office Savings Bank as high as the rate in the joint stock banks or the Birmingham Bank. We are only proposing to raise it half as far, that is, to make it 3 per cent. instead of 2½ per cent. The other verbiage in the Clause is because the amount that the Debt Commissioners pay to the banks is always in excess of what is paid to the depositors.
If we want to encourage thrift through the Post Office Savings Bank and the trustees savings banks it is very important that we should retain the goodwill of those who are likely to deposit their money. To do that, we must pay a rate of interest that seems reasonable. The rate at the present time is unreasonable. Two arguments may be brought against our proposal. The first argument is that the present deposit rate of 3½ per cent. in the joint stock banks is only a temporary rate, and depends upon the fact that the discount rate of the Bank of England is 5½ per cent., and that when that rate comes down again the deposit rate will not be 3½ per cent., but may fall even below the figure of 3 per cent. suggested in our proposal. I wish I felt as sure as those who take that view, that the Bank rate is going to fall in the immediate future. Unfortunately, owing to the American situation, the Bank rate went up in the early part of last month and so far from its falling, some people have been afraid that it was going to be raised still further. It may unhappily be a considerable time before it falls even a half per cent., let alone one per cent. Even if it were to fall by one per cent., I think the margin between the Bank Rate and the rate which would be paid to depositors in the Savings Banks would be quite sufficient to enable them to pay 3 per cent. interest. After all, the Birmingham Municipal Bank has paid 3½ per cent. from its inception, at any rate for a considerable time, and the general rate of interest seems, unfortunately, likely to remain high for a considerable time. If in the years to come the general rate of interest should be permanently reduced, it would be possible to alter the rate, which, after all, is I understand only permissive in any case.
2370 In the second place, the argument is used that it may be all very well in dealing with large depositors to pay substantial rates of interest, but that you are dealing here with very small contributors, in some cases only fractional amounts of £1, and that you cannot afford to pay the small people the same rate of interest which you pay to large depositors. The whole object of the Trustee Saving Bank movement and the Post Office is to encourage thrift on a small scale. The Birmingham Municipal Bank is willing to open, and has opened, deposits with sums of one penny, and everyone knows that minute deposits of that amount are not a paying proposition. It is recognised, however, in all sorts of businesses that you have to begin to encourage people to give small orders and make small deposits. They may be small, with a loss in the first case, yet by doing so you are able to build up a large custom which in the long run it pays you to carry on. Therefore, I do not think that argument holds good. The Birmingham Municipal Bank, which has paid 3½ per cent. and taken contributions beginning at one penny, has nevertheless succeeded in making all its enterprises pay, and pay very handsomely; and I see no reason why the Trustee Saving Banks and the Post Office should not also be able to pay the rate of 3 per cent. on their deposits which we propose by this new Clause.
§ Mr. GILLETTI beg to second the Motion.
The object we have in moving this Clause will really have the sympathetic interest of all hon. Members in all parts of the House, provided a case can be made out which will satisfy them. Everyone is exceedingly anxious that thrift, which is the main object of these savings banks, should be encouraged in every possible way. I should like to point out that our Amendment still leaves the margin the same; that is the margin between what is to be paid by the Bank of England for funds that are deposited there and the interest that is to be paid to depositors. Provided the Treasury leaves the first figure as it is at present, our Amendment will leave the margin the same; and they have exactly the same powers of altering the figure within the scope of the proposed new Clause. The question it seems to me is, at what rate of interest can you invest the money you 2371 are receiving. If you have a large enough margin between investments and the interest you are paying, surely the higher figure ought to be paid out. Our figures would have been justified as long ago as 1920, but when you compare the figures of to-day with 20 years ago, there would have been a strong case for opposing our Amendment. At that time Government stocks were only paying the investor 2½ per cent. Gilt-edged stocks, before the recent slump, were paying 4¾ per cent., and you can get short-term Government Bonds which pay between 5¼ per cent. and 5½ per cent. War Loan is paying at the moment almost on a 5 per cent. basis. If you ignore the depreciation of gilt-edged stocks in the last few days and take the previous figure, surely the margin that is allowed between a return of 4½ per cent. to 4¼ per cent. and the payment to these people of 3 per cent., ought to be quite appropriate.
There is another argument. The people who invest these small savings have often been the prey of men who have brought out companies like the Liberator Building Society and a number of other institutions, often called banks, which one after another have ended in failure. Some of the most thrifty people in this country have lost nearly everything. One of the reasons why they go to these other concerns is because the rate of interest has been so exceedingly high compared with the figure which they are offered here. I am not suggesting that we can compete with those figures, but when you have the rate of interest so exceedingly low you are almost tempting these people to look to these other investments instead of keeping their small savings in the security of these Trustee Saving Banks. There is one other point, rather more in the form of a question, because I have been unable to check it. Is it the fact that every year something like £1,000,000 goes from the Post Office into National funds? If I am right, I believe that £1,000,000 was received last year by the national income from the Post Office Savings Bank. I do not think we ought to receive any income at all from the Post Office Savings Bank; and I do not think the hon. Member can justify it. But that seems to me to be a further reason, and a good one, why this Clause should be accepted and, therefore, I hope 2372 he will give it the most sympathetic consideration he can.
Mr. SAMUELI will answer first the question as to the money paid by the Post Office into the Exchequer. It is true, I believe, that the Post Office does pay back to the Exchequer something in the nature of a surplus. But it must be remembered that for a large number of years the interest given by the Post Office to depositors was greater than the sum that the State earned, and that the State has lost a considerable amount of money in this way in the past. Two-and-a-half per cent. Consols at one time gave a yield of 2¼ per cent. or less to the State, but 2½ per cent. was paid to the depositor. If the Exchequer is getting back a little now it must be remembered that the State has paid considerable millions towards capital deficiencies in order to make good its obligations to the public. I do not know that I need trouble the House with a long explanation as to the reasons why we cannot accept the new Clause. We had a tussle over it upstairs.
Mr. SAMUELThen I will give my reason for not accepting the new Clause. It means an increase of interest from 2½ per cent. to 3 per cent. in the trustee banks and in the Post Office. This matter was thrashed out by the Montagu Committee in 1916, not when stocks were issued at 110 and yielding 2½ per cent. 20 years ago, but in the middle of the War, when we were paying 5, 5½ per cent. or 6 per cent. for our money. This is what the report of that Committee stated and I read it because it exactly answers the case made out for this new Clause. It was a Committee on War loans and the Small Investor, and dealt with the case of the small depositor. The Report stated:
We do not recommend any increase in the rate of interest allowed on ordinary Savings Bank deposits. … A moderate increase in the existing rate would result in imposing a heavy charge on the taxpayer in respect of the £250,000,000 of existing deposits without, so far as we can judge, attracting any appreciable amount of new money. Although 2½ per cent. might appear to be a low return, it must be remembered that institutions such as the savings banks cannot adjust their rates from time to time according to prevailing market conditions, but must adopt a rate 2373 which, taking one period with another, will preserve its financial stability. The experience of the past has shown that 2½ per cent. is fully as high a rate as the State can afford to pay under these conditions, and having regard to the fact that savings bank depositors as a class look to the State for the safety and the accessibility of their capital, much more than to the interest paid, we do not think that a case has been made out for increasing it.
§ That Report exactly meets the case of the Mover of this new Clause, and I should be boring the House if I elaborated my opposition in any way.
§ Question put, "That the Clause be read a Second time."
§ The House divided: Ayes, 78; Noes, 132.
2375| Division No. 278.] | AYES. | [9.21 p.m. |
| Adamson, W. M. (Staff., Cannock) | Hall, G. H. (Merthyr Tydvil) | Ritson, J. |
| Alexander, A. V. (Sheffield, Hillsbro') | Hardle, George D. | Saklatvala, Shapurji |
| Ammon, Charles George | Hayday, Arthur | Shaw, Rt. Hon. Thomas (Preston) |
| Baker, J. (Wolverhampton, Bilston) | Henderton, Rt. Hon. A. (Burnley) | Shield, G. W. |
| Batey, Joseph | Hudson, J. H. (Huddersfield). | Shiels, Dr. Drummond |
| Benn, Wedgwood | Jenkins, W. (Glamorgan, Neath) | Shinwell, E. |
| Bowerman, Rt. Hon. Charles, W. | Johnston, Thomas (Dundee) | Smillie, Robert |
| Broad, F. A. | Jones, T. I. Mardy (Pontypridd) | Smith, Rennie (Penistone) |
| Bromfield, William | Kelly, W. T. | Snowden, Rt. Hon. Philip |
| Bromley, J. | Kennedy, T. | Stamford, T. W. |
| Buxton, Rt. Hon. Noel | Lawrence, Susan | Stewart, J. (St. Rollox) |
| Charleton, H. C. | Lawson, John James | Sutton, J. E. |
| Clarke, A. B. | Lee, F. | Taylor, R. A. |
| Cluse, W. S. | Lee, Jennie (Lanark, N) | Tinker, John Joseph |
| Compton, Joseph | Lindley, F. W. | Trevelyan, Rt. Hon. Sir Charles |
| Connolly, M. | Lowth, T. | Viant, S. P. |
| Dennison, R. | MacLaren, Andrew | Watson, W. M. (Dunfermilne) |
| Duncan, C. | Maclean, Neil (Glasgow, Govan) | Welsh, J. C. |
| Dunnico, H. | Morrison, R. C. (Tottenham, N.) | Westwood, J. |
| Garro-Jones, Captain G. M. | Naylor, T. E. | Williams, David (Swansea, E.) |
| Gibbins, Joseph | Oliver, George Harold | Williams, Dr. J. H. (Llanelly) |
| Gillett. George M. | Palin, John Henry | Williams, T. (York, Don Valley) |
| Gosling, Harry | Paling, W. | Wilson, R. J. (Jarrow) |
| Graham, D. M. (Lanark, Hamilton) | Pethick-Lawrence, F. W. | Young, Robert (Lancaster, Newton) |
| Grenfell, D. R. (Glamorgan) | Potts, John S. | |
| Griffiths, T. (Monmouth, Pontypool) | Richardson, R. (Houghton-le-Spring) | TELLERS FOR THE AYES.— |
| Grundy, T. W. | Riley, Ben | Mr. Allen Parkinson and Mr. Whiteley. |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Graham, Fergus (Cumberland, N.) | Morrison, H. (Wilts, Salisbury) |
| Ainsworth, Lieut.-Col. Charles | Grant, Sir J. A. | Neville, Sir Reginald J. |
| Albery, Irving James | Greene, W. P. Crawford | Newman, Sir R. H. S. D. L. (Exeter) |
| Alexander, E. E. (Leyton) | Grenfell, Edward C. (City of London) | Nicholson, Col. Rt. Hon. W. G. (Ptrsf'ld.) |
| Applin, Colonel R. V. K. | Gretton, Colonel Rt. Hon. John | Nield, Rt. Hon. Sir Herbert |
| Ashley, Lt.-Col. Rt. Hon. Wilfrid W. | Gunston, Captain D. W. | Nuttall, Ellis |
| Balfour, George (Hampstead) | Hartington, Marquess of | Oakley, T. |
| Barclay-Harvey, C. M. | Haslam, Henry C. | Penny, Frederick George |
| Beamish, Rear-Admiral T. P. H. | Headlam, Lieut.-Colonel C. M. | Percy, Lord Eustace (Hastings) |
| Benn, Sir A. S. (Plymouth, Drake) | Henderson, Capt. R.R. (Oxf'd, Henley) | Porring, Sir William George |
| Bevan, S. J. | Henderson, Lieut.-Col. Sir Vivian | Peto, G. (Somerset, Frome) |
| Bourne, Captain Robert Croft | Heneage, Lieut.-Cot. Arthur P. | Pitcher, G. |
| Bowater, Col. Sir T. Vansittart | Hennessy, Major Sir G. R. J. | Price, Major C. W. M. |
| Brittain, Sir Harry | Hills, Major John Waller | Rome, Sir Walter |
| Brocklebank, C. E. I. | Hopkins, J. W. W. | Ramsden, E. |
| Brooke, Brigadier-General C. R. I. | Hudson, Capt. A. U. M. (Hackney, N.) | Remer, J. R. |
| Broun-Lindsay, Major H. | Hudson, R. S. (Cumberl'nd, Whiteh'n) | Richardson, Sir P. W. (Sur'y, Ch'ts'y) |
| Buckingham, Sir H. | Hume, Sir G. H. | Robinson, Sir T. (Lanes, Stratford) |
| Carver, Major W. H. | Iliffe, Sir Edward M. | Ruggles-Brise, Lieut.-Colonel E. A. |
| Cassels, J. D. | Jackson, Sir H. (Wandsworth, Cen'l) | Rye, F. G. |
| Chadwick. Sir Robert Burton | Jones, Sir G. W. H. (Stoke New'gton) | Samuel, A. M. (Surrey, Farnham) |
| Charteris, Brigadier-General J. | Joynson-Hicks, Rt. Hon. Sir William | Samuel, Samuel (W'dsworth, Putney) |
| Christie, J. A. | Kindersley, Major G. M. | Sandeman, N. Stewart |
| Colfox, Major Wm. Phillips | King, Commodore Henry Douglas | Sanders, Sir Robert A. |
| Cope, Major Sir William | Lamb, J. O. | Shaw, Lt.-Col. A. D. Mcl. (Renfrew, W.) |
| Courtauld, Major J. S. | Lister, Cunliffe-, Rt. Hon. Sir Philip | Shepperson, E. W. |
| Craig, Sir Ernest (Chester, Crewe) | Looker, Herbert William | Smith, Louis W. (Sheffield, Hallam) |
| Crookshank, Cpt. H. (Lindsey, Gainsbro) | Lougher, Sir Lewis | Smith, R. W. (Aberd'n & Kinc'dine, C.) |
| Davies, Sir Thomas (Cirencester) | MacAndrew, Major Charles Glen | Somerville, A. A. (Windsor) |
| Davies, Dr. Vernon | Macdonald, R. (Glasgow, Cathcart) | Southby, Commander A. R. J. |
| Edmondson, Major A. J. | McLean, Major A. | Stanley, Lord (Fylde) |
| Edwards, J. Hugh (Accrington) | MacRobert, Alexander M. | Stanley, Hon. O. F. G. (Westm'eland) |
| Ellis, R. G. | Marriott, Sir J. A. R. | Storry-Deans, R. |
| Erskine, Lord (Somerset, Weston-s.-M.) | Meller, R. J. | Streatfeild, Captain S. R. |
| Flelden, E. B. | Merriman. Sir F. Boyd | Sueter, Rear-Admiral Murray Fraser |
| Forestler-Walker, Sir L. | Meyer, Sir Frank | Sugden, Sir Wilfrid |
| Ganzonl, Sir John | Milne, J. S. Wardlaw- | Thompson, Luke (Sunderland) |
| Glyn, Major R. G. C. | Mitchell, S. (Lanark, Lanark) | Thomson, Sir Frederick |
| Gower, Sir Robert | Monsell, Eyres, Com. Rt. Hon. B. M. | Tinne, J. A. |
| Vaughan-Morgan, Sir Kenyon | White, Lieut.-Col. Sir G. Dairymple- | Woodcock, Colonel H. C. |
| Wallace, Captain D. E. | Williams, Com. C. (Devon, Torquay) | Wragg, Herbert |
| Ward, Lt.-Col. A. L. (Kingston-on-Hull) | Williams, Herbert G. (Reading) | Wright, Brig.-General W. D. |
| Warner, Brigadier-General W. W. | Winterton, Rt. Hon. Earl | |
| Warrender, Sir Victor | Womersley, W. J. | TELLERS FOR THE NOES.— |
| Watts, Sir Thomas | Wood, Rt. Hon. Sir Kingsley | Captain Margesson and Captain Bowyer. |