The post office and its story

by Edward Bennett

I believe that the first recorded instance of the establishment of a Savings Bank in the United Kingdom was in the year 1810, in the little village of Ruthwell in Scotland. The minister of the church, the Rev. Henry Duncan, D.D., conceived the idea for the benefit of his parishioners, but found at first great difficulty in persuading people to entrust their money to him. To meet the difficulty a box was provided with three padlocks, which could only be opened in the presence of the three different holders of the keys. This box is still in existence, and was produced at the centenary of the opening of Savings Banks held at Edinburgh in 1910.

In 1817 Trustee Savings Banks were established in certain towns under regulations fixed by Act of Parliament, and for nearly half a century these institutions provided a means by which the small savings of the public could be deposited at a fixed rate of interest. But these were local banks, and there were still vast areas of population unprovided for in the matter of banking facilities. What was wanted was a system for the whole of the country, something which could really be regarded as a People's Bank.

The rapid extension of the Money Order system, and the creation in every town and in almost every village of a post office where business other than that of the receipt and despatch of correspondence was conducted, suggested to Mr. C. W. Sikes, a bank official of Huddersfield, that here was the organisation for the purpose. He wrote in 1860 an open letter to Mr. Gladstone, who was at the time Chancellor of the Exchequer, in which he pointed out that there were eighteen counties and 2000 towns without a Savings Bank of any kind. He directed Mr. Gladstone's attention to the success of the Money Order system, and he urged him to use the same medium for savings, “for thereby you bring the Savings Bank within less than an hour's walk of the fireside of every working man in the Kingdom.” The appeal was successful. Mr. Gladstone with characteristic enthusiasm adopted the plan, and carried a Bill through Parliament to give effect to the proposals. On the 16th September 1861 Post Office Saving Banks were opened in 300 towns, and from that date onwards the story has been one of continued progress. According to the Postmaster-General's report of 1910 the number of Post Office Savings Bank accounts, excluding those which experience has shown are dormant, was 7,913,295, and the amount of money standing to the credit of depositors was £164,596,065. The average amount of each deposit was £2, 7s. 9d.

Here, therefore, we have a People's Bank actually established in our midst, and the best excuse of the improvident no longer exists.

During the fifty years of its existence, remarkable developments have taken place in the working of the Post Office Savings Bank. The facilities for the public have been increased enormously, so much so that the old idea of a bank existing simply for the encouragement of thrift has been considerably modified. The ease with which withdrawals can now be made, and the extension in the limits of money which may be deposited annually, have provided the man or woman of small means with most of the advantages to be obtained from the possession of a current account at a private or joint-stock bank. And he obtains one additional advantage, in that on any sum from £1 upwards he obtains 2½ per cent. interest. These increased facilities are looked upon with disfavour by those who consider that the slight difficulties which were for many years placed in the way of those who wished to withdraw money, were created in the interests of the depositors themselves.

In order to bring out clearly what are the benefits of which I have spoken, let me state briefly the possibilities which are open to a man who becomes a depositor. He goes to any post office where Savings Bank business is transacted, and after signing a declaration and depositing any sum, not containing fractions of a shilling, up to £50, a book is handed to him in which his transactions are recorded. That book can be used at any Post Office Savings Bank in the United Kingdom for deposits or withdrawals. He can deposit £50 in any year until a total of £200 is reached, and in addition he can replace the amount of one withdrawal made during any year. Further, he can invest in six different kinds of Government Stock to the amount of £200 Stock in a year, or £500 Stock in all, and he can make special deposits to cover his investments, irrespective of the limits fixed for his deposit account. Roughly speaking, he can therefore hold £200 in his deposit account and at the same time be the possessor, through the medium of the Post Office, of Stock of the nominal value of £500. The smallest amount of Stock he can purchase is one shilling. Means are provided by which he can transfer his Stock from time to time to the books of the Bank of England, and so enable him to continue purchasing Stock by means of his deposit account. Or he can buy a Stock certificate with coupons for dividends annexed. The commission on every transaction is considerably below that charged by a stockbroker.

Occasionally there appears in the press a demand for the popularisation of Consols, and it is suggested that the Post Office should be the medium of selling across the counter to the British public scrip for small amounts of Government Stock. There should be no book transactions with the public, and the scrip could be disposed of at the price of the day, when the owner wished to sell. The people who make this demand usually show a lamentable amount of ignorance as to what the Post Office does in this matter. They argue as if there were no opportunities for the British public to invest in Consols in small amounts, as the French do in their own Government securities. It may come as a surprise to many people, who are inclined to entertain favourably the proposals I have mentioned, that considerably over £23,000,000 Stock is held already by depositors in the Post Office Savings Bank, and that the average amount credited to each person is about £140 Stock. The facilities for purchase and sale are as easy as it is possible to arrange.

There is also another consideration which should make the present system more valuable to the man of small means or the workman who wishes to invest in Government Stock. The purchase is registered in his name in the Stock registers of the Post Office. If he were to buy the Stock across the counter he would be handed the scrip or bond, and he would have the great responsibility on his shoulders of keeping it in a safe place. A great deal of the value of the Savings Bank to the working classes is that it takes care of their property: they get the money out of the house, where its presence is always an anxiety. Under the proposed arrangement the man would have to look after his scrip. A poor woman was asked why she despatched £100 in bank notes direct to the Controller of the Post Office Savings Bank without her book or any letter showing what she wanted done, or without even indicating whether she held an account at all. She simply replied, “I wanted to get it out of the house: the anxiety was wearing me to pieces lest it should be stolen, and I was told the Controller would take care of it for me.” That is surely the supreme advantage which the Post Office system offers, and it is a backward step to ask poor people to become again their own bankers, and in fact force them once more to the hiding of their treasure in the back garden or under the floors.

It is interesting to know that the small investors of the Post Office Savings Bank follow the rise and fall in the Stock markets with considerable keenness. A fall in price means an immediate increase in the number of investments, and of course with a rise the sales are similarly affected. Many, however, unfortunately invest in sheer ignorance of what they are doing, and the reputation of the Post Office suffers in their eyes when they lose by the transaction.

But let us get back to our imaginary depositor. If he wishes to withdraw from his deposit account a sum not exceeding £1, he can obtain it on demand from any post office on production of his book, and on his satisfying the paying officer of his identity as the depositor in the account. If he wishes to withdraw any sum by the ordinary means he forwards a notice of withdrawal to the Head Office in London, and he receives a warrant for the amount payable at any post office named by him.