TRUSTEE SAVINGS BANKS BILL (Hansard, 17 November 1967)

§ The Financial Secretary to the Treasury (Mr. Harold Lever)
I beg to move, That the Bill be now read a Second time.
I invite the House now to transfer its attention from the complicated problems affecting the taxi men of London to this Bill, which relates to the trustee savings bank movement and the statutory machinery governing the operations of our trustee savings banks. I hope that it will be thought right, even at this late hour, if I say a few words about the banks before dealing briefly with the content of the Bill.
The trustee savings banks constitute an important part of our National Savings movement. It is true that they do not have the self-assured opulence or cathedral grandeur of the great joint stock banks, but they are a real workaday advantage to the modest savers of this country and have been now for 150 years. No small sums of money are involved. Neither is it, as some seem to suppose, a declining movement. On the contrary, it is a vigorous and expanding movement.
In the last decade, the amount of money deposited with these institutions has risen from £1,126 million in 1957 to nearly double that sum, £2,230 million, today, and they represent a quarter of the entire National Savings movement. When people's eyes are caught by the proliferation of betting shops in modern society, it is as well to get the balance right and to recall that there are very many citizens who lead lives of somewhat less psychedelic quality than those who figure so prominently in the newspapers. A modern Napoleon, if he said that we were a nation of shopkeepers, might be tempted to add "a nation of betting shop keepers", judging by that proliferation. So I am happy to draw attention to the thrift movement, and to its vitality and success in recent years as evidence of the rôle of the trustee savings banks. It was the great Pitt who said in relation to thrift Poverty is no disgrace, but it's damned annoying. 878 I think that many of those who would sympathetically echo his words are to be found among the devotees of this movement.
I shall explain as briefly as I can the proposals in the Bill. It might be that right hon. and hon. Members opposite will want to ask questions, and it may be that I will be granted leave of the House to speak again—

§ Mr. J. C. Jennings (Burton)
Look at the time.

§ Mr. Lever
I was about to add that that request was unlikely to be made today. I hope that, if I come to make it, hon. Members will know that at any rate in this case the reason for my asking will be in order to conform to the convenience of the House in enabling me to sketch the Bill in opening, leaving all the details to be filled in by those who wish to raise any questions on the Bill or to refer to the movement it is intended to convenience.

§ Sir Douglas Glover (Ormskirk)
Are we to understand from what the Financial Secretary says that he has no intention of trying to get the Second Reading today?

§ Mr. Lever
It is a matter for the House when I get the Second Reading, but we have only a few minutes to go, and I expect that hon. Members opposite will regard this, as I do, as a serious and important Bill. I cannot imagine that the House would wish it to go through without some critical examination of its various aspects—

§ Mr. Jennings
Has the hon. Gentleman any message from the Chancellor relating this Bill to the present financial situation and the terrible news this morning—

§ Mr. John Rankin (Glasgow, Govan)
Stop filibustering.

§ Mr. Jennings
I am not filibustering. It is a very bad situation—

§ Mr. Speaker
Order. The hon. Gentleman has made his intervention: he should not comment on it.

§ Mr. Lever
Whatever communication my right hon. Friend the Chancellor of the Exchequer had to make relative to 879 the Trustee Savings Bank Bill would not, I am afraid, be specifically attractive to the hon. Member for Burton (Mr. Jennings), whose curiosity seems to want to range rather more widely than is possible within the ambit of the Bill—

§ Mr. Jennings
It is not curiosity.

§ Mr. Rankin
It is.

§ Mr. Jennings
Oh, shut up.

§ Mr. Rankin
On a point of order, Mr. Speaker. Is it in order for the hon. Gentleman to say "Shut up" to another Member of the House?

§ Mr. Speaker
I deprecate the passing on to the Chair of bits of gossip that the Chair does not hear.

§ Mr. Jennings
It was the first time—

§ Mr. Speaker
Order. Sir Stephen McAdden, on a point of order.

§ Sir Stephen McAdden (Southend, East)
Is it more reprehensible Mr. Speaker, for one hon. Member to say to another "Shut up", or for one hon. Member to say to another "You shut up," which surely applies to, Mr. Speaker?

§ Mr. Speaker
If an hon. Member applied it to Mr. Speaker, it would certainly be reprehensible. Mr. Lever.

§ Mr. Lever
I sometimes think that the only reprehensibility which seems to be apparent to hon. Members is the failure to respond to that invitation, rather than the reverse. I am in no way making any criticism in saying that. I am deeply regretful that I am unable to gratify the hon. Member's curiosity—

§ Mr. Jennings
So am I.

§ Mr. Lever
—upon very relevant matters but, unhappily, not relevant to the Trustee Savings Banks Bill which is before the House.
Two main changes are proposed by the Bill. The first is that the Debt Commissioners be empowered to increase the rate of interest at present paid to the trustee savings banks in respect of money deriving from the ordinary department and advanced to the Debt Commissioners through the appropriate fund. At 880 present that limit is £3 2s. 6d. and the Bill gives power to increase the rate to £3 13s. Unfortunately, I cannot commit myself at the moment to the intended use of the power with any exactitude, but I can certainly tell the House that it is intended to use the power fairly soon. That is why we are seeking it.
The reason is that the rate of interest which the trustee savings banks pay on the ordinary department is 2½ per cent. per annum. In the past they have been in the habit of receiving that money at the rate of £3 2s. 6d. from the National Debt Commissioners and the difference has enabled them to finance and cover the cost of running the banks. Unhappily there has been a steady rise in the cost of running the banks and the margin between £2 10s. 0d. which they pay and £3 2s. 6d. which they receive cannot cover that. The Treasury, which is not paying an excessive rate for the money, is minded to lift the amount so that these very zealous people who run the savings banks and act in a completely voluntary capacity in their onerous duties may not be behindhand in the arrangements we are making.
Although the rate was fixed at £3 2s. 6d. in 1965, it is necessary to lift it up to something more and we are hoping that the figure of £3 13s. cautiously placed as a ceiling on what the Debt Commissioners may pay will be enough to see the banks through for some years to come with some margin and these changes can be amended by Order.

§ Mr. Charles Fletcher-Cooke (Darwen)
Does not the hon. Gentleman think that these rates of interest are ludicrously low, whether they are 2½ per cent. or 3½ per cent., and something of a fraud on poor people who could get far more than that but who are attracted by the aura of respectability of public service and are being traded upon in this way? They could get 5 per cent. or 6 per cent. just as securely quite easily.

§ Mr. Lever
I think the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) knows me well enough by now to know that, although I may ministerially achieve more discretion than I managed to accomplish as a back bencher, I shall not pretend to views which are not my own on this subject. I 881 shall not therefore pretend that I regard the sum being paid as excessively generous, but I do not think the bald statement which has been made can be accepted in the way in which it was put.
It should be borne in mind that the first £15 of interest paid on these accounts is tax-free. It is of considerable importance to those who use the accounts, many of whom do not want the inconvenience of adding these to their tax returns, or indeed having the trouble with tax returns, in relation to interest. Many of these accounts are small accounts. I have not the figures available to give to the hon. and learned Member, but I dare-say that he might find a high proportion of the accounts are not getting 2½ per cent. but something more like 4 per cent. by reason of the tax-free concession. That is not a bad rate as a permanent unchanging rate, so unchanging that it has not changed since 1888 and, so far as I know, there is no immediate prospect of its changing.
For the majority of people with these ordinary accounts, the true rate, having regard to the tax concession, is considerably better than 2½ per cent. and might mitigate some of the hon. and learned Member's anxieties. Rapid arithmetic will show that one has to have over £600 in an ordinary account before one comes into the taxable zone. Until that point, which I think covers the majority of the accounts, one is getting the equivalent of 2½ per cent. tax free. If someone multiplies 2½ per cent. approximately by five over three he will probably get the answer.

§ Sir Eric Errington (Aldershot)
We know that the Bill is not unconnected with the position of the Post Office Savings Bank. My information is that up to £3 10s. of the £3 13s. 6d. will be used at an early date. Does the hon. Gentleman think that 3s. 6d. is a satisfactory balance for, to use his expression, some time to come?

§ Mr. Lever
We might look at that again in Committee. In giving this prediction, I was relying on the advice of those who advise me in these matters. It might well be that Ministers would be safer if they did not predict the future and confined themselves to estimating accurately the past. However, I note 882 what the hon. Gentleman says. I shall consider whether we should have regard to a longer period of years, because, enjoyable as it is to have the privilege of addressing hon. Members on Trustee Savings Bank Bills at five to four on a Friday afternoon, I do not think that I should unnecessarily again come before the House if I can make appropriate arrangements to delay my arrival a few years by raising the figure.
These small accounts are fairly costly to manage. In the trustee savings bank movement, there is great encouragement to people with more than £50 to consider investing in the Special Investment Department where about 5½ per cent. can be earned on the money. The hon. and learned Member for Darwen always chooses his words with great care and fairness, but I am sure that he will acquit trustee savings banks of wishing to pay too low a rate of interest to those who do not want their money on short call. Prominently displayed in all banks is encouragement to make use of the Special Investment Department which gives a much better rate of interest. Nobody in the banks would dream of seek-ink to do other than to assist somebody for whom the Department was appropriate for their money. They have no interest except to get the best results for the thrifty people concerned.
There is no accounting for taste. The hon. and learned Member for Darwen belongs to a party which passionately believes that people should have freedom of choice. The trustees savings bank gives absolute freedom of choice to the depositor—whether he prefers to have his money on short call at 2½ per cent., mostly tax free, or to move into the longer notice deposit involved with the Special Investment Department. We are not in the least anxious that people should get 2½ per cent. when their circumstances warrant investment in the Special Investment Department, where every convenience for their investment is offered.
There is another point involved in this change in rate. It makes it possible for the trustee savings banks to achieve a more equitable sharing of costs between the ordinary department and the Special Investment Department. As the margin tightened, it was inevitable that perhaps the arrangements made for splitting the 883 costs could be regarded as a little out of line and putting too great a burden on the Special Investment Department. We are so anxious to see the Special Investment Department flourish that we want to make sure that by giving ample funds to the ordinary department to cover its expenses it does not have to lean for overheads unfairly on the Special Investment Department, which will make it possible for the Special Investment Department to give the full fruits of the higher interest rates for the longer term savings deposited with it.
The second main point of the Bill is that it makes arrangements for the capital expenditure of trustee savings banks on a more rational basis. In the past, the capital expenditure of savings banks has been met, first and originally, out of reserves and any spare cash left over in the margin between £3 2s. 6d. and the £2 10s. which had to be paid, and then later the Debt Commissioners gave an extra shilling in interest in the hope that this would be a means of financing the capital payments of the trustee savings banks. All this is to be put on a proper basis in the arrangements made in the Bill. When the trustee savings banks have capital expenditure, they will—