§ Order of the Day for the Second Reading read.112
§ LORD TEMPLEMORE
My Lords, the Bill to which I ask your Lordships to give a Second Reading this afternoon is a Bill to facilitate the further expansion of trustee savings banks, and to simplify the administration of those banks. I wish that my noble friend the Chancellor of the Duchy of Lancaster could have been here this afternoon, as he would, with his Treasury experience, have explained this Bill far better than I can hope to do. However, with your Lordships' permission I will do my best to explain as briefly as possible the clauses of the Bill.
Many of your Lordships may be aware that these trustee savings banks are some of the oldest saving institutions in the country. Some of them have been in existence, I am informed, for considerably over 100 years. They were first brought under Government control in 1817. Since that date many Acts have been passed regulating the administration of these banks and the investment of the funds deposited. Throughout all that time the popularity of the banks has been secured by the maintenance of the principle of local management and control by bodies of unpaid trustees. It is to this principle, which has been maintained throughout, that the great popularity and usefulness of these banks are due. These trustee savings banks are for the most part divided into two departments. There is, firstly, the ordinary department, the funds of which are invested with the National Debt Commissioners who guarantee a fixed rate of interest to the trustees, and secondly, in the case of banks which have deposits of £200,000 or more, there is a special investment department in which depositors who have £50 or more in the ordinary department may deposit. It is interesting to note that on November 20 last there were 119 of these banks with 450 branches. The total amount due to ordinary depositors was over £81,000,000. In fifty-seven of the banks there were special investment departments with deposits of over £38,000,000 making a total of rather over £120,000,000. These facts will show, I think, the usefulness and popularity of these banks and the very important place they have in the life of the country.
Coming to the clauses of the Bill, they may, I think, be dealt with under 113 three headings—firstly, simplification; secondly, development; and thirdly, miscellaneous. Under the first heading may be mentioned Clause 1 which will enable the banks to take security from their officers in the form of a general bond of a guarantee society covering all officers in accordance with modern practice. Clause 16 simplifies the dealings of the banks in property by vesting all property in four custodian trustees instead of requiring all documents to be executed by every member of a numerous body of trustees. Clause 18 empowers the National Debt Commissioners to prescribe what persons are to sign the numerous documents and returns prepared by the banks. Under the second of the headings that I have mentioned, development, there is an important clause, Clause 2, which prevents the closing of any trustee savings bank until it has been found absolutely impossible to obtain suitable persons to carry it on. This clause is important because at present the trustees can close a bank whenever they please, provided, of course, that they give the required notice and pay out their depositors. I am informed that in many cases these banks have been closed when they could have gone on and done useful work for the community. Clause 6 will permit the opening of special investment departments in exceptional circumstances where a trustee bank has not in its ordinary department deposits amounting to £200,000, and it widens the scope of the securities in which deposits in these departments may be invested.
Under the third heading, miscellaneous, we find Clause 3, an important clause, enabling the National Debt Commissioners to invest the savings bank funds in any security guaranteed by the Government, instead of as at present, when half the trustee savings bank funds must be invested in direct Government obligations. Clause 9 empowers the banks to undertake certain ancillary business to help thrift, such as the safe custody of depositors' valuables and matters of that kind. This clause will only be put into force very sparingly and the duties which it permits will only be undertaken subject to the consent of the National Debt Commissioners given after consultation with the Inspection Committee and the Trustee Savings 114 Banks Association. Then there is Clause 10 which removes most of the existing restrictions under which depositors may not have more than one account in a savings bank. At the present moment, for instance, a person may not have an account in the Post Office Savings Bank and in a trustee savings bank, and he may only have one account in whichever bank he chooses to put his money into. This clause will enable depositors to open, for instance, separate accounts for holidays, education and such like matters. In the future, a depositor will be able to have an account in the Post Office Savings Bank and a trustee bank. The only restriction will be that he cannot have an account in more than one trustee savings bank.
The last clause that I think I need describe to your Lordships is Clause 12, which is also an important one. At present pre-War stocks can only be bought through the trustee banks or the Post Office Savings Bank by existing depositors or by an individual opening a savings bank account specially; whereas Government securities issued during and since the War can be bought by the public in general through the Post Office Savings Bank and the trustee banks. There seems to be no reason whatever for maintaining this difference between pre-War stock and other stock. It is an inconvenience to the public and causes extra work for the banks. It is proposed, therefore, to put all these stocks on the Post Office Register, which will mean that in future any one will be able to buy all Government stocks through the Post Office and trustee savings banks. This will bring within the ambit of these banks such stocks as local loans and other securities which are not directly charged on the Consolidated Fund.
I have said enough, I think, to show that this is a useful measure which will simplify procedure and will generally bring the conduct of these banks up to date. The noble Lord opposite, who I believe is going to address your Lordships, said last week that this Government never did anything that he wanted them to do. I believe that that is not an uncommon complaint for an Opposition to make about a Government, but it would be a great satisfaction to me if, on the first occasion that I have intro 115 duced a Bill from this Table, I could obtain even a qualified approval from the noble Lord when he comes to reply. However that may be His Majesty's Government believe that no Party will challenge the principle of this Bill. They look on this measure, the provisions of which have been discussed at length with the representatives of the banks concerned, as advantageous to those banks and one which will assist that person whom they specially desire to assist—namely, the small investor. As such I commend it to your Lordships for Second Reading.
§ Moved, That the Bill be now read 2a.—(Lord Templemore.)
§ LORD ARNOLD
My Lords, I do not think, if I may say so, that your Lordships have suffered at all in regard to this Bill through the absence of a noble Lord, Lord Cushendun, because the noble Lord opposite has, I think it will be generally agreed, put forward the case for the Bill with brevity and lucidity, both of them qualities much to be desired. I am sorry I cannot go further in saying entirely pleasant things to him. He was good enough to refer to an observation I made last week when I said that this Government never do quite what I want them to do. That still remains true despite this Bill. It is the case that the Bill, broadly speaking, is non-controversial. I will give the noble Lord that satisfaction if it is any pleasure to him. Whatever pleasure that may bring to him he may enjoy to the full, but my complaint about the Bill is not so much with what is in it but as regards what is not in it. It does not go far enough; it is too restricted. I propose to confine myself to one point, and one point only, of omission from this Bill.
This is a Bill, as the noble Lord has explained, to amend the savings banks procedure, and he says that those banks have great popularity and usefulness. I think it would probably be more true to say that they have had great popularity and usefulness; I believe that under existing conditions their popularity and usefulness are likely steadily to diminish and, indeed, are diminishing in a sense. The reason is that these banks are still only allowed to give the depositors a rate of interest not exceeding 2½ per cent. That is too low in these days and 116 I think I can prove that quite apart from the general statement, which carries its own truth with it. Complaint is made, and is made justly, that these banks do not offer the inducements which are given by other institutions, and given with absolute safety. Take the Birmingham Municipal Bank. The Birmingham Municipal Bank, which was formed in 1919, pays 3½ per cent. It is a very prosperous bank and it is growing rapidly; in fact its history is a romance. The authorities are paying 3½ per cent. and are allowed to pay that by their Act, and they pay it to all the depositors I believe. If the Birmingham Municipal Bank can do that, I think it is clear that more than 2½ per cent. should be paid by others, and I am very sorry the opportunity has not been taken in this Bill to raise the permissive rate of interest at least to 3 per cent. That is what was urged in another place, but the Government would not yield on the point.
The chief purpose of these banks is to encourage thrift. That is what they are for; their name implies that; and, therefore, they ought to give the best inducement which it is reasonably possible for them to give for thrift; and they are not doing that. Look at the position to-day. The Bank Rate is now 5½ per cent. The utmost which a depositor in these savings banks can get is 2½ per cent. Even if the Bank Rate fell 1 per cent., or 1½ per cent., of which there seems to be no prospect, at any rate at present—1½ per cent. is probably the most by which it will fall for a considerable time to come—even then I think the savings bank could afford to pay 3 per cent. But even if the Bank Rate fell to such a figure that there was a small loss, there is nothing new about that. The main defence of the Government in regard to this matter in another place, as I understood it, was this. There used to be a loss in those days, now so far in the past that it scarcely seems possible to recall them, when Government securities only yielded 2½ per cent. Still, 2½ per cent. was then paid by those savings banks, and there was a loss. The Government say: "That is quite true; the position now is reversed; it is true that now there is a profit." The Financial Secretary admitted there is a profit made out of depositors which is going to the 117 relief of taxation. In effect he said: "Well, there it is; there used to be a loss but now there is a profit, and so, on the whole, justice is done." But justice is not done. It is not the same people to a very large extent that you are dealing with. You are dealing with a new class of depositors and they are entitled to have more than 2½ per cent. having regard to present monetary conditions.
I am only asking that this should be a permissive power. It would not be obligatory to pay 3 per cent.; it would be permissive. It is no answer to say that a lot of these depositors are very small people and they cannot expect very much. But those are just the people you want to encourage. Small depositors may grow into large depositors, and they do in many cases. I point out what the pre-War position was, compared with the present position, and I say the contention of the Government is one which cannot really be sustained. What was said in another place in addition to what I have already told your Lordships was this. It was said there was a Committee—the Montagu Committee—that went into this matter in the middle of the War (when money was much the same as it is to-day) and the Committee said you had better not change it because experience has shown in the past that 2½ per cent. is as much as can be paid over a long period of time. That may have been so in the twenty or thirty years previous to the War, but it is no use to quote the Montagu Committee as one whose findings apply to the present day. The Montagu Committee thought, as practically everybody else did at that time, that after the War monetary conditions would become again pretty much what they were in pre-War days, but that has not happened. The Montagu Committee's Report was based upon past experience and did not take into account the conditions as they exist to-day. Therefore I maintain that to put that forward as a reply is something which, as a matter of fact, is not a sound thing to do, and something which it is very easy to refute by simply looking at the position as it is now.
That is all I am going to say. I do not suppose the Government will give way on the point. I suggest to noble Lords that the Bill does not go far 118 enough. It is typical of so many Bills of this Government. They seem to think they ought to do as little as possible; in fact, from the hopeless and dreary speeches of the Prime Minister, I gather that their political philosophy is that if they go on doing nothing, in the long run everything will come right. That is not our view. We have a very different view, and we think, in a modest Bill like this, something might have been done which would have made for its greater usefulness. If I thought there was any use in putting down an Amendment on this point I would do so, but having now some experience of your Lordships' House I will not do that, but will simply leave it as it is.
§ THE MARQUESS OF READING
My Lords, I have no desire to take part in a discussion on the merits of this Bill which has been so carefully and well explained to us by the noble Lord in his speech. I confess, however, that I think it is difficult to bring forward an argument against that which was just now advanced by my noble friend Lord Arnold. I have always wondered why it is now-a-days, when money brings in so much higher a rate of interest, that we should still adhere as a Government to this percentage of 2½, which is founded on past conditions which certainly do not apply at present. The object of these banks and of course of the Government is always to encourage thrift, but it is a poor encouragement to tell a man that if he deposits money in these banks or the Post Office he will only get such a small interest as 2½ per cent. when he can get more elsewhere. Most of the people who deposit their money in these banks have no notion that they can get more elsewhere, or they do not know how to set about depositing their money with another bank or putting it in some other institution where it would be perfectly secure.
I have wondered why it is that the Government have not gone further, and this particular Bill supplies an opportunity, as my noble friend Lord Arnold has stated, of questioning the policy of the Government. He is not asking that you should make this a statutory rate of interest of 3 per cent. All that is requested is that there should be a permissive three per cent. It is quite right that there should be that distinction, be- 119 cause no doubt once you have a clause giving a statutory rate of interest in an Act of Parliament, notwithstanding that money might fall in its yield, it would be very difficult indeed to change the rate of interest which you have agreed to give to persons who have deposited money. I suppose that one of these days—not in the lifetime, I am afraid, of some of us who are here—we may have money again at the rate it was before the War, but I cannot see why there should not be a clause introduced for the purpose of enabling the banks to pay this rate of 3 per cent.
I suggest it is worth the inquiry of the Government. I must assume, and indeed I am perfectly certain, that the object is to get people to deposit money in these banks who otherwise would not deposit their money anywhere, and to get absolute security which is, of course, very much to be desired. I do not want to enter into a controversial discussion with regard to it, but I do suggest that it is worth thought and examination, and it is difficult to see why we should not have a permissive clause in the Bill which would enable a rate of interest not exceeding 3 per cent. to be paid instead of the 2½ per cent. now permitted. I hope some attention may be given to it.
§ LORD HUNSDON OF HUNSDON
My Lords, I would like to raise a smaller point than that raised by my noble friend opposite. It is with regard to Clause 9. It is really a Committee point, but I dare say your Lordships will allow me to bring it forward this afternoon so that my noble friend may consider it between now and the Committee stage. When I read Clause 9, which, as my noble friend explained, gives power to the trustees of trustee savings banks "to undertake any business which is, in the opinion of the Commissioners, of a nature ancillary to the purposes of the bank," I was rather alarmed, because it is obviously an exceedingly vague expression, and I thought it was intended to enable trustee savings banks to undertake important operations. But when I heard what the Minister in charge of the Bill said I realised that it is a very trivial matter indeed. All they wish to do by the clause is to give trustee savings banks power to take the custody of any securities or wills or documents just as other banks do, and also—a point which my noble friend 120 left out—to enable clerks in the savings banks to go round and collect members for trustee schemes from neighbouring factories.
It is nothing at all; it seems a trivial matter. But really the language is almost portentous. I will read the clause to your Lordships. The clause says:—It shall be lawful for the trustees of a trustee savings bank, with the consent of the Commissioners given after consultation with the Inspection Committee and the Association and subject to such conditions as the Commissioners after such consultation as aforesaid may impose either generally or in the case of any particular bank, to undertake any business which is, in the opinion of the Commissioners, of a nature ancillary to the purposes of the bank…I do not know whether that last expression conveys anything to your Lordships. It conveys nothing whatever to me. I have heard banks described as the handmaids of commerce, but who are the handmaids of the handmaids I really do not know. The clause goes on—and calculated to encourage thrift "—that is quite right—and within the financial capacity of the bank.That is to say, a few shillings paid for overtime to a clerk to tout for members is not to endanger the position of the savings bank. Really the Bill makes extraordinarily heavy weather of almost nothing at all. I very much hope that my noble friend will consider the matter, because I suggest it is inadvisable in an Act of Parliament to suggest that a bank, of all institutions, should have vague powers when it has not got them at all.
§ LORD OLIVIER
My Lords, I feel so strongly about the inadequacy of the Bill in view of the considerations that have been put forward by noble Lords who have spoken to-day that I wish we could get from the noble Lord in charge of it some indication of the principle on which the restrictions are based. Clause 10 carries on the old Post Office restriction as to the amount which a person may deposit and the number of accounts he may have. What is the reason for saying that a man may not have more than one deposit account in a savings bank or in the Post Office Savings Bank? If you want to encourage thrift why should he not have as many accounts as he likes in 121 these very safe institutions? Do you wish to discourage him from making deposits? The history of all these limitations is that, when the Government went into the Post Office Savings Bank business, so far as the Government were concerned there was no money in it, as I think has been pointed out, and they did not want to get saddled with liabilities for large or multiple accounts, and moreover they did not want to compete with what was called the legitimate business of the regular banks. That is the principle in deference to which all these restrictions upon the legitimate use of these very useful institutions (so long as they are run on sound lines) were set up. Do these reasons, in the opinion of the Government, still exist to-day? If they do not exist, why should not the Government make a little more profit and why should they not compete with the so-called legitimate interests of the larger banks which are supposed to cater for any one with more than £100? I should like an explanation of the restrictions to which noble Lords have called attention.
§ LORD JESSEL
My Lords, before the noble Lord who speaks on behalf of the Government replies I should like to say that some of us who have listened to this debate have been very much impressed by the able speeches of noble Lords opposite. I am sorry that the noble Lord, Lord Arnold, has again made an attack on the Government. It is habitual with him, and he never sees any good in the Government. I can only hope that when he is pressing for the rate of interest to be raised he is not looking forward to the time when possibly a Labour Government may come in and the Bank Rate instead of being 5½ per cent. may be in the neighbourhood of 10 or 15 per cent. in consequence of the damage to the national credit.
§ LORD JESSEL
They were not in power at the time and I very much doubt if such a contingency happened whether the event I have foretold would not occur. Be that as it may, noble Lords have made a very interesting suggestion. The Montagu Committee sat some time 122 ago, and I should like to ask the Government if they cannot see their way clear to make an Amendment now which would not jeopardise the fate of the Bill, or whether they could not set up another Committee or Commission to enquire into the whole question of the rate of interest. It does seem to me to be exceedingly small and that you are defeating the very object you want to achieve—to induce people of small means to deposit their money in these valuable institutions. I merely throw out that suggestion because I think that a great many of us who have not studied the question as closely as we might are anxious to know the reason why the figure is fixed at 2½ per cent., and whether the time has not come to adopt the suggestion so usefully put forward both by Lord Reading and Lord Arnold. As I have said, I know the danger of jeopardising the Bill at this moment, but I hope that the noble Lord will be able to say that the Government will set up another Committee on this important subject to see whether anything can be done in the future in the direction that has been so strongly urged on the opposite side of the House of a proposal which, I am sure, hail the sympathy of many upon this side.
§ LORD DANESFORT
My Lords, I confess to feeling a certain degree of sympathy with the point raised by the noble Lord, Lord Arnold, and so strongly reinforced by the noble and learned Marquess opposite. There can be no doubt that the rate of interest was fixed at 2½ per cent. when the conditions in the money market were entirely different from what they are now. It is not suggested that there should be a statutory minimum rate of interest, but that there should be a permissive rate of interest. May I suggest that, if the noble Lord who is in charge of the Bill cannot give a decisive answer at the moment, as I think is extremely likely, he should consult with his colleagues and see if they will be prepared to accept an Amendment somewhat in that direction? This is not a very large question, but it is of great importance both to the savings banks themselves and also to the depositors. If we want to encourage investment in savings banks, as I understand the noble Lord, Lord Templemore, desires, and to add to their usefulness, I 123 venture to think that this object would be attained to a certain extent by making the suggested alteration.
§ THE FIRST COMMISSIONER OF WORKS (THE MARQUESS OF LONDONDERRY)
My Lords, in view of the speeches that noble Lords have made in regard to this Bill, perhaps I am in a position to throw some light upon the questions which have been raised by the noble Lord, Lord Arnold, and by the noble and learned Marquess. I am given to understand that in respect of Post Office savings the rate of interest is 2½ per cent., but I would venture to point out to noble Lords that there are other methods of saving on which the interest is at a higher figure and that the general public, when saving is in view, is not confined to investments in the Post Office Savings Bank. Another argument which I think noble Lords will appreciate is that, if the rate of interest were to be raised, this would not have the effect of attracting much new money, but that, while only a small amount of new money would, it is estimated, be attracted by a higher rate of interest, the Government would at the same time have to pay that higher rate of interest on other deposits. Those are, I think, arguments which noble Lords have not considered in their full bearing, and I am bound to say that I have not done so either. I would venture to suggest that the further points that have been raised by my noble friends could be brought forward when the Motion is moved that the House go into Committee, and I am sure that my noble friend who has introduced the Bill so admirably will then be in a position fully to answer the questions which noble Lords have put.
§ LORD PARMOOR
My Lords, I should like to say a few words in answer to the noble Marquess. I think his last suggestion is a good one. If the Second Reading is agreed to now, I understand that the points will be raised and discussed at a later stage. That would fully answer the purpose of my noble friend Lord Arnold, and, I hope, of the noble and learned Marquess as well. But there was one point in the argument which certainly did not appeal to me, perhaps because I did not understand it. The noble Marquess tells us that you could 124 get more than 2½ per cent.—I presume up to 3 per cent.—from alternative investments of an equally safe character so far as the small investor is concerned. He referred no doubt to the savings certificates. I thought that this fact was rather an argument in favour of the permissive 3 per cent. I do not want to argue the point further. It may properly be raised, and I hope it will be fully discussed, at a later stage, and I think that when it is reconsidered it may be seen that this is an argument, not in favour of the statutory limit of 2½ per cent., but of a permissive limit up to 3 per cent.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.