§ Order for Second Reading read.
§ 11.6 a.m.
§ The Financial Secretary to the Treasury (Mr. J. Enoch Powell)
I beg to move, That the Bill be now read a Second time.
This Bill relates to the fortunes of a very remarkable institution, an institution which, I think, may be fairly described as characteristic of the British—characteristic of the British in its long continuity, in its power to combine sturdy independence with common sense, cooperation, and in the ability which it has shown over a long period to adapt itself to changing circumstances.
The origin of the trustee savings bank goes back to the very last years of the eighteenth century, to the middle of the first Industrial Revolution. It took its origin in circumstances which socially, politically and economically are about as different from those of today as can well be imagined, yet over all that period it has survived and its usefulness has grown rather than diminished until today there are 84 of these trustee savings banks, with a total of £1,250 million invested in them. It is ironical to note that in these recent weeks, which have not been a very easy period for national savings, those forms of national savings which have done best have been the very newest and the very oldest—the Premium Bonds and the savings banks.
1270 This is an institution in which almost from the beginning hon. Members of this House have taken a special interest. Its earliest legislative basis was given to it by a Bill of 1817, which was moved by my predecessor the right hon. George Rose, friend and colleague of the younger Pitt.
§ Mr. Powell
Was he Sir George at the time?
Ever since then Parliament has been busy and has been anxious to adapt the legislative framework within which the trustee savings banks function in such a way as to enable them to suit the demands of the time and not be constricted by the requirements which the law placed upon them.
In that series stands the Bill of which I am moving the Second Reading, which will further ease the inconsistencies between the present practice and the present circumstances of the trustee savings banks and the legislative framework within which they are required to operate. In explaining its provisions to the House, shall need to touch upon the main characteristic developments in the form of the movement over two or three generations.
Hon. Members will, of course, be familiar with the general financial framework of trustee savings banks. They pay interest at a fixed rate to the depositors in their ordinary departments, and they receive interest from the National Debt Commissioners upon those deposits when they invest them with the Commissioners. Both that interest and that capital are guaranteed by the Consolidated Fund. It follows that, to cove: their expenses of management and operation, the banks are dependent upon the difference between the rate of interest which they pay to their depositors and the rate of interest which they receive from the National Debt Commissioners.
The interest paid to depositors has, for about seventy years—to be precise, since 1888—remained unchanged through all financial vicissitudes at the figure of 2½ per cent. The Trustee Savings Banks Association is quite clear and unanimous that this was right and ought to continue: that it does not want the rate of interest to the ordinary depositor in 1271 trustee savings banks to move up, or, incidentally, to move down, following temporary alterations in the ruling rates of interest. Certainly, experience has shown, and the success of the banks has shown, that their depositors also share this point of view and this preference.
It is easy, however, to exaggerate the gap, in reality, between the rate of 2½ per cent. paid by the trustee savings banks and the ruling rates of interest at a time when Bank Rate is 7 per cent. It must be borne in mind that the depositor has the advantage of complete security combined with complete liquidity. He has what is virtually a free banking service, and under my right hon. Friend the First Lord's legislation of last year, the depositor has the first £15 of his interest free of Income Tax. There is, too, from the point of view of the banks, the not inconsiderable administrative advantage that 2½ per cent. happens to be 6d. in the £.
The rate of interest paid to depositors remains, therefore—and, so far as one can see, will remain—at 2½ per cent., but the difference between the rate, which in practice costs the banks about £2 8s. 6d. in every £100, and the maximum rate, payable to them by the National Debt Commissioners, of £2 17s. 6d., now barely covers the average costs of management and operation of the banks. Therefore, the statutory ceiling of £2 17s. 6d. which has existed ever since 1920 upon the rate of interest payable by the Commissioners to the trustee savings banks, and fixed from time to time within that limit by Treasury order, requires now to be raised, and the first and immediate purpose of this Bill is to raise the statutory maximum upon that rate of interest from £2 17s. 6d. to £3 2s. 6d.
Within that new maximum, the standard rate will from time to time be fixed by Treasury order. The first such Treasury order under the new maximum cannot come into force until 21st May next. In the meantime, the banks' average operational costs will be outrunning the 9s. tolerance that I have just mentioned. Accordingly, provision is made in Clause 1 (4), as the House will see, for a lump sum to cover that deficiency to be paid to the trustee savings banks. 1272 In speaking just now of the costs of the banks I referred to their average costs of operation, and the word "average" is important, because perhaps the most important modern development in the trustee savings bank field has been the rise in the years since the war of mutual assistance, to which legislative recognition was given in 1949. Under that mutual assistance scheme, in which nearly all the trustee savings banks participate, the low-cost banks pool their surpluses in order to meet the deficiencies of the high-cost banks and thus make those surpluses available to help with expansion and development where it is going ahead. I think that it is the general view that this has been a most important and valuable development.
It is, therefore, the average operating costs to which the standard rate of interest paid by the National Debt Commissioners requires to be related, since the mutual assistance scheme has the effect of averaging those costs over all the banks that participate. It equally follows that where a bank does not participate in the mutual assistance scheme the rate that applies to that bank should not necessarily be the average standard rate which I have mentioned, but a rate which takes account of its particular costs of management and operation.
Accordingly, for the first time, by Clause 1 (2), the Treasury will be enabled to fix a differential rate below—or certainly not exceeding—the standard rate for such banks as may, at any time, be outside the mutual assistance scheme. I should, perhaps, add that what the Fund for the banks for saving will gain by this new provision will, in fact, accrue to the advantage of the mutual assistance scheme, since the difference between the two rates of interest as applied to the non-participating banks will be paid into the mutual assistance account—
§ Mr. Marcus Lipton (Brixton)
Before the Financial Secretary leaves that point, can he say what the cost will be to the National Debt Commissioners by way of extra interest in respect of the Treasury order which the hon. Gentleman says is to come into effect in May next?
§ Mr. Powell
Of course, the order cannot yet have been made, and until consultations have taken place with the trustee savings banks, and until there are 1273 available the latest figures of their current costs it would be premature to fix what the rate of interest, within the new maximum, will actually be when it comes into force on 21st May next.
Before I pass from this development of mutual assistance in the trustee savings bank field, may I refer to sonic later provisions of the Bill which relate to the old separate surplus fund kept by the National Debt Commissioners?
The mutual assistance scheme has had the effect, as the House will realise, of virtually eliminating the surpluses of the savings banks by making them available for others through the mutual assistance scheme. The provisions of the legislation of the last century under which a separate surplus fund was kept have, therefore, become completely and finally obsolete, and Clause 3 does away with them, while retaining that part of the old surplus fund which relates to the closed banks. At the same time, that part of the separate surplus fund relating to the closed banks will be made available more freely than under existing legislation for the development of existing, as well as for the establishment of new banks
From mutual assistance I pass to another less recent but equally important development in the evolution of trustee savings banks. That is the rise of the special investment department in which the deposits, instead of being invested with the National Debt Commissioners, are invested by the banks themselves: subject to very strict statutory limitations and control exercised by Treasury regulation and the National Debt Commissioners.
Clause 2 modernises the legal framework in which the special investment departments work. The present limitations and regulations governing the investment boards of special investment departments are of a highly complex nature. If inquisitive, hon. Members will find them in Section 41 of the consolidating Act of 1954. They limit the modernisation—if I may so describe it—of the portfolios of the special investment departments. Clause 2 (1), combined with the First Schedule of the Bill, sweeps away the existing legislative provisions and erects a new structure. In the First Schedule are set out the range of securities in which special investment departments will be permitted to invest. 1274 subject to the other controls which I will mention.
The practical effect of that new schedule of securities is quite substantial. It brings within the field of investment of the special investment departments longer dated municipal stocks, Commonwealth and colonial stocks of more than one year and the stocks of certain water boards. For the convenience of the Channel Islands all securities issued by the States of Jersey and Guernsey are included; and it brings in mortgage loans issued by the local authorities in the Isle of Man and Northern Ireland. So the First Schedule specifies the field within which the securities must be selected by the special investment departments.
On top of that the requirements as to liquidity and other ratios will be imposed by Treasury regulation under existing law; and finally, as hon. Members know, there is the specific and detailed control which the National Debt Commissioners are required to exercise over the investments of these special investment departments.
The remaining provisions of the Bill, though of value to the trustee savings banks as modernising the law under which they work, are matters of detail with which I will not weary the House; except perhaps to refer to Clause 6 which, in line with a certain amount of recent legislation on superannuation, makes it possible in appropriate cases for previous service in a bank which subsequently becomes a trustee savings bank to be taken into account for superannuation purposes.
I will not conclude without once again referring to the role of the trustee savings banks in the field of national savings and the service of thrift. Anyone who studies the history of this movement, as they may do in the fascinating history of the savings banks, published in 1947 by Mr. Borne, is struck to find that, in fact, he is studying the social history of Britain over nearly two hundred years. As we turn over the leaves of that book it may seem a far cry from some of the conceptions of the early founders or from the pages of Samuel Smiles' famous bestseller. "Thrift".
But is the distance really as great as we had first imagined? Today, we are learning yet once again, laboriously and by hitter experience, that a nation cannot 1275 invest more than it is willing to save. In view of the service to the cause of propagating, encouraging and facilitating saving which the trustee savings banks have performed over this great period of time, I ask the House to help them further in their task by agreeing to the legislative changes proposed in this Bill.
§ 11.25 a.m.
§ Mr. Glenvil Hall (Colne Valley)
I think it is generally known by hon. Members opposite that we on this side of the House give hearty support to this Measure and sincerely welcome its introduction. For us it is a rather pleasant change to see the Government introducing a Measure which is not destructive but, on the contrary, entirely constructive in almost every Clause.
To begin with, I wish to pay tribute to the splendid voluntary work performed by the trustees and managements of these banks. They give unstinting service to this movement, and I am sure that the House and the nation, and certainly the individual depositors, owe them a deep debt of gratitude. I am told that this Bill is an agreed Measure and the Trustee Savings Banks Association has been taken into consultation at almost every stage. Therefore, I assume that there will be few, if any. Amendments moved to it and that it will have—as I certainly hope will be the case—a very quick passage to the Statute Book.
I was glad that the Financial Secretary said what he did about the age of this movement. He said it was characteristically British. I imagine that my hon. Friend the Member for Leith (Mr. Hoy) may be speaking later. He has taken a long interest in this movement, and, if so minded, will be able to inform the Financial Secretary that, if anything, this movement is characteristically Scottish. It took its birth there, and the Scottish people have always been strong and steady supporters of the movement. It is true that the movement has spread to this country and that we now have over 80 of these banks. If the branches are added, the number amounts to well over 1,000.
These savings banks are fulfilling a great function. They do not attempt to attract the very large depositor. They seek to help the small saver. One of the advantages of the savings banks is that 1276 they are, if I may use the term, homely institutions. Ordinary people, who may be rather awestruck at the portals and atmosphere of the large banks, know that they can go into their local savings bank, where the staff are friendly and understanding, and feel quite at home. That makes an enormous difference, and I think it is one reason why the depositors are satisfied with the interest figure of 2½ per cent.
It is not, I think, entirely true that all of them are not interested in the percentage they get but only in the security offered and the homely feeling they find in these banks. Looking at the figures for 1956, and comparing them with those for 1955, one finds that although deposits have gone up by over £50 million, the deposits in the ordinary departments have actually sunk by £15 million between those two years. The increase has been in the special investment departments, where rates are higher. It is obvious that although they have taken their money out as ordinary depositors, because, perhaps, some of them, at any rate, thought the 2½ per cent. interest might be bettered, they have not gone elsewhere but have changed over to the special investment departments, which shows the very large increase in the last figures which I have seen.
These banks originated in the days before the Post Office Savings Bank was formed in 1861, and there was a fear at the time that the Post Office Savings Bank facilities would hurt the trustee savings banks and, possibly, put an end to the movement. It has not done so. People have found that they can use the facilities of both, and many of them do so. At any rate, it is quite clear now that these banks have come to stay, and that they are fulfilling a very useful function.
The first Measure regulating these banks, as the hon. Gentleman said, was passed in 1817 at the instigation of Sir George Rose, who was a distinguished predecessor in the office which the hon. Gentleman now adorns. Unlike the hon. Gentleman, however, Sir George was a great holder of sinecures. He and his family attracted a number of them, and at one time he was holding four or five, which brought him in. I have read somewhere, between £10,000 and £20,000. He was also an ardent Pittite. I do not know whether the hon. Gentleman would describe himself as a Pittite or not. 1277 Though I know that his political theories are pretty antique, whether this is a further bond between them and they do go back as far as those held by William Pitt, I do not know.
§ Mr. Glenvil Hall
That confirms my view that the hon. Gentleman is a Pittite, and that in that respect he is also like his distinguished predecessor Sir George Rose.
I am glad that the hon. Gentleman referred briefly to the fact that, in spite of the poverty which existed at the end of the eighteenth and certainly in the early part of the nineteenth century, these banks then flourished. I have often been astonished at the fact that when the wages of the weavers in my own area were something less than 10s. a week, they should still be interested in forming and supporting these banks. In Huddersfield, the centre for the banks in my constituency, they started one in 1818, and at that time the price of wheat, which at the turn of the century had been 47s. to 48s. a quarter, had risen to 126s. 6d. a quarter. With wheat at that price and with wages us low as they were, it is astonishing that people not only wanted to save but actually somehow did so, and it shows that, given the facilities, many people are more anxious to save money than to spend it. There are times in the economy of nations when people should be encouraged to spend rather than to save. Today the reverse is the case. It is quite obvious that, if inflation is to be properly fought, we should encourage the people, and especially the small people, as far as we can to save to the utmost.
For that reason alone, if for no other, we are grateful to the Government for introducing this Bill, which is mainly designed to increase the upper limit of what is called interest allowed by the National Debt Commissioners through the Bank of England to these banks. It is called interest, but that is in many ways a misnomer, because the £3 2s. 6d. now to be allowed as the upper limit is, as far as 12s 6d. of it is concerned, not interest but an allowance for expenses. I should like to express the hope that, if the hon. Gentleman is to speak again at the end of the debate, I may get an assurance from him that, now that the upper limit is to be increased to £3 2s. 6d., the whole 1278 of that 12s. 6d. should be allowed to the banks.
This Bill is overdue indeed, because the banks for some time have been facing the difficulty of making management expenses meet the amount which they have received by way of the allowance from the National Debt Commissioners. The 7s. 6d. which they have had under this head has not been enough, and, as the hon. Gentleman pointed out, it is time it was increased. Not only that, but the banks cannot apparently even wait until May, when the Bill conies into operation, and £300,000 is being set aside to assist them in the meantime. If that is the situation, I should like to feel that the Treasury will not be niggardly in this matter, but will see to it that, now that the limit has been raised, these banks will have the full advantage of it.
I, for one, would like to have seen no limit put in at all and the matter left instead to the discretion of the Treasury, realising that from time to time what the situation was and what the expenses of the banks were. If that had been so, it would not have been necessary, as I think it very likely will be, to have another of these Bills raising the rate in about five years' time. We shall see; but it would, I think, have been better to have left this matter to a Statutory Instrument in the same way that some other matters are to be so left.
There are one or two matters on which I should like to comment. There is a reference in the Bill—the hon. Gentleman did not refer to it—to seamen's savings banks, and, unless I misread the Bill, which is possible, it seems to me that they are to be taken out of the advantages given by this Bill for higher rates.
§ Mr. Powell indicated dissent.
§ Mr. Glenvil Hall
I see that the Financial Secretary shakes his head, and I am glad to realise that that is not so. If it is not so, why is this reference made in Clause 1 (5)? I know that their expenses are far less than those of the trustee savings banks branches usually are, but nevertheless, it seemed to me rather niggardly, if they were to be taken out of the Bill, that that should be so.
§ Mr. Powell
Perhaps I may be allowed to clear up that point at this stage. The reference to seamen's banks is simply a 1279 drafting consequence of the change in subsections (1) and (2), whereby there ceases to be one rate only, but may be more than one. It was therefore necessary to write into the legislation covering seamen's banks words which would make it clear which rate was under reference. It is purely drafting.
§ Mr. Glenvil Hall
I am much obliged to the hon. Gentleman; that explanation had occurred to me, but I am glad to have his assurance that it is the right one, and that these banks are to share like the others in any advantages that may come along.
I should like also to refer to Clause 4 (1). Of course, we approve the proposal dealing with the closed banks fund and its use to assist existing banks to expand as well as new banks to start. I do not know how much there is in that fund, but I am told privately that theme is about £200,000 left. That is a useful sum, but it would be nice to feel that, when that amount is exhausted, some other amount could be forthcoming or saved in some way during the years in order to assist new banks to start.
I know that there is the mutual assistance fund, and provision is made in the Bill to carry it on and use it in a better way; but again I am not quite clear as to how many banks are now standing out of the mutual assistance scheme. My information is that there are only one or two and that the likelihood is that they will be coming in quite shortly. If that is so, this Clause may then become largely redundant. I should like to feel that the Treasury and the Government were helping the banks, as an act of national policy, in a forthright way to extend and expand beyond what may be possible when the present fund of £200,000, which has accrued from banks which have closed, is exhausted.
Clause 7, I take it, is put in more for form than for anything else, because complete provision is made for deficits to be made up out of the Consolidated Fund in the Act of 1954. In the Explanatory Memorandum, however, we are told that there is little likelihood of any deficit occurring. We are very glad to hear that, of course. There is, however, a reference in the same paragraph dealing with Clause 7 which indicates that the Consolidated 1280 Fund may have to find money in respect of Clause 4 (7).
Turning to Clause 4 (7), I find that that is the subsection dealing with closed banks to which I have just been referring. I cannot see, from the wording of that Clause, that any deficit can possibly arise because there is no reference there to moneys being found out of the Consolidated Fund once the £200,000 is exhausted. I should like to feel that it is in the mind of the Government that, when that money has been spent, under that particular subsection additional sums may be found out of the Consolidated Fund.
Looked at in one way, that might be the supposition, taking the Explanatory Memorandum and the subsection together; but, having had some experience of the Treasury and knowing how it never spends a penny unless it is forced so to do, I can hardly imagine that it would construe the wording of this subsection in that generous fashion, though I should be very pleased to feel that it would.
On this side of the House, we give our blessing to the Bill. These banks need all the support we can give them. They do very fine work, particularly in these days when inflationary pressure is so strong. They have, I believe, total deposits amounting to more than £1,300 million, and I gather that the number of depositors is increasing. I should like to hope that the banks themselves were increasing, too, and giving additional help to localities which now have little or no facilities of this kind. If the Bill can help such an expansion, no one will be better pleased than those who sit on this side of the House.
§ 11.43 a.m.
§ Sir James Henderson-Stewart (Fife, East)
I warmly agree with the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) in his compliments to the Government on introducing this Measure. I should like to congratulate my hon. Friend the Financial Secretary also upon the broad and sympathetic survey he gave in his opening speech. It is very good to hear from a representative of the Treasury so frank a recognition of the value of the trustee savings banks and an expression of such unmitigated admiration for the work they are doing. In the past, Treasury spokesmen have not, I 1281 think, been quite so forthcoming in their admiration as they might well have been. My hon. Friend made up for that today.
This is one of those pleasant occasions when the Measure before us commands the support of both sides of the House. These occasions occur much more frequently than the general public realises. I have not actual figures, but I imagine that I should not be far wrong if I said that at least half the proposals which come before us in any one Session are not opposed at all but pass through swiftly and easily. That is a tribute to the good sense of Parliament and of members of Parliament. I wish that these occasions would occur still more often, of course; but when they do, as today, they are to me unreservedly welcome.
This is a small Bill designed to strengthen the hand and, therefore, to encourage the efficient management of what everyone will agree is one of the most praiseworthy and, to use the right hon. Gentleman's words, constructive voluntary organisations in the country. As the Financial Secretary told us, the movement began a century and a half ago. It was begun by public-spirited men voluntarily, who in the words of the Year Book.recognised the importance of individual thrift to the well-being of the community".There is nothing old-fashioned about that ideal or those words. The initiative of those men of a century and a half ago has been maintained, of course, by succeedings generations, so that today, as we have learned, about £1,250 million small savings are deposited in the safekeeping of these banks by some 11 million people. That is a very remarkable achievement.
As to whether the banks started in Scotland or in England, I do not wish to argue, but, with respect to the right hon. Gentleman, I should like to point out that my hon. Friend in his introductory remarks spoke about the British tradition. There is no difference between the British tradition and the Scottish tradition. The right hon. Gentleman ought to know that Scotland is part of Great Britain, but, had the words "English tradition" been used, the hon. Member for Leith (Mr. Hoy) and I would have risen at once to dispute the suggestion that the Scottish and English traditions were not the same in this 1282 respect. But Britain encompasses Scotland, and, as a Scotsman, I am very proud that that should be so.
§ Mr. Glenvil Hall
I know that the hon. Gentleman sits for a Scottish constituency, and I should not like him to fall out with his constituents. He says that Britain encompasses Scotland as well as England. Did he not mean that Scotland encompasses England?
§ Sir J. Henderson-Stewart
The modesty of the right hon. Gentleman sometimes quite staggers me.
The Trustee Savings Banks movement is still growing. It is no exaggeration to say that it plays a vital part in the National Savings Movement and, therefore, in the drive, never more needed than today, for moderation in spending and setting aside surplus funds on the part of everybody in the country for investment in the long-term advancement of our country. That is what they are for.
Like the hon. Gentleman the Member for Leith, whom on this occasion I am happy to call my hon. Friend, because we are associated in this cause, I have been associated with the leaders of the trustee savings banks for a great many years, and I should like to join with the right hon. Gentleman in paying my personal tribute to the self-sacrificing splendid work these men do. There must be literally thousands of men in all walks of life, in all parts of the country, devoting their spare time magnificently to this cause, with no reward whatever save the satisfaction of seeing a good job well done.
Those of us who as Members of Parliament are moving about and meeting men in their various occupations are all conscious of the immense work done by voluntary organisations throughout the country. I think that the longer one is in the House the more one realises the supreme part which voluntary effort plays in maintaining the British way of life. The trustee savings bank is one of the great voluntary organisations, and because this Bill in a small way strengthens its hand, I think it is a splendid act which we do this morning, the results of which I am sure will be good.
§ 11.51 a.m.
§ Mr. James H. Hoy (Leith)
I rise to support the Bill not in a personal way, but as chairman of the all-party Committee which looks after the affairs of the trustee savings banks in the House. I am certain that I speak for every member of the Committee when I say that we give a very warm welcome to the Bill which has been so admirably introduced by the Financial Secretary this morning. Perhaps the reason why he introduced it with a little more warmth than the Treasury Front Bench has done on previous occasions was that he was widening the interest just a little. In the past the Treasury has been afraid to introduce a little warmth in case it was asked to give a little, and it did not want to be led into that position. On this occasion, however, we are to have a little more for the job that the trustee savings banks do.
I think that the Financial Secretary was correct when he said that the trustee savings bank was a characteristically British institution. One of the great reasons for its success has been its sturdy independence and reliability. It is a social service to a vast section of the community. It is because of that that I think it has been the undoubted success it has. Of course, reliability can only come through the faith of the people over a number of years. Perhaps this may be partly due to the care with which the movement was founded. I understand that the Scots have a reputation for care and precision in money matters.
I have read with great interest that when the Rev. Henry Duncan founded the first trustee savings bank in the village of Rothwell, in the Parish of Dumfriesshire, in 1810, he had a fairly extensive constitution set up. It provoked the comment in the Edinburgh Review of that period that the Bank of England had not so magnificent a constitution, but that the Bank of England, of course, had not half so much to do. Perhaps it was because of the care with which the first bank was founded that that reliability has grown. It is interesting to recall that in the first year of the Bank's existence the deposits amounted to £151, while some four years later the deposits reached just over the £1,000 mark, and its annual report marked it down as an astounding success.
1284 Indeed, from these very small beginnings the bank has grown, and when the centenary of the bank was celebrated in 1910 in Edinburgh, the capital city of Scotland, it reported tremendous success over the century. I think it is interesting to note that while there may have been division as to where the first bank was founded, I think it has come to be accepted over the years that the first bank was the one in Dumfriesshire, which, of course, is represented by the Joint Under-Secretary of State for Scotland. But the pattern of the banks, if we may claim something for the capital city, was laid down by the Edinburgh Trustee Savings Bank and is the one which has been followed by trustee savings banks throughout the length and breadth of the country.
It is true that over these years Governments of all political colours have been indebted to the trustee savings banks for the work which they have done. It may be interesting to recall that even in the First World War, when it was decided that more savings had to be obtained, it was the trustee savings banks which played a tremendous part in raising the money, because the then Chancellor of the Exchequer, Mr. Reginald McKenna, wiped away any restrictions on deposits for the period of the war and indeed for six months following the war. The trustee savings bank, of course, did its job in the last war, and it is so recent history that I do not think it need even be recalled on an occasion such as this.
As has been said, the £2 17s. 6d. interest rate paid to the trustee savings banks includes £2 10s. paid to depositors and the balance is for management expenses. It is this sum that we are mainly dealing with in the Bill, because over the years there has been a tremendous growth in the banks, not only in ordinary deposits, but in the special investment department, and costs, of course, have continued to rise. It should, however, be pointed out this morning that the costs of the trustee savings bank have not risen any faster than those of any other similar institution. It ought to be put on record, I think, that costs with regard to trustee savings banks are, if anything, slightly less than those of any other similar institution. I think that is extremely important. Costs have risen because of circumstances over which the trustee savings banks as such have no 1285 control. Over this long period of years there has been a steady rise in the cost of living which, naturally, has led to increased salaries. There has been the superannuation scheme and the widows and orphans scheme, which I think was a scheme welcomed by everybody in this House.
It is, however, a responsibility which has to be paid for. Because of that, the banks need a little more to carry on their job. If the trustee savings banks are to fulfil all the functions which they have undertaken and to expand in future, then the trustee savings banks must have money to modernise the present banks and to create new banks. They cannot do that at the present time.
All these things, as I have said, make for greater business. Instead of being only a social service, since 1916 the banks have been regarded as institutions which provide money very easily and reasonably to successive Governments. It is a service which continues to expand. I do not want to go into figures this morning, but it is interesting to note that, over the years, in the course of this evolution the deposits in the bank, which amounted to £77 million in 1916, grew to £1,100 million or rather more in 1956. That is a fourteen-fold increase. Even though there have been changes in the value of money, I think that that figure conveys to the Government and to the country the necessity to have a little more cash in the hands of the trustees to undertake and carry out their tasks.
Many tributes have been paid to those who manage these banks on behalf of the depositors, and I am sure that the members of the Parliamentary Committee would not like me to conclude without, as chairman of the Committee, paying the tribute of the Committee to Sir Kenneth Stewart, chairman of the Trustee Savings Banks Association, and his associates for the work they are doing and also to their trustees and managers throughout the country. They are doing a magnificent duty in the interests of saving and rendering a first-class service to the country as a whole, and this Bill, I am certain, will make it just a little easier for them to carry out their duties. For those reasons, I should like on behalf of the Committee to extend a sincere welcome to it.
§ 12 noon.
§ Mr. George Lambert (Torrington)
At the outset of the very few remarks I propose to address to the House, I feel that I should declare an interest in this Bill, because I have the privilege of being a trustee of the Devon and Exeter Savings Bank. The Financial Secretary, in moving the Second Reading, said that the oldest and newest organisations to encourage thrift were probably the most successful. I think the success of the savings banks is due almost entirely to their staff. They are efficient and they are friendly, and when the prospective depositor goes into the bank he is made very welcome.
The growth of the funds of the various trustee savings banks, as the Financial Secretary said, does reflect the tremendous changes which have taken place in the last 150 years in both the value of money and the distribution of money, and also in the increase in the population. In our bank in Devonshire, which was founded in 1815, it took 39 years to attract the first £1 million, till 1854; the second £1 million 67 years, till 1921; it took the bank until 1943 to get £10 million—89 years after the first £1 million; and then between 1943 and 1953 it got another £10 million, the second £10 million, making a total of £20 million, taking only 10 years compared with the 89 years it took to get the previous £10 million.
Today the rate of progress has become slower, and this, I think, is due to the many other attractions for the small saver. One of the reasons I am so delighted the Government have seen fit to present this Bill is that it will enable the old-established banks to devote more resources to develop the facilities within their own areas, instead of as at present, as they have been only too willing to do, helping through the mutual assistance fund other smaller and newer banks.
Of the other attractions, the so-called industrial banks offer very high rates of interest to prospective depositors, between 8 per cent. and 10 per cent. some of them. I wish it were possible to include in the Bill a Clause making this type of bank, the industrial banks, show clearly to their prospective depositors that they are no more than hire-purchase customers. I wish it were possible as well to make the prospective borrowers realise what very high rates of interest they have to pay. 1287 There is no doubt that hire purchase, when employed for the financing of holidays or buying suits of clothes, has gone very much too far.
I do not wish to detain the House any more and will conclude by welcoming the Bill.
§ 12.4 p.m.
§ Mr. B. T. Parkin (Paddington, North)
I felt some anxiety when I read the Bill as to whether we ought to give it a Second Reading for the following reasons. I had hoped that the subject would have been considered so important as to have been worth a wider, fuller discussion and a bigger Bill. Of course, I have no quarrel with the very few Clauses in the Bill and I am very glad to support them, but I wondered why it was put down for a Friday. I listened to the Financial Secretary giving his historical survey and telling us that this Bill was in the direct line of control by Parliament of these banks. Then we came to the real point of it.
Then, of course, I realised—perhaps I ought to have realised it before—why it is that the Financial Secretary is dealing with such an important subject as trustee savings banks in such a very modest way. He said that this was an arrangement to enable the National Debt Commissioners to pay more money to the trustee savings banks on account of higher operating costs as a result of which no depositor will get any higher rate of interest or any better service, except in so far as the banks will become more efficient or in so far as they could not continue without this support.
This is nothing more nor less than a wage claim. Now I understand why, at this time, when all other Government Departments are telling a different story, the Treasury itself has to bring this skeleton out of its cupboard and try to get it past the House by smothering it under a mountain of floral tributes to the work of the trustee savings banks. That is one of the minor reasons, perhaps, why this Bill is being, as it were, played down.
I have nothing to say in criticism of the speeches made up to now in support of the Bill, but those speeches have been made by hon. Gentlemen who are closely associated with the movement and who have played a part in it, and it is very proper that tributes should be paid to those who give voluntary service, but this 1288 is the Second Reading of a Bill laid before Parliament, and Parliament ought to be rethinking its attitude to the subject of savings banks. It was just touched on by the hon. Member for Torrington (Mr. Lambert), when he indicated his disquiet at a certain tendency in these banking developments in this country, developments which, he rightly said, put a rather heavy burden on the shoulders of those who chose to take advantage of them.
Surely the time has come to look again at the principles of something which was started so long ago and to consider how far the interpretation of those principles is in accord with the circumstances of the day. There has been a little disagreement in the House whether the movement started in England or in Scotland. Daniel Defoe has not been mentioned, but he wrote a very moving document in support of thrift when sitting in the debtors' prison, and he had some schemes.
I also refer the House to the old French monk, Hugues de Lestre, who, in 1610, put forward some proposals for a savings movement which had two admirable objects. The first was to enable the poor to better their lot, and the second was to absolve the rich from the obligation of alms giving. Both of those principles have some relevance today, but they both need to be re-examined.
I happen to be one of those on this side of the House who doubt—and it is rather strange that on the Left side of my party and the Right of the party opposite there is common ground in feeling doubt—whether the Welfare State can for ever be sustained by direct personal contributions through Income Tax or Estate Duty. It would be very wrong to develop that theme at the moment, but I think that this much is relevant and that one should say that if there is a question of banking controlled and supported by the State and giving a service at no cost we ought to see whether the service can be extended.
I believe that the State will have to find other ways of raising its income. That is a matter of controversy outside the terms of the Bill, because the trustee savings banks are not allowed to make a profit. But we might at least consider whether these banks can widen the services that they offer to the community with no cost.—
1289 As to one of the admirable objectives—bettering the lot of the poor—since the savings banks were started the habits and objectives of savers have been completely transformed by the progressive development of the Welfare State. There was a time when the existence of an invalid or cripple in a working-class family meant that that family had to club together and make strenuous and regular savings for the support of that liability on the family in later years and in old age. Savings, for that reason, were regarded as something to be accumulated continuously over the years, to make provision for many other things which are now looked after by insurance schemes, pension schemes, health services and the like.
That does not mean, of course, as those who are against the Welfare State often say, that the moral fibre of the country has been undermined and people have not the will to save and better themselves. The very success of the movement and the figures of deposits in the savings banks show the contrary, but we ought to look at the type of depositor and the objects of the savings.
The Financial Secretary could probably confirm that most of the people who save today do so for one specific limited objective over a limited period of years. They set themselves a target. It is often a savings effort by an individual or by a family to achieve a deposit on a house before the purchase of the house from a building society, or to achieve a deposit on an article of equipment before borrowing the rest from one of the institutions to which the hon. Member for Torrington has referred.
I should have thought it worth while considering whether the fullest attention has been paid to the potential size of that market, particularly in view of the assertion by the hon. Member for Torrington that such people were badly served by the present system. There must be an opening for something else that could help them along. I refer to the fact that many people who are saving hard help themselves to do so by borrowing from institutions which charge an enormous rate of interest. Anything that could help them would be of enormous social advantage.
Apart from the experts who actually are engaged in managing trustee savings 1290 banks under the regulations, the Government ought to look at this matter in the spirit of a productivity committee. They ought to ask the questions that such a committee encourages young managers to ask when it is looking at industry. A committee of that kind has done excellent work under the influence of the T.U.C. and of Mr. "Ted" Fletcher, its secretary. Young managers are asked, "What are you doing, how are you doing it and is that the best way of doing it? Is the bottleneck in your production the point at which you make the greatest profit?" In this case, we are not producing anything. The bottleneck is the number of taxpayers and if we want to increase the productivity and usefulness of the service we must consider how we can increase the number of depositors.
It is regrettable that we take for granted the rather lazy decision of Parliament so long ago to cover all risks involved in the National Savings Movement by saying that the best way out is to make the movement lend to the Government and then there will be no losses or any bother. It is unfortunate that, just because the movement is so strong and there are so many depositors who need such a service, the movement has an easy £800 million which it can borrow on behalf of the Government at a low rate of interest. In present circumstances, we might see whether there is not some other way in which we can enable the money to be invested more profitably, in a way that would enable a higher rate of interest to be paid to the depositors.
We had an example the other day of a bank—not a trustee savings bank—which got itself into trouble because it had invested too much money in Government securities. It was a savings bank which had put a lot into Government securities and was not liquid any more. I speak of this without any inside knowledge and, therefore. I am not claiming any accuracy for what I say, but I read that support has been given to that bank by one of the joint stock banks. That again is something which would not have happened a hundred years ago. It would not have happened hitherto in my lifetime. I remember Farrow's Bank going "bust". I was quite young then and I do not know the details, but it is quite inconceivable that a community 1291 would allow a bank to go "bust" present circumstances.
Perhaps the joint stock bank, in the long run, will do all right. It must wait a little time until it has made up what would have been a deficit if the securities had been sold now, but if the joint stock bank is going to lend money at 8½—per cent. and borrow from the Bank of England at 7 per cent. it will do quite nicely in taking over that savings bank which has a lot of Government securities behind it. The joint stock bank will not take long to catch up on the deficit.
Although the hon. Member for Torrington spoke a little discouragingly about the newer forms of commercial companies calling themselves banks, the joint stock banks are not above having a finger in the pie. I believe that Lloyds control the Commercial Bank of Scotland and I believe that that bank is in the hire-purchase industry. Therefore, if there are well-respected institutions getting a share in this business we should have a look at it too. It is a strange anomaly, but the people who apply to hire-purchase institutions are, in fact, the most strenuous savers of the day in the new circumstances in which people are trying to acquire an asset.
I have said that depositors today try to save for a short time for a specific object. I read in this morning's paper that a conference of the National Women Citizens Association was addressed yesterday by Miss Beatrice Seear, of the London School of Economics, who had recently taken part in a survey on "Women at Work" in Bermondsey and Bethnal Green. She said that women seem to go out to work toraise the family's standard of living by buying new furniture, or paying for holidays and redecorations.They were trying to raise their standard of living by saving.
One of the ways in which it is possible for women to go out to work is by providing themselves with properly equipped homes. A washing machine, a refrigerator, decent equipment in the kitchen, are all part of the industrial re-equipment of this country because they enable women to go out to work. There is nothing wrong from the economic point of view, indeed quite the contrary, 1292 in encouraging people to install better in equipment in their homes.
We have a quiet House this morning. If this had been a Bill to meet a deficit in a nationalised industry, a wage claim which had been put into cover increased costs without increased productivity, there would have been much bellowing and rumbling from certain benches which are noticeably empty this morning. There would certainly be opposition to my next point.
Why should not the trustee savings banks be allowed to make an arrangement with the nationalised industries to lend them money which could be re-loaned to consumers of, say, fuel and power for the purchase of better equipment? The Financial Secretary to the Treasury has had experience of all these problems. Surely he would at least agree that anything we could do to improve the efficiency of our use of fuel and power would be a good investment for the country?
The nationalised industries could well afford to pay a higher rate of interest than can the National Debt Commissioners, because, in return, they would not only get the trading profit on the articles they would sell, but would even get a slightly higher rate of interest if they only charged 5 per cent. One of the mysteries of hire purchase is that one pays nearly twice what is apparently being paid. In other words, if I am asked to pay 10 per cent. hire-purchase charges on a certain amount, that is 10 per cent. on the amount owing from the very beginning, whereas, of course, over the entire period of repayment the average owing is only half, so the rate of interest is nearly doubled. If, therefore, the nationalised industries were lending out their money to cover the installation of equipment in homes at, say, 5 per cent., they would, in fact, be earning about 9 per cent. This would be a good business proposition and much more attractive to the consumer and everyone else than the companies to which the previous speaker made a reference.
There is another field which the trustee savings banks could enter. I have mentioned that many of the people who go for hire-purchase facilities to industrial banks are the most commendable and energetic savers. They represent an enormous section of our economy. They 1293 are the small manufacturing establishments in industry. Eighty per cent. of the manufacturing establishments in this country employ less than 100 workers and about 30 per cent. of them employ less than 2,000 workers. There are 1½ million workers in this country in establishments employing less than 100 people.
The efficiency of these small units of production is of great economic importance to the country. I am sure that both sides of the House would agree that in what is called a mixed economy it would be in the interests of both sides of the House to see that such institutions are encouraged to be properly equipped. Many of those firms, however, are run by people without capital though with a great deal of energy and faith and drive. Often, they can get capital only by selling out to a bigger organisation. They have an idea which they want to develop, but are deprived of decent accommodation and the best kind of machinery by the rather doctrinnaire approach of the party opposite in these financial matters.
They, too, if they buy new machinery, will be paying about 25 per cent. in interest on the amount they borrow. That puts up the cost of re-equipping a section of British industry by probably 20 per cent., because these firms pay too much for the machines they buy under existing hire purchase. Again, there has been reference to the banks holding property. What great scope there is for investment in small modern factories, what an excellent security that should be for banks of this kind.
I have referred to the numberless small establishments. Hon. Members will recollect seeing these as they have passed through districts of Acton, Birmingham, or elsewhere in the Midlands, or some other part of the country. Even in the Cotswold district, for instance, which appears less industrial than it is, can be found people occupying out-of-date factories, built originally for a different kind of industry. In far too many cases these are over the dwelling-houses. Such premises they have to acquire by renting them at high prices. How much of their effort is stupidly wasted in unnecessary errands, going up and down awkward stairs or blocking up roads because there is not proper access to the premises?
1294 There is an enormous scope for increased productivity through investment in small modern factories. A man in a small way of business who wants to get a new factory has to incur an enormous surplus or else has to make arrangements for a loan over a very brief period. If we widened the scope of the business entrusted to these banks, we would have to calculate a proper proportion between the short term and the long term, because it would be necessary to arrange for liquid funds coming in from the repayment of the loan. The only time the banks do not have any worries of that kind is when they are completely stagnant; that is to say, when the deposits just equal the withdrawals, and so there is no serious thinking to do. If we were thinking in terms of extending the service, we would have to get a balance between short-term and long-term loans. That is why I have mentioned several of these possibilities.
There can be no doubt, however, that loans for new buildings over a longer period, perhaps ten years, could be very good business for such a bank and also of great social usefulness. I also think that it would be of considerable interest to certain Government Departments. How often have we had to contemplate the helpless, hopeless, hang-dog attitude of the President of the Board of Trade. When badgered to arrange this and that, factories for the new towns or the Development Areas, the right hon. Gentleman says, "I have no power. I cannot compel industry. I can only advise. I can only invite. I can only suggest."
I do not suppose that any of us want to go back to purely restrictive controls, driving the sheep down a particular alley by blocking up all the others. There must be an alternative. There must be scope for flexibility and here, I think, is an opportunity. Here the President of the Board of Trade could consult with the Minister of Housing and Local Government. It would be a rather good idea if an arrangement were made that, in order to get the right kind of balance in industry in the new towns, a number of small, modern and efficient factories could he offered to small firms without the resources to build factories themselves and transfer to a new area. That would be a most attractive proposition, a social service, and a profit to the bank.
1295 This is a theme which one could develop with a certain amount of enthusiasm for a long time. I have spoken at some length because I felt it was a pity to let such an occasion pass without suggesting that from time to time the whole basis of the working of these banks, in relation to the services which they should render, might be re-thought.
We do not, of course, oppose the Bill. However, I regret, not that those concerned in the banks at present have framed the Bill in this way—that was nothing less than their duty—but that someone from the political side, from the Treasury, has not thought fit to say that this is worthy of a bigger and better Bill and a bigger and better occasion, that it is worth giving to an institution which has a very honourable and successful record an opportunity to expand into an even greater future, an opportunity to do something bigger than it has previously done, and that it ought to have the backing of Parliament when it is ready to ask for such powers.
§ 12.31 p.m.
§ Mr. Marcus Lipton (Brixton)
By the time my hon. Friend the Member for Paddington, North (Mr. Parkin) had reached his peroration, he had almost persuaded me that the Bill was an economic White Paper in disguise. I must resist the temptation—it is a very strong one—to follow him in the very many interesting economic and sociological aspects that he has brought to the notice of the House.
Like the hon. Member for Torrington (Mr. Lambert), I must at the outset declare my interest, because I, too, am a trustee of the savings bank in my constituency. Looking over the list of honorary positions which I occupy, I have to conclude that my position on the board of my local trustee savings bank is probably the most respectable of the lot. I hope the Financial Secretary will regard it as a mark in my favour that, in addition to the other things that I do, I devote a little time, less time than I should like, to the work of the trustee savings bank.
It is very pleasant to reflect that in these days there is still a not unsubstantial section of the community which is not particularly interested in securing the maximum possible yield on savings and, 1296 instead of watching the ticker-tape or reading the City page of the more important newspapers and following the fluctuating rates of foreign exchange or industrial shares, is content to deposit savings in the local trustee savings bank and receive a return of 2½ per cent. on the money. The advantage, as the Financial Secretary pointed out, is that they have liquidity and know that the money is absolutely safe.
I suggest that those who still hold earlier issues of Savings Certificates might be persuaded to cash them and put the money into a trustee savings bank. If one holds the first and second series of Savings Certificates, one is getting under 2 per cent. for one's money. The special £1 issue certificate now earns about 1½ per cent. interest. It might be desirable to invite such people to switch into the new series of Savings Certificates or put the money into their local trustee savings bank.
There are also some people who for some reason or other are holding on to bank notes of high denominations, such as £10, £20, £50, £100, £500 and £1,000, which were discontinued in 1942, and £200, which were discontinued in 1928. According to the last return of the Bank of England, there are still seven £200 notes, 94 £500 notes and 114 £1,000 notes locked up in boxes somewhere or hidden under beds. No one knows the holders of the notes, but I take this opportunity of inviting them to dig the notes out from wherever they are resting at the moment and put them on deposit in a trustee savings bank or in some other useful form of national saving.
In introducing the Bill, the Financial Secretary made a much better speech than he normally does, and I congratulate him and the Treasury official who provided the draft on which his speech was based. I do not think there will be any difficulty in ensuring that the Bill passes through all its stages at the earliest possible moment. It will certainly be an encouragement to the people who are devoting so much of their time to the work of the trustee savings banks. Whether or not it is a disguised wage claim I do not know, but whether it is or not I am in favour of it. I hope the Bill will find its way to the Statute Book at the earliest possible moment.
§ 12.37 p.m.
§ Mr. Powell
I ask leave of the House to speak again to refer to some of the points which have been put to me during the debate. I was subjected to a little good-tempered criticism on grounds of nomenclature, which I think was entirely unjust, for when King George III declared that he gloried in the name of Britain, he meant to include, pointedly and even offensively, in that description the Scots. I recognise, as I know the House recognises, the important part played in the trustee savings movement, especially in the early days, though no less than today, by the Scottish Trustee Savings Banks.
The right hon. Member for Colne Valley (Mr. Glenvil Hall) appeared to be urging that the standard rate should at once be raised to the new maximum of £3 2s. 6d. I do not think that that would be necessary or desirable, since the average total costs of the trustee savings banks, including payment of interest to depositors, are at present around £2 19s. When the right hon. Gentleman prophesied that another Bill would be necessary in the next five years to raise the maximum, I was not clear on which of two assumptions he was working, that the Labour Party would lose the next General Election or that it would win the General Election and lose the battle against inflation.
The right hon. Gentleman referred to Clause 7 and the effect on the Consolidated Fund of the Bill, and, in particular, of Clause 4 (7), which deals with payments out of the Closed Banks Fund. Since the Consolidated Fund guarantees the income and capital of the Fund for the banks for saving, anything in this Bill which would increase the calls upon that Fund in any way would increase the ultimate potential liability of the Consolidated Fund and must, therefore, be covered by the proper machinery in the procedure of this House.
Like the hon. Member for Brixton (Mr. Lipton), I will not be drawn into following the hon. Member for Paddington. North (Mr. Parkin) in his long disquisition on the potential scope for investment by the trustee savings banks, not all of which I can say might be to the taste of the trustee savings banks. I would only say that if it be true that the raising by this Bill of the statutory maximum rate 1298 of interest payable by the National Debt Commissioners is equivalent to the satisfaction of a wage claim, I think that is inconsistent with his demand that these banks should widen their service to the public at no cost.
§ Mr. Parkin
Is not the whole case of the hon. Gentleman and his Government that the increased wages can only be paid if there is increased productivity? Have I not been suggesting that the way to meet that is to make the banks bigger and more efficient? Then the "wage claim" could be met without having to smuggle it through Parliament in contradiction to the policy applied by every other Member of the Government.
§ Mr. Powell
If the hon. Member has discovered a method of extending the service to the public without any increased cost, that is an important discovery which, perhaps, on a more suitable occasion he might explain. I can assure him that the net effect of what is being done by this Bill In assisting the trustee savings banks in their operations is disinflationary. It is basically for that reason that on behalf of the Government I thank hon. Members in all parts of the House for the reception they have given to the Bill.
§ Mr. Glenvil Hall
May I put a question which has been worrying some of us to the hon. Gentleman? I should not have contemplated doing so if we were pressed for time, but we have finished the debate on the Bill a little earlier than some contemplated we would. Why, in Clause 2 (3), is the occasion taken—we are glad of—it to permit the special investment department of a savings bank to deposit moneys in another hank, a commercial bank—I suppose that for the sake of liquidity, and so on, assistance is given in that direction—hut it cannot deposit in another savings bank?
I cannot understand that. If this facility is to be extended to allow a savings bank to deposit in another bank why cannot it deposit in another savings bank? I wonder whether Sir Kenneth Stewart and other members of his association approved this, or pressed for something different.
§ Mr. Powell
Subsection 3 of Clause 2 is merely a re-enacting provision. It only re-enacts a power which exists in the principal Act of 1954. I think that the 1299 right hon. Gentleman will find the particular power for which he is asking in the preceding subsection.
§ Mr. Glenvil Hall
If I may have the leave of the House to speak again, I do not, of course, query what the hon. Gentleman said, but with all respect I should say that the wording of Clause 2 (3) does not seem to bear that out. This, as I understand, is a new power given to savings banks.
§ Mr. Powell indicated dissent.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).