§ Order for Second Reading read.
§ 11.5 a.m.
§ The Assistant Postmaster-General (Mr. Joseph Slater)
I beg to move, That the Bill be now read a Second time.
This is a short but important Bill which will, I am sure, receive the full support of the House. It follows the proposal made by my right hon. Friend the Chancellor of the Exchequer when he reviewed the Government savings services in his Budget speech last April. It relates to the Post Office Savings Bank, which, as the House will know, is the most widely used and probably the most affectionately regarded of all the national savings facilities.
The Government's immediate economic objective in encouraging savings is to restore a better balance in the domestic economy and to strengthen the balance of payments. A higher level of savings can help us to achieve this objective more quickly. I have in mind, of course, savings in the aggregate, since it is the postponement of consumption which is significant. But it is national savings which are specially important for the small saver—and the small savers as a group account for a large part of our total consumption, not only of domestic resources, but of goods and services from overseas. For this reason the Bill includes provision to encourage a bigger flow of small savings.
We are also on the threshold of a new experiment in national planning. The National Plan envisages a massive investment programme, both public and private, which will need to be financed, one way or another, out of the incomes we receive between now and 1970. In the economic language of the National Plan document, 1860The more rapid the rise in the ratio of savings to disposable income, the lower will be the taxation required".In the more terse words of my right hon. Friend the Chancellor of the Exchequer recently to the Scottish National Savings Committee, "More savings, less tax".
The Bill is designed to improve the tools available for achieving these objectives. It will repair an important gap in the scope of the Post Office Savings Bank services by providing for what the Bill describes as "investment" deposits. The Savings Bank, in fact, still operates fundamentally under the Statute which created it in 1861. It is a considerable tribute to the authors and sponsors of that Statute that with all the social and commercial development of the past 100 years the principles on which the Bank was founded are still sound today.
William Ewart Gladstone, who was largely responsible for promoting the concept of the Savings Bank, when looking back over his legislative work wrote:Selecting the larger measures and looking only to achieved results I should take the following"—and he named the Post Office Savings Bank among six enactments selected from his long career.
One of the main planks of the 1861 Statute, which is now consolidated in the Post Office Savings Bank Act, 1954, is a fixed 2½ per cent. interest rate on deposits. This has never been varied whatever fluctuations have taken place in interest rates on other savings and investments. In recent years, however, when gilt-edged rates have been high, the Savings Bank rate has tended to come in for some criticism, and we have naturally thought seriously about the possibility of increasing it.
We still consider, however, that a guaranteed and steady 2½ per cent. is a fair rate to pay on the present deposits which are virtually on call and carry a wide range of free facilities, especially as the first £15 of a person's annual interest is free of Income Tax. We accept deposits and withdrawals through no fewer than 21,000 post offices throughout the United Kingdom, and the popularity of the service is indicated by the fact that about 20 million people currently operate accounts with the Bank and make almost 100 million transactions a year. About 1861 35 million of these are withdrawals made on demand over post office counters.
We do not propose any material change in this ordinary deposit service. But the Savings Bank, despite its continued popularity, has for some years now tended to lose ground in relation to its competitors. The amounts withdrawn from the Bank now exceed fairly regularly the deposits, and had it not been for the interest credited to depositors' accounts annually, the aggregate balance with the Bank would have fallen.
Undoubtedly, people with quite small savings are now adopting a more sophisticated attitude to the investment of their money and, before making their choice, weigh more closely the alternatives open to them as regards both the income and facilities they offer. This is, of course, all to the good, if only because it means we must keep our services continually refurbished. We have concluded, therefore, that there is now a strong case for providing additionally within the Savings Bank for deposits on longer notice than the present ones which could be invested to earn the depositors a better rate of interest.
We must admit that in reaching this conclusion we have noted the way in which our friends in the trustee savings banks have developed their special investment departments through which they cater for longer-term deposits. Although special investment departments started towards the end of the last century, it is in recent years that they have grown apace and have undoubtedly contributed to the progress of the trustee savings banks as a whole.
We are not, of course, out to take their business, although I think the trustee savings banks would agree with us that some friendly competition between them and the Post Office Savings Bank is not a bad thing. But there are, for example, many areas, especially country districts, more conveniently served by local post offices than Trustee Savings Bank branches, and our objective is to provide Post Office Savings Bank customers with as nearly as possible an equally comprehensive service. Without in any way disparaging other savings media, we want to tap the undoubted confidence which many people place in the Post Office Savings Bank so as to 1862 get the extra savings which in these days of relative affluence we are sure are there to be obtained.
Therefore, the purpose of the Bill is to authorise the Post Office to run the new service and to invest the deposits received in a wider range of securities than that provided for ordinary deposits. Clause 1 brings the new deposits within the scope of the 1954 Act, but excludes certain of its provisions which are inappropriate to them—such as the provisions for the 2½ per cent. interest rate and the investment of ordinary deposits. Incidentally, the 1954 Act gives the Postmaster-General power to make Regulations with the consent of the Treasury for the transaction of Savings Bank business, and this power, as extended and modified by the Bill, will extend to the new business.
The heart of the new service will, of course, lie in its financial management. The basis of this is provided by Clauses 3 to 5. A new and quite separate account or fund is to be created, through which the whole of the new business will be transacted.
The balance of deposits over the relevant withdrawals and other payments will be invested to provide the income of this fund, and the fund will meet all the outgoings of the business, including the full cost of managing it. We are not expecting any subsidies whether from ordinary deposit business or from the taxpayer or from the Post Office: our intentions are to be strictly self-supporting. This is an objective which, taking one year with another, the Bank has handsomely discharged in respect of ordinary deposit business over the whole of its history. In fact, over the years we have paid to the Exchequer net surplus income from this business amounting to no less than £125 million. We shall not be committed to similar payments for investment deposit business, but we do, of course, accept as an obligation that the new service should pay its way.
We are confident that we shall be able to run investment accounts substantially more cheaply than our present accounts. Investment deposits will be repayable only after a period of notice, and we shall not have to cater to the same extent for the day-to-day purposes which many of our present accounts undoubtedly 1863 serve. There will, therefore, be less account activity, and no need for quite the same range of withdrawal facilities. Moreover, we believe that it will not be long before the new accounts build up considerably higher average balances than obtain in our ordinary accounts, and our investment income will thus be improved.
Lower costs will help to enhance the interest rate we can pay depositors, but basically the rate will depend on the income we can earn from investing the deposits. The Bill provides for a wider range of investments than the Government and Government-guaranteed securities authorised for ordinary deposits by Section 17 of the 1954 Act. Clause 4 does this by giving the Treasury power to make Orders which will permit our directing investment account moneys to a selection of the investments within Part II of the Frst Schedule of the Trustee Investments Act, 1961, which, as the House will recall, lays down the narrower range of investments in which trustees are authorised to invest after taking competent advice.
Not all of these investments would necessarily be appropriate for investment deposits at any particular time, but the Bill applies the whole of Part II of the Schedule so as to enable the Treasury to establish a basis of reasonable flexibility in investment policy for any future situation. Selected investments within the range will be prescribed by Statutory Instrument which will be laid in draft before both Houses of Parliament.
The House will wish to know now that it is intended to make an order including local authority loans and securities within the permissible range of investments. These, together with Government securities and securities of nationalised industries and undertakings, will, it is considered, start the new service with an adequate choice of investments offering good yields with proper security of capital. It will then be for the Post Office in agreement with the Treasury, and with the benefit of the experience of the National Debt Office and Government Broker, to decide within these limits precisely how its investment portfolio should be composed in the best interests of the business and of the 1864 depositors. In contrast with the ordinary account fund there is, however, no provision for creaming off any surplus from the new fund to the Exchequer, and that is, in my opinion, very important. Any part of its earnings not required for current payments of the business will be ploughed back and reinvested to the ultimate benefit of the people who use the service.
A statement of the investments of the fund will be included in the annual accounts which the Post Office and the National Debt Commissioners are required under Clause 5 to present to Parliament each year. These accounts will be prepared in accordance with the best commercial principles and will contain all the information necessary for Parliament to satisfy itself as to the Post Office's stewardship of the new business. A report by the Comptroller and Auditor-General, who will audit the accounts, will be presented to Parliament with them.
In order that the service should pay its way and be fully competitive we must be able to adjust our interest rate to meet variations in our income and expenses, and Clause 2 provides for this by giving the Postmaster-General power to determine the rate and to vary it with the consent of the Treasury. Any new rate will be published in advance. We shall give at least as much notice of any change as is required to withdraw the deposits its affects. The Bill requires us to give this notice through the Gazettes, and, as a matter of practice, we shall take any further steps necessary to bring changes to the attention of the public. One step will certainly be to put up notices in the main post offices. We do not, of course, expect to make frequent changes as we shall aim to fix the rate at a level which will remain reasonably stable over a period.
I would like to have been able to give the House a firm indication now of the rate with which we shall launch this service, but I think that hon. and right hon. Gentlemen will agree that we cannot at this stage be certain about this as yet. Unless, however, there is any significant change in the investment market in the meantime we should probably be able to start with a rate of about 5 per cent.
1865 This interest will be subject to tax, that is, it is not intended that the Income Tax concession on the first £15 of ordinary account interest will extend to investment account interest, but tax will not be deducted at source.
Apart from the actual rate, we intend to open the new service with interest calculated in exactly the same way as it is at present calculated on ordinary deposit that means to say that it is on complete pounds on deposit for complete calendar months. It will also be added to capital in the accounts at the same date, that is, 31st December. These details are to be made by regulations so as to allow them to be more easily adapted to future requirements of the service if necessary.
Regulations are also to be made under Clause 2 fixing the notice to be given for the withdrawal of investment deposits. We intend to start by taking deposits on one month's notice, but the Clause will allow us to offer depositors a choice of different withdrawal terms, each with a different interest rate, if it should be decided to widen the service later.
Another important condition, I would submit, appears in Clause 7(1). This provides for the fixing by regulations of a minimum amount of deposit in an ordinary account before anyone may pay money into an investment account. The House will wish to know that it is intended initially to fix for this purpose a minimum amount of £50. This is the same amount as customers of the trustee savings banks are required to have on deposit in ordinary accounts before they can make payments into special investment accounts. Therefore, competition between the two institutions will thus be fair. This is a consideration which, I am sure, will be given full weight by the Government if ever there is any question in future of changing our requirements.
Clauses 6 and 8 make a number of provisions which will be applicable to both ordinary and investment deposits. The Bill in fact brings up to date in these Clauses certain provisions of the principal Act which are now rather out of line with current Savings Bank practice and experience. For instance, the Act still assumes that all deposits are made at post offices, but this is no longer the 1866 case—I think it is as well that Members of this House should be aware of this as many organised savings schemes now operate in Her Majesty's Forces, in firms and in industry. Moreover, it is current practice for many depositors to post cheques and dividend warrants direct to Savings Bank headquarters for credit to their accounts. Therefore, Clause 8 amends the principal Act to cover these matters.
Again, Section 3 of the 1954 Act makes somewhat rigid provisions for the headquarters office to send acknowledgements of larger deposits. Well, these provisions are in fact relatively little used, because by virtue of regulations the minimum amount acknowledged has been increased until it now stands at £250, and we think the time has now come to discontinue the acknowledgement of individual deposits. Indeed, the whole of the provisions in Section 3 about acknowledgements and deposit book entries have now outlived their usefulness, and Clause 6 substitutes power to make regulations covering all the matters now dealt with in the Section, but primarily this will give us greater freedom to adapt our detailed deposit arrangements to changing conditions now that investment deposits have to be catered for and the Savings Bank is on the brink of converting its system to computer working.
The powers proposed in Clause 6 will also enable us to make regulations, with Treasury consent, prescribing minimum deposits. We intend that for investment deposits the minimum amount should be £1. Regulations can also be made so that the minimum ordinary deposit, which has stood at 1s. since the inception of the Savings Bank, can be brought more into line with current money values and costs, and we are at present considering what the figure for ordinary deposits should be.
Section 4 of the 1954 Act empowers the Treasury to make orders fixing annual and aggregate limits on the deposits a person may hold. Clause 7(1) will enable separate limits to be made for investment deposits, and we envisage that there would be an initial aggregate limit of £5,000 on investment deposits but no annual limit. On the other hand, the trustee savings banks have a £3,000 aggregate limit on their special investment deposits, but, in view of our centralised 1867 funds and investments, we consider that we can safely pitch our figure at £5,000.
Among the other supplementary provisions in Clause 7 there are perhaps two which call for some comment. Subsection (2), and the Schedule to the Bill, make rather complex reading, but their purpose is merely to simplify procedure in cases where the National Debt Commissioners invest deposits in loans with local authorities under the powers conferred by Clause 4. The provisions are, in fact, modelled on similar provisions in the Public Works Loans Act which became law earlier this year. They have the effect that when loans are made to local authorities, here or in Northern Ireland, it will be sufficient for the Commissioners and the authorities concerned to enter into simple agreements to make the loans without the need for formal mortgage deeds.
Other supplementary provisions I would mention are those relating to tax under Clause 7(1). So far as ordinary deposit business is concerned, the Post Office is not liable for contributions in lieu of Corporation Tax on income or Capital Gains derived from the investment of these deposits. The trustee savings banks also enjoy exemption from Corporation Tax in respect of their ordinary deposit business. As regards their special investment deposits, however, the trustee savings banks have a liability to pay Corporation Tax on income and capital gains arising from the relative investments but with the benefit of a limited exemption and relief. This exemption extends to the amount of income and gains they apply in payment or credit of interest to depositors' accounts, and they enjoy relief in respect of management expenses. In order that our new accounts should have the same tax treatment as the trustee savings banks special investment accounts, the Investment Account Fund will make contributions to the Exchequer in lieu of Corporation Tax calculated on a similar basis. Clause 7(5) makes the technical provisions necessary to achieve that.
The Bill, like the principal Act, is to extend to Northern Ireland, the Channel Islands and the Isle of Man so that investment deposit business can be transacted at all the Post Offices which offer the present Savings Bank facilities. Subject to the passage of the Bill, we 1868 hope to launch the new service by next July.
It is important to state today that we intend to administer the service from Glasgow where, as the House is aware, the new headquarters of the Savings Bank is to be located under the Government's dispersal plans. Preparations for it are now going ahead.
Finally, I would invite the House to consider this project in a broader perspective. With investment accounts at one end of the spectrum and the Giro at the other, the Post Office will at last answer the need for a popular bank on a national scale giving a reasonably full range of simple facilities for transferring and investing money. I believe that these two major innovations ensure that 1965 will come to be regarded as one of the most creative and significant years in the history of the Post Office.
§ 11.33 a.m.
§ Mr. Paul Bryan (Howden)
We thank the Parliamentary Secretary for his very agreeable, able and clear exposition of the Bill. We welcome it. We will help it if it needs any help, and we shall improve it if we can.
I think that even hon. Members on the Government side will probably admit that our attitude towards savings on this side of the House is not merely negative. If one goes to any Conservative meeting at election time, it will not be long before you hear a speaker say that our record as a party on savings is second to none. One would hear the usual figures, that in 1951 savings were £116 million and that by 1964 they had increased 16 times. We do not reckon that that is just sheer chance. We regard it as being due to the fact that we positively stimulated savings, not least by reductions in taxation.
The threat to the effect of the Bill does not arise through any fault in its mechanics. It will undoubtedly come from the fact that over the last year we have had a higher rate of Income Tax and higher taxes on all the people who normally save. It is rising taxes, rising prices, and the further rise in prices that everyone expects in the new year, that are likely to blow up in the face of the First Secretary and impede savings as the year goes on.
One has to judge this Bill by the extent to which it meets the changing needs of the modern saver, and I underline the 1869 word "changing", because his needs are changing. That is one of the reasons why the Bill is necessary.
After the war, my party made a great point of the theme of the property owning democracy. It did not seem to mean an awful lot in 1947, because people did not really believe that it would come. But the property owning democracy has arrived, and a much wider range of people now own property, not only houses but expensive and valuable things like cars, television sets, refrigerators, caravans and the rest.
Such a wide-scale possession of valuable property was simply not envisaged in those days, but it has come. It has come because people have more money, but it has also come because their needs have been met. The car manufacturers and television manufacturers have met and more than met the demand. They might even be said to have over-stimulated the property owning democracy.
The time has now come for a capital owning democracy. Owing to the rise in standards, people have a bigger surplus to save. But that surplus has not been matched in the first case by an increased savoir faire of the saver on how best to save his money, and it has also not been matched by any great increase in the facilities for saving. We have had the unit trusts, which have done a wonderful job of work and are increasing all the time. But, in spite of their increasing funds, the fact remains that only 9 per cent. of the population own shares. We have had the work of the Wider Share Ownership Council in the field which its title implies. In a very interesting survey that it has just made of the saving habits and wishes of the manual worker, it comes to the conclusion that on the whole he does not own shares not because he has objection to shares but because he has never simply thought of doing so. He puts his money into the Post Office Savings Bank, Premium Bonds and trustee savings banks, in that order.
To discover the needs of the small saver, we have to see what are the characteristics of that section of the public which the Post Office Savings Bank serves. The chief characteristic is a general ignorance in things financial coupled with a growing awareness of investment values.
1870 One does not need to underline the general ignorance very strongly. It is one of the reasons for the success of the Post Office Savings Bank. Quite obviously, large amounts of money in the Post Office Savings Bank are not short-term savings. They remain there for a long time. If a person was really knowledgeable about where to put his money, he would not be content to draw 2½ per cent. on it. He would put it somewhere else.
One can also see ignorance in the success of the hire-purchase movement. Time and again one finds a person with money in the bank using hire-purchase. That is a poor bargain, for he is getting 2 per cent. below Bank Rate for his deposit in the bank, and he is probably paying teens of per cent. in interest on his hire-purchase contract. Similarly, anyone with overdraft facilities is stupid to use hire-purchase. A housewife will go a long way to save 3d. on a packet of Tide but, at the same time, she will not examine very carefully the conditions of her hire-purchase agreement. I do not think that I have to argue for very long to bring out the fact that there is a great unawareness of the disadvantages of hire-purchase facilities.
There is an increase in the movement of small savings, and one reason for the Bill is that deposits in the Post Office have been fairly static compared with the trustee savings banks. There has been a movement towards the trustee savings banks and, earlier in the year when we had a financial crisis, local authorities were offering high rates for short term loans and were getting money. The building societies are getting more and more conscious now that it really matters what percentage they offer on their savings money, which flows in and out in relation to their interest rate. There is a growing body of the public which knows a good return when it sees it. The object, therefore, of the Post Office Savings Bank should be not to outbid the existing media which go for the savings of middle-class people who are well served by stockbrokers and banks, but to give a better service, and in fact provide a better bank, for the category of saver about whom we have been talking. The first feature of a better bank is a better return, or at any rate an appropriate return, and that is what the Bill offers.
1871 Reverting to what I said about ignorance and awareness, the next thing that a bank should offer is information. I know that if there are 20,000 or 21,000 outlets, it is impossible to provide advice at every source. One knows that the person who runs a small sub-post office is not in a position to give financial advice, but, on the other hand, I think that something could be done. I live in the small village of Sawdon, which has 184 inhabitants. I would not expect advice from the local post office there, but would not it be possible to have advice available in, say, Scarborough? Could not there be a Post Office there to which people could go for a modest degree of financial guidance? There are only about half a dozen ways of saving open to the sort of people about whom we are talking, and the information could be given either personally or in leaflets.
If advice is going to be available, what is the service of this bank going to be like? It will be necessary to have separate counters. When it comes to investments, people want to talk about what they are going to do, and they want a little privacy. At the moment, owing to the staff problems of the Post Office, one's vision of a post office is the shutter up at two desks, and possibly queues at the rest. I happened to do a radio broadcast last night. Sir Robert Shone, who was on the programme, talked about the possibilities of future savings, about unit trusts administered by the Post Office, and possible contractual schemes, and so on. This may be good, bad, or indifferent, but how can the Post Office cope with it? This is a genuine worry about which we want to know more in respect of the Bill.
The House may think me somewhat ungrateful in throwing any doubts on new ideas because for the party opposite either to have or to welcome new ideas for savings is fairly novel. One throws one's mind back to the days when Premium Bonds were introduced. The present Prime Minister welcomed the idea by calling it a squalid raffle. He is always a sensitive man, and at the time he said:I believe this proposal will offend a great number of our people on sincerely held religious and moral grounds.However, he is now in power. In those days he called it a candy-floss bingo 1872 society. Now his "sincerely held views" have evaporated, and Harold, the Bingo King, has upped the jackpot to £25,000, and good luck to him.
§ Mr. Bryan
I have three questions to ask the Postmaster-General about the Bill. First, can he say why a month's notice is necessary for the withdrawal of a deposit, or part of one? Is it because this is the usual practice, or because of the mechanics of the thing? Is it not possible to do it at shorter notice? Is it a deterrent to persuade people to keep their money there? If we could reduce that period of notice it would be a great help. The Parliamentary Secretary said, in a nice unaggressive way, that the Post Office was clearly going to compete with the trustee savings bank. We therefore might as well try to beat the trustee savings bank at something from time to time, and perhaps this might be a way of doing so.
My next question, which also has to do with competition with the trustee savings bank, is why is £50 required in the ordinary Post Office Savings Bank before one can open an investment account? This seems a very big disincentive to start with. If one had £80 to invest and one found that one had to put the first £50 into ordinary account at 2½ per cent., one would hesitate about going through the bother of putting the rest into investment account.
From what one hears and reads, the trustee savings bank has found that this preliminary, or conditional, £50 in the ordinary account is often meaningless, because people put it in to qualify to get the other account, and then withdraw it as soon as they like, so I should be interested to hear the Postmaster General's views on this.
Thirdly, will the right hon. Gentleman say why a new Department is required at all? Obviously the reason for it at the moment is that the public are discovering and reacting to the fact that 2½ per cent. does not represent the modern earning power of their money. The old idea that 2½ per cent. was reasonable because this was short-term in and out 1873 money is clearly no longer valid, because, as I said earlier, a large amount of it stays there permanently, or as permanent as any money can be. What is wrong with the idea of not creating a new Department, but merely raising the ordinary rate from 2½ per cent. to 5 per cent. and penalising withdrawals by lower rates, or in some other way?
By doing that, there would be the simplicity of not having to create a new Department, and at the same time it would be a somewhat dramatic step. If everybody who had a Post Office Savings Bank account suddenly discovered that his interest had doubled, it would be an enormous stimulus to saving. People would wake up and take notice. My fear at the moment is that the Bill is going to come in with a whimper, rather than a fanfare of trumpets.
I hope that the right hon. Gentleman will show real enthusiasm for the Bill. I say this advisedly, because lately he has not shown much enthusiasm for the House of Commons. He has dealt with problems by way of written Answers instead of, as one would have thought, by Question and Answer in the House. Even this morning I read in the paper of the findings, or should I say a leak to the papers, regarding the future of broadcasting by pirate radio ships. We have been asking about this in the House for months, and I should have thought that any information which this broadcasting committee was going to release should come to the House first. Therefore, and I say this quite sincerely, I hope that the right hon. Gentleman will be with us when we consider the Bill, and will show real enthusiasm for it. I think that his absence has been offensive to the House. I wonder why he took so much trouble to get back here, when he is so seldom with us when we need to see him.
The Bill shows that we are becoming alive to the marvellous and inherent advantages which the Post Office has over all other banks. First, it has 20,000 outlets. The trustee savings banks does very well with 12,000 outlets. Any investment trust, or other savings organisation, would love to have 20,000 outlets, with overheads paid for as well. The outlets available to the Post Office are outlets 1874 into which the normal rank and file of the population have to go, perhaps not every day, but certainly weekly, for one purpose or another. Post Office outlets are, therefore, familiar places, which people are likely to use. They are very convenient. They are open when other banks are not, and, as the Wider Share Ownership Council found in its survey, the main reason why they are used is that they are convenient. The reason why the Post Office Savings Bank has been so successful, despite not over-imaginative management under both parties, is the fact that there are these tremendous advantages.
Everyone is now beginning to realise its advantages. Treasury officials see it as a promising way to increase savings. The Radcliffe Report refer to the immense saving possibilities of the Post Office, as did Sir Robert Shone, who in his enthusiasm reminded me of Ko-Ko in the Mikardo, who sangMy brain it teems with endless schemes both good and new for Titipu.I return to what I said earlier. Can the Post Office really give a good service, first of all, through this Measure and, secondly, in respect of other schemes in prospect which also appear to demand a very great deal in the way of service? I hope that the Postmaster-General will be able to convince us that he is able to provide this backing, and that he sees the Bill as what I believe it is, namely, an opportunity to bring a new and genuinely worth-while service to the public.
§ 11.51 a.m.
§ Mr. H. Hynd (Accrington)
The hon. Member for Howden (Mr. Bryan) has made an agreeable and constructive speech, spoilt by some rather unfair criticism of my right hon. Friend, especially in regard to his alleged absences from the House. I should have thought that that remark could apply to many hon. Members on both sides of the House—and in any case this is rather a bad day to complain about absences from the House, because there are many absentees today. Nevertheless, the hon. Member did offer a subdued welcome to the Bill. He seemed to praise it with some faint damns in parts, but at least he gave it a welcome, and I am very pleased about that.
1875 I would go further than he did, and offer congratulations to my right hon. Friend upon bringing forward just one more example of his enterprise and initiative in the Post Office since he took office. We are becoming used to these announcements of further imaginative extensions of work within the Post Office, and my right hon. Friend deserves congratulations upon them.
I have very few points to make about the Bill. It will open an entirely new and useful chapter in the work of the Department. I cross swords with the hon. Member for Howden on one minor point. I did not agree with his remarks about the ignorance of depositors in the Post Office Savings Bank. He seemed to imply that they put their money into the Bank out of ignorance of more remunerative channels for the investment of their money. In my opinion, this is not the reason why so many people use the Post Office Savings Bank. Most of them use it because it is such an uncomplicated way of saving money. It is a simple service, which does not bring them into contact with such strange people as stockbrokers, bankers, unit trust operators, and the rest.
People are rather shy of entering into that field, but a person can go to his local post office or sub-post office and obtain a savings book on demand. He can draw a few shillings if he wants to, or put in a few shillings. People are not primarily concerned with the amount of interest they get on their money. That is not to say that I believe that 2½ per cent. is a reasonable rate of interest. I do not think that it is. But that is not the prime consideration. People regard the Post Office Savings Bank as something to serve them and to be of use to them. That is why so many of them have Savings Bank books.
I hope that this idea will spread, and that every child will automatically be given a Post Office Savings Bank book at a fairly early age, so that he can get used to the idea of it. I agree with the hon. Member for Howden that if we are to make comparisons with the trustee savings banks there is no reason why we should not have a little competition with them. This £50 deposit is rather an artificial and perhaps an unreasonable amount to expect the ordinary 1876 Savings Bank depositor to have in his book before he can start an account under the new service. I hope that that point will be noted by my right hon. Friend so that, in Committee, he may be able to agree to a reduction of the amount.
With those few remarks I welcome the Bill and hope that it will have a speedy passage into law.
§ 11.55 a.m.
§ Mr. Anthony Grant (Harrow, Central)
Following what was said by the hon. Member for Accrington (Mr. Hynd) about encouraging children to have Post Office Savings Bank books, whenever, on the birth of my children, they are given Post Office Savings Bank books I smile politely, but I am a little inclined to wish that they had been given a unit trust share or something more encouraging. However, like the hon. Member, I welcome the Bill, and the dignified manner in which the Parliamentary Secretary moved its Second Reading. He roared rather more like a lion while acting a little more like a tortoise. Nevertheless, I welcome the Bill as a small and timid step, among other things, to mete out some belated justice to depositors in the Post Office Savings movement. This scheme, I understand, was prepared in the Treasury when my right hon. Friend the Member for Barnet (Mr. Maudling) was Chancellor, so there is no particular contention between the two sides about it.
For many years the Post Office Savings Bank has been regarded as the only bank and the only means of saving for wage earners and the broad mass of the community. I believe that, unwittingly perhaps, the Post Office has been trading on their ignorance of financial matters, of the change that has taken place in our economy and the belief that the Post Office is the only safe and convenient method, by giving to the depositor his miserable 2½ per cent. interest while, at the same time, unrealised by most depositors, the capital value of their savings has been whittled away all the time by inflation.
I sometimes have to administer small estates, and I am always shocked and disappointed to find that simple, thrifty and responsible people have saved money through the Post Office over the years 1877 and have left behind what they imagine to be a little nest egg for their descendents. It turns out that those savings have been whittled away to an extent that they would never have dreamed of.
In the case of many of the small estates the principal asset is the Post Office Savings book, and it is the responsibility of the Post Office to be imaginative and up to date. My hon. Friend referred to the Acton Trust survey—carried out on behalf of the Wider Share Ownership movement, of which I am a member—into the saving habits of wage earners and people in industry. It pointed out that the first thing a wage earner thinks of as a savings medium is the Post Office. It is almost the only medium that he considers. The survey revealed also something which the hon. Gentleman did not mention, namely, that there was a desire on the part of wage earners generally, if they knew more about it, to engage in more sophisticated savings media. This desire was particularly manifest among the younger people, in their thirties—the high wage earners. They desire very much more sophisticated means of investment, and that puts a heavy responsibility upon the Post Office as to what medium it should use.
I regret to say that the Bill perpetuates, in its ordinary deposit accounts, the mischief that has existed for so long. It makes a nervous attempt to break out from the state of affairs with its investment deposit accounts, but it is like the man who, on a very hot day, when everybody else is in the warm sea bathing, condescends to take off his shoes and socks and paddle at the edge but who, at the same time, leaves on his overcoat. This proposal is unimaginative. It copies the trustee savings bank special deposit which has been so successful that it has doubled since 1961, compared with the growth of Post Office savings, which is only about 5 per cent. If I am wrong the right hon. Gentleman will correct me.
I would have hoped for a more bold and imaginative step in the Bill. There is now far more money available for investment than ever before. There is also a great desire among people, in spite of what the hon. Member for Accrington said, to invest and to own more of the nation's wealth through shares. This is indicated by the growth of the unit trust movement, by the tremendous growth of 1878 the investment club movement, and by the increased interest in and increased amount of space devoted to financial matters in the columns of the national dailies. They appeal to an altogether wider section of the community, which is a wholly desirable trend from the social and the economic point of view. It is a trend which the Government should encourage.
The difficulty is the widespread ignorance of investment matters. Further, much of the existing media—like the Stock Exchanges—are simply not geared to meet the needs of small savers. The Post Office movement and the National Savings movement are the ideal media for spreading investment throughout the country. My hon. Friend referred in opening to Sir Robert Shone, on behalf of the National Economic Development Council, recommending that the Post Office should engage in unit trusts. He also recommended the contractual savings scheme operating in Germany.
I recall recommending this scheme to the First Secretary of State and Secretary of State for Economic Affairs during the debates on the Finance Bill. I said that it would help in some degree in the incomes policy that he hopes to achieve. I am afraid that all I got was a rather frosty shaking of the head. I hope, now that rather more important people than I have suggested this, that it will receive a better reception. This idea for a Post Office contractual savings scheme, put forward with all the weight and responsibility of the N.E.D.C., is something which the Wider Share Ownership movement and some hon. Members have been urging for a number of years. I hope that the Postmaster-General and the Government will not allow these ideas to rot in the lockers of the corridors of power.
There may be some anxiety lest a Post Office unit trust scheme could be described as in some way back-door nationalisation. If it were so, I should be the first to oppose it. However, the State already has powers to invest. In exercising those powers it does not have to disclose its investments—for example, the United States portfolio. If the Post Office were to engage in a unit trust scheme, it would have to disclose its investments. Provided that the management was entirely separate from the 1879 Government as such, I would wholly support such a movement.
Some people may fear that making some media of National Savings more attractive than others will simply take money from one pocket and put it into another, but figures over the last ten years have shown that competition and originality have stimulated an overall increase in savings. It is with an overall increase in savings that Parliament and the nation should be concerned. I believe that there is some need for an attempt to get a uniform tax relief system for small savers. There seems to be no logic in having one system of tax relief for one form of saving and different form for another. I hope that the Chancellor of the Exchequer will consider this matter. I am disappointed to learn that there is to be no tax relief on investment deposits. I hope that thought will be given to this.
The Treasury and the Government generally seem to be living very often in a different age on this issue, an age when wealth was confined to a small section of the community and a paternalistic State thought that it needed to protect the ignorant masses. Times have changed enormously. There is great scope for spreading ownership, and the responsibility that goes with it, throughout the community. As the Assistant Postmaster-General said, it is a simple fact that more savings mean less taxation and less savings mean more taxation. During the course of the debates on the Finance Bill, Treasury Ministers repeatedly paid lip-service and tributes to the cause and importance of savings.
Thus this Bill should be regarded as merely a slow start along the right road. Our aim should be to turn earners into owners. That should be the task of society over the next decade, because to spread wealth throughout the community and to create, as my right hon. Friend the Leader of the Opposition described it, a share-owning democracy is, in my view, a wholly noble ideal. It should be the task of the Government to translate this ideal into reality.
§ 12.5 p.m.
§ Mr. Albert Evans (Islington, South-West)
The Bill is long overdue. Action should have been taken years ago to give just reward to the small saver in the Post Office movement. Because of his 1880 lack of information, or his ignorance, as the hon. Member for Howden (Mr. Bryan) put it, he has been exploited by the State. An obvious financial injustice has been committed.
We are told that the Bill was in the pigeonholes already prepared by the Chancellor of the Exchequer in the former Administration and that my right hon. Friend merely picked it up and, after some time, proceeded to bring it before the House. At least he has brought it here. Previous Chancellors of the Exchequer over many years failed to give justice to the small saver. This first small step by my right hon. Friend is to be welcomed.
Has my right hon. Friend calculated the amount of profit that the community has made on the Post Office account over the years? By paying 2½ per cent. to depositors at a time when rewards for money were considerably higher, I should think that small savers have been underpaid by a very large sum. Now, at last, a Postmaster-General is attempting to begin to remedy that injustice. He is to be congratulated on this, even though he found the Bill waiting for him when he took office.
I hope that my right hon. Friend will use the powers the Bill will give him. I should not like to see him start dabbling in unit trust shares. I hope that he will leave the Premium Bond business alone. I think that he made a mistake when he started meddling with that. I hope that he will stick to his last and use the instrument in his hands and encourage the small saver. He has power in the Bill to raise the rate of interest to be paid on this special account as he thinks appropriate. The Parliamentary Secretary said that my right hon. Friend is thinking in terms of 5 per cent. That might have been suitable at one time. Let him be bold. If the fund allows him to go beyond the prevailing 5 per cent. that the trustees savings bank is paying, let him go beyond it. Let him bring in the savings. Let him outbid the unit trusts. Let him use the power the Bill will give him to use a community instrument—the Post Office—to encourage widespread saving amongst the less well-off section of the population.
When the Bill is enacted, my right hon. Friend will have no excuse. If the fund 1881 will allow him to pay not 5 per cent. but 5¼ per cent. at any one time, he should pay it. This Bill should be hammered by my right hon. Friend into an instrument for making small savings an effective and powerful element in our whole economic policy.
Having said that—I hope that my right hon. Friend has got the gist of my suggestion that I want him to lead the market, especially in small savings—I want to make one further point. The hon. Member for Howden, who spoke from the Opposition Front Bench, spoke about services, including information and guidance, to the small saver. There is a point here that the Post Office rather fails to understand. The small saver in a trustee savings bank can go and see 'he manager of his local bank and discuss quietly and in private his money affairs. The same facility obtains with the joint stock banks. Anybody who has an account has the opportunity to have a quiet, confidential word with his branch manager.
At present, there is no such facility with the Post Office. I cannot see how such a facility could be provided throughout the country at all post offices, but as the Post Office takes a considerable amount of savings of small people it owes them the duty of giving guidance about their investment policy and where they should put their money. This section of savers is in great need of advice about how to handle their investments. Ignorance in some of these matters, to which the hon. Member for Howden referred, could be obviated if people who are bewildered about the complexities of financial investment could have an interview with an informed official and get advice from him.
As the hon. Member for Harrow, Central (Mr. Grant) suggested, the small savings of these people frequently represent their entire financial assets that they have managed to accumulate. All too often their money is misused. They live in fear of using it. They know nothing about investing it in some kind of annuity so that they will have the benefit of their thrift in their old age. They desperately need guidance about their small savings. I know that this is not a proposal which could be quickly or easily implemented, but certainly at 1882 some stage the community, which takes the savings of large numbers of people, will have to think about giving some kind of advisory service on financial investment to the less-informed sections of our people.
§ 12.13 p.m.
§ Mr. Stratton Mills (Belfast, North)
I am continually horrified by the pious nonsense which one hears so often from politicians about savings. We heard a lot of it from the other side of the House during the Budget debates, but not only in Budget debates. It comes all the year round. Politicians must realise that exhortation to saving is not enough unless the Government of the day backed by the community can hold inflation in check and give a decent rate of interest and not cheat the people who by saving a little bit week by week find at the end of the day they have been cheated.
Under another hat, I spend a lot of time as a solicitor and I am constantly alarmed at the number of small savers who see the effects of inflation upon what they have put away. The small saver does not appreciate the effect of inflation while he is working—it is only when he retires that he sees that the money which he has put away has been eroded so much by inflation over the years.
I recently asked a Parliamentary Question concerning Savings Certificates and the value of £100 invested in each of the 12 issues since 1916, adjusted for the fall in the purchasing power of the £. In seven of those issues, despite accumulated interest, the small saver is getting back less in purchasing power than his original £100, despite the fact that the savings movement has had the benefit of his money for a considerable period. In three of the other issues the small saver is just about level pegging, getting back approximately his £100 in purchasing power. In only two of the issues, both of which date from the early days of the savings movement in 1916 and 1920, does the saver have slightly more in purchasing power than he put in. In a process of this kind, if the small saver finds that he is not getting a fair deal from Governments, he will look elsewhere. This has been one of the reasons for the considerable growth in unit trusts and other bodies such as the trustee savings banks and media of that kind.
1883 The House would do well to remember that the mass dailies—the Daily Mail, the Daily Express and the Daily Mirror, for example—now devote considerable space to the small investor, advising not only on shares or unit trusts, but on Savings Certificates and trustee savings bank matters. It is clear that particularly among the younger and middle-aged sections of the community, there is a developing interest in savings and in how to protect one's savings against inflation.
I welcome the Bill and congratulate the Assistant Postmaster-General on his presentation of it to the House. The Bill is long overdue. Although it could scarcely be called revolutionary in its principles, one should not be cussed about it and I am glad to see it coming forward. There is, however, little difference between this new form of deposit account and the services offered by the trustee savings banks. I hope that the Postmaster-General will be able to exercise the flexibility which he will have under the Bill to see how the new methods can have an edge over the trustee savings banks, thus stimulating competition.
As we have been told, this is the first structural change since Gladstone's revolutionary Bill in 1861. But 2½ per cent., which I understand was the rate under that Bill in 1861, was a handsome rate in an era when interest rates were much lower and when people did not live in an age of galloping inflation. I have forgotten which of Galsworthy's Forsytes is was who late last century paid special attention to the fluctuations in consols, but I am quite certain that he would have been reasonably satisfied with a rate of 2½ per cent. although he would have looked aghast at such a rate in 1965.
I feel, as the hon. Member for Harrow, Central (Mr. Grant) has said, that the Post Office has to some extent been taking advantage of the unsophisticated nature of the small investor. As my hon. Friend rightly said, however, the trustee savings banks have doubled their investment in recent years while the Post Office has remained virtually static. With the 4 per cent. per annum rate of inflation which we have seen in post-war years, the rate of 2½ per cent. offered by 1884 the Post Office is, frankly, not good enough.
I am not clear whether, under the Bill, the Postmaster-General has power to increase the rate of 2½ per cent. on ordinary account.
§ The Postmaster-General (Mr. Anthony Wedgwood Benn) indicated dissent.
§ Mr. Stratton Mills
Apparently the Postmaster-General will be unable to do that. I hope that the right hon. Gentleman will consider this matter further because, despite the heavy overheads of this type of fund, a fund which cannot earn more than 2½ per cent is very poor indeed. While I appreciate the tax exemption which is given, it must be remembered that the bulk of the people who use the Post Office Savings Bank are not, I suspect, paying the higher rate of 8s. 3d. in the £ Income Tax.
I turn to the question of the investment policy of the investment deposit account. As I mentioned, it is clear that fixed-interest deposits, with the rate of 4 per cent. inflation in post-war years, have done very badly indeed. I cannot help thinking that those who are responsible for investing these funds—whether it be the 2½ per cent. Post Office ordinary account or the National Savings account—have not paid sufficient attention to their responsibilities to the investor. They have tended to look towards balancing the interests of the investor with the capital needs of the Government and of nationalised industries. This is wrong and I welcome what the Assistant Postmaster-General said in that those who are responsible for the fund will pay primary attention to the interests of investors. Would it not be possible to have some form of independent watchdog over the National Debt Commissioners to see that the interests of the investor are at all times primary in the management of these funds?
I have three main points to put to the Postmaster-General. First, why the limit of £5,000 on deposits? Would not the right hon. Gentleman agree that it is unlikely that the amounts which savers in this type of account will invest are unlikely to be excessive, certainly when we think in terms of £5,000? It would nevertheless be a pity if such a restriction were written into the scheme.
1885 Secondly, is it not possible, assuming that the Bill will be passed at a reasonable rate of progress, for the scheme to start before July? Thirdly, I hope that it will be possible in the larger post offices to have special counters. There are at present 20 million savers using this method of saving—100 million transactions a year and 20,000 post offices. With this volume of saving and the number of transactions, would it not be advisable, certainly at the larger post offices, to have special counters where the small saver is able to go, rather than having to join the endless queues of people who are concerned with entirely different matters? The atmosphere of such a queue and the pressure of work on post office staff is at present not a good atmosphere for this kind of investment account.
The Bill, though not very exciting, is nevertheless to be welcomed.
§ 12.24 p.m.
§ Mr. David Gibson-Watt (Hereford)
We have a chance today to refer to the great work which the National Savings movement does throughout the country, of which the work of the Post Office Savings Bank is part. It so happens that tomorrow I shall be present in my constituency of Hereford at the presentation of a shield to the best voluntary savings collector in the National Savings movement in that county. We should pay tribute to those who, in street and village, factory and school, do so much to forward the totally voluntary work of the National Savings movement.
As hon. Members have made clear, the Bill is designed to improve the position of the Post Office Savings Bank. In so doing, it clearly takes note of the success of the trustee savings bank. One might almost describe it as keeping up with the Jones's—though in this case that is certainly worth doing.
My hon. Friend the Member for Howden (Mr. Bryan) and others referred to the ignorance which has existed over the years in regard to investments. This ignorance has gradually been dissipated and more and more people are today aware of the importance of getting a good return on their money invested. Perhaps it is not too much to say that the queries raised over the First Secre- 1886 tary's reference to a 3 per cent. mortgage rate have drawn attention to the ignorance which exists in some quarters about interest rates.
The Bill represents a development of Post Office savings, and we wish it well. It means an added amount of business to be carried out by post office employees throughout the country and it will undoubtedly add, if this investment departure is successful, to the crowding and queueing which is unfortunately a feature of many post offices.
Bearing this in mind, I echo the remarks of my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) about it not being easy to give and receive the sort of advice about investments which we all need from time to time in the atmosphere which exists in some post offices, particularly in heavily populated areas at peak periods, where queues are long. I hope, therefore, that the Postmaster-General will consider having special counters in post offices to deal with this new matter.
I suppose that the Post Office will be putting out literature to postmasters throughout the country telling them how to explain to the public how these new departures will affect them and how the additional moneys will be invested. Once the scheme is going, after July, will the Postmaster-General use the wide powers available to him to advertise and publicise the investments made from the money invested in the investment account? I trust that this will be done from time to time because it would be a great encouragement to people who are going in for this new form of investment to know just what they are investing in.
I should like to add to what has been said about the handling by the Post Office of this new business. In past months we have seen the inception of the giro system, and now we have this new departure in the Post Office Savings Bank. We on this side have not opposed the giro system and we shall not oppose this Bill, but it is right to ask whether the Postmaster-General is satisfied that the Post Office, as at present constituted, can carry these new burdens.
We must not get away from the fact that the fundamental duty of the Post 1887 Office is to see that the postal and telephone services hold their own, and do not deteriorate. All hon. Members get a continual stream of complaints about the standard of the parcels deliveries and, in some cases, about the letter post. This is no crack at the Post Office—it was admitted by the Postmaster-General in his speech at Aberdeen earlier in the year. We all realise the great strain put upon this very large Department. Is the right hon. Gentleman satisfied that the Post Office can carry these new burdens?
Is he certain that the move to include an investment account in the Post Office Savings Bank will be sufficiently attractive if he still insists on 50 per cent. being left in deposit account? Perhaps he will tell us why he thinks that provision should remain. Again, does he think that the interest rate of 2½ per cent. on deposit accounts should remain unchanged? Might not that rate be increased? Does he envisage a large movement of money from deposit account to investment? I know that he cannot foretell that with any assurance, but no doubt he has taken it into consideration.
We are happy to see this Bill, and wish to give it a speedy passage through the House. The various remarks made by hon. Members have been pertinent, and I underline that the whole success of savings depends upon the structure and the level of taxation. With regard to what the Chancellor said about savings in a speech referred to by the Assistant Postmaster-General—and I was glad to hear that he had said it—let the Chancellor realise, above all men, that savings fundamentally rely on how he fashions our taxation policy.
§ 12.34 p.m.
§ The Postmaster-General (Mr. Anthony Wedgwood Benn)
This has been a very interesting debate and, like all debates centred round savings, has had a certain bipartisan flavour. The Post Office is not only responsible for the Savings Bank but manages about 75 per cent. of all National Savings—and I would join in saying how important the savings movement is, and how important is the need to stimulate savings.
Despite the thin smoke-screen of political controversy from the Front Bench opposite, there was a pleasantly bi- 1888 partisan note which drew me towards what Lorenzo said in "The Merchant of Venice":How sweet the moon-light sleeps upon this bank!Here will we sit, and let the sounds of musicCreep in our ears; soft stillness, and the night,Become the touches of sweet harmony.The only difference between the two sides is that we have done it and they did not, but when hon. Members opposite say that it was unimaginative to have done it in this way I must reply that we have made a real advance, and that this year, with this step and with the Giro that is coming, there will be the first major change in Government banking plans for at least a hundred years.
I should not like to issue from this debate the idea that a 2½ per cent. rate of interest is not good value for money. The exemption from Income Tax of the first £15 of interest means that a married couple with £1,200 investment are getting an effective rate of 4¼ per cent., which is not bad at all. Coupled with the fact that there are immediate withdrawal facilities, the Post Office Savings Bank represents a very convenient way of holding money. It would, therefore, be a mistake if our anxiety to look at new methods of attracting savings were to lead us to write down the Post Office Savings Bank which now exists, and which has existed for very many years.
§ Mr. Stratton Mills
Has the Postmaster-General any figures of what approximate proportion of people who are savers are taxed at the full Income Tax rate of 8s. 3d. in the £?
§ Mr. Benn
I cannot give the figures. I am not even sure that such figures are available. The answer would involve Inland Revenue figures and Post Office Savings Bank figures. But, if they are available, I will write to the hon. Gentleman and let him know.
I should now like to try to deal with some of the questions that have been put. First of all, there was the question about an annual report, and making known to the House what investments are held for the Investment Account. This information will be published in the annual report. It is already available for the Savings Bank. and there 1889 will be no difficulty in making it all available.
The hon. Member for Howden (Mr. Bryan) spoke of the desirability of providing what I took to mean investment advice in Post Offices. As managers of so very much of the National Savings Movement, we have a large number of leaflets and much other material available in the Post Office for would-be savers. Into the Investment Account we shall start, people will be putting a sum of money that will be invested on their behalf by us. There is therefore no question of people making an investment choice between different securities when putting money in the new Investment Account. Whether it will be possible for the Post Office to assume, in addition to its many other functions, an investment advice service operating through post offices for savers interested in a wide range of investment is a question that goes very much wider, but I shall certainly read very carefully what the hon. Gentleman said, and see whether such a thing could be considered.
The hon. Member also referred to the length of notice for withdrawal. It really is necessary to have a one-month period of notice in order to make it possible for the money to be invested in securities which will give a high enough rate of return to permit us to offer a reasonable rate of interest to the depositor. We cannot combine the advantages of a higher rate of return, which is what we want to attract new savers, with the withdrawal-on-demand facility which is quite reasonable at the 2½ per cent. rate offered by the Post Office Savings Bank.
In this case it is necessary to have some longer period of notice, but in the Bill we have provided for the possibility of varying the notice one way or the other because we conceive it possible that we might have two rates of interest; perhaps a higher rate for money that is on even longer call. We are not thinking in rigid terms here. That is why, in contradistinction to earlier Post Office legislation, so much has been left out of this legislation. Once one legislates one is tied and, as we all know, to get a legislative change through the House is very difficult. To act by regulation preserves the essential Parliamentary control but gives greater freedom of manoeuvre.
§ Mr. Bryan
On the question of the month's notice, is it not a fact that even now with the 2½ per cent. system and withdrawal whenever required, the sum available to the Post Office for investment is fairly steady because incomings and outgoings are pretty equal? It alters only marginally from the point of view of the investment and this from the point of view of the individual makes little difference.
§ Mr. Benn
This must be left to the discretion of those managing the fund. I shall certainly see if this is a point we can look at again. I think that in the first instance it is right to establish the idea that this is not a high-interest easy-withdrawal deposit account such as the Post Office Savings Bank account. It is intended for a longer period and for that a period of notice of this kind does not seem unreasonable.
Another point raised by hon. Members was whether it is right to insist on a £50 balance in the deposit account before money can be put into the investment account. This is a matter which, if no one else had raised it, I should have drawn to the attention of the House. There were a number of considerations in our minds in fixing this. The first is the similar provision laid down for the trustee savings banks. Despite this, as pointed out by the hon. Member for Harrow, Central (Mr. Grant), the trustee special deposit accounts have been an enormous success. To say that it is unimaginative to repeat what has been a triumphant success for some years, seems rather harsh.
§ Mr. Benn
I do not see that if something has been a success for so long we can say it is unimaginative to adopt it in another direction. Another factor is that, although a little competition in savings is all right, it would be wrong to suggest that we should direct Post Office Savings Bank investment in this new form into cut-throat competition with the trustee savings banks. They perform a useful function and are well trusted by the public. This £50 is not incorporated in the statute, but will be dealt with by 1891 regulation. The Assistant Postmaster-General made clear that the relationship between the trustee savings banks' minimum figure and ours would be borne in mind if ever it were thought desirable to make an alteration.
Another factor we have to consider is that a new service of this kind has never been available in so many places as this will be—there are far more post offices than trustee savings banks offices—and the possibility of an enormous switch has to be considered. Therefore, some threshold has to be borne in mind because otherwise there could be an effect on the gilt-edged market if there were a major switch. I must also remind the House that this provision will be made by regulations. There is no requirement that there should be a £50 balance in the ordinary account at all periods. There will not be a legal requirement that if one puts money in an investment account and then, over Christmas, runs down the ordinary account that will invalidate the amount put into the investment account.
Another point raised was, why should we not raise the Post Office savings interest to 5 per cent.? This has been pressed for in the past as people realised that 2½ per cent. in recent years was not so attractive an investment as it might be. There are a number of reasons why this cannot be done. I have mentioned the ease of withdrawal. Another reason is the special tax allowance which could not be available on the new account. If we were to seek to find a solution on the lines suggested, legislation would be required to remove the £15 tax allowance from the new account and also make it possible for us to vary the rate of interest paid.
As my hon. Friend the Member for Islington, South-West (Mr. Albert Evans) said, we want imaginative management of the fund. The reason why we do not describe it as a 5 per cent. investment account is that we visualise the possibility of variations. We feel that this is the right way of going about the matter. When this matter has been pressed in the past, for instance when the right hon. Member for Barnet (Mr. Maudling) was Chancellor and was pressed on it in July last year, he drew attention to the essential difference between the two systems.
1892 The hon. Member for Harrow, Central raised the question about proposals by Sir Robert Shone for new facilities for savings. The Chancellor made it clear in his Budget statement that there was a possibility of adopting various devices and he said that a State operated unit trust was being considered. This Bill is a proposal which we hope to get through and to get started quickly. But there are other issues and we shall consider alternatives.
I come to the questions raised by the hon. Member for Belfast, North (Mr. Stratton Mills). He asked why we should leave the absolute upper limit of £5,000. In this respect we have gone further than the trustee savings banks as the limit for them is £3,000. With centralised accounting it will be possible to go up to £5,000, but there must be some limit. The possibility of some hot money movements has to be considered, but this, like most of the effective working arrangements under the Bill, will be governed by regulation and can be looked at in the light of experience.
The hon. Member asked when the service would start. I very much hope that it will start by the summer of next year, but I would have been strongly criticised by hon. Members opposite if I had announced the starting date before Parliament had passed the legislation. If we are to have a rule about Parliamentary authorisation, it must be adhered to. It has obviously been possible to make certain preliminary preparations, but clearly until Parliament has passed the Bill—that is why we are glad that it is being given such a fair wind—we cannot get on with the major preparations which will be necessary.
Another point which interested me very much has been raised in a number of speeches. That was the question of whether or not in post offices there should be special counters to deal with this type of business. When the hon. Member for Howden visualised a post office with two positions closed and long queues, he did rather less than justice to the average post office. I visualise the post office as a place one may find almost everywhere open almost all hours of the day as distinct from a bank, which closes early in the afternoon and which it is even contemplated may close entirely on Saturdays.
1893 On the subject of internal management of post office counters my predecessor—perhaps this went back to his predecessor—set up a working party to study the way in which counters should be operated. That working party came to the conclusion that great benefits were to be had from the so-called all-purpose counter as distinct from the one where a person may buy stamps in one section, receive pension payments in another, and do parcel transactions in another. If there is one thing more irritating than standing in queues in a post office it is to stand in one queue for one item there and see several disengaged clerks who are selling stamps, dispensing wireless licences and so on, but cannot issue—say—a postal order. The all-purpose service counter undoubtedly deploys counter staff to the best possible advantage from the point of view of the public.
If we are tempted by this idea that we are to become investment brokers, which is a very exciting idea, are we to move away from the all-purpose service counter towards having an investment position which may or may not be regularly used? It would then be possible that there might be a clerk, a postal and telegraph officer, specialising in investment business, who, if there were not a lot of custom at his position, would not be able to help to relieve the queues which at peak periods might be developing for other business. At first thought I do not think that this idea would recommend itself to us.
However, work is going on in the Post Office to see whether we cannot to some extent mechanise the work of the counter clerk so that different transactions can be coped with on the same machine, ultimately to go on to a punch tape and, of course, be entirely computerised. This brings me to what the hon. Member for Hereford (Mr. Gibson-Watt) said about the strain which these proposals would impose on the Post Office.
In fact, the number of new staff involved in the new investment accounts is small. It is far smaller than the number of staff whom we shall lose by natural wastage when computer operations come to the Post Office Savings Bank in its move to Glasgow. Although 1894 there is some validity in one aspect of what the hon. Gentleman said, and I will return to that, it certainly will be true that, as a result of computerisation, the Post Office will be offering not only its existing Post Office Savings Bank facilities much more efficiently and economically, but also the new services with fewer staff at the end of five years than at the beginning.
This is a very remarkable achievement. Of course it is the product of technical change, but it has involved the Department itself in a great deal of complicated programme analysis work which is going on at the same time as the move to Glasgow. I think that I have dealt with most of the questions of the hon. Member for Belfast, North. I can confirm that we hope to get all this done by next summer, which is one reason why we want the Bill to go through as quickly as possible.
Finally, I will try to set these proposals in their wider context. In the Post Office we already have a very large number of communications functions. The post and telephones have been mentioned and we also have some limited policy responsibility for television matters and we have this banking function. All of these are communications facilities. After all, all banking is really only a matter of communications, of transmitting from one place to another knowledge of a man's credit. When the credit card and the computer and the Giro come in, the carrying of cash will become much less necessary and it will be much more a matter of moving the news about how far a man can be trusted on credit from one place to another—rather like the man with the £1 million note and who—in the story—never needed any cash at all.
The new banking rôle for the Post Office in which investment accounts and the Giro system will function is extremely interesting and this is one of the reasons why consultants were called in at the beginning to consider the way in which we did our work. In practice, from the point of view of the Post Office, this will be largely a matter of work at post office counters. It will not in any way interfere with, delay or slow down the delivery of the mail or any of our other functions. It will be a counter job.
1895 Counter clerks play a very important part in the Post Office, because they are the people with whom the public has to deal. They are highly responsible people and we look to this idea and the Giro as a way of giving them a new and more important rôle to play in the work of the Post Office. We do not believe that these proposals will impose a strain upon the Post Office organisation in the sense that it will in any way make it more difficult for us to perform our other functions, particularly the delivery of post, which is subject to staff difficulties from quite another direction.
May I conclude by saying that the Post Office is very well trusted by the public and that the public will welcome the opportunity to use its services in order to make investments of this kind. I strongly reinforce what has been said by previous speakers, namely, that the extent to which we can save as a community will decide how we can cope with the problem of inflation which faces us and will also ultimately decide our tax bill from whatever Government happens to be in power at any time. The rôle of savings in the National Plan has already been made clear, and the rôle of savings in the future of our country is of greater importance than ever before.
We are sometimes divided in political controversy between Left and Right. Sometimes there is another controversy between Governments and Opposition, whoever is the Government and whoever is the Opposition. But inside each political party a very much more interesting argument is always going on. It is about how much importance should be attached to the present satisfaction of present wants and how much to investment by the community to meet its future needs.
It may well be that the economic future of the country depends on our winning this battle more than any other, on persuading people to put away for the future, to see the need for investment and to regard their political function at election or other times not only as seeing how much they can satisfy current demands for themselves alone. In so far as the Post Office's new account, which is an investment account, helps to meet this need to save and to encourage others to 1896 do so, I hope that the Bill will rapidly reach the Statute Book.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No.40 (Committal of Bills)