TRUSTEE SAVINGS BANKS BILL (Hansard, 23 November 1967)

§ The Financial Secretary to the Treasury (Mr. Harold Lever)
I beg to move, That the Bill be now read a Second time.
On Friday, I was about to deal with the capital expenditure of trustee savings banks, and I can understand that the House will, with considerable reluctance, turn itself from the mutual congratulation of the lawyers which has preceded our discussion to the rather more prosaic consideration of matters affecting the trustee savings banks. As I was explaining, until this Bill it has been the practice that the trustee savings banks could provide for their capital expenditure out of the difference between the rate which the National Debt Commissioners allowed to them on moneys deposited with the Commissioners and the rate which they paid their depositors.
It is now thought that this should be put on a more satisfactory basis, and the Bill provides that the savings banks can now borrow from the Commissioners up to £10 million at commercial rates of interest, subject to the Commissioners' satisfying themselves that the borrower is sound and is borrowing for satisfactory purposes and after proper scrutiny by the trustee savings bank regional movement.
The main reason is to provide more modern buildings, to keep the existing ones in better repair and to provide the kind of frontal adornment which is now more popular than the old-fashioned presentation of shop fronts which has been common in the past. It will also be an area in which capital equipment will be particularly beneficial because no-where more than in banking are the modern devices of computer and office machinery more fruitful.
The third important change in the Bill is that it widens the scope of investment in the investment departments of the trustee savings banks. It widens them only modestly. It does not, of course, take them into the field of speculative investment, but merely makes possible to them a marginal gain in the way of interest returned on funds invested. So, for example, under the old restrictions, the savings banks 1574 could not lend their money to local authorities in a yearling bond which has become fashionable and profitable to those who hold it, and this disability is removed by widening the range of investment.
The remaining Clauses deal with some small but useful changes in the trustee savings banks legislation affecting the form of accounts and matters of that kind with which I will not deal in detail unless I am asked to do so.
The Bill represents a useful support and encouragement to the better management and the progressive direction of the trustee savings bank movement. We should remember that, even in the Welfare State, which we all welcome, it is still necessary to encourage thrift and the more sober expressions of the human personality than those which usually feature in our Press. It is reassuring to emphasise, as I said on Friday, that this movement has grown to twice its size in volume of money in ten years and that thrifty people are still putting by for their old age to supplement by self-help whatever advantages the Welfare State brings—

§ Mr. Michael Alison (Barkston Ash)
Would the hon. Gentleman elucidate whether this doubling in the volume of deposits is in the special deposit or ordinary deposit section, or in both together?

§ Mr. Lever
I am referring to the ordinary deposits, which have increased from £1,000 million to £2,000 million in the last ten years, give or take a few insignificant millions in either case.
The Government entirely support this movement and want to give it every encouragement. Even in our advanced Welfare State it is of the highest importance that self-help should be encouraged so that people can add to whatever is provided by the State in illness or old age. However gratifying it may be when one retires to reflect that one is a 50-millionth part-owner of the railway system, it is not quite so comforting as to have a little money in the bank, which adds to the dignity and the freedom of the individual when faced with some of the vicissitudes of life and the inevitable decline of old age.
For all these reasons, I am sure that the House will welcome the Bill and will 1575 join with their encouragement to the trustee savings bank movement which we are aiding by this Bill.

§ Mr. Terence L. Higgins (Worthing)
We on this side of the House certainly agree with the Financial Secretary's closing remarks, and we therefore welcome the Bill. I want to raise a number of fairly technical points, but first, on behalf of many hon. Members who sat here on Friday, I would say that we found the performance of the Treasury Bench last Friday quite extraordinary. There were two Bills on the Order Paper—the London Cab Bill and this Bill—and during the debate the Under-Secretary of State for the Home Department began by speaking at 11.6 a.m. and continued until 11.25 a.m., altogether 19 minutes, and later in the debate he intervened—first he forgot to ask leave to speak again but eventually did so—between 2.7 p.m. and 3.29 p.m., making a grand total of one hour 41 minutes out of a total debating time on that Bill of four hours 36 minutes.

§ Mr. Speaker
Order. The hon. Member should come to the Bill which we are now discussing.

§ Mr. Higgins
I will certainly do that Mr. Speaker, but I wished to point out that a number of my hon. Friends who hoped to take part in the debate on Friday on this Bill and who sat throughout the day in an attempt to do so were sadly disappointed.

§ Mr. Harold Lever
Will the hon. Member permit me to intervene to correct a figure which I gave a few moments ago? The doubling is of the entire deposit and investment department, from about £1,140 million in 1947 to £2,232 million at present.

§ Mr. Higgins
I was glad to give way in order for the hon. Member to do that.
There are three points on which we have some advantage in concluding the debate today which was started on Friday. First, one point arises from what I find recorded in column 882 of HANSARD reporting he hon. Gentleman's speech—a passage concerned with the actual rate paid by the two departments of the Trustee Savings Bank. He said: 1576 The Trustee 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."—[OFFICIAL REPORT, 17th November, 1967; Vol. 754, c. 882.] In fact, there is not complete freedom in that respect because people are not allowed to invest in the special investment department unless they have a minimum of £50 in the ordinary department. That is a restriction to which I shall return in my concluding remarks, but I thought that I ought to give the hon. Gentleman notice of it.
The second reason is that in an answer to a Written Question yesterday the Postmaster-General revealed that the Post Office rate is to rise to 6 per cent. To the extent that the Bill is designed to put the trustee savings bank and the Post Office Savings Bank on the same basis, that change is not wholly irrelevant to our discussion. Thirdly, the Bank Rate has meanwhile risen to the record level of 8 per cent.
We on this side of the House welcome the Bill because it is designed to facilitate one of the most important sectors of the National Savings Movement, and we are sure that the voluntary sacrifice of people who have decided that they will defer consumption is very important, because it is on that basis that investment in productive capacity can take place without at the same time causing inflation. We therefore believe that this is an important point.
May I clear up one or two points of jargon? The fact that the hon. Member's speech was interrupted means that he has not been entirely clear when defining terms in his opening remarks but no doubt he will confirm what I say when he concludes the debate. The first piece of jargon is the expression "Fund for the Banks for Savings", which is a singularly clumsy expression to apply to funds which lie between the Government themselves and the trustee savings bank. The hon. Member has already distinguished the ordinary department, on which there is a rate of interest at the moment of 2½ per cent., from the special investment department, where the scope 1577 for investment is somewhat broader and rate of return higher. It is important to distinguish these two Departments and to ascertain exactly what is the relationship between them, because there has been some correspondence in The Times in the last few days on the exact and precise relationship between them, a relationship which will be affected by the Bill.
May I now take up the point on which the hon. Member intervened—the level of savings. The figures which are available give cause for considerable alarm, not least because they are clearly related very closely to the movements of the stop-go cycle. The Quarterly Bulletin of the Bank of England last September pointed out, The peaks in the savings ratio have usually followed periods in which real disposable incomes have been rising fast. They generally occur in years when action has been taken to correct inflationary conditions and when growth in real consumption has fallen. Thus measures to control the growth of incomes after the rapid increases of 1955, 1960 and 1963 curbed consumers' expenditure and led to peaks in the savings ratio in 1956, 1961 and 1964. On the other hand, when the savings ratio was low, measures were taken to stimulate demand—in 1954, 1958 and 1962. In the present situation there is a danger (hat savings will fall, and we therefore need to examine the rates specified in the Bill, and go into the question in greater detail in Committee. The picture is less optimistic than that which the hon. Member sought to give the House. The level of savings in the Trustee Savings Bank has improved to some extent during 1967 compared with 1966 but it is still only half as great as in the same period in 1964. Net savings in the trustee savings bank during the 31 weeks of the financial year so far are 48 per cent. less than in the same week of 1964: a much sharper fall than the reduction in total national savings in the same period of about 20.7 per cent. The situation is not as favourable as the hon. Member suggested in giving us the increased flow of savings over a much longer period, because the fact is that the major increase took place between 1952/55 and 1962/65. That is when the real growth took place.
It is therefore important that we should consider whether the interest rates which are set in the Bill are adequate to ensure that the trustee savings bank movement, 1578 which relies so heavily on voluntary workers and the enthusiasm of people in the movement, are adequate. On Friday the hon. Member pointed out that the rate of interest which is being changed in Clause 1 is not the rate of interest which is being paid to depositors. I believe that it would be wrong for us to try to reach any formal conclusions tonight on the rate to be paid to depositors, but in the light of the change which has taken place in interest rates generally we need to consider whether that, too, should be reviewed at later stages of the Bill.
The rate with which we are specifically concerned in Clause 1 is the rate which is paid to the trustee savings bank by the Government themselves through the "Fund for the Banks for Savings". That brings me to a number of questions which I should like to put to the Financial Secretary. First, in answering a Written Question yesterday, the Postmaster-General said that the interest rate on the Post Office Savings Bank investment accounts would go up from 5½ per cent. to 6 per cent. on 1st January. It has been pointed out in The Times today that in previous squeezes the branches of the National Savings movement have suffered from the inflexibility of their interest rates. The impression is that at this time the authorities acted unusually promptly in an effort to keep the movement buoyant. Are the trustee savings banks to be given the same degree of flexibility as that which the Postmaster-General is to give to the ordinary Post Office Savings Bank?
Secondly, the actual rate specified in the Bill is a maximum level, and I am not clear why the Financial Secretary should be so anxious to set that rather low ceiling. Clearly he could set a higher limit and still fix the exact rate by Statutory Instrument. Thirdly, what is the exact rate which it is proposed to set by the Statutory Instrument? I appreciate that last Friday the Financial Secretary had good reason to suppose that it would have been wrong for him to specify the rate. Tonight, however, he must have a clear idea of this rate. Will the Statutory Instrument fix the rate at the maximum specified in the Bill?
The increase in the rate is not directly related to the rate paid by depositors but is designed to enable the trustee savings banks to cover the increased costs which 1579 they incur as a result of their normal operations. Thus, this is effectively not a rate of interest increase in the strict sense of the term but is, rather, an additional payment to the trustee savings banks so that they may carry out their operations properly.
One of the many increases in costs suffered by them have resulted from the Selective Employment Tax. It seems extraordinary that the Government should impose S.E.T. on these banks—which enable the Government to borrow money at low rates of interest by current standards. I understood from the Financial Secretary's remarks that it is intended that the increased rate paid will enable the trustee savings banks to reapportion their expenses between the ordinary department, on the one hand, and the special investment department, on the other.
This matter was raised in a letter published in The Times Business Section yesterday. In it, the writer, Mr. John Kerr, of the Enniskillen Savings Bank, Northern Ireland, asked a number of questions. He asked, among other things, whether it was right that the Government should deal with the allocation of expenses as between two departments in this way. In case the Financial Secretary is not familiar with the letter, and since it could be of importance, I will read it: With regard to the Trustee Savings Banks Bill presented by the Chancellor of the Exchequer, attention should be drawn to Clause 6 where the directions may be given by the National Debt Commissioners to a trustee savings bank under Section 40(1) of the principal Act with respect to the bank's business of making special investments include directions as to the manner in which the total expenses of management are to be apportioned in the bank's accounts, as between the business of making such investments and the handling of ordinary deposits … The letter went on to complain that this would substantially alter the competitive advantage of the trustee savings banks vis-à-vis, for example, building societies. I hope that at least in Committee if not now, the Financial Secretary will clear up this matter and say whether this determination of the allocation of overheads by the authorities is necessary or whether it is something which could conveniently be left to the trustee savings banks themselves.
Clause 2 concerns the money which the trustee savings banks may have to build 1580 up their establishments; the buildings, computers, and so on they employ. I was interested to hear the Financial Secretary say that they would be borrowing at "commercial rates of interest". Does that mean Bank Rate? Or does it mean the present deposit rates of the ordinary banks? What does the hon. Gentleman regard as a commercial rate of interest in this context? It may make a great difference to the trustee savings bank movement if, instead of borrowing at the rate which these banks are giving their depositors, 2½ per cent., they must pay for their buildings at 8 per cent. On the other hand, there is no real reason why these institutions should pay a rate of interest which is significantly lower than that which other institutions must pay. I trust that the hon. Gentleman will clear up this point and will define what he means by "commercial rates of interest".
Clause 3 is concerned with the greater freedom which the trustee savings banks are to have in regard to their investment portfolio. As the Financial Secretary pointed out, this is at present determined by the Trustees Investment Act, 1961. I believe that the scope of the trustee savings banks is to be widened to include all the items specified in Schedule II of that Act. This is somewhat worrying because, in the present financial situation, the Government may find themselves—as the Prime Minister said last night—in a situation in which inflation is taking place. It is clearly difficult for the trustee savings banks to have an adequate hedge against inflation if they are limited to a very narrow range of investments. Does the hon. Gentleman feel that these banks have sufficient scope to avoid that danger?
I return to the question of the £50 requirement which had to be met by people investing in the ordinary department before being allowed to invest in the special investment department as well. This concept has been attacked by a number of people; for example, by Lombard in an article in The Financial Times on 20th November, 1965, when it was stated: In any case, it is hard to see what possible justification there can be for the decision to link the right to open an investment deposit account with the possession of a minimum deposit in an ordinary account. The experience of the trustee savings banks has 1581 shown that this requirement is next to impossible to enforce since there is nothing to stop an investor taking the qualification sum out of the ordinary account once it has served its purpose". Is that true? In other words, is it possible for someone who wants to invest in the special investment department to put £50 in the ordinary department, invest in the investment department, and then take the £50 out of the ordinary department? If so, it seems a silly situation and undue restraint is being placed on the choice which the investor in the trustee savings banks is allowed to exercise.
My hon. Friends and I are gravely concerned at the fall in the level of savings. The rate of inflation has a considerable amount to do with this. We are particularly concerned to see in the last two days the extraordinary doctrine proposed from the Government Front Bench—in particular proposed by the President of the Board of Trade—that on our international obligations there is no reason why we should not refuse to repay the full amount of principle which has been lent to us because those concerned have been getting a reasonable rate of interest on the money, anyway.
To propound this doctrine is iniquitous and we are concerned because, once such a doctrine is propounded in the international sphere, it may spread. The whole basis on which the trustee savings bank movement has been founded—namely, that it is virtually Government guaranteed, so that one can be sure of security and so on—could then be undermined.
'This Bill will assist the trustee savings bank movement, and we hope that it will now go forward. I join with the Financial Secretary in paying tribute to the work of the movement and in stressing the very great necessity there is, if we are to progress on the economic front, to do everything possible to encourage the level of savings, and to ensure that that level rises consistently and steadily in the future.

§ Mr. John Rankin (Glasgow, Govan)
I join the hon. Member for Worthing (Mr. Higgins) in welcoming this Bill. The hon. Gentleman has submitted the Bill to very close examination, but 1582 despite his remarks I am comforted by the knowledge that this Measure has been considered by the Trustee Savings Bank Committee. We have been through the Bill, and we are satisfied that it meets the requirements of the situation. I do not dissent from his observation that we would not have been disappointed had the interest rate been a little higher.
I, too, regard this as a very important Bill. I was rather astonished, however, to hear him say that but for some reason or other which he did not mention, a number of his hon. Friends would have been taking part in our debate this evening. I think that he had in mind the large number of his hon. Friends who were present on Friday. It struck me as strange at the time that on a Friday, which is not always a convenient day for hon. Members to attend, there should have been such a large number of hon. Members opposite present; while tonight, a Thursday evening, which is much more convenient to hon. Members, such a relatively small number of them should now be present.
I suspect that the reason for such a large outturn of Opposition Members on Friday was not to support the Bill—and I cast no aspersions on their motives—but to promote an entirely different type of debate on a topic in no way related to the purpose of this Measure. I guess that it was purely a political adventure aimed at cashing in, for party purposes, on a Bill which they are now supporting—

§ Mr. Deputy Speaker (Mr. Sydney Irving)
Order. I understand that Mr. Speaker intervened to prevent the hon. Member for Worthing (Mr. Higgins) from pursuing this line. In the circumstances, I think that the hon. Member for Glasgow, Govan (Mr. Rankin) will be wise to draw his present remarks to a close.

§ Mr. Rankin
I leave that part of my speech, Mr. Deputy Speaker—

§ Mr. Alison
I also recognise, Mr. Deputy Speaker, that on a Thursday evening all good Scotsmen go to Scotland.

§ Mr. Deputy Speaker
Order. I think the score is now even.

§ Mr. Rankin
That is a great distortion of the fact and a grievous insinuation, because it infers that I am not a good Scotsman. The hon. Member said that all good Scotsmen returned to Scotland on a Thursday evening. That is quite untrue, because in the House at this moment there is one of the best of Scotsmen addressing the hon. Member and those of his hon. Friends who are present.
The hon. Member for Worthing lamented the fact that the returns show that savings have fallen seriously since 1964. He implied to that the interest rate was not sufficiently attractive. But a fall in savings so serious, as to attract his attention might be due, not so much to lack of inducement; as to the results of thirteen years of Tory misrule beginning to manifest themselves in 1964 on the savings of the people. Here is proof of what we have all along maintained—the devastatingly bad effect of Toryism on the people's savings—

§ Mr. Higgins
Personal savings rose threefold in the period 1952–55 to 1962–65. That scarcely suggests that in that period people were not saving better.

§ Mr. Rankin
But the hon. Gentleman knows quite well that money was much cheaper then than it is now.
The hon. Gentleman referred to investment in buildings, and so on. Great investment is now being made at Cow-glen, not far from where I live in Glasgow. The buildings are not yet completed but they will be a tremendous credit to the results of our savings movement. The housing of the staff and their working conditions will be quite unmatched. The new Post Office savings bank building is in one of the loveliest areas of southern Glasgow. Therefore, we now have a tremendous physical incentive for supporting generally this movement. The Glasgow Corporation is also playing its part in providing accommodation for the bank employees at Cow-glen. One great multi-storey block of flats is already up and occupied by bank servants. We must take note of this progress on the physical side.
So, in those few words, I welcome this Bill. I am sure also that I win the support of both sides of the House in saying that we wish success to the trustee savings banks.

§ Sir Eric Errington (Aldershot)
I must declare an interest, thought not a financial one, because trustees and managers of trustee savings banks do not get any financial benefit from their position. But I would like to commend the Bill to the House. Some of us in all parties are interested in the trustee savings bank organisation when we have an opportunity to discuss these matters.
It would be fair to say that there are problems, some of which have been indicated by my hon. Friend the Member for Worthing (Mr. Higgins), which might be considered again. There is always—I am pleased to say this, because it is extremely satisfactory—consultation between the National Debt Office and the Treasury and the Trustee Savings Bank Association. But I must say that, in the light of events, I wonder whether the ceiling fixed for the payment made by the Government to the trustee savings banks at £3 13s. per cent.—and I am trying to be quite non-political in the party sense—are at present in a state of flux.
It is important that this payment should be sufficient, because it could involve further legislation. That is not a simple matter, because the whole idea of the Trustee Savings Bank Association is that it should be on equal lines with the Post Office Savings Bank. I realise that we cannot change the one without changing the other but, between now and the Committee stage, it might be of advantage if the top rate were considered with a view to its being raised to some extent.
Mention has been made of the £50 which must be in the ordinary account before investments can be made in the special investment account. I think that it is true that this must be so. Although the £50 can be taken out, no further investment can be made without £50 being put back. Perhaps the element, which must be borne in mind, of the £15 interest free of tax, is not unconnected with that. I think that this may possibly justify what, at first sight, appears to be a rather unusual way of dealing with the situation.
I shall not go into detail about the developments which have taken place amongst the trustee savings banks. They are a very live body and will be much 1585 helped by Clause 2, which revives capital for certain purposes, such as the buying of buildings or the building of buildings, buying land and also the provision of up-to-date sophisticated office equipment. It is satisfactory that the sum of £10 million is not being specifically allocated. It is not divided in any particular way. That will be a great help in the development which is taking place in various parts of the country.
The hon. Member for Glasgow, Govan (Mr. Rankin) referred to Glasgow. The three places where development has taken place which has helped subsequently other places are probably Glasgow, Manchester and Liverpool. This is all very satisfactory, but it had its limitations and I think that development will be much better dealt with by the arrangements to be made in the Bill.
I do not want to say much about the extension of investments for the special investment department, but I want to say something about the arrangements made previously for dealing with the difference between the ordinary accounts and the special investment accounts. The situation was that the special investment department accounts were carrying an unfair share of the burden of management and it was agreed, and thought to be wise, that there should be a change which recognised the situation, so that ordinary accounts and special investment accounts would proportionately share management costs. I am glad indeed to see that.
I have two other small matters to raise. One is very small indeed. I wonder whether the penny will buy anything now that it is proposed in the Bill to abolish it for the banks' annual statements. That is a praiseworthy thing to do, but it removes the last means of using a penny by itself.

§ Mr. Harold Lever
The hon. Gentleman forgets the possibilities still in force of using the coin usefully in a well-established manner in old-established premises.

§ Sir E. Errington
At any rate, this is one more piece of erosion of the value of the penny.
I want finally to mention the superannuation of those who have savings bank experience and who go to the Savings Bank Institute and who pre- 1586 viously have not been able to carry on their superannuation arrangements with the savings bank. The Institute is a very valuable educational body and some very good and able people go there and it would be very wrong if they were to suffer in their superannuation.
I heartily support the Bill. It has been arranged and discussed and is subject only to whether some of the rates can be adjusted more nearly to meet the situation. Subject to that, I submit that it is an extremely good Bill on a very important activity and should have the support of all parties.

§ Mr. Richard Body (Holland with Boston)
As my hon. Friend the Member for Aldershot (Sir E. Errington) has just said, the Bill has the support of the trustee savings bank movement and for that reason alone deserves the support of the House. I should like to pay some tribute to those who, like my hon. Friend, are trustees of these banks and who give their services free and, in particular, to the actuaries whose skills and judgment would be rewarded elsewhere on a higher level.
Despite what the hon. Member for Glasgow, Govan (Mr. Rankin) said, savings have undergone a difficult three-year period, and it is interesting to compare the fortunes of the Post Office Savings Bank with the trustee savings banks in the last three years. The Financial Secretary gave some figures for the trustee savings banks but left out any comparative figures for the Post Office Savings Banks. Going back only to 1964—the hon. Member for Govan will detect the significance of that year—the Post Office Savings Bank had total balances of £1,814 million. At the same time, the trustee savings banks had total balances of £1,893 million. They were running about neck and neck. After two years, the Post Office Savings Bank's balances had fallen by £20 million yet at the same time the trustee savings banks' balances had gone up by £257 million.

§ Mr. Rankin
That is when I joined the Committee.

§ Mr. Body
The hon. Gentleman must have joined the committee of an English trustee savings bank, because there has 1587 been a greater growth in England than in Scotland—which may explain why, as was said earlier, not all Scotsmen leave the House on a Thursday night. The latest figures which I have for the Post Office Savings Bank show a further fall of £6 million and a further rise of £81 million for the trustee savings banks. The situation now is that the Post Office Savings Bank is down to £1,788 million while the trustee savings banks balance is now £2,232 million. Instead of their being neck and neck, as they were three years ago there is now a great gulf between them, and, far from their having the equal popularity of three years ago, the trustee savings banks are now markedly more attractive to depositors.
The Chancellor of the Exchequer said recently that savings were improving. He did not say by how much and one suspects, as my hon. Friend the Member for Worthing (Mr. Higgins) hinted, that any improvement has been the result of the notable achievements of the trustee savings banks in the last three years, since the hon. Member for Govan has shared in their fortunes. Clearly, the wage freeze at a time of rising prices must be the main reason for these other savings not having gone ahead. The policy of a wage freeze, except as a short-term expediency, is unjust, unworkable and unnecessary. I would be out of order if I argued that it was unjust and unworkable, but I apprehend that I shall be in order if I suggest that it is unnecessary. If higher wages are accompanied by higher savings, an incomes policy can be avoided. Moreover, it is not essential for all the increase in incomes to go into savings. A fraction of that increase in wages put into savings is enough, provided that it goes into the right form of savings.
In present conditions, the right form of savings must be in the form of capital for the private sector of the economy where further wealth can be generated and the commercial and industrial greatness of the country can be restored. It is up to the Government by their fiscal powers and Parliament by its legislative powers to provide incentives to enable those savings to be made and, having been made, to see that they are diverted 1588 into places where the maximum amount of good to the economy can be done.
The Government have convinced themselves that an increase in wage costs must make for an increase in unit costs, and, according to that doctrine, an increase in wages must have the effect of raising the cost-of-living index and accordingly forcing wages up further.

§ Mr. Norman Atkinson (Tottenham)
Nonsense.

§ Mr. Body
I am surprised that the hon. Gentleman should say that it is nonsense. If there is one Member among those opposite, who as a whole voted for a wage freeze, he alone might support me on this, and I find it strange that it should come from his lips that what I am saying is nonsense. We know that if the wages bill goes beyond a certain point, the employer is driven to lowering his unit costs by capital expenditure. He increases the intensity of capital and lowers the intensity of labour. That is what economic progress is about.
Such progress can be made only if there is a supply of fresh capital. Higher wages can supply that fresh capital. Perhaps the hon. Member for Tottenham (Mr. Atkinson) might agree with me at this stage? I am all in favour of a high wage economy. To hold down wages artificially is to blunt the competitive edge of our economy. An incomes policy must, in the long term, be the hallmark of a stagnant and growthless society.
This side of the House glories in the fact that there are now 4 million shareholders in industry. Many hon. Members opposite would be surprised to meet some of the numerous steelworkers and farm workers who, two decades ago would have shied away from the Stock Exchange, but who now read avidly the reports of the Stock Exchange and watch their investments.

§ Mr. Rankin
I want the hon. Gentleman to be quite clear. I hope that he is not under the impression that I do not believe in savings. It is the most important part of our social life. I have always been a firm supporter of Mr. Micawber's maxim.

§ Mr. Body
I am sure that the hon. Gentleman is. One does not doubt that, 1589 but one wishes that his Socialist doctrines would in practice enable more people to save.
It is unrealistic to expect the number of small investors on the Stock Exchange to grow quickly. Money will go on flowing into the trustee savings banks. Here are the funds which could be devoted to the great free enterprise companies. Clause 3 does not go far enough to canalise the funds where they are most needed to restore the commercial greatness of our country.
The Clause permits the trustee savings banks to acquire investments as set out in Part II of the First Schedule of the Trustee Investments Act, 1861. It provides 13 more kinds of investment for a trustee savings bank. What a staid list it is. One sees there the 2 per cent. Consols. I cannot imagine any trustee savings bank being enthused by that relic of Dr. Dalton. Also on the list are the securities of the nationalised industries—again no vigorous director of the trustee savings bank—

§ Mr. Harold Lever
I wish that the hon. Gentleman would enlighten me because he has obviously studied this matter with great care and is expert in this area. I have not previously heard of the 2 per cent. Consols, supposedly issued by Dr. Dalton. Could he give me some reference to the date at which they were issued and where such stock can be bought?

§ Mr. Body
I cannot imagine that the Financial Secretary would be the slightest bit interested in investing in such woebegone securities.

§ Mr. Lever
There is not such a thing.

§ Mr. Body
I should have said 2½ per cent. [Interruption.] I do not know what the hon. Gentleman is muttering about.

§ Mr. Lever
I will help the hon. Gentleman. He seems to be very vague about the rate of interest, I hope that the trustee savings banks are a little more precise when they examine these matters. The hon. Gentleman was talking about 2 per cent. Consols, which he has now amended rapidly to 2½ per cent. Consols. I want to assure the hon. Gentleman that the 2½ per cent. Consols were in existence before either he or Dr. Dalton was born.

§ Sir E. Errington
They were called the Funds.

§ Mr. Body
Part II does not specify these Consols by name but the hon. Gentleman knows perfectly well what I am referring to, and he knows perfectly well, in those days of the cheap Bank Rate, that the former Chancellor launched upon the public such stock. They were launched, if my memory is correct—I may be out by a point or two—at something like 98 and they fell rapidly and are now under half their original value, even in money terms let alone real terms. Some people on this side of the House believe that the launching of that stock verged on deception of the public.

§ Mr. Rankin
In the days when wages were 25s. to 30s. a week, saving was almost impossible.

§ Mr. Body
Exactly. That was before the days to which I was referring, but enough has been said already about that period.
Part III of the Schedule should be included. This would enable the trustee savings banks to invest in unit trusts and shares in building societies and in ordinary equities. I hope that the Financial Secretary will not suggest that the trustees cannot be trusted to embark on such investment. Obviously, no board would be reckless enough to invest more than a small proportion—perhaps 10 per cent., certainly no more than a quarter—of its deposits in such equity. It cannot be suggested that the banks are not competent to handle such money.
The figures which I gave earlier show quite definitely that the trustees and actuaries of the trustee savings banks have amply discharged their duty to protect depositors' money. The increased power of investment could safely be put in the hands of the trustee savings banks, and I believe that if that were done the nation's wealth would gain.

§ Mr. Michael Alison (Barkston Ash)
I wish to draw attention to a hiatus which certainly occurs in one particular case and may occur in other cases between the general provisions, in particular, of Clauses 1 and 2 relating to what might be described as a bonus for management purposes of 10s. 6d. per cent. 1591 and the possibility of £10 million for investment to improve property.
In a bank of which I have had some detail from a constituent not entirely disconnected with it, to put it at its most discreet, conditions are so bad that the staff are leaving rapidly. He and one clerk look after about £750,000 in balances, representing 3,000 to 4,000 investors. If they are to have a meal, it is impossible to observe the trustee savings bank rule that two clerks must attend to every transaction. He has had two Saturday mornings off in 15 years. They do all their own cleaning. I could elaborate in greater detail.
Is it within the remit of the Treasury, with its paternal rôle in the trustee savings bank movement as provided for in the Bill, to concern itself with conditions of this sort within individual branches or banks? If it is, I should be happy if the Financial Secretary would allow me to send him details of this case. It has been impossible to find any responsible body to which one could make reference in such cases. This is the first general point on which I should like elucidation.
Secondly, in so far as it is his concern, is the Financial Secretary sure that the method of running the ordinary deposits is right? He intervened earlier to indicate that the very substantial increase in total deposits in the trustee savings banks over a long time was a general one embracing both the special and ordinary. My question is this: Are the ordinary deposits being used in the way in which Lord Radcliffe indicated there was some danger they might be used?
I hope that the hon. Gentleman will not think it an imposition if I read a very short paragraph, paragraph 957, of the Radcliffe Report on the Working of the Monetary System. It states: … the trustee savings banks are organised to do savings bank rather than current account banking business, and the terms on which they take deposits are based on the assumption that the deposits they receive, though technically repayable at call, will in practice be savings rather than demand deposits. As the pressure upon these institutions to offer current account banking facilities grows, their embarrassment, and their real difficulties, will increase. I get the impression that there has been a subtle if definite change in the rôle 1592 of the ordinary deposit in the trustee savings bank movement, namely, that it is rapidly becoming akin to an ordinary account in a joint stock bank.

§ Sir E. Errington
While it is most important that the essence of the trustee savings bank is savings, is it not desirable that people who have savings may, if they wish, use the sort of facilities, as long as they do not get out of hand, which my hon. Friend has in mind?

§ Mr. Alison
I concede that it is certainly desirable that the trustee savings banks should be used to the maximum possible extent, but if they are being used in regard to the ordinary deposits as day-to-day banking facilities, the 2½ per cent. interest rate is neither one thing nor the other. Either it should be totally absent, as in the case of the ordinary joint stock banking facilities, or it should be boosted up a bit and a moderate time withdrawal clause should be inserted, as in the case of a building society loan.
If we are about to give a substantial extra bonus of 10s. 6d. per cent. for the management of the ordinary deposit accounts, we should be clear whether there is a change as indicated by the Radcliffe Report, whether they are not so much savings in the terms of the ordinary deposit account as ordinary banking facilities and, if so, whether the money will be well spent. It is important that the 2½ per cent., which is a peculiarly remote figure in terms of current reality, should have some value in the programme of work and objectives of ordinary deposits. I hope that the Financial Secretary will be able to illuminate this.

§ Mr. Harold Lever
I hope that the House will give me permission to speak again so that I may clear up one or two of the points which have been raised. I welcome the support which has been given to the Bill from all parts of the House and the interest which hon. Members have shown. Even my hon. Friend the Member for Glasgow, Govan (Mr. Rankin), who obviously would have preferred to speak on a Friday, has overcome his propensity to taciturnity and has stayed for a Thursday debate, to which he contributed so brilliantly, bringing in the local colour which we expect from him.
1593 I hope that I do not seem discourteous to the ingenious contributions which have been made from the other side of the House which sought to weave into the pattern of an innocent savings Bill all kinds of intriguing political controversy, the relevance of which must have been obvious to you with your greater tolerance and quicker understanding, Mr. Deputy Speaker, but which was not always obvious to myself. I could not hope to emulate those hon. Members who have spoken and I will, therefore, avoid such topics as the prices and incomes policy and the records of the respective Governments over a wide field of economic activity and I will confine myself rather narrowly to the Bill.
I was first asked the reason for the £50 restriction on the depositor who wants to put his money in the investment department. This originally came because in earlier days—it is a long-standing restriction—it was found that when people started to put their money into the investment department without keeping any money available on short call, they tended to embarrass themselves and the trustee savings bank manager by coming in in emergency and asking for the month's notice rule of the investment department to be broken.
To discourage that and to encourage a certain liquidity preference on the part of those who wish to embark on a more ambitious range of investments, the rule was applied. It is not remorselessly policed by the trustee savings banks, who are, obviously, not only a successful institution, but a tolerant, understanding institution with roots in the locality, especially those mentioned by the hon. Member for Aldershot (Sir E. Errington), where the savings bank movement has been strongest and where common sense is probably at the highest level in the kingdom. There we very often find that, although this rule is enforced before the account is opened, the investment accounts' running down by a few pounds is not altogether forbidden
I am not saying that such matronly supervision is as appropriate to the average depositor in 1967 as when the rule was first established, but when the hon. Gentleman feels so very strongly about it I am prepared to have a look into that, in consultation with those self- 1594 sacrificing gentlemen who, like the hon. Gentleman the Member for Aldershot do, in fact, run these banks, and on whom we rely for a good deal of advice about local conditions.
The hon. Gentleman the Member for Worthing (Mr. Higgins) raised a point about the Post Office putting up the rate to 6 per cent. in the investment department and wondered why the trustee savings banks, which are private enterprise banks, respectable and worthy people, but not under the control of this Government, are not doing as well as the Post Office Savings Bank in this respect. The answer is that they may well do so. The answer is that the amount each bank returns to its investment department depends on how successfully it invests funds placed with that department, and with higher rates of interest temporarily available the trustee savings banks presumably will look to their laurels and seek to improve the returns on their investment departments. I think it may be a question of time. The Post Office has got off the mark very well, before the trustee savings banks—

§ Mr. Higgins
The hon. Gentleman will recall that in 1964–65 effectively a curb was placed on the rates which the special investment departments of the trustee savings banks were allowed to give to their depositors. Would he give us an assurance, in view of what has happened with the Post Office, that no such curb will be imposed in future? Would he do so, if not immediately, some time before the end of his speech, because I raised this point with him on Friday, and he will be aware of it?

§ Mr. Lever
All I can say at this moment—I have lost my means of communication—is that I hope the hon. Gentleman will rely on my interpretation of signs and symbols rather than actual reliable communications, but I think I can say for my own part that I cannot see why the Government should put a curb on the success of these departments by limiting the rate. It is up to these departments to earn as much as they can within the area of safe investment.
The hon. Gentleman the Member for Holland with Boston (Mr. Body) very understandably felt they ought to branch out into financing industry—into unit trusts and investment in industry. In these departments the depositors are not men 1595 who want by choice to go and invest in unit trusts or anything of that sort. These are accounts which guarantee a return of money at an appropriate rate of interest not subject to the kind of capital loss which the hon. Gentleman expatiated upon and which is possible in an altogether different kind of investment. I do not want to enter irrelevant party politics and I do not want to play tit for tat in the hon. Member's politicking, but the greater part of the losses occurred in the era of the Conservative Government. The depositors do not want to be involved in the ups and downs of Government bonds. These are small investors who, in the main, do not wish to acquire knowledge of equities or forms of bond buying. They want to know their money is safe. They want to know they will get a steady rate of interest and these things can best be achieved if they do not invest in equities.
In the new year they will be allowed to initiate, with a great deal of care and caution, the trustee savings banks' unit trust. I think that the hon. Member for Holland with Boston will be unable to detect any signs of an ideological approach on the part of this Government, since it is under our auspices and with our blessing that, for the first time in the 150 years' history of the movement, this will enable the trustee savings bank movement to participate in equity investment, and it proves how false are those who say that this Government are prejudiced against private enterprise. Here we are, for the first time in a century and a half—this is not a case of 13 years but of 150 years of neglect under Conservative Governments—initiating the Savings Bank movement into channelling the funds of small savers into the equity movement—

§ Sir E. Errington
And it is being done voluntarily and charitably.

§ Mr. Lever
It is being done voluntarily, charitably, and with great skill by those who devote their time to organising it.
I hope that the hon. Gentleman and the hon. Member for Holland with Boston will not think it discourteous of me if I do not deal in detail with the arguments about the relative attractions 1596 of the Post Office Savings Bank. There is a see-saw in these matters. Sometimes the Post Office attracts more deposits and sometimes the savings banks. In a sense, they are in competition, but it is a healthy competition, and it is for the public to choose where and at what times they invest in those bodies.
I do not think that one can nourish the House a great deal intellectually by a study of the up and down graphs and the neck-and-neck racing for the acquisition of deposits by these two well-known, well established and thoroughly trustworthy institutions. I welcome the success of either or both, and long may their healthy rivalry continue.
We should not be too unduly perturbed if there are moments when savings decline as well as moments when they go up. The money is put by for rainy days, and sometimes we have national rainy days when a great many people have difficulties together. One of the points of these savings is to ensure that if, for any reason, there is a decline in employment, the economic difficulty of reduced overtime or a matter of that kind, those who have been thrifty are able to use their savings to mitigate the effect of the depression of their incomes.
I have been asked whether the rate should be increased above the ceiling provided for in the Bill, and what will the rate be after the acceptance of the Bill by the House, as seems probable. The rate proposed is some way below the £3 13s. 6d. ceiling fixed in the Bill. The reason why we fixed the ceiling fairly low was to ensure that either I or some future Financial Secretary should appear before the House within a measurable number of years to ask for the ceiling to go up, if it should prove necessary, in the event of a rise in prices. We think that the ceiling will last for a number of years, although I understand the tactful allusion to recent events which might shorten the period which we had in mind. However, this is the rate paid to the trustee savings banks and not that paid to depositors.

§ Sir E. Errington
Surely there can be no harm in raising the rate. It is always very nice to see the Financial Secretary to the Treasury at the Dispatch Box, but legislation is difficult, things take a little 1597 time, there is considerable argument, and so on. Surely there is no merit in keeping the top ceiling low. There is some merit in keeping the lower level as low as possible, but not the top ceiling.

§ Mr. Lever
The Treasury feels that a wide latitude without legislative provision encourages everyone to hit the ceiling, however high it may be. The Treasury has a reflex preference for lower ceilings, with legislative provision required to lift them. I am not sure that its purpose is solely to give the House what the hon. Gentleman kindly called the pleasure of seeing me here. On the one hand, it is to encourage trustee savings banks to keep within the ceiling in the management of their costs, seek to be more efficient, and keep the process of erosion at its slowest pace. On the other, it is to give the House an opportunity to discuss the affairs of the savings banks. If we fixed the ceiling at something like 6 per cent., it would be difficult to persuade my right hon. Friend the Leader of the House that any such consideration of the trustee savings banks would be appropriate.
It has also been suggested that the 2½ per cent. rate we are paying now to depositors is either unsatisfactory or ought to be looked at again in Committee This is the rate which has been paid since 1888. It must not be said that this is paid at this flat rate as a touching adherence to Victoriana. One of the few remaining Victorian institutions is the 2½ per cent. rate. The reason is that we give tax-free exemption to the great majority of the accounts in the ordinary department, most of which are small accounts, and the interest on which is below the £15 ceiling. Therefore, they are in many cases getting 4 per cent.
The hon. Member for Barkston Ash (Mr. Alison) queried whether some embarrassment would not be caused by the running of these accounts as current accounts in some way. The hon. Member for Aldershot has a long and intimate connection with these banks. They are there to serve the public, and if there are minor modifications in the way that the service is afforded I would have thought that there was no objection to that
The hon. Member for Barkston Ash brandished the Radcliffe Report at me. I must freely confess that I once read it, 1598 but I cannot honestly say that I recall with particular attention the paragraph that he quoted in support of his arguments to suggest that in some way there would be growing embarrassment to the trustee savings banks if they continued the practice of making available the widest possible service to their customers.
The hon. Member for Aldershot seemed singularly unembarrassed at having this crime pinned upon him, and all the eminent gentlemen who have helped in this movement seemed in an equal state of unembarrassed pleasure at the savings banks adding to the services that they render to the workaday public every year. They are not in competition with the joint stock banks. They do not draw cheques or anything of that kind, but if they perform useful little services for the management of money, that is why they are brought into existence.
I do not follow the point made by the hon. Member for Barkston Ash, that if they are giving this useful service they should pay nothing by way of interest and, if they are not giving this useful service, they should pay more. Why not leave it to the eminent trustees to decide what services they should give? Far from being a cost to the public Exchequer by reason of the services that they give, it must be conceded that the Exchequer has no cause for resentment either at the size of the deposits that accrue to them from the savings banks ordinary department, or the rate of interest that it has to pay back in return.

§ Mr. Alison
I am grateful to the hon. Gentleman for giving way. I thought it was relevant to the extent that the 10s. 6d. per cent. increase in the Treasury bonus, as one might say, seemed to be directly related to the management expenses of the trustee savings bank. If they are increasingly being used to operate demand deposits as ordinary current accounts, the management expenses are bound to go up considerably. One wonders whether to give them at the same time possibly a 4 per cent. rate of interest on what amount to demand deposits is not pulling in the opposite direction to the need to help management.

§ Mr. Lever
The fact remains that they are giving this service and are able to do it on a margin between what they have to pay at 2½ per cent. and what 1599 we are allowing them. The hon. Gentleman will remember that the ceiling here is £3 13s. 6d. and we are not even paying that yet. Even if we get to the ceiling, the Exchequer would be getting a good bargain and so would the customer by having, cheaply provided, services which very often preclude him, as the hon. Gentleman implies, in a commercial bank from having any rate of interest at all. If these banks can, on the one hand, give the service and, on the other, give the rate of interest to the depositor and also require for the management of their banks so modest a sum that the overall rate of interest to the Exchequer is as favourable as it now is, why should we complain? We should praise them and encourage them to widen and continue it.
The question was asked: why should the Government dictate the apportionment of costs as between the savings banks and the ordinary department? This is to get some sort of uniformity, one would suppose, in the arrangement. The Government look at these things through the Treasury and we try to see what is a fair basis.
It is not always easy to calculate, and I do not want to weary the House by going into the detailed possibilities of apportionment, but we have people in the Treasury who are not unfamiliar with handling these matters. We do not dictate. We seek to assist the banks by naming the manner in which the apportionment should take place. When we make an apportionment it is with the honest intention of being fair to both departments. We do it in consultation with the trustees and with a desire to produce an overall just result.

§ Mr. Higgins
I am puzzled by the hon. Gentleman's statement that they do not dictate, they merely advise.

§ Mr. Lever
I did not say that we merely advise. We do not dictate. We fix the apportionment, but it is not dictation. It is a rate which is fixed after consultation with the trustees and in each case after consideration of what would constitute a fair apportionment of the costs. One reason why we are moving up the rate paid to the ordinary department is to enable it to pay its fair proportion of costs. I hope that the hon. 1600 Gentleman will not mind my precluding him from going on with the argument, but I think that he misunderstood me when I said that we did not dictate. I did not mean that we do not take responsibility for fixing the rate, but that is different from laying down the law to a reluctant victim. This is done in consultation with the Trustee Savings Bank, and, we think, to the general satisfaction of everybody concerned.

§ Mr. Higgins
In that case Clause 6 seems to be otiose, because it says that direction may be given by the National Debt Commissioners to a trustee savings bank. If it can be done by consultation, and there is not going to be direction, why do we need Clause 6?

§ Mr. Lever
We must have uniformity. It has to be enforceable, and after consultation, in the way we normally do it, the Commissioners lay down what the apportionment should be and the manner of it.
When I said, "to the satisfaction of everybody", I was exaggerating slightly. because there is the gentleman in The Times Business News. I am not unfamiliar either with tax law, or with some of the financial matters to which he alludes, but I confess that the editor of The Times Business News must have a more acute grasp of these matters than I have, because I find the letter largely incomprehensible. One may infer from that that my lack of understanding is the product of my learning, but even so I cannot illuminate the subject in any way based on this letter. It seems that Mr. Kerr is dissatisfied. At all events, that emerges clearly from his somewhat lengthy letter, but what has caused his dissatisfaction I am unable, with the best will in the world, to analyse. Therefore it is not the point that he made, which is the apportionment of costs as between one department and another, which causes his dissatisfaction. There must be another point about tax law which seems to be of too erudite a nature for me to comprehend, though I have studied it carefully.
I am asked what rate we will charge on the loans of capital by the National Debt Commissioners to the banks. The answer is the commercial rate. It will be investigated by the Commissioners in the same way as any other investment, and 1601 we will get the commercial rate from the trustee savings banks for the loans that we make for capital account.

§ Mr. Higgins
Can the Minister say what that rate is at the present time?

§ Mr. Lever
The hon. Gentleman can hardly have chosen a more awkward moment for me to fix the rate of interest. I think that there is a sufficient state of flux in these matters. There is no fixed rule-of-thumb rate. It is the rate which the Commissioners in their infinite wisdom and experience consider to be the reasonable commercial rate when they lend. So far they have not loaned anything. They cannot do so until the House concedes the power in this Bill. When the power is conceded, if the House thinks fit to do so, the Commissioners will proceed to put a new customer on their books for loans. So far it has all been one way. It has been the trustee savings banks offering money to the Exchequer. Now the Commissioners will lend capital money to the trustee savings banks, and they will lend at the rate appropriate on commercial terms, having regard to the length of time, the nature of the sum, and all ancillary relevant matters. I cannot give the hon. Gentleman the rate for lending, which cannot in the nature of things take place until he and his hon. Friends, and my hon. Friends, if they are so minded give us power to lend this money.
I think that I have dealt with all the points except one, namely, the pensions situation, which was raised by the hon. Member for Aldershot. The situation there is the same as for the Civil Service. The hon. Member for Barkston Ash wondered whether the Treasury power extended to cover the working conditions of any trustee savings bank. It is primarily the responsibility of the trustees themselves to see that the working conditions are up to scratch. If the hon. Member will give me particulars I can say on behalf of the Department of which I have the honour to be Financial Secretary that nothing humane is alien to us and that our paternal and sympathetic eye is everywhere in matters of this kind. If the hon. Member can give me particulars, I assure him that the Treasury will immediately and effectively, and probably informally, see what is to be done about it.
The hon. Member for Holland with Boston referring to what my right hon. 1602 Friend the President of the Board of Trade said yesterday asserted that my right hon. Friend excused the default on obligations. I hope that the hon. Member will not repeat that assertion, especially as he used it inappropriately in relation to a Savings Bank Bill debate.

§ Mr. Body
indicated dissent.

§ Mr. Lever
The hon. Member said that my right hon. Friend excused the default on our international obligations on the ground that we had paid interest—

§ Mr. Body
indicated dissent.

§ Mr. Lever
I understood that the hon. Member was making that point. If not, I am delighted. I understood him to criticise my right hon. Friend by suggesting that he excused—

§ Mr. Body
indicated dissent.

§ Mr. Lever
I took a careful note of what the hon. Member said, but no doubt it is a figment of my imagination. In that case I will pass from the point and thank the House for its cordial reception of the Bill which I am sure will serve the purposes we desire to further—the cause of the trustee savings bank movement.