HL Deb 22 April 1861 vol 162 cc880-91

Order of the Day for the Second Beading read.


, in moving the second reading of the Bill, said that its object was to give greater facilities for the investment of the savings of the industrious classes, and to give to savings banks depositors a Government guarantee through the medium of the Post Office. The existing savings banks were found to be insufficient in number, inadequate in the accommodation they afforded, and insecure as to the repayment of the deposits until the money had passed into the hands of the Commissioners for the Reduction of the National Debt. The numbers of the savings banks had undoubtedly increased, but not in proportion to the increase of the money circulating among the working classes. There were, for instance, fifteen counties in which no savings banks existed at all; there were probably 100 towns with populations varying from 10,000 to 30,000; he held in his hands a list of upwards of twenty populous towns containing more than 10,000 persons where no savings banks existed; and of the 624 savings banks that did exist, only twenty were open daily, while the majority were available for the receipt of deposits only once or twice a week. This of course often neutralized the saving disposition of the working-man; for it was obvious that when a working man formed a good intention to invest his small savings there was a danger lest he should spend his money if there were no savings bank in his neighbourhood, or if some few days must elapse before he could invest it. Great losses had occurred to the depositors in savings banks from the want of security. During the period since savings banks had been established these losses amounted to not less than £229,000. In many cases the loss had fallen on the depositors, while in others it had been made good by the trustees. The manner in which it was proposed to remedy these inconveniences was by the adaptation of the money-order offices in connection with the post offices throughout the kingdom. The effect of the measure would be to give Government security for the money invested, which the Government would be enabled to give, because the measure would be administered by officers of their own, as it would he carried into effect by the machinery of the Post Office, every postmaster at present gave security, and additional security would be required, if necessary. Their Lordships would, perhaps, be surprised to learn that a similar plan had been prodosed in 1807 by Mr. Whitbread, before savings banks Were established. Mr. Whitbread brought in a Bill in which he proposed to make use of the machinery of the Post Office as savings banks. The Bill passed a second reading, but it was then dropped. The plan had been since revived, and had been lately advocated in some admirable letters by Mr. Sykes, and the Government with the assistance of two able gentlemen in the Post Office Department had matured the present plan. The depositor would go to a money-order office, would receive a book from the postmaster, in which his name and the amount of his deposit would be inscribed, and this book would be conclusive evidence against the Government. It would be the business of the postmaster to transmit the name and address of each depositor, with the sum invested, to the Postmaster General, and the depositor would then receive a letter from the Postmaster General informing him that such an amount had been placed to his name and credit. If such a letter were not received within ten days, the depositor would be requested, by instructions printed in every book, to write to the Postmaster General, and until an answer was received from the Postmaster General his name in the book would be a sufficient security. Ten days' notice must be given when money was to be withdrawn. It would then be paid to the depositor without charge or deduction. The depositor would also have this advantage—that, if he deposited the money in one part of the country, he could have it repaid at any other part. Thus, a man who deposited money at Bristol could receive it at York, Belfast, Aberdeen, or wherever he might happen to be. It was somewhat remarkable that nine-tenths of the depositors were domestic servants, clerks, &c., and that only one-tenth belonged to what was usually meant by the term the working classes; yet large numbers of these latter were in the receipt of wages far exceeding the incomes of many that possessed savings banks accounts. He hoped that working men, when they received their wages, would be induced, before going home, to invest a portion of them at these receiving houses, and if so, the results could not but be highly beneficial as inducing the spread of thrifty habits among the working population. The interest to be given 2½ per cent was not such as would put this scheme in unfair competition with existing savings banks, and their Lordships would understand that in the meantime it was to be put in operation only as an experiment. If it should prove that the extension of the system was demanded by the public it could only be by reason of the greater security and the greater facilities the new institutions would offer.

Moved, That the Bill be now read 2a.


admitted the great facilities which this system would hold out to the deposit of small sums on the part of the working classes; but when the noble Lord said that the Post Office had officials in every town who could be entrusted with the management of these banks he thought the statement was hardly correct; for while there were 2,500 money offices in the kingdom there were only 800 head offices; the rest were what were called sub-offices, managed by small tradesmen found on the spot, and who were, therefore, as a rule, unfitted for this particular work. The Bill did not state whether its operation was to be confined merely to towns in which there were money-order offices corresponding with the head Money Order Office in Loudon, which formed an entirely distinct department of the Post Office. The noble Lord went on to describe the way in which the money would be sent up from the local post-office to the Postmaster General, and would be transferred by him to the Commissioners for the reduction of the National Debt. But the question was how the local postmasters were to be remunerated, and from what fund it would be paid. That it would not be a small financial operation was pretty clear. From a Return made in 1859 it appeared that the number of deposits made in that year was £1,500,000, and that the sums deposited amounted to nearly £2,000,000. Allowing that each depositor paid in or withdrew money only once a month there would be no fewer than 18,000,000 transactions to be accounted for yearly. Their Lordships would thus see the enormous amount of business which even the present savings banks had to transact, and might thence be able to judge of the extent of labour which would fall upon the local post-offices and the central office in the event of the scheme proving as popular as was anticipated by its projectors. It was said that there was a want of security in the existing banks, but he saw from a Return that there was security given by the officers of the present savings banks to the extent of considerably more than £600,000. He regretted to say that no plan of the scheme had been laid before them, and no estimate of the expense. The noble Lord said, indeed, that a Report had been drawn up in the Post Office on those subjects; and perhaps, before going into Committee on this Bill the noble Lord would be good enough to lay that Report before the House.


said, that his noble Friend's Bill seemed to rest upon the supposition that the progress of the existing savings banks had not been satisfactory, and that it was, therefore, necessary, instead of remedying defects in the existing system, to destroy it entirely and to substitute for it a system totally different, which it was thought would more adequately carry out the object for which savings banks were instituted. But he (Lord Monteagle) denied that the progress of the existing savings banks was unsatisfactory. The very contrary is the truth. He was old enough to remember the introduction of the present savings banks. They were begun in 1817, exclusively as a benefit to the poorer classes, and with a view to promote their moral and social welfare; but since then new and very different elements had been introduced into this question, and great interests of a political and financial kind had become involved in the working of the system. At the present moment the amount deposited in the savings banks was no less than £40,000,000 sterling. This showed the immense importance of these institutions, and spoke loudly as to their success. Yet the Government proposed to interfere with their very existence; and this, as his noble Friend (Lord Colchester) had said without any estimate of the expense at which the new system was to be worked, or, even shadowing forth any plan by which it was to operate. If their Lordships thought that the deputy-postmasters throughout the country wore all competent to undertake the new and varied duties of the savings banks he could assure them they were entirely mistaken. Many of their Lordships were connected with savings banks, and took an interest in their proceedings, and they knew that the duties of the actuaries, clerks, and other officers consisted, not only in giving receipts, but in making calculations of interest to be added or deducted from the deposit accounts with other calculations which the postmasters, in the majority of districts, were hardly unequal to; in fact many of these parties deputed the duties of the post-office to their wives or sons and daughters. But there were already 1,800 officers in the savings banks engaged in performing those functions; in fact, in a large portion of those banks there were experienced actuaries employed who were paid highly, and who performed duties of which the postmasters as a class would be incapable as they were of working a biquadratic equation. If proper officers were to be employed their salaries would require a new Post Office Estimate. He had heard a noble Lord say that the Estimates as they stood made his hair stand on end; and were they now deliberately to augment those Estimates still further by being compelled to engage officers who would be competent to deal with forty millions of money? He had often had occasion to admire the pluck and courage of the noble Lord (Lord Stanley of Alderley) who was at the head of the Post Office; but those qualities were never shown in a stronger light than when he undertook the oversight and superintendence of the millions of money that would pass through his department in connection with the savings banks. But he objected on higher grounds to the Government proposal for undertaking the management of forty millions of the capital of the country. He objected to the centralization which would be the effect of this measure. The principle of non-interference with the local management of our local and charitable institutions was one which was justly appreciated in this country; and if there was one thing more than another on which it behoved the Government to interfere cautiously it was with the capital of the working classes. There had been times in the history of this country when the connection of the Government with the savings banks would have been anything but a safeguard and protection to those institutions; on the other hand, there was nothing in which the connection between the upper, the middle, and the lower classes was more valuable than in their administration of the savings banks. His noble Friend spoke of the great losses that had been incurred under the present system. But had there been no loss sustained in the Government establishment of the Post Office and in other revenue departments? In point of fact the savings banks losses were less than one-half the amount stated by his noble Friend, for while he stated the amount of money that at different times was placed occasionally in jeopardy he made no mention of the money that had been paid in to avert the danger and make good losses, nor of the amount received from defaulters and their sureties. It might be said, indeed, that such compensation was only paid through the generosity of men acting as trustees. But it must be remembered that originally the trustees of the savings banks were personally responsible for the whole amount deposited, and it was only when the deposits became so enormous that the trustees became uneasy, and induced Parliament to relieve them of that responsibility. But, in additon to that voluntary responsibility there was security to the amount of £700,000 actually lodged by the 1,800 persons officially connected with the management of the savings banks; and he believed that was a larger amount of security against abuse than his noble Friend held from all the persons now employed in the Post Office. He must remind their Lordships that our system of savings banks was no new subject. A few years ago it was referred to a Committee of the House of Commons presided over by a Gentleman whose name was esteemed wherever probity and intelligence, and a deep interest in the welfare of the working classes were held in honour—he meant Mr. Sotheron-Estcourt. That Committee in its Report recommended much larger changes in the system, changes, too, of a very different description from any to which his noble Friend invited their attention. Their Report called attention to the mode in which the savings bank deposits were now administered. They were nominally entrusted to the Commissioners for the Reduction of the National Debt, but of this board, the real and sole acting functionary was the Chancellor of the Exchequer. By his command over the sales and investments of these funds the Chancellor of the Exchequer acquired a power to which, as at present administered, he (Lord Monteagle) had very strong objections. He did not speak of any particular Chancellor, for his objection to the principle applied to himself when he had the honour to be Chancellor, as well as to the right hon. Gentleman who now held that office, though he had not used this authority in the same manner or to the same extent as it had been applied in later times. When the Chancellor of the Exchequer found that any particular stock or fund—Exchequer bills, for example—did not appear to have a favourable aspect in the market, he was empowered to apply the funds of the savings banks in making large purchases of that stock; and was thus enabled to give to that stock a fictitious value. In the same way that purchases were at one time effected, at another sales were made, and the market was thus unduly influenced at the pleasure of the Chancellor of the Exchequer, who thus might be turned into the largest stock-jobber in England; or, at least, the Chancellor of the Exchequer was the largest dealer in public stock of any man in England, and exercised a command over the largest amount of capital. That was not right. It should be remembered that when the Chancellor of the Exchequer went into the market to buy or to sell, he went with a capital of forty millions at his back, and knowing what he intended to do in his financial operations; while the persons with whom he dealt had no such knowledge; so that he had an advantage over others which was only to be paralleled by the case of a person who went to the gambling table with loaded dice. This was even avowed and justified. When the subject was mentioned in the House of Commons, the late Mr. Wilson said it was quite true that at a time when Exchequer bills were inconveniently low the Government were enabled to raise their market value by the employment of the savings bank money and purchasing bills in the way which he had just described to their Lordships; and Mr. Wilson defended the practice by saying that it was very beneficial that the Chancellor of the Exchequer should have the power of purchasing Exchequer bills when the price fell so low as to endanger their being returned on his hands for money, as he thereby raised their value and prevented the necessity of raising the interest. But that system of dealing with the public securities was not, he (Lord Monteagle) considered to be tolerated. He did not wish to take away from the Chancellor of the Exchequer any legitimate power which be ought to possess, but he desired that be should in such cases apply to Parliament and obtain his authority from them. As the law stood at present these financial operations were conducted in secresy—a practice wholly indefensible. Precedents were not wanting for proceedings such as he alluded to, but not to the same extent. He (Lord Monteagle) when in office had funded Exchequer bills bought with savings banks money—but not with money produced by sale of stock. He believed the Chancellor who had employed those funds most usefully and most justifiably was his late esteemed Friend Lord Althorp, one of the most constitutional as well as the most conscientious of men. But his noble Friend had acted with the knowledge and the approval of Parliament. In later times the practice had been greatly, and, as he considered, dangerously extended. In one case a transaction to the extent of £7,000,000 took place, although at the time it wanted but three days to the assembling of Parliament when, consequently, Parliamentary authority might have been sought for. Exchequer bonds had also, within a few years, been issued, and payment fixed for certain periods, but, though these securities had arrived at maturity, it was not convenient that they should be paid; and securities which the stock market rejected were only kept afloat by applying the money of savings banks, in order to repair a financial error, and influencing the price artificially. Such a course—in time of war especially—was also said to be convenient and necessary, as borrowing to pay off the bills returned for money, and borrowed at a higher interest, was thus averted. But neither Mr. Pitt, in the midst of all difficulties and foreign subsidies, and loans, nor anybody else ever dreamt till the year 1828 of making the public credit depend on savings banks, and not on the securities of the State and the revenue raised from taxation. But there were other constitutional objections which deserved notice. No principle was better established than that any person lending money to the Treasury or to the Crown without Parliamentary sanction committed a misdemeanour against the State. In the charter of the Bank of Eng- land a clause was introduced forbidding money dealings between the Bank and the Treasury except sanctioned by the Crown with Parliamentary authority. Yet in the present case, and under the Bill before the House, forty millions sterling were left to be dealt with at the mere verbal fiat of the Chancellor of the Exchequer according to his view of the exigencies of the moment. He, therefore, objected to the unauthorized interference of the Chancellor of the Exchequer with the funds of the savings banks on any pretence whatever. Under the present system the savings banks were managed by the country gentlemen of England, by the clergy of all persuasions, and by the respectable middle classes, who give up their time willingly for the benefit of their humbler neighbours, and from whom, without any fault that could be proved, these useful duties were now to be withdrawn and transferred to the hands of the servants of Government. What would happen in case difficulties were again to occur, such as those cases in which good and generous men had put their hands deep into their own pockets in order that the depositors might not suffer? In one at Hertford, where a deficiency amounting to £10,000 was discovered, Lord Salisbury, the late Lord Cowper, Lord Melbourne, and their fellow-managers agreed to subscribe £1,000 each for the purpose of making good the amount of deficiency; but, reflecting that one of their number was a clergyman, not in affluent circumstances, in addition to their individual contributions, one tenth each, they divided the odd thousand pounds among them, and subscribed the clergyman's share in addition to their own contributions. Such was the spirit which the Bill now proposed as about to crush. He, therefore, denied the expediency of change, on the ground that it would affect the welfare of the savings banks, and that it was an attempt to effect without necessity a great Government centralization. He objected also on constitutional principles, as tending to free the financial Minister from his just dependence on Parliament, and placing large sums of charity funds at his disposal. The only comfort which he had derived from the speech of the noble Lord who moved the second reading was his assurance that the measure was to be of an experimental character. He should not trouble their Lordships to go to a division; but, awaiting the result of that experiment, next year he should take the liberty of moving for a Committee of inquiry into the whole subject, to compare the working of the new system with that which for nearly a half century had been the glory of England and had served as a model to the whole of Europe.


did not rise to oppose the second reading of the Bill; but he wished to point out that under the system which it proposed to establish there would be no opportunity of comparing the depositors' books and the ledgers, according to the practice in existing savings banks; and he feared that owing to this and other difficulties the accounts would soon get into a state of confusion, extrication from which would be almost impossible. He also called attention to the 10th Clause, authorizing the transfer of deposits from existing banks to post-office banks, or vice versâ, but requiring the signature of two trustees to each transaction. This clause would entail so much trouble upon trustees of savings banks as to render persons unwilling to accept that office; and as it was entirely unnecessary—because its object could be effected by the depositor drawing his money out of one bank and paying it into the Other—he recommended that it should be omitted from the Bill. This scheme was said to be an experiment, and in his opinion it was one which had better be tried for two or three years in certain localities only, before it was extended to the whole kingdom; otherwise, he was afraid that it would produce much disappointment to the public, and a great loss to the nation.


, from his own experience as to the Money-Order Offices, when filling the office of Postmaster General, was of opinion that the new system would cause inconvenience, and would very materially interfere with the Post Office in the performance of its proper functions. In regard to money-orders, that was not a purpose for which the department was properly intended, and the performance of which had only been undertaken under great pressure. He did not believe that as yet any correct estimate had been made as to the probable results of the measure. He did not think this could be looked upon as a mere experiment, because he did not see the possibility of the Government stopping short, unless the system should prove at once to be a complete failure, which he did not apprehend. It might be quite right that the Government should provide the labouring classes the opportunity of investing their money; but it ought to have been stated exactly what was proposed to be done to effect this, and how the money deposited was to be invested. He trusted that before the Bill passed the information which had been asked for would be given to their Lordships.


said, as to the danger of allowing the Chancellor of the Exchequer to use the savings banks' money in the way he thought most advantageous to the public interest, it was an objection against the present state of things, and did not, therefore, constitute a special objection against the new system. It was a power which had been used, he believed, very much for the public good by the noble Lord (Lord Monteagle), when he occupied the office of Chancellor of the Exchequer; and when the expediency of entrusting such a power to Ministers was at that time challenged, the noble Lord defended it with his usual ability, and urged that it was a power that should be given, and, indeed, could not be entrusted to any other person than the Chancellor of the Exchequer. Now, however, the noble Lord gave the same principle his strongest condemnation. As to the objection against removing the management of the depositors' money from the trustees of the savings banks, he willingly admitted that in some instances trustees had generously made up deficiencies out of their own pockets; but he thought that depositors ought not to be left to the accidental generosity of any one; and one object of the Bill was to provide them with legal security for their money. In answer to the objection on the subject of expense, it was confidently hoped that the Post Office Savings Banks would not lead to any charge upon the Revenue. It was contemplated by the Government in introducing this Bill that, looking to the low rate of interest they gave—namely, £2 10s. per cent. and comparing it with the market rate, there would be left ample means of defraying all the expenses of this establishment, inasmuch as the existing savings banks, which gave a much larger rate of interest, contrived to defray all their expenses. The experience they had had in respect of the money-orders issued by the Post Office afforded them an opportunity of judging how far its machinery was suitable for the new purposes to which it was now proposed to apply it. The money-order branch of the Post Office was, in fact, a bank of transmission, and the savings bank would simply be a bank of transmission and detention—there would be only ore additional duty imposed upon it. It had been said that the Post Office could not undertake the duties of a savings bank, as the transactions would be so numerous as to overwhelm any public department. Now, the amount of deposits in the savings banks in 1851 was £16,250,000, but in the money-order office in the same year the transactions amounted to £26,506,000. Then as to the comparative security, the loss in respect of post-office orders had, out of transactions amounting to £350,000,000, only been £5,696, and of that sum £5,000 was prior to 1851, and mainly in respect of two branches, namely, Jersey and Barnet; and during the last ten years the loss had only been about £900. The loss at Jersey arose from the money being transmitted in mercantile bills, a practice since prohibited. They had reason to believe the proposed savings bank business would be carried on with equal security to the public, facility to the depositors, and without imposing any expenses on the State, inasmuch, as from the transactions connected with the money orders they had derived a profit, and the public had not paid sixpence towards the maintenance of that branch of the Post Office. His noble Friend opposite (Lord Colchester) had said something as to the remuneration to be given to the officials, and expressed a doubt whether it would be good enough to secure persons of a sufficiently high character and ability to fit them to conduct the necessary operations; all he could say was, that if the present officials were competent to conduct the money-order business, which they had done with great ability and fidelity, he saw no reason why they should not perform the duties in connection with these proposed savings banks. All the business of keeping the accounts was to be done at the central office in London, and the duties imposed on the postmasters was simply that of receiving and transmitting the money, for which service he thought the remuneration proposed to be given was quite sufficient.

After a few words from Lord and Lord in explanation

On Question agreed to.

Bill read 2a accordingly, and committed to a Committee of the whole House on Thursday next.

House adjourned at a quarter before Nine o'clock, till To-morrow, half-past Ten o'clock.