HC Deb 05 May 1969 vol 783 cc52-225

Order read for resuming adjourned debate on Question [30th April], That the Clause (Amendment of section 17 of Post Office Savings Bank Act, 1954), proposed on Consideration of the Bill, as amended (in the Standing Committee), be read a Second time. To section 17 of the Post Office Savings Bank Act 1954 (Securities in which the Commissioners may invest) there shall be added the following sub-paragraph of subsection (1):— (e) In equity shares'.—[Mr. Ridley.]

Question again proposed.

4.19 p.m.

Mr. Speaker

May I remind the House that we were debating the Second Reading of new Clause 11 standing in the name of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). In our debates on the Bill last week we drifted into very long speeches from time to time. May I point out that we have many Amendments to discuss in what seems likely to be a long sitting today. I therefore hope that hon. Members will be reasonably brief when called. I venture to remind the House of an old saying, that speeches, to be immortal, need not be eternal. I do not know who had the Floor.

Mr. John Hay (Henley)

No one had the Floor, Mr. Speaker. If I recollect, the Postmaster-General had just sat down, having made what I thought was a completely inadequate answer to the very important and useful speech made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). The Clause would enable the Post Office Savings Bank to invest in equity shares. I need not traverse the ground covered by my hon. Friend in pointing out the declining value of gilt-edged securities in which, I understand, the Post Office Savings Bank is at present obliged to invest.

I hope that the Postmaster-General has had further thoughts on this matter over the weekend. Whatever may have been the historical reasons for requiring the Post Office Savings Bank to invest only in gilt-edged securities, the country's economic climate has changed so much during the intervening years that this has become an important matter which we ought to discuss.

Equity shares have shown tremendous advances. They have more than kept pace, on balance, with the growth of inflation in the economy over the past 20 years, yet we have the extraordinary state of affairs that gilt-edged securities have shown a decline during that period. I am no mathematician, but I am sure that it would be possible to show how the true net value of the Post Office Savings Bank's investments in gilt-edged securities has declined over the years.

In reply to the case put by my hon. Friend, the Postmaster-General, I thought, was about to make the point—perhaps I headed him off before he really made it—that there was something rather odd in the suggestion coming from this side of the House that money entrusted to the Government should be invested in equity shares because it was contrary to our belief that the Government should not take a stake in private industry.

As I tried to make clear to the right hon. Gentleman in an intervention, that is a false point. As he himself had to admit, the situation of the Post Office Savings Bank and those who control it, and of the National Debt Commissioners, is a fiduciary one and they are, therefore, not the servants or agents of the Government. In the circumstances, it would be wrong for any hon. Member opposite to think that there was something unusual, abnormal or contrary to Conservative Party policy in the suggestion that money invested by millions of people in the Post Office Savings Bank should not have open to it the most lucrative form of investment.

That is all I wish to say. I have in mind, Mr. Speaker, your indication to us a few minutes ago that speeches should be brief. In conclusion, I invite the right hon. Gentleman to ask the leave of the House to speak again in reply to this serious point. It is no time-wasting manoeuvre. My hon. Friend's suggestion ought to be adopted. It is high time that it was done. The range of investments open to the Post Office Savings Bank should be spread, and this Bill gives us an important, and in some ways unique, legislative opportunity to do it.

The Postmaster-General (Mr. John Stonehouse)

Before the hon. Gentleman resumes his seat, perhaps I could answer his courteous question and make clear to him and to the House that I have no wish to add to what I said in the debate last Wednesday evening, reported in columns 1584–8 of the OFFICIAL REPORT.

Mr. Michael Alison (Barkston Ash)

I wish to add one dot to, and cross one "t" of, the substantial appeal just made to the Postmaster-General by my hon. Friend the Member for Henley (Mr. Hay). If the new Clause is rejected, the Post Office Savings Bank will not stand all square with the practice of the trustee savings banks. The Postmaster-General will know that light has dawned in that quarter and investments placed in the special department of the trustee savings banks have in recent years, I understand, been eligible for investment by those who look after the money so entrusted in a fairly narrow range of equity shares and blue-chip stocks.

It is unsatisfactory that potential investors in the Post Office Savings Bank should be discriminated against in this way. The Post Office Savings Bank system is a very convenient one for many people, particularly for the large numbers who have to call regularly at the post office for their weekly financial transactions, taking small sums out of the Savings Bank, collecting pensions, buying stamps, and so on.

Deposits in the Post Office Savings Bank are one form of Government borrowing which does not increase the supply of money in the economy. Money lent to the Government in the form of non-marketable securities in no way increases or extends the credit base of the banking system. It seems most desirable, therefore, that everything possible should be done to encourage small savers in this sector of saving.

The right hon. Gentleman will appreciate that the question of money supply is now extremely pressing in the United Kingdom's economy. He will have read in the newspapers today that Mr. Richard Goode, of the I.M.F., has just completed his stocktaking of the financial position here, and that one of the undertakings which the Chancellor of the Exchequer gave him in respect of the money supply was that he would do his best to control it.

Government borrowing on short-dated marketable securities has a tendency to increase the credit base of the economy, and Government borrowing, when they have to do it through the banking system because no one else will lend to them, has a colossally multiplying effect on the money supply in the economy. On the other hand, one of the few sectors in which Government borrowing has no effect on the credit base is borrowing through non-marketable securities such as trustee savings bank or Post Office Savings Bank deposits.

It is irrational, therefore, that the Postmaster-General is not taking steps at this time to put the Post Office Savings Bank on the same footing as the trustee savings banks, particularly when the Post Office system is of such convenience for the small saver. People should be encouraged not to be net withdrawers from this source, but to lend to the Government in this way through non-marketable securities. So many people go to the Post Offices that it would enormously facilitate the uphill work of those who promote and run the National Savings movement. Moreover, this is a change which the right hon. Gentleman could rationally make to help back up the work of his right hon. Friend the Chancellor of the Exchequer.

The average rate of interest which the Government are at present paying on all the money which they borrow—this was given in an Answer last week—is about 7 per cent. It seems reasonable, to say the least, that the Government should face the need and the possibility of bringing the interest which they pay on deposits in the Post Office Savings Bank up to the level which they are paying for most of their borrowing. Why should they get away with paying 2½ per cent. or whatever it is, which is all—

Mr. Speaker

Order. With respect, the hon. Gentleman is going rather wide of the new Clause,. which would merely give the Commissioners power to invest in equities.

Mr. Alison

I accept your injunction, Mr. Speaker, but it remains true that, if it were possible for the Commissioners to invest in blue-chip equity stocks, they could afford to pay a much higher rate than they are at present paying.

The Postmaster-General will appreciate that there is much more at stake here than the simple mechanical continuation of a long-established practice, which even the Radcliffe Committee thought a little odd when it considered it in 1958. He would do the country and.more important, perhaps, from his point of view—the Chancellor of the Exchequer a great service if he really encouraged small savers through the Post Office savings movement by letting them have their investments reinvested in blue-chip stocks, thereby making it possible for them to have a better return.

4.30 p.m.

Mr. Stratton Mills (Belfast, North)

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has initiated a useful debate, which not only focuses attention on the type of investment by the Director of Savings but forces us to look slightly more carefully at the overall performance of national savings vis-à-vis the small saver.

I was very disappointed by the Postmaster-General's reply. He did not seem to take this point, which was the real point of the debate. My right hon. Friend showed very forcibly that the national savings media have been an unsatisfactory place for the small saver's money in an era of rapid inflation. It is the small saver, the person without expert professional advice, who can lose out in such a period of rapid changes in money values.

In 1965, when we debated the Post Office Savings Bank Act, I pointed out that while the amount owed by the Post Office Savings Bank to depositors was about £1,800 million the market value of its investments was only £1,600 million. There was a deficiency of about £200 million in that fund, and having regard to the way the gilt-edged market has gone since then, I imagine that that position has become much worse. I would make it clear that there is a Government guarantee here, so that no small saver is likely to lose money, but it is a terrible indictment of the way in which the funds of the small saver are managed that such a situation should occur.

The Financial Secretary to the Treasury gave some very interesting figures last month. Asked in a Parliamentary Question what rate of interest would have to be paid to a saver to give him 3 per cent. after tax at the standard rate, and to make up for the decline during the year in the purchasing power of his pound, he said that it was about 12 per cent.

There may be two or three distinct views on the desirability of investment in equities in the present political climate, and under the present methods of control which the Government have over these matters directly or indirectly. Is it desirable that the Post Office Savings Bank, a branch of the Government, should have a large holding of ordinary shares unless one can work out an absolutely foolproof method of ensuring that such holdings are used absolutely independently; that they are not used as a branch of public policy by any Government; that they are not used to support a form of political dogma; and that they are not used to build up a large shareholding to enable a future Government to take a large slice of particular firms or a major position in any industry?

These matters all merit much wider debate than we can have today, but they would have to be considered, and one would have to be strongly convinced on them before one could be sure that this was necessarily a wise course to follow.

Another question to consider is whether, from the point of view of the small saver who wishes to take an investment in equities, national savings in any form are the best media. There are alternative vehicles for such investment which would perhaps have slightly more effective management, and would, therefore, encourage me to look more in their direction.

Whilst we have had a very useful debate, I am sure that my hon. Friend will not wish to press the new Clause to a Division.

Question put and negatived.

  1. New Clause 12
      2. cc57-97
    1. AMENDMENT OF SECTION 5 OF POST OFFICE SAVINGS BANK ACT 1954 15,562 words, 2 divisions
  2. Clause 1
      3. cc97-117
    1. ABOLITION OF OFFICE OF MASTER OF THE POST OFFICE 7,989 words, 1 division
  3. Clause 4
      4. c119
    1. TRANSFER TO THE MINISTER OF THE POSTMASTER-GENERAL'S FUNCTIONS UNDER SECTIONS 2 AND 6 OF THE COMMONWEALTH TELEGRAPHS ACT 1949 109 words
  4. Clause 6
      5. cc119-203
    1. THE POST OFFICE 30,802 words, 3 divisions
  5. Clause 7
      6. cc203-25
    1. POWERS OF THE POST OFFICE 7,864 words, 1 division
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