Trustee Savings Banks (Hansard, 31 July 1974)

§ Mr. Dell

The Report of the Committee to Review National Savings (Cmnd. 5273) made a number of valuable recommendations on the future organisation of national savings. One of the committee's major recommendations was that the trustee savings banks should be freed from specific Government controls and given power to provide a full range of personal banking services, including personal loans to their depositors.

After discussion with the Trustee Savings Banks Association the Government have agreed that the trustee savings banks should be empowered to develop along the lines recommended in the report. The development of comprehensive banking services will bring major benefits to depositors numbering over 10 million the majority of whom are in the lower income groups. Profits will be retained in the business for the further improvement of services. The banks themselves will be given an important rôle to play and one which will contribute towards the competitiveness and efficiency of the whole banking system. A transitional period of about 10 years is likely to be necessary to enable the banks to build up reserves, to remodel their structure and to adapt themselves to their new functions. At the end of the transitional period the banks will be subject, like the commercial banking system, to the guidance of the Bank of England.

One of the main structural changes will be a reduction by amalgamation, from 72 to about 15 in the number of banks. This will produce a stronger organisation which will benefit not only depositors through the improvement of services, but also the staff of the banks whose career prospects will be enhanced. A new central body will also be set up to which many of the powers now exercised by the Government will be progressively transferred. This body will have policy making functions relating to, for example, portfolio and banking controls; reports; accounts and inspection; and capital and current expenditure.

The banks have indicated that they believe they can build up reserves to the level appropriate to their new functions from their own resources over the transitional period if the Government, for their 239W part, will make available to them the full income of the Fund for the Banks for Savings. The Government have agreed to do this. No new fiscal aids will be made available to the banks. As part of the process of removing existing Government controls, the banks will be allowed to phase out their investments in the Fund for the Banks for Savings by gradually running down the ordinary department. The banks will continue, however, to invest substantially in public sector debt. During the transitional period the Government will retain sufficient powers of control and intervention in order to protect depositors. The Government intend to introduce as soon as possible the legislation which will be necessary to give effect to these proposals.

The Government also continue to attach importance to the growth of the National Giro and are actively considering Post Office proposals for the further development of this service. Subject to a further and more detailed examination of the way in which this can be achieved the Government are in principle ready to see a comparable extension in Giro's facilities so as to provide a more complete banking service for its customers. The Government also, of course, intend to maintain the competitive strength of the National Savings Bank.

In reaching their decision on the trustee savings banks the Government were greatly assisted by the valuable work of the Page Committee. They are continuing to give consideration to the other recommendations in the report and will announce further decisions when this proves possible.