§ Mr. Graham Page (Crosby)
I beg to move,That leave be given to bring in a Bill to amend the Bills of Exchange Act, 1882, so that endorsement of order cheques and similar instruments received for collection by the banker, of whom the payee is a customer, shall be unnecessary.I apologise for detaining the House for another 10 minutes before getting on to the main business, but I did not know that it would be two hours after the usual time that such a Motion is taken.
This short Bill would, I think, be acceptable to the House both from its simplicity and from the economy which it would effect in business, commerce, accountancy and in the professions; in fact, in almost every sphere of commercial, administrative and private monetary activity. It would provide that a cheque collected by a bank for its customer would be deemed to be endorsed in blank by that customer if and when it is specially crossed by the bank, and, furthermore, that such a cheque when honoured would be prima facie evidence of the receipt of the money by the payee.
I claim no originality whatever for the ideas on which this Bill is based. They have been discussed for many years in banking, trading and professional circles. In particular, the ideas are associated with the name of Mr. G. O. Papworth, who happens to be a constituent of mine and who, from great knowledge of banking administration, so successfully advanced this proposition about four years ago that the Committee of London Clearing Bankers appointed a subcommittee to report on the subject. That report has not been published, but it is no secret that it was very thorough and very much in detail, and unanimously recommended legislation on the lines which I have indicated for this Bill.
The Bill would occupy only about a dozen lines of print and would be in the form of an addendum to Section 77 of the Bills of Exchange Act, 1882. Hon. and right hon. Members who are lucky enough to receive a cheque made payable to themselves or order, know that before they can put it into their bank 2639 they have to turn the cheque over and write their name on the back of it. The real purpose of writing one s name on the back of a cheque is to negotiate it to a third person, but, in fact, only 3 per cent, of all the order cheques issued are ever negotiated to a third person. The other 97 per cent. are paid straight into the bank account of the payee. The writing of one's name on the back of such a cheque is merely done to provide a safeguard to the bank under certain circumstances.
I am sure that hon. Members would not begrudge the time spent in endorsing the few cheques which they are individually lucky enough to receive if that endorsement gives their banks a legal safeguard. But that 97 per cent. of all the cheques which I have mentioned which require that endorsement amount to no fewer than 600 million cheques a year. Those hon. Members associated with business concerns will know the time taken in endorsing cheques and the consequent expenditure of salaries and wages on that unproductive work. Reliable calculations reveal that in commerce and business about 2½ million man-hours are spent in this unproductive work and about £1 million a year at least are spent in wages.
The endorsements on those 600 million cheques require examination by two banks, the collecting bank and the paying bank, and thus there are about 1,100 million to 1,200 million examinations of endorsements each year. In time, represented by money, that costs the banks about £500,000 a year. Then there is the further trouble and expense of the two million cheques which are dishonoured each year because of something being wrong with the endorsements. Quite obviously, if we can abolish the requirement for endorsement where that requirement is not really necessary, and yet retain it for its true and useful purpose of negotiating a cheque, there would be a very real saving of expense both to commerce and to the banks and, not least, to Government Departments; for this business of endorsement costs the General Post Office £19,000 a year.
Fortunately, the abolition of that requirement can be done in a very simple manner by saying that something else which is always done to a cheque shall be deemed to be that endorsement. That 2640 "something else" is the special crossing of a cheque by the collecting bank to itself. When I say "special crossing," there is nothing special about it in the sense of its being abnormal. Hon. Members will know if they have ever looked at the paid cheques coming back from their banks that there is a rubber stamping on the face of the cheque with the name of the bank between the two "crossing" lines. That is the special crossing of the cheque by the collecting bank.
This Bill would provide that that special crossing could be deemed to be an endorsement of the bank's customer who pays in the cheque. In addition to the saving in time and expense, there would be the added advantage that the cheque would not be a bearer cheque from the time it leaves the office desk to the time it reaches the bank's counter, as it is at present and is liable to mis-appropriation.
I would not take up the time of the House without first having obtained the considered views of responsible bodies on this subject, such as associations of traders and of manufacturers; societies representing solicitors, accountants, secretaries and other professions, and the banks and bank staffs and many others. I am grateful to those responsible bodies for the very careful study which they have given to this subject. I will not weary the House by quoting the results, but I ask the House to take it from me that they were overwhelmingly in favour of these proposals.
Perhaps more important were the constructive proposals which emerged from the discussions I have had with those responsible bodies and which improved upon the proposals I originally framed. I feel confident that, with the permission of the House, I can present a Bill embodying an accumulation of knowledge and practical experience gathered in this way.
Some misgivings have, of course, been expressed. In particular, it has been asked what effect these proposals would have on the practice, now popular, of the printed receipts on the backs of cheques. The Bill would not prevent the continued use of such receipts if persons desired that, and desired to make the necessary arrangements with their banks for that type of receipt which requires to be signed "in full and final discharge of 2641 such-and-such an account." But so far as the simple receipt is concerned, I trust that the House will approve the inclusion in the Bill of a provision that a cheque so specially crossed, deemed to be endorsed as I have described, would be sufficient evidence of receipt of the money by the payee named on the cheque and that any further receipt would be superfluous.
Many other—[HON. MEMBERS: "Time."]—there is one minute more—problems have been raised and studied and solved in these discussions. We cannot afford to employ people on this non-productive work of signing the backs of 600 million cheques a year, and we cannot afford, in modern commerce, to waste the time of our people in this fantastic and farcical fetish of endorsement.
§ Mr. Norman Smith (Nottingham, South)
I hope that the House will not give the hon. Member for Crosby (Mr. Page) leave to introduce a Bill of this kind. In 10 minutes he could not expect to make a complete case, but to be able to do so in favour of a Measure representing so drastic a departure from accepted practice he ought to be able to prove that there would be some saving of labour to banks and other institutions concerned if the necessity for the endorsement of cheques were done away with. I submit that it is no use putting forward astronomical figures about the number of hours spent by bank clerks in examining endorsements I assert that any bank clerk worth his salt has only to glance at my signature in order to do his job.
Cheques are much the most important part of our currency. It would not be a proper thing for the House to give leave for the introduction of a Private Member's Bill which would have the effect of increasing the possibility of fraud in the handling of currency transactions. If a Bill of this nature has to be brought in, it should be the responsibility of the Treasury to do that. I deeply regret that the Financial Secretary to the Treasury is not here—and for another reason. The hon. Member referred to endorsements and receipts on the backs of cheques. If he is right in what he said about such receipts causing trouble, one effect of his Bill would be to deprive the Revenue of some of the money which it now gets 2642 from the stamps which have to be put on the backs of cheques when they are receipted.
On the hon. Member's own submission, the only beneficiaries of a Bill such as this would be the banks and other commercial houses. But most of us are interested in banks as consumers and users. It is the custom of banks—irrationally, and quite without justification, in my opinion—to charge their customers for keeping their accounts. Is it proposed that the banks shall diminish the services which they give in return for the charges they make? I do not pay bank charges. I made so much fuss that my bank no longer charges me, but most people accept the charges uncomplainingly. The hon. Member now proposes that the services rendered by the banks shall be abated to this extent, and that to save supposedly redundant and unnecessary labour there should be an abatement of the element of security.
§ Mr. Smith
I submit that there would be an abatement of security.
This country has always been ahead of the rest of the world in the use of cheques. In percentage of population, more Englishmen habitually use cheques to pay their bills and carry through their transactions than people in any other country. We have become accustomed to the idea. The use of cheques should be extended widely among the wage-earning section of the population. I can see a great advantage in that. It would be to the great convenience of the Government and of everybody in the years that lie ahead. I hope that the hon. Member will be refused permission to bring in this Measure, which will not help ordinary bank customers in any way and which, if it helps the banks, will do so at the expense of security.
§ Question put and agreed to.
§ Bill ordered to be brought in by Mr. Page, Mr. Holt, Mr. Roy Jenkins, Mr. Mitchison, Mr. Stevens, Sir W. Wakefield and Mr. G. Wilson.