§ 10.4 p.m.
§ Mr. Stratton Mills (Belfast, North)
I beg to move,That the Post Office Savings Bank Regulations, 1966, a draft of which was laid before this House on 21st April, be not made.I think that the Assistant Postmaster-General will accept that the Opposition have constructively supported the Act which went through the House in the last Parliament, and will agree that we can claim at least some part of its parentage. However, we feel it right to probe these Regulations now that they are before the House. A number of the detailed points in the Regulations with which we have some doubts were fully debated in Committee, and it is not necessary to burden the House with them. The Regulations are partly a consolidation Measure, consolidating the 1938 Regulations and the subsequent Amendments to them, as well as extending them to the new investment deposits created by the 1966 Act.
We on this side of the House welcome the oportunity which the Government have taken to consolidate all these Measures into one document. Many of the Regulations have a slightly motheaten appearance, and I suspect that some of them date back to the time of Mr. Gladstone. It is, perhaps, a pity that the Assistant Postmaster-General has not looked at some of them afresh. I hope that he can assure us this evening that, when the Regulations have gone through the House, a pamphlet will be prepared in simple terms, setting out their operation for the benefit of the general public.
The development of the Post Office banking services has been increasing in momentum, and certain of the new services that are now promised will greatly extend the range of services. Is the Assistant Postmaster-General satisfied that the structural organisation is satisfactory? Should the banking side of the Post Office be more of a self-contained unit than at present, similar to the self-contained units for posts and telecommunications?
I understand that McKinsey and Co., the management consultants, are looking at the whole question of postal services. Perhaps they might look at the 421 banking side of the Post Office, because I suspect that many of the procedures in operation go back a very long time and are, perhaps, not fully relevant to the services now being developed.
There are five detailed points which I wish to put to the Assistant Postmaster-General concerning the Regulations. My first concerns Regulations 20 and 21, which deal with the procedure on withclrawal. As is well known, £10 a day can be withdrawn on demand from the Post Office, and more can be withdrawn by sending the savings book to the principal office of the Post Office Savings Bank. Is it satisfactory that the book should be sent to the principal office?
The Assistant Postmaster-General should tell us this evening why this is necessary. He may say that it is essential for checking accounts, but he will know that the trustee savings banks can pay out £50 on demand and that their local offices have a much greater discretion in making payment on a local basis to individual depositors. The building societies are also much more flexible in their procedure, and the ordinary joint stock banks inevitably must have a much more fluid system. Is not a more flexible procedure possible than the existing system of sending the savings book or withdrawal form and having everything centralised at head office?
Secondly, Regulation 40 deals with withdrawal from the investment deposit account. A month's notice of withdrawal is required. I should like to know what power the Postmaster-General has to pay out money in an emergency. Regulation 40 (1) uses the wordsExcept where the Postmaster-General otherwise directs".I suspect that these words may be sufficient to give discretion to the Postmaster-General. Emergencies very often happen, and there could easily be circumstances in which it is impossible for people to wait for a month before being able to withdraw money from the investment account. It may be, for example, a matter of the illness of a relative abroad or of putting down a deposit on a house. These are matters in which a much more discretionary procedure would be welcome.
My third point concerns Regulations 29 to 35 and the procedure of nomination. This is a continuation of the pro- 422 cedure in the 1938 Regulations, but it has now been extended to investment deposit accounts. If I may remind hon. Members of the procedure, under a nomination a person who has an account may nominate someone to receive his funds in the Post Office after his death—the important feature is that the nomination is not revoked by a subsequent will.
I have considerable doubt as to the desirability of this practice. Certainly it was satisfactory when the ordinary accounts of the Post Office catered for smaller savers with, perhaps, average accounts of £200. Now, however, the investment deposit accounts can go as high as £5,000, in addition to whatever money a person has in the ordinary account.
I question whether, for what might be a comparatively large sum of that kind, this nomination procedure is desirable. Suppose, for example, a person makes a nomination and years later makes a will but does not reveal to his solicitor that he has made an earlier nomination. His assets in the Post Office Savings Bank will not be covered by the will as the nomination cannot be revoked by a subsequent will. Considerable unfairness could arise in this kind of situation.
The Assistant Postmaster-General will be familiar with the procedure in the trustee savings banks in which a limit of up to only £200 can be covered by nomination, as provided by the 1956 Regulations. It may well be that in the drafting of the present Regulations this point has been overlooked, and I suggest that a limit should be placed upon the amount which can be dealt with by nomination.
The fourth point which I should like to make deals with Regulation 41, which concerns the interest on investment deposits. In Committee, we expressed our dissatisfaction with the procedure by which only moneys which have been in the Post Office for a complete month were eligible for interest, and we have no wish to go over that ground again. However, the Postmaster-General hinted that the procedure might be changed when some more mechanised accounting system was installed. I suspect there was a slight change of emphasis between what he said in Committee and what he said subsequently at Question Time to my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot) on 423 Wednesday, 18th May. I felt that on that occasion he was looking more favourably towards the proposal of introducing a more flexible system.
I would ask the Assistant Postmaster-General to tell us what arrangements he proposes to make to publicise the fact that interest is payable only if the deposit comes in before the 1st of the month and, similarly, that the interest for certain days is lost unless the withdrawal is made shortly after the beginning of the month. That is a matter which should be publicised, and it might be put in the form of a note in the front of the deposit book. It should be displayed in the Post Office, it might be outlined in the pamphlet which I understand is to be produced, and it should also be drawn to the attention of depositors on the lodgement and withdrawal dockets in each Post Office. It is important that it should be fully drawn to the attention of depositors.
My fifth and last point deals with Regulations 52 to 54, which concern the indemnity of the Postmaster-General. Regulation 52 is very widely drawn. As I read it, if a Post Office book is stolen and, by mistake, the Post Office pays out to the wrong person, under the Regulation as drawn the Postmaster-General is not liable, even though the mistake may have been due to negligence in accepting an incorrect signature. The only remedy which the depositor would seem to have is to find the person who took his book and withdrew the moneys and institute civil proceedings against him.
That is an unsatisfactory procedure, especially now that the moneys in such accounts can amount to very substantial sums. A joint stock bank is not protected in that way. If it pays out on a cheque carrying the wrong signature or on a cheque from a book which has been stolen where someone goes to the bank and forges a signature, the bank is responsible. I understand that the trustee savings banks do not have anything like the same immunity, and I do not think that the building societies do if they make an error of that kind. I would suggest a similar procedure in the Post Office, and I ask the Assistant Postmaster-General to look into the way in which Regulation 52 has been drawn.
424 Those are just five basic points on the Regulations. In general, we wish them well, but we should welcome some clarification on those points from the Assistant Postmaster-General.
§ 10.19 p.m.
§ The Assistant Postmaster-General (Mr. Joseph Slater)
Let me say, first of all, that I am grateful to the hon. Member for Belfast, North (Mr. Stratton Mills) for the obvious interest and care with which he has studied the draft Regulations and for the suggestions and comments that he has made.
Before I deal with them specifically, the House will wish me to say a general word about the purpose of the Regulations.
First, they cover new matters which were provided for in the Post Office Savings Bank Act passed by the previous Parliament, notably the Investment Account Service which the Post Office Savings Bank hopes to introduce in a few weeks' time. Then there are a few small amendments to the conditions of ordinary deposits, some of which also arise from the 1966 Act, the principal ones being mentioned in the Explanatory Note to the Regulations. We have also been glad to take this opportunity of consolidating the Savings Bank Regulations as a whole, and the new code brings together the changes arising from the 1966 Act with the existing Regulations.
The hon. Gentleman, when talking about these Regulations asked what plans the Post Office had for the long-term organisation of the Savings Bank. He asked whether any change was contemplated in the structure, and whether the Post Office would call in McKinsey's to examine the structure of the Savings Bank. The hon. Gentleman touched on the question of the administrative structure of the Post Office in relation to the Savings Bank. He asked what our longterm plans were and what reconstructions we had in mind. With respect, I feel that this is not the right occasion to embark on the discussion of such a fundamental and indeed complex matter as this. I therefore suggest that it would be right for me to put this issue aside and to limit what I have to say to matters directly concerned with the Regulations against which the hon. Gentleman is praying.
425 The hon. Gentleman also made some reference to publicity, Posters and showcards advertising the Investment Account service—I say this for the information of both hon. Gentlemen who take a great interest in these matters —which point out that the initial interest rate which we are seeking to introduce is 51 per cent., are being, distributed to all Savings Bank post offices for exhibition when the new service starts. Copies of leaflets giving information about the service will also be issued through post offices and put in the leaflet containers on public counters.
A full publicity campaign, which is being organised by one of the major advertising agencies, using the national Press and other media, will be launched later in the year, probably in September. By wailing until then we hope to take advantage of the seasonal increase in savings which follows the summer holiday period. That deals with the aspect of publicity in which the hon. Gentleman is so interested.
The hon. Gentleman then queried the procedure for making applications for withdrawal to the principal office of the Savings Bank instead of to local offices. The whole basis of the Post Office Savings Bank system is, and always has been, that the records of depositors' accounts should be kept centrally. It is this factor which makes it possible for depositors to operate their accounts at any of the 21,000 Savings Bank post offices throughout the country.
Within this system we provide facilities for withdrawal of up to £10 on application at any local office—under Regulation 21—but I must tell the House that we cannot afford to take any greater risk than that, and application for larger withdrawals must be carefully checked against the ledger account held centrally. They must, therefore, be forwarded to the principal office. It would, I submit, be pointless for depositors to apply for such withdrawals at local offices, merely for the office to forward them to the principal office, because this in itself would merely introduce delay.
The next question raised was with regard to the limitation of the number of crossed warrants. Regulation 21(1,a) 426 applies here. The hon. Gentleman said that he would like an explanation of this paragraph which providesthat the Postmaster-General may in his discretion limit the number of crossed warrants which may be issued to or under the direction of the same depositor in any Savings Bank year.A crossed warrant is virtually a cheque. It can be used to transfer money to one's own account in a joint stock bank or to the account of a third party. It thus uniquely provides a cheque service for which no charge is made, from an account on which interest is paid. As it is, in addition, an expensive service to operate, the Post Office must be watchful —since it is the trustee of people's investments—that it is not abused, always bearing in mind that the Post Office Savings Bank's function is to provide facilities for saving and not a current account service.
The power to restrict the use of crossed warrants is used only exceptionally. Our practice is to use the regulation in general terms and to seek the depositor's cooperation in a more modest use of the service. We have, however, had to step in where, for example, as many as 70 crossed warrants were asked for in a year and where nearly 20 were requested on one occasion.
The hon. Member asked about emergency withdrawals—Regulation 21 (1,c), concerning payments on demand on ordinary accounts. The demand withdrawal service is vulnerable to fraud because it permits withdrawal at any of our 21,000 post offices without a check against the records of the accounts which are kept centrally by the Post Office Savings Bank. The purpose of this provision is to provide some protection against fraud by calling in the bank book for a subsequent check with the ledger record.
We operate the regulation as reasonably as we can consistent with adequate security. We permit a depositor to make two withdrawals up to £10 each in a period of seven days before his book is retained for comparison against the ledger record. We then return the book as rapidly as we can. I submit that without this arrangement, and from information that I have had from the Department, fraud losses—already very serious—would undoubtedly be much greater.
427 The hon. Member then turned to the question of the withdrawal of investments —Regulation 40 (1). He asked about the procedure for emergency withdrawals within the normal period of one month's notice. As the condition of one month's notice will be given wide publicity, and as depositors will normally have £50 worth of ordinary deposits which they can draw on first, we would expect applications for emergency withdrawals of investment deposits to be very rare. This is the feeling of the Department.
The opening words of Regulation 40(1) are:Except where the Postmaster General otherwise directs,and these are intended to provide a loophole in very exceptional cases where grave hardship might be pleaded, and which might warrant special treatment.
An interesting comparison is that encashment of Development Bonds requires one month's notice under the relevant propectus. This operates without exception, and no real difficulty arises.
Then we come to Regulations 29 to 35, concerning nominations. The hon. Gentleman wanted to know whether any power to make nominations is desirable and whether the Post Office Savings Bank nominations should not be restricted to smaller amounts. This raises a wide issue, because powers for nomination exist not only for the Post Office Savings Bank and for the other savings services operated by the Post Office, but also for the Trustee Savings Banks and a variety of other bodies and institutions, such as the friendly societies, trade unions, and industrial and provident societies. Legislation on this subject in general goes back into the last century. The power for making regulations for the nominations of Post Office Savings Bank deposits derived originally from an Act of 1883.
The power of the Postmaster-General to make regulations with the consent of the Treasury for the nomination of Saving Bank deposits used to be limited to £100, but this limit was specifically removed by the Saving Bank Act, 1920, and Regulations providing for nomination up to the full amount of an account were made in the following year and have operated ever since. The nomination ser- 428 vice is not very widely used in the Post Office Savings Bank, but it is clear that a number of depositors still find it a simple and convenient way of disposing of their deposits at death. The absence of any limit on the amount under nomination does not, in our experience, cause any real difficulty.
Each year—I believe that this is the information that the hon. Gentleman wanted—about 15,000 new nominations are registered in the Post Office Savings Bank where in total over 360,000 nominations are now in force. We understand that the Trustee Savings Bank has a limit of £500 on its nominations. Of course, we are not in a position to comment on experience of its service.
§ Mr. Stratton Mills
Would the hon. Gentleman look at this point again at a later stage to see if it is not likely to give rise to great problems? There are family inheritance problems as well. The amounts involved will now be very much larger and, as he says, the Trustee Savings Bank has put a limit on the amount.
§ Mr. Slater
Yes. I have no objection to looking at this matter again. We will see what the position is.
The hon. Gentleman then turned to the question of revocation of nominations. The position must be stated precisely in order to avoid disputes about the validity of a nomination on the depositor's death. But there is nothing peculiar about the way in which the Post Office treats the nominations. I understand that the rule that a nomination is not revoked by a subsequent will is common to all forms of nomination. This applies in the case of the Trustee Savings Bank, trade unions, industrial societies and the railways. The position seems to be fully understood by most people, but the Post Office takes care to ensure that each depositor receives a full explanation when making a nomination.
Coming to Regulation 41(1), concerning interest on investment deposits, the position on calculating day-to-day interest has been explained by my right hon. Friend the Postmaster-General in Standing Committee and in reply to a Parliamentary Question by the hon. Member for Carshalton (Captain W. Elliot) on 18th May. There are practical operational difficulties in paying interest on a different basis 429 under the present manual system. We are, however, fully prepared to look at this again. We are planning and preparing the computer system, but it is bound to be some years before we can get the bank records on to computers.
I come now to the hon. Gentleman's observations on Regulation 52, concerning the indemnity of the Postmaster-General and his officers——
§ Mr. Slater
All that has been taken care of. I cannot mention all the matters which will go into the book, but a suitable reference will go in. On publicity, the pamphlet which has been drafted will give such information as possible to every depositor who cares to make a deposit or invest in this system.
Regulation 52, in the same terms as Regulation 49 of the 1938 Code, provides indemnity for the Postmaster-General for payments duly made and acts duly done in accordance with the Acts and Regulations. It covers cases in which the Postmaster-General exercises discretion, for example, in the case of payments made out on an account 430 if the child is seven years old, where, under Regulation 4(3), the Postmaster-General is satisfied that it is in the child's interests to allow the parent to make the withdrawal.
But the indemnity does not protect the Postmaster-General if the Savings Bank has done anything contrary to Regulations. It does not, for example, take away the depositor's right to have his account reinstated where the Savings Bank has paid a withdrawal from it on a forged application. We are most desirous, because of the interest which has been shown in this new savings operation, to get the thing going as quickly as possible. We believe that we shall be able to offer to people in their investments under the new scheme an adequate service and adequate compensation for their investments.
I am indebted to the hon. Gentleman for the way in which he has presented his case. I sincerely hope that my answers to his queries will give him clarification about how we expect to operate the new service.
§ Motion, by leave, withdrawn.