HL Deb 30 April 1929 vol 74 cc239-57

Order of the Day for the House to be put into Committee read.


My Lords, in moving that the House do now resolve itself into Committee on this Bill, I would like, with your Lordships' permission, to take this opportunity of making a reply to some of the questions which were asked me in the Second Reading debate a week ago. Your Lordships will remember that on that occasion questions were asked me by noble Lords opposite, and by some of my noble friends behind me, and I must confess that although I could perhaps have given a short answer, I was not prepared to do what I think is more respectful to the House, give a full answer to those questions. Therefore, Lord Londonderry, who replied in the debate, gave an undertaking on my behalf that I would answer those questions to-day. Since then I have observed that Amendments have been put down by Lord Hunsdon of Hunsdon and by a noble Lord opposite, and I will deal with those questions when the House is in Committee. The Amendment put down by Lord Arnold no doubt covers the point raised on Second Beading by the noble Marquess, Lord Reading.

There remain two questions, one by Lord Olivier and the other by my noble friend Lord Jessel. Lord Olivier stated that Clause 10 carried on the old Post Office restrictions as to the amount which a person may deposit and the number of accounts he may have. With all due respect to the noble Lord, I do not think he quite understood the clause, although I allow that the wording is a little difficult. What the clause does is to remove all restrictions but one which now exist on the number of accounts which a depositor may open. At this moment a depositor may have only one account in the Post Office, or one account in a trustee savings bank; he cannot have an account in each. Under the Bill he will be able to open as many accounts as he likes in the Post Office, and at the same time, and in addition, as many as he likes in any one trustee savings bank. The solitary restriction, which we retain for administrative reasons, is that he may not open an account in more than one trustee savings bank, and I do not think there is any great reason for us to take off this restriction, since there is no demand, we think, that a man should be able to open an account in a trustee savings bank, say, in Liverpool and another in Norwich.

I pass now to the point raised by Lord Jessel. He said that he knew the danger of jeopardising the Bill at this moment, but he hoped that the Government would undertake to set up another Committee to enquire whether anything could be done in the direction urged on the other side—namely, of increasing the interest on these deposits. I really think the noble Lord will see that it is very late in the life of this Parliament to give an undertaking of that kind. The Government want to, get this Bill through. They think it is a good Bill, the banks want it, and, as I have said, in the present state of the life of this Parliament the Government cannot give any such undertaking as is asked for. I hope I have answered the questions which were put to me, and I beg to move.

Moved, That the House do now resolve itself into Committee.—(Lord Templemore.)

On Question, Motion agreed to.

House in Committee accordingly:

[The EARL OF DONOUGHMORE in the Chair.]

Clauses 1 to 8 agreed to.

Clause 9:

Power to undertake business calculated to encourage thrift.

9.—(1) 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 and calculated to encourage thrift and within the financial capacity of the bank.

(2) Any expenses properly incurred by a bank in carrying on any such business shall be deemed part of the necessary expenses of the bank within the meaning of section two of the Trustee Savings Banks Act, 1863.

LORD HUNSDON OF HUNSDON moved, in subsection (1), to leave out all words after "undertake" and to insert "subsidiary operations for the purposes of rendering such customary banking services to their depositors as would encourage deposits or of assisting in the formation of independent savings schemes." The noble Lord said: On the Second Reading I called your Lordships' attention to a phrase in this clause which I considered was too vague for an Act of Parliament. The clause says:— It shall be lawful for the trustees of a trustee savings bank…to undertake any business which is, in the opinion of the Commissioners, of a nature ancillary to the purposes of the bank…. I also suggested that when you take that phrase in conjunction with the last phrase of the subsection, which provides that the business must be "within the financial capacity of the bank," it looks as if very important business were contemplated. That is not the case, because the Financial Secretary to the Treasury, when explaining the matter in Standing Committee in another place, stated that the object of this clause was merely to allow these banks to render those small services to their clients which are customary among other banks, that is to say, to undertake the custody of their securities, and matters of that sort, and to assist in the formation of savings schemes.

I have endeavoured in my Amendment to put those views into the clause, instead of the vague words which are there at present. Your Lordships may not agree with my wording, but I hope that at all events noble and learned Lords will sympathise with me in my endeavour to put the intention of Parliament into precise and intelligible English. I think your Lordships have some cause of complaint that the clause is so vague, because if it is impossible to know the meaning of a clause, we cannot criticise it, and if your Lordships had known that the clause meant that banks should, among other things, take the custody of their customers' securities, some of you might have wished to ask why a law was necessary to enable trustees of trustee savings banks to do that when they already hold over £32,000,000 of their customers' securities. However, I dare say there is a very good reason for it; but Bills ought to come before this House in an intelligible form.

Amendment moved— Clause 9, page 6, line 19, leave out from ("undertake") to end of subsection (1), and insert the said new words.—(Lord Hunsdon of Hunsdon.)


The objection raised by my noble friend is apparently to the drafting of the clause, not to its principle. The noble Lord is afraid that it suggests powers which are much beyond those which are intended. It is true—I have often remarked it myself before I held a position of responsibility—that the language is a little forbidding, but that arises from the care with which the clause has been drafted in order to keep the powers within narrow limits. The Savings Banks Acts, extending over a very long period, laid down the things which a savings bank may do fairly precisely; it is ultra vires for savings banks to undertake types of business which are not covered by the regulating Statutes, and it would not be competent for the National Debt Commissioners to pass expenditure on any such business. At the same time, small developments are desirable, and we therefore seek the necessary powers. It is not, however, the intention to allow savings banks to embark on what may be termed general banking business; therefore the clause says that the banks can only undertake business "of a nature ancillary to the purposes of the bank and calculated to encourage thrift."

These words, I submit with due respect, are really very much narrower than Lord Hunsdon's words, which are:— subsidiary operations for the purpose of rendering such customary banking services to their depositors as would encourage deposits…. Apparently the noble Lord's proposals would allow the savings banks to embark upon almost anything that a joint stock bank does. That is neither the purpose nor the desire of the trustee savings banks. The clause, as inserted in the Bill, has received most careful consideration with a view to confining its scope to the minor business which we have in mind. It is not intended for big developments, on which it would clearly be proper that we should seek the authority of Parliament. The trustee banks are well aware what is the scope of the clause, and are under no misapprehension. On the other hand, the Amendment goes much beyond our intentions, and is much too wide. In the circumstances, I fear that we cannot accept the Amendment, and I hope that my noble friend will not press it.


I confess that when Lord Hunsdon raised this question on the last occasion I thought there would be something more in the point than appears now from the Amendment. I agree entirely with what the noble Lord who has just spoken for the Government has said—that the language used in the Amendment would carry much further the operations which could be undertaken by a savings bank, and also I think, than the noble Lord intends. All that the clause does is to give the power to do certain things, limiting the trustees by well known language, and I must say I infinitely prefer the Government's language to that of the noble Lord. I am quite sure that if we adopted the language of the Amendment it would carry the scheme of savings banks much further than was ever intended.


I am glad to hear that Lord Templemore in his private capacity agrees with my general opinion as to the unintelligibility of Acts of Parliament. I beg to withdraw.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clause 10 agreed to.

LORD ARNOLD moved, after Clause 10, to insert as a new clause:—

Provisions as to interest.

".—(1) Section two of the Savings Bank Act, 1920, shall have effect as though for the words 'two pounds fifteen shillings per centum per annum and not exceeding two pounds seventeen shillings and sixpence' there were substituted the words 'three pounds five shillings per centum per annum and not exceeding three pounds seven shillings and sixpence' and section five of the National Debt (Supplemental) Act, 1888, shall have effect as though for the words 'two pounds ten shillings' there were substituted the words 'three pounds.'

(2) Section seven of the Post Office Savings Bank Act, 1861, shall have effect as though for the words ' two pounds ten shillings ' there were substituted the words 'three pounds'."

The noble Lord said: This is a new clause which has been put down following on the debate which took place last week on the Second Reading about the deposit rate in savings banks. The rate is at present 2½ per cent., and there is a very strong view that that is too low. The arguments which I put forward last week received very welcome support from the noble and learned Marquess on my right (Lord Reading) and from two noble Lords opposite, and I was very much hoping that, in view of the almost unanimous opinion, except on the part of the Treasury, that 2½, per cent. is in these days too low, the Government were going to give way. I am rather afraid from what the noble Lord said on the Motion to go into Committee that that is not so. Seeing that the rate which is obtainable on gilt-edged securities is now 4½ to 4¾ per cent., and seeing that the rate paid by the Government itself on War Savings Certificates is, taking everything into account, in the region of 5 per cent., it does appear that this rate of 2½ per cent.—which was fixed, as a matter of fact, in 1861, when the conditions were totally different, and has never been altered—ought now to be reviewed and changed.

The noble Marquess, Lord Londonderry, last week put forward as some reason for not making a change that there were alternative methods of investment open, but not the same methods. If he had in mind Savings Certificates, which probably he had, they are really not the same thing as the Post Office Savings Bank. Many of the accounts, for instance, in the Post Office Savings Bank were begun by children with a distinctly smaller sum than is necessary to buy one. Savings Certificate. Then it is a more difficult matter to withdraw money in the case of a Savings Certificate. In the case of the Post Office Savings. Bank, any amount can be paid in, however small, and any amount can be taken out, with notice. Therefore I contend that the point which was made last week is not in itself a good point. Indeed, as my noble and learned friend behind me said then, it can be argued that it is a point against the 2½ per cent. rate, because if the Government pay double that amount on the Savings Certificate, that is an additional reason for not adhering to the very low rate of interest in the case of the savings banks.

One of the arguments of the Government, as I understand it, is that even if the rate were raised to 3 per cent.—and that is all I am asking; it is not a very great change—it would not attract much new money. They do not know that. Even if it did not attract much new money, the point is that it is not a right thing because of that to go on paying too low a rate on existing deposits. In my view, and without using too strong language on a financial matter, it really is not a just thing at present to pay only 2½ per cent. Whether it will attract new money or not, and it might do, it might even mean theoretically (I do not say that it would) a saving to the Government; because if 3 per cent. can be got upon Post Office Savings Bank deposits it might induce persons, instead of going in for Savings Certificates on which the Government have to pay something in the neighbourhood of 5 per cent., to put their money into the Post Office Savings Bank. Then you would gain by the change, if you do the right thing and make the rate at all events permissive up to 3 per cent.

Another point which was made by the noble and learned Marquess, Lord Reading—and there is a great deal in it—was that large numbers of people have no knowledge really of how to go about putting money into any other bank or channel except the Post Office Savings Bank. That is all they know. These people are, no doubt, very ignorant; as I say, many of them are children. In country places they ought, perhaps, to know the other channels which are available, but the fact is that they do not know, and I think it might easily be suggested that they are not receiving fair treatment, and almost that some advantage is being taken of their ignorance. If they had better knowledge and had a real channel through which they could do the same thing and get a higher rate of interest they would, no doubt, avail themselves of it. But because of its simplicity and because of their inexperience, the Post Office Savings Bank offers them practically the only channel.

Another argument which could be used against the maintenance of this very low rate of interest is that in the case of some of them—I do not say that this applies to all—this very low rate may be an inducement to go in for risky investments and to put their money into something which it is not wise for them to invest in. I have asked the noble Lord to be good enough when he comes to reply to tell me what is the profit or the surplus which the Government are making out of the present low rate of interest. I think that it must he very considerable. The Financial Secretary admitted that it was so, and I think we ought to know how much has been made by the Exchequer out of this present state of things, this low rate of interest of 2½ per cent. I believe it is a very considerable amount and if the public get to know what it is I think they will feel that some change ought to be made. I have already had several communications about this matter, and from very important quarters. People are interested in it because I suppose, although it might seem a very minute thing, this particular point that we are discussing affects some hundreds of thousands of people.

I want to be quite candid. I have looked into the matter further since I spoke last week, and in its present form I do not think my Amendment would do precisely what I seek to do and that is to make the rate permissibly 3 per cent. We are all very busy in these days, and I accepted what was said about it in another place. Since then, I have looked for myself and I think that some slight change will be necessary to make my Amendment mean that the rate in the Post Office Savings Bank could be raised to 3 per cent., but need not necessarily be 3 per cent. for all time. It would not be compulsory. It would probably be necessary therefore to insert some such words as "or such lower rate as the Lords Commissioners of the Treasury may from time to time determine." That would be very easy to do if the Government would accept the principle. I wanted to make it clear that I was rather led away by what had been said by other persons on this matter.

It is quite conceivable that monetary conditions will remain for a very long time such that this 2½ per cent. will, as I have said, really create injustice. There seems no prospect at all (and you can tell that from the rate of issue of Corporation loans and so on) of money going back within the lifetime at any rate of your Lordships to anything like the low rates of pre-War days. It may conceivably go down to 4 per cent. in the course of the next ten years, though I very much doubt it. I take such opinions as I can in these matters. A great many persons who are much more qualified to judge than I am also take the view that it is very unlikely, except perhaps as a temporary dip, that monetary conditions will alter. Even if money went to 4 per cent., I do not think the 3 per cent. I suggest would be a very high rate to pay to these depositors. It is no argument to say that the Government used to make a slight loss in pre-War days and that if they now make a profit justice is done on the whole. That is not a sustainable position because you are not dealing with the same people. Even if there were a loss, it would be very small and it would also be in a good cause. That is my opinion. There need not be any loss, and I ask that it should be made permissible for the rate to be 3 per cent.

It could be easily done, and it could easily be altered if necessary. But there is no probability that it would have to be altered for a great many years to come. I think it is unfortunate that opportunity has not been taken of putting this permissive power into the Bill; even if it were never used it would be as well to have it. It might be used or ought to be used as time goes on, if monetary conditions remain anything like they are at present. I hope that the noble Lord opposite in his reply will not refer to the findings of the Montagu Committee. The Montagu Committee, which dealt with this matter, sat some twelve years ago now. They expected, as everybody else did, that after the War money would go back very much to pre-War rates. That has not happened. Therefore the findings of that Committee are not really in point at all. In all the circumstances I should be very disappointed if the Government do not accept this Amendment, which I beg to move.

Amendment moved— After Clause 10, page 7, line 26, insert the said new clause.—(Lord Arnold.)


May I venture to make one or two comments on the speech of the noble Lord? This very important question, which is supported by the noble Marquess, is well worthy of consideration by the Government. There are one or two points which the noble Lord has not mentioned and which I am sure that he will agree are important in this consideration. In the first place, I do not know how many years the noble Lord's memory will carry him back, but I very well remember that after the crisis of 1890 money at call was practically unlendable and, moreover, that you could not buy Consols to pay you 21½ per cent. Therefore, as depositors get, by law I suppose, a fixed deposit rate of 2½ per cent., it is manifest that at that time the savings banks must have been losing money during the whole period. When the turn of the tide came, they had to make it up again.

But that is nothing like the most important thing. The most important thing, to my mind is this. As the noble Lord perfectly well knows, a rise in the value of money, the rate of interest, connotes a fall in capital values. Therefore, if the savings banks are making money now, as no doubt they are, much of that money must be required to make up for the very heavy fall in their assets. I agree with the noble Lord that the object of these banks is to encourage thrift and that therefore one does not want to be too pedantic in the matter of banking principles: but the proper banking principle is first of all to make up your assets to the value of your deposits, and then to form a reserve against some further fall. At the same time it might be possible, if one saw the account, which I have not done but should like to do before forming an opinion, to make some small extra payment to the deposi- tors, and yet with the balance to fill the gap which has been made by the fall in their assets.


I much regret that the Government, so far as I can judge, do not see fit to fall in with the suggestion that has been made to accept the Amendment, particularly with the alteration spoken of by my noble friend Lord Arnold. We are discussing, it is true, a small matter, but it is one of importance. It strikes me that it is not right to allow only 2½ per cent. to the class of persons who deposit in the Post Office Savings Bank, trustee savings banks and such like institutions, when at the present time the Bank Rate is 5½ per cent. I can see no possible objection to accepting an Amendment which merely gives liberty to raise the rate of interest to 3 per cent. To deny what is proposed in the Amendment is approaching to injustice and even meanness on the part of all of us who are responsible for legislation. What reason can there be for denying what the Amendment proposes to domestic servants and persons of that class who have no knowledge of how to invest or how to get a higher rate of interest? What can be the reason? Is it that there is a profit made on the present arrangement? I gather from what was said on the last occasion that there is a profit. Really the Government ought not to be making a profit to the extent they are doing and pay only 2½ per cent. on this money.

I have thought much about this matter since it was raised on the last occasion, and I am grateful to my noble friend Lord Arnold for having raised it. The question has often occurred to me: Here is money deposited at 2½ per cent.—why is it? I thought there was some reason for it, but I did not understand what it could be. I have now examined it a little more closely. Apparently the matter dates back to a time when the Bank Rate was very much smaller than it is now. The noble Lord, Lord Hunsdon, referred to a later period when money was at 2¼ per cent., or even lower, but surely that does not touch the point we are now on, because the Government already gives 2½ per cent. That is the rate of interest which was imposed because it was thought it was a safe rate. What we wanted to avoid was the placing upon the Government of an obligation to pay a rate of interest which would result in a loss to the community, and consequently the rate was fixed at a low level. When it was so fixed it was a perfectly safe rate, but now the rate of interest has increased so much that it is absolutely unjustifiable to pay a rate of only 2½ per cent. particularly to a class of persons who have not the least notion how to get a proper reward for the money which they advance.

It is no use saying there are special investments, because these people do not know of the special investments. It is quite true that if we are speaking among ourselves we understand that. I assume there is no single member of your Lordships' House who deposits in a savings bank at 2½ per cent. I hope for the sake of the financial acumen of this House no one would suspect that of us. I might say just the same of the House of Commons. Yet here are we, legislators in this House and in the House of Commons, insisting that these unfortunate people, who have not the same knowledge and experience as ourselves, shall contribute, without their knowing it, an amount which gives the Government a good profit. Apparently the Government are going to object even to make the rate of 3 per cent. permissive, because that is all that is asked by the Amendment. I understand the reason why my noble friend is merely asking that it should be permissive. It is, of course, that in time to come the general rate of interest may fall and, consequently if the. Government were compelled to pay 3 per cent. when the general rate of interest was only 2½ per cent. the country would lose; but the Amendment only proposes that the interest should be 3 per cent. if, and when, the Commissioners think it is desirable. Unless there is some reason which at present I am quite unable to understand we ought, in this instance, dealing as we are with a class of persons who perhaps find it difficult to put forward their own case, to do what is asked in the Amendment. It is a very modest Amendment, and I should be very surprised if, should it go to the other House, any objection was raised to it there. I understand there was a debate on the matter in the other place, but I cannot conceive the position was understood.

I only want to add this. The noble Lord, Lord Hunsdon, spoke of the effect it might have on capital values. I did not really quite know what my noble friend was seeking to prove. What would be the effect on the capital value of the securities in this country? What is going to be the fall in War Loan or in any securities of that kind if these institutions, which at the very utmost have deposits of £81,000,000, are allowed to pay, with the permission of the Commissioners, a rate of interest of 3 per cent.? Does my noble friend really think that is going to have such an effect on the capital value of the securities which any of us should consider? I would beg your Lordships to take into consideration this case merely from the point of view of justice. I discard all question of capital values and questions of that character. As far as I am concerned I withdraw nothing I have said on that subject, but I want to base my case on the merits. I beg your Lordships to say that you will, now that you have the opportunity, put right something which is an obvious injustice, something which I cannot help saying is rather mean on the part of Governments—I am not speaking of any particular Government; all have taken the same attitude. I would ask you to remedy this injustice when you have the opportunity by giving permission to raise the rate of interest by one half per cent.


I can assure the noble Marquess opposite that many of your Lordships are perfectly familiar with an investment that gives 2½ per cent. I sincerely hope that the Government will resist this highly contentious Amendment. According to my information this Bill represents an agreed measure to carry through certain minor reforms and is not intended to be a contentious measure. I cannot believe that after the discussions which took place with the Treasury this Amendment can possibly be entertained. It is not as if the wage-earning classes had not other facilities for placing their money in perfectly safe investments and also in the ordinary joint stock banks; while it is obvious that this Amendment would involve the taxpayer in additional taxation without reason or justification.


The last words which fell from the noble Viscount induce me to put a simple question. Is it within the competence of this House to impose an additional charge upon the Exchequer? The difference between 2½ per cent. and 3 per cent. will have to be paid by somebody. I presume the noble Marquess himself does not propose to meet it. It will have to be paid by the national Exchequer. Is it not contrary to the principles of the noble Marquess himself that this House should impose a charge upon the Exchequer?


As this question has been put by the noble Viscount, I would say that I do not disagree with the suggestion which he has made, but it is no reason for refusing to discuss the Amendment. The other House, if it pleases, can object to it as a breach of Privilege, but there is no reason why we should not pass it. Your Lordships are familiar with cases when we have again and again imposed charges. It does not dispose of the argument, but only places us in the difficulty that we are not able, if it is objected to by the other House, to enforce any such proposal.


I will not enter into the question of Privilege which has been raised by my noble friend on the Cross Benches. May I assure the noble Lord, Lord Arnold, of one thing—that if I can give him satisfaction in nothing else in the reply which I am going to make, I will in one matter, and that is that I will not refer in any way to the Montagu Commission. I understand that the main grounds on which it is urged that the rate should be increased are that it would be an act of justice and that it would encourage thrift and attract additional money to these savings institutions, which is what this Bill seeks to do and what I think we all want to do. It is an arguable question how far saving is influenced by the rate of interest, but as regards the small investor it is probable that all who have enquired into the matter will agree that his first needs are those which are amply met by these banks—namely, the absolute safety of his savings and immediate accessibility to them in case of necessity. I must say, in spite of the words addressed to us by the noble Marquess that we should not consider such matters, that if the rate of interest were to be increased as proposed it would involve a large additional charge on existing savings banks deposits and it is not considered to be likely that it would attract any appreciable amount of new savings.

I think there is on the part of the noble Lord who moved the Amendment and on the part of the noble Marquess, Lord Reading, rather a tendency to look at the 2½ per cent. only and forget all about the other facilities offered to the small investor. The trustee banks themselves have their special investment departments in which depositors who have £50 in the ordinary department may make deposits subject to notice, and on these special investments depositors receive in most cases now 4 per cent. I think sometimes it is a little more. I think it is forgotten that in the present Bill we seek to help trustee banks to develop these departments even further under Clause 6 by waiving the rule that these banks before forming a special department must have £200,000 or more in deposits. Moreover, there are the National Savings Certificates which are cashable at all times. They are on continual sale and can be purchased by very small instalments if desired. After the first year or two they yield a rate of interest in excess of that proposed in the Amendment. Including accrued interest, there are nearly £500,000,000 of certificates outstanding; yet, despite this competition, deposits in the savings banks are well maintained. Through all the savings banks the small depositor can purchase other Government securities under a very simple procedure. I am informed that £235,000,000 of stocks have been bought in this way.

I pass to the question asked by the noble Lord opposite as to how much the Treasury receives from savings banks. I will give him what I hope he will consider, if not a satisfactory at all events a very full answer. As regards the Post Office Savings Bank the surplus of interest remaining after paying depositors and expenses for the year ended December 31, 1927, was £3,734,000. Of this amount, 20 per cent. goes to reserve to provide against depreciation of securities and 80 per cent. goes to the Exchequer as miscellaneous revenue. The Exchequer received £2,987,000. For trustee banks the surplus was £917,000 of which one-half went to make good depreciation and one-half (that is £458,000) to the Exchequer. These figures may seem very large, but on the other hand it must not be forgotten that as regards trustee savings banks the taxpayer at different dates has paid over £5,500,000 towards capital deficiencies and in addition has made good deficiencies of income in twenty-seven years out of the thirty-three years from 1876 to 1908 inclusive. As regards the Post Office Savings Bank there were repeated income deficiencies from 1896 to 1910. The country has not actually paid up money for a capital deficiency, but there is a deficiency of some £30,000,000 for which the taxpayer is responsible. I think the point is that the 2½ per cent. is guaranteed in good years and bad and that the taxpayer has very often in the past had to put his hand in his pocket.


May I interrupt the noble Lord for a moment in order to get this perfectly clear? Is this £30,000,000 of which he speaks due to depreciation of investments?


My noble friend is good enough to inform me that it is due to depreciation of investments. I think I have shown that the small investor has very wide Government facilities for investment open to him. The different types carry different rates of interest and it is open to the investor to choose that which suits him best. There is really, I think, little ground for saying that the Amendment, if it were carried, would encourage thrift or even that it would attract additional money to the State. If it were necessary to make any alteration in the present facilities, the most scientific course would seem to be to develop the Post Office on the lines of the trustee banks, giving to all depositors who have a fixed sum at 2½ per cent. in the ordinary department a higher rate on additional sums deposited at notice. While in view of the very wide facilities which are now offered by the State, there is no strong case for any change—unless there is evidence that additional facilities would contribute to thrift—that solution would avoid many of the objections which can be raised against the flat rate increase proposed in the Amendment. I am afraid the Government cannot accept the Amendment and I hope that, in view of the full explanation I have given, it will not be pressed.


The noble Lord has given us a very interesting speech, and I am much obliged to him for dealing with the matter so fully and, if I may say so, so fairly. He certainly has given us some very astonishing figures, which I think will mean that the present rate of 2½ per cent. will not be allowed to continue very much longer. The profit is very much larger than has been supposed. We arrive at the astonishing position that, in the year ending December 31, 1927, the Post Office Savings Bank alone had a profit of £3,734,000—that is to say, that sum was made out of these very small investors. It is true that 20 per cent. of this was for depreciation of investments, but 80 per cent., or £2,937,000, actually went to the relief of taxation. That is a very extraordinary state of things, and I think that when the public learns of it the agitation that, has already begun regarding this matter will grow so rapidly that something will have to be done. We also find a profit of £917,000 on trustee savings.

It is true that the noble Lord, in his endeavour to remove the impression which those figures were bound to create, went into past history and told us of the times when money used to be lost. He did not tell us how much was actually lost in this way to the State through paying more interest than it could really afford to pay. It would be very interesting to know with what term of years he was dealing and how much the actual sum amounted to. He refers to a sum of £30,000,000, representing depreciation of investments, but he was really, if I may be allowed to say so, mixing up two totally different things. When the Post Office Savings Bank began, it was never intended that these small depositors should bear the cost of such depreciation. A figure of £30,000,000 may sound impressive, but it is not really very impressive when you look into the total sums involved and the period over which it would have to be spread.

I do not know that there is very much more to be said now, except to express profound disappointment. The figures which the noble Lord gave regarding Savings Certificates are certainly, if I may say so, very misleading. I know that he did not intend them to be misleading, but it is well known that a considerable proportion of Savings Certificates are not held by poor people but by Super-Tax payers—no doubt many of your Lordships hold them—because they are not subject to Income Tax or Super-Tax. That is a perfectly legitimate and proper thing, but it is one reason why the total amount stands as high as it does to-day. With regard to that which the noble Viscount upon the Cross Benches said about the nature of my Amendment, it happens that I have just been looking through the debate in another place on the Amendments of your Lordships' House to the Local Government (Scotland) Bill. Nearly every Amendment was a Privilege Amendment, but there was no trouble about it. There is really nothing in that point as a matter of practical difficulty.

I should like to make quite clear what it is that I am asking your Lordships to vote upon. I am not sufficiently versed in the rules of your Lordships in Committee to know whether I could add words to my Amendment, but I should like to do so. After the second subsection of my proposed new clause I should like to add the words: "provided that the Treasury give their consent." I think those words are quite sufficient, and they make the provision permissive. If it is said that there will have to be consequential changes in subsection (1), those changes could be made later. That is only a drafting matter. The words at any rate make it clear that the Amendment is permissive and that it is not compulsory upon the Treasury. It is quite conceivable that money might range from 5 per cent. to 7 per cent. in the next quarter of a century, or even higher. Surely this is a very modest permissive power to give. I think there is a very strong case for allowing even 3½ per cent., which is what most banks allow to their small depositors. It is an extremely moderate request that I make. I beg to move my Amendment in that form.

Amendment, by leave, withdrawn.

Amendment moved— Page 7, line 26, insert as a new clause:—

Provisions as to interest.

".—(1) Section two of the Savings Bank Act, 1920, shall have effect as though for the words 'two pounds fifteen shillings per centum per annum and not exceeding two pounds seventeen shillings and sixpence' there were substituted the words 'three pounds five shillings per centum per annum and not exceeding three pounds seven shillings and sixpence' and section five of the National Debt (Supplemental) Act, 1888, shall have effect as though for the words 'two pounds ten shillings' there were substituted the words 'three pounds.'

(2) Section seven of the Post Office Savings Bank Act, 1861, shall have effect as though for the words 'two pounds ten shillings' there were substituted the words

Remaining clauses agreed to.

Schedule agreed to.

Bill reported without amendment.