The History of the British Post Office

by Joseph Clarence Hemmeon

Inland money orders which started to decrease in amount in 1878-79 steadily continued their downward course until 1891-92, when there was a slight recovery for a few years, but since 1903-04 the number has somewhat diminished. During the postal year ending in March, 1907, the number of inland money orders transmitted was nearly eleven millions as compared with nearly nineteen millions for the year ending March, 1879. This decrease in numbers is largely due to the lowering of the registration fee for letters, the introduction of postal notes, and the use of other means for transmitting small sums of money. The total value of inland money orders also began to diminish in 1879, but began to recover in 1886, and has since increased quite uniformly, being in 1907 nearly £38,000,000 as compared with £29,000,000 in 1879.[294] The increase in the number of postal notes has been enormous, although there was an apparent falling off in the years 1903 and 1904 due to the increased number of denominations offered for sale. For the first complete postal year after their authorization the number issued was nearly four and a half millions of the value of £2,000,000, and for the postal year 1906-07 the number was 102,000,000 of the value of nearly £41,000,000.[295] On the other hand, while inland money orders were decreasing in number, colonial and foreign orders increased in general both in number and value.[296]

The establishment of Post Office savings banks is naturally closely connected with the money order department since both of these departures from a purely postal character were adopted at about the same time, for much the same reasons, and were opposed on the ground of their infringement upon the banking prerogative. In 1859 the efforts of Mr. Sikes of Huddersfield to bring a Post Office Savings Bank into being were supported by Mr. Gladstone, Chancellor of the Exchequer, and Sir Rowland Hill, the then Secretary of the Post Office, and two years later it was established by Parliamentary sanction.[297] The main features of the system were that deposits could be withdrawn not later than ten days after demand; that accounts should be kept at London alone, all money being remitted to and from headquarters; that the total amount deposited should be handed over to the "Commissioners for the Reduction of the National Debt" for investment in government securities, and that interest on complete pounds at the rate of 2½ per cent should be allowed to depositors. As the interests of the poorer classes were made the primary object in establishing the banks, deposits were limited in the case of individuals to £30 a year and £150 in all, later increased to £50 a year and £200 in all, but Friendly Societies were allowed to deposit without limit and Provident and Charitable Societies might deposit within limits of £100 a year and £300 in all or, with the consent of the Commissioners, beyond these limits.[298]

In 1880 the savings banks were made a medium for investing in government stock at a trifling expense varying from 9d. to 2s. 3d. and with the privilege of having dividends collected free from further charge. These special advantages were confined to investments from £10 to £100 in value, the latter being the maximum sum in any one year, and the investments themselves might be sums especially deposited or transferred from a depositor's account. In 1887 the minimum amount of stock purchasable was reduced to 1s., and anyone who had purchased stock through a savings bank might have it transferred to his own name in the Bank of England. In 1893 the limits of investment were raised from £100 to £200 in one year, from £300 to £500 in all, and the Post Office was empowered to invest in stock any accumulations of ordinary deposits above the limit of £200, unless instructions were given by the depositor to the contrary.

An act was passed in 1864 enabling the Postmaster-General to insure the lives of individuals between the ages of fourteen and sixty for amounts varying from £20 to £100. He might also grant annuities, immediate or deferred, to any one of ten years of age or upward for sums between £4 and £50. The act came into operation in certain towns of England and Wales in the following year, and the system remained unaltered until 1884. During this period of nineteen years, 7064 policies of insurance were effected, representing a yearly average of 372 policies amounting to an average of £79 each. The contracts for immediate annuities numbered 13,402 or an average of 705 a year and there were 978 contracts for deferred annuities. The value of immediate annuities granted was £187,117 and of deferred £19,938, but a part of the latter never came into payment as the purchasers were relieved from their bargains upon their own representation.

A new system associated with Mr. Fawcett's name was prescribed in 1882. Its merit consisted in linking the annuity and insurance business with the Savings Bank Department so that payments for annuities and insurance are made through deposits in the savings banks. It was further provided that for persons between the ages of fourteen and sixty-five the limits of insurance should be from £5 to £100 and that sums of money might be insured payable at the age of sixty or at the expiration of a term of years. For annuities the minimum was reduced to £1, the maximum increased to £100, and the annuity and insurance privileges were extended to all places having savings banks. Owing to the necessary preparation of tables the new regulations did not actually come into operation until 1884. The growth of life insurance and annuity business was slow as compared with the rapid growth of the savings deposits. Intended, however, primarily for the poor, it has not been without success, especially as the premiums charged are lower than those of insurance companies or industrial societies.[299]

In addition to joining the insurance and annuity business with the savings banks operations, Mr. Fawcett was responsible for a rapid increase in the number of branch saving offices in villages, for the special attention paid to "navvies" and workmen at their places of employment, and above all for the arrangement for making small deposits by slips of postage stamps. In 1887 by act of Parliament the Postmaster-General was empowered to offer facilities for the transfer of money from one account to another and for the easier disposal of the funds of deceased depositors. In 1891 the maximum permissible deposits of one person were increased from £150 to £200 inclusive of interest. The annual limit remained at £30 but it was provided that, irrespective of that limit, depositors might replace the amount of any one withdrawal made in the same year. Where principal and interest together exceeded £200, the interest was henceforth to cease on the excess alone, whereas previously it had ceased entirely when it had brought an account to £200. The next development arose from the Free Education Act of 1891 in order to make it easier for children and parents to save the school pence which they no longer had to pay. Special stamp slips were prepared to be sold to children, and clerks attended the schools with these slips. About 1400 schools adopted the scheme at once and three years later the number had risen to 3000, but the movement seemed by 1895 to have spent its force.

In 1893 the annual limit of deposits was increased to £50 and, as we have already seen in another connection, any accumulations over £200 were to be invested in Government Stock unless the depositor gave instructions to the contrary. In the same year arrangements were made for the withdrawal of deposits by telegram. A depositor might telegraph for his money and have his warrant sent by return of post at a cost of about 9d. or the warrant also might be telegraphed to him at a total cost of about 1s. 3d. In 1905 a rule was introduced by which a depositor, on presentation of his pass-book at any post office doing savings bank business, may withdraw on demand not more than £1. This obviates the expense of telegraphing and, that it was appreciated, is shown by the fact that during the first six months after the privilege was extended there were nearly two millions of "withdrawals on demand," forming nearly one half of the total number. As a result the number of telegraphic withdrawals fell from 227,573 for the postal year 1904-05 to 180,996 for the year 1905-06.[300]

There has been a steady and pronounced growth in savings bank business since its establishment. This growth has shown itself in the increased number of banks, of deposits, and of the total amounts deposited. The average amount of each deposit has varied somewhat from £3 6s. in 1862 to £2 in 1881, but since this date it has increased slowly but steadily and in 1901 it stood at £2 14s. 2d., which is about the average yearly amount since 1862. At the end of the year 1900 over £135,000,000 were on deposit in the Post Office savings banks.[301] The increase in amounts invested in government stock has not been by any means so pronounced but there has been an increase. In 1881 we find that nearly £700,000 were so invested, in 1891 nearly £1,000,000, and in 1900 a little over £1,000,000.[302] So far as annuities are concerned, the immediate seem to be considerably more popular than the deferred. The purchase money receipts for the former were £184,000 in 1881, £296,000 in 1891, and have since increased more rapidly to £728,000 in 1900, with an actual decrease, however, for the four preceding years. The receipts for the purchase of deferred annuities amounted to £5243 in 1881, £12,578 in 1891 and £14,283 in 1900, also a decrease since 1896. The amounts received as premiums for life insurance policies have also been rather disappointing, having increased from £10,967 in 1881 to £15,073 in 1891 and to £22,185 in 1900.[303]

The increasing use of railway trains for the conveyance of the mails has presented new and difficult problems with reference to the authority of the Postmaster-General over mail trains and reasonable payments to the railway companies. So far as the method for ascertaining the rate of payment was concerned, a difficulty arose as to whether the Post Office should pay any part of the tolls as distinguished from operating expenses. Major Harness, a Post Office official, stated that in discussing this question with Robert Stephenson in the case of the London and Birmingham Railway it had been agreed that tollage should not be paid but only the out-of-pocket expenses, this being in conformity with the principles adopted in paying for mail coaches. The question of tollage was not mentioned by the Railway Mails Act (10 and 11 Vict., c. 85), but Major Harness, in his evidence before a parliamentary committee, stated that he, as an arbitrator, estimated the tollage payable by the Post Office by finding out how much each ton, if the road were fully occupied, should contribute to return 10 per cent upon the share capital and 5 per cent on the bonds, the Post Office to pay its proportion according to the weight of mail matter carried. The cost of locomotive power was also taken into count and the carriage accommodation was paid for on the basis of what the railways charged each other.[304] In addition to these items the committee recommended that the expenses for station accommodation, the additional cost of the working staff, and interference with ordinary traffic should also be taken into account.[305] In the event of a failure on the part of the Post Office and a railway company to come to an agreement as to the amount payable, each of the parties nominated an arbitrator whose first duty was to select an umpire. Each arbitrator was required to present his case in writing to the umpire and to attend in person if required. The umpire was supposed to give his decision within twenty-eight days after the receipt of the cases.[306] In 1893 it was provided by act of Parliament that when any dispute arose between the Post Office and a railway, the question should be taken to the Railway and Canal Commission for settlement instead of being left to arbitration.[307] The Postmaster-General has also been authorized to make use of tramways for transporting the mails, and in 1897 the experiment was made of using motor vans for the same purpose. A few years later the Postmaster-General expressed himself as "doubtful whether a thoroughly reliable motor vehicle suitable for Post Office work has yet been found." However, in 1906-07 about thirty-five mail services were performed by motors, the work being undertaken by contractors who provide the vans and employ the drivers. They have proved to be more economical than horse vans when the load is heavy, the distance considerable, and greater speed desirable.[308]

The expenditure for the conveyance of mails by the railways for the year ending 5th January, 1838, amounted to only £1743. In 1840 this had increased to £52,860, in 1850 to £230,079, in 1860 to £490,223, in 1870 to £587,296, in 1880 to £701,070 and in 1890 to £905,968. By 1896 the million mark had been reached and after that year all the expenses for the conveyance of the mails are grouped together. For the following year this total was £1,453,517, the payment for mail coaches in the preceding year, which are here included, being £365,000. In 1906 the total expenditure for the "conveyance of the mails" was £1,821,541.[309]