SAVINGS BANKS BILL (Hansard, 1 February 1949)

LORD PAKENHAM

My Lords, I rise to move the Second Reading of the Savings Banks Bill, which I hope will prove generally acceptable. This Bill covers a variety of amendments to the law dealing with Trustee Savings Banks and one amendment affecting the Post Office Savings Bank. For the most part the points covered are of secondary importance. Many of them have been under discussion between the Government and the Trustee Savings Bank Association for some time, and all concerned are agreed that the provisions of this Bill are necessary in the interests of the smooth administration and the future development of Trustee Savings Banks. I feel therefore that it would have to be a very cantankerous noble Lord to offer any serious opposition this afternoon. I am sure that the noble Lords whom I see still with me in the House do not want to come into that category.

There are some eighty-six Trustee Savings Banks in the United Kingdom, each operating now within definite areas. The Trustee Savings Banks are non-profit-making institutions, managed by voluntary trustees who are local residents of public spirit and integrity and who freely give their time to the work of management. The thanks of the community are due to the trustees and the disinterested efforts they put into this very valuable social service.

The policy of the Government in recognition of the place of the Trustee Savings Banks in the National Savings Movement is to give all reasonable scope to the enterprise of the banks and to encourage their development. In 1947, sixty new branches were opened and in 1948, 120. It is hoped to bring the figure 450 to 150 new branches a year for the next five or six years. The Trustee Savings Banks have long been recognised as partners in the National Savings Movement, because their deposits, like deposits in the Post Office Savings Bank, are invested with the National Debt Commissioners in a fund. There is a distinction between money deposited in the ordinary departments of the Trustee Banks—this is the money which is invested with the National Debt Commissioners—and the money deposited in the special investment departments of the banks. The latter is invested in certain securities authorised by Statute. Formerly, the rate of interest paid on special investment deposits was higher than the 2½ per cent. paid on ordinary deposits and this naturally encouraged deposits in the former, but with the improvement in Government credit in recent years and the lowering of interest rates, special investment departments have not found it possible to pay more than 2½ per cent.

I would remind your Lordships that deposits in Trustee Savings Banks have grown notably in the last few years. In contrast with the decline of savings in other directions, 1948 was a particularly good year, and total deposits, including special investment deposits of £110,000,000, reached £800,000,000 at the end of November last. This represented an increase of no less than £75,000,000 on the previous year. There is no doubt that a large part of this increase has been due to the development of new branches, for which much credit is due to the energetic leadership of the Trustee Savings Bank Association and its Chairman, Sir Kenneth Stewart, to whom I desire to pay tribute in this place on behalf of the Government. The Association is a purely voluntary one, and there is no obligation on any bank to join; but in fact every one has joined, with two insignificant exceptions. The 1929 Act was the first Act in which reference was made to the Association. There are provisions in the Act ensuring that the Association should be consulted, or that its concurrence should be obtained before certain measures Lire taken by the National Debt Commissioners. In practice, consultation between the Commissioners and the Association goes far beyond any statutory requirements. Consultation has been particularly close 451 and continuous over the development of new branches.

I now turn to the provisions of the Bill. With the exception of Clause 14, on Naval Savings Banks, which is a distinct matter, all the provisions of this Bill were agreed in substance with the Association before the Bill was presented. And during its progress up to the present time the Association have had ample opportunity to see that the Bill meets their needs. Generally speaking, the Bill aims at providing for improvements in the administrative machinery of the banks and some extension of their powers. The purpose of most of the clauses is plain from the text, although some complications of machinery and of statutory terminology are here and there involved. There is no doubt that the most important clause is Clause 1, which will be of considerable assistance to the banks in carrying out their development programme, and which represents a part of the solution to a problem which has been for some time under consideration—namely, the question of the remuneration of the banks.

The Treasury has power, under the Savings Banks Act, 1920, Section 2, to fix the interest payable to the banks on sums invested with the National Debt Commissioners at any rate between £2 15s. 0d. per cent. and £2 17s. 6d. per cent. The rate has stood at the latter figure since 1920, but it has been clear for some time that the margin of ⅜the per cent. between this rate and the 2½ per cent. paid to the bank's depositors was more than was needed by the banks as a whole to meet their management expenses. Since we are dealing here with, if not the higher form of mathematics, at any rate with fairly intricate arithmetic, it is a great consolation to see that the noble Lord, Lord Cherwell, is sitting with us in order to make sure that the calculations are made smoothly! Some banks are not as fortunately situated as others, often as a result of enterprise and because they have branches in an early stage of development, and since the Treasury has at present no power to lay down different rates of interest for different banks, a cut in the rate of interest would put some of the banks in great difficulty.

After considerable discussion with the Association, an understanding was reached that the Treasury, under its existing powers, would reduce the in 452 terest to £2 16s. per cent. and seek legislation to empower the stronger banks to give assistance to the weaker. That means, of course, a reduction from £2 17s. 6d. to £2 16s. This understanding has been implemented in Clause 1, which enables the banks to make grants either to the credit of a Mutual Assistance Account in the hands of the Debt Commissioners, who may use the funds in the Account for making grants to banks, or, exceptionally, to make grants directly to other banks. This in practice will leave it to the banks themselves to ensure an equitable redistribution of the reduced total of interest paid to them by the Debt Commissioners. The mutual assistance scheme to which I have referred is now being drafted in discussions between the Commissioners and the Association. It is not yet in its final form, but it is expected that the discussions will soon be concluded successfully and to the satisfaction of all concerned.

In case I have failed to make it plain, I would emphasise that the particular importance of the mutual assistance scheme at present is that it will prevent the new development of the weaker banks being hampered by lack of funds. Subject to the wishes of the House, I do not think that at this stage I need refer in detail to the remaining clauses of the Bill. There will be an opportunity later of explaining any obscurities. In a period when conflict is not unknown, even between friends, it is a pleasure to present a Bill which I feel will arouse so little heat and controversy. Therefore, I would recommend this Bill as a useful and necessary instrument for the assistance and development of institutions of great value to the country and to the individual citizen. I hope your Lordships' House will give it a Second Reading.

§ VISCOUNT BRIDGEMAN

My Lords, the noble Lord opposite who has explained the provisions of this Bill so clearly and, if I may say so, so agreeably, can be assured that on this occasion I shall say nothing which is meant to be antagonistic. Like the noble Lord opposite, I too am fortified by the presence of my noble friend Lord Cherwell. We 453 agree that this is a non-controversial Bill. My information tallies with what the noble Lord has said, that the details of the Bill have been carefully worked out with the Association which represents the banks. For that reason, if for no other, we ought to make no criticism of the Bill. We could put it in a more positive way and say that if this Bill is in any way intended for the encouragement of saving, we are under the plain duty of supporting it. We could do no other with a Bill which is aimed at making saving easier because, since the course of national savings during the last year has not been as good as it ought to have been, there is a great need for an incentive to save if we are to make any headway in the policy of disinflation.

It is not necessary to emphasise the importance of any measure which serves to stress the great need to pursue a policy of disinflation, and to do anything we can in that direction by encouraging saving. As bank chairmen have said, this need of disinflation calls for any means. The Trustee Savings Banks, as we all know, are a most important agency in this business of small savings. Here, I wish to associate my noble friends on these Benches and myself with the tribute which the noble Lord opposite paid to the Trustee Savings Banks. In point of fact, according to figures recently published, the Trustee Savings Banks have been the most successful of the three main agencies for small savings—namely, the Trustee Savings Banks, the Post Office Savings Bank and the National Savings Scheme. In the second week of January of this present year there was a net dis-saving of something like £5,000,000 (I am now using the English as reported in the Press, which is not necessarily the best English) since gross savings were £634,000,000 and encashments were £639,000,000. During that period, however, the Trustee Savings Banks put up a figure which was £500,000 better than the corresponding week of the year before—that is to say, in January, 1948.

If one may lapse for one moment into some political remarks, it gives us on these Benches some comfort to think that any organisation which has its origin and its roots in private enterprise can still be so successful at present. And we are even more fortified to think that His Majesty's Government have seen fit to 454 take care of the movement in the way that they have by bringing this Bill before Parliament. As to the Bill itself, the noble Lord opposite gave such a clear explanation of the clauses that I need not detain your Lordships' House for any length of time. It seems to me that there was a perfectly good case made for the reduction of the interest paid by the National Debt Commissioners from £2 17s. 6d. to £2 16s. Od. It seems to me—and I am told that the Association fully agree—that there was a sound case for making this arrangement whereby the stronger banks are put in a position to assist the weaker. I am told that one of the results of that will be that, not only will the small banks be able to open up more branches in different localities, but that new Trustee Savings Banks altogether may be started if, through the medium of the National Debt Commissioners, they can avail themselves of this form of financing by the richer banks.

Upon that, I would make only one slight comment, which may be quite unfounded. That is, that in the case of the Trustee Savings Banks—perhaps more so than in the case of any other kind of bank—it does seem important to obtain the highest degree of liquidity. Despite all the advantages of this arrangement, it looks as if it will have the disadvantage, in theory at any rate, of making the resources of the lender banks rather less liquid than they have been hitherto. I hope that that is an objection in theory, rather than in practice. It may be, as I expect is the case, that the Trustees Savings Banks Association have decided that the advantages clearly outweigh the disadvantages. There are only two other clauses I should like to mention. One is Clause 9. We on this side of the House are glad to see that the suggestion, made in another place has been accepted, and that now the power of the Treasury to regulate the rates of interest can, if necessary, be subject to control by Parliament. I think that was an Amendment to the Bill as introduced in another place, and it is a satisfactory one.

Then I suppose one should say a tender farewell to the Naval Savings Banks. I understand that, in practice, little or no use is now being made of those Naval Savings Banks, and that there have been no deposits made under that scheme since 1946. So that here we have 455 a case where the scheme for the Naval Savings Banks has done its work. It is now possible, I am told, for sailors, like members of the other Services, to save through the National Savings Scheme and over the pay-table. Therefore, we can say goodbye to this arrangement of the Naval Savings Banks, realising the good work they have done and removing a piece of machinery which is no longer required. With those words, I say once again that we support the Second Reading of this Bill. I doubt very much whether we shall need to come back to it on the remaining stages.