A History of Banks for Savings in Great Britain and Ireland

by William Lewins

It, however, was not to be settled so soon. Before we refer to any further expression of opinion on the subject in Parliament and the ultimate decision in the case, it is only right that we should present the other—the Savings Bank—view of the matter, as uttered by the powerful, we had almost said corporate, body at St. Martin's Place. The Committee of Managers of this important London institution met, as their custom was, to pass resolutions on any matter affecting Savings Banks. A petition to Parliament was framed on the resolutions come to in this as in other instances, and similar petitions were got up and presented to Parliament from other Savings Banks, who naturally looked to the St. Martin's Place institution for advice and guidance. At a meeting held at this representative bank on the 14th of May, 1850, Lord Walsingham in the chair, the proposals of the Chancellor of the Exchequer were gone through seriatim, and all of them, without exception, disputed and condemned. It came to the conclusion that (1) the proposed introduction into Savings Banks of a Government treasurer, &c., “must lead to great confusion, and eventually to the disruption of these valuable institutions;” (2) that “the proposed reduction of the existing rates of interest and the limit in the amount of deposits will, besides imposing injurious restrictions on depositors, so diminish the means of defraying the expenses of management as to render it extremely difficult in some, and impossible in other cases,” to engage efficient assistance; (3) that any further reduction of the rate of interest to depositors would only tempt them to withdraw their money from Savings Banks and place it in “more attractive, but frequently hazardous investments;”[90] (4) that the grand principle on which well-conducted Savings Banks have hitherto been so efficiently managed, viz., “that of having the constant superintendence of gentlemen unconnected with the receipt or payment of money, will be destroyed if the new bill should be passed into a law.” We ought to add that this Committee did not object to the abrogation of the law of 1844, which was passed “contrary to their expressed wishes and recommendations;” that, although they urged that frauds were comparatively rare, and far less in amount and extent than in public or mercantile establishments, and that for such reason there was no just ground for the introduction of an entirely new system such as was now proposed, they had no objection to a measure adapted still further to promote the solvency and good management of Savings Banks, only they must insist that the necessity for such important changes “should be considered by a Select Committee, and evidence taken from men of long experience in Savings Bank management.” The last resolution to which this body came was, “That a petition to the House of Commons, founded upon the foregoing resolutions, be printed and circulated for the information of other Savings Banks.”

To return to the discussion in the House of Commons on the bill now proposed, Mr. Hume in a temperate speech supported, on the whole, the Chancellor of the Exchequer. He held that Government ought to undertake one of two things—either to leave Savings Banks altogether alone, or else to ensure perfect security to the depositors, which he saw no difficulty in doing. Of course he agreed with the proposal to reduce the rate of interest and the limit of the total amount of deposits, remarking on the latter subject that he had known many cases where Savings Banks had been taken advantage of in a way that, he was about to say, was quite unworthy of them; “but let no man say that anything was unworthy where profit was the object, for he found in all ranks and classes a tendency to avail themselves of the folly of the public.” Government, he thought, could not do better than try to encourage among the labouring classes the habit of saving; “for the moment a man had a nest-egg he desired to add to it, and thus were habits of economy and prudence fostered among the mass of the people.” Sir Henry Willoughby opposed the bill; he thought the proposal to reduce the rate of interest would be “an extremely disagreeable measure.” He referred, however, on this occasion principally to the management of Savings Bank funds, and expressed his opinion that what was required was that the management of the affairs of Savings Banks should be taken out of the hands of the Commissioners of the National Debt, and a separate commission appointed for the purpose.

Few members questioned the wisdom of the proposals at this time, but many expressed themselves dissatisfied that the bill would have no reference to the past, and that the Chancellor had not alluded in any way to the depositors who had lost their all by the bank failures and by the action of the bill of 1844. Mr. Crawford spoke of the Rochdale depositors, Mr. Fagan of the Killarney depositors, and Mr. Herbert of the Dublin and Tralee depositors. Mr. Slaney thanked the Chancellor of the Exchequer for the amount of attention which he had bestowed on the bill, which he “deliberately thought would interest more persons than any other measure that would be introduced this session.” He thought the security now promised would be real, though he was sorry the Chancellor meant to make the people pay for it. His opinion (and he had considered the subject of industrial investments very largely) was that neither the amount of, nor the interest on, deposits should be reduced; he would “be most willing to pay a small bonus to tempt the savings of these poor people.” We are glad, however, to say that this view of the case did not meet with much approval. After several more appeals from such members as Mr. Bankes and Colonel Thompson, that Government would come to the rescue of the defrauded depositors who had, in their ignorance it might be, looked to the country for security, the bill was ordered to be brought in by the Chancellor and Mr. Attorney-General. On the motion made to read the bill a second time on the 8th of August, 1850, Mr. Hume and Sir Henry Willoughby importuned the Chancellor of the Exchequer to defer the consideration of the bill to the next session; the former urging that honourable members might study the reports of the Committees of 1849-50, during the interim, and the latter that time might be given “to allow of a consolidation of all the statutes relating to Savings Banks, and an inquiry into the whole subject.” The Chancellor replied, that after the agitation which had been got up among the managers of Savings Banks, and the considerable misunderstanding which prevailed relative to the provisions of the bill, he reluctantly consented to withdraw it.[91] Several members took the opportunity to urge that the Chancellor should bring the matter forward the first thing in next session; but the Savings Bank interest proved still stronger in 1851, and again Sir Charles Wood got nothing done, and never heartily took up the question again.

In 1853 an Act was passed to “Amend and Consolidate the Law relating to the Purchase of Government Annuities.” The bill was introduced and carried through by the Chancellor of the Exchequer. This Act continued the same powers to the Commissioners as were given in 1833, and the clauses relating to the purchase of annuities, deferred and immediate, were continued. It further empowered them, however, to grant deferred annuities for a sum to be paid down at once, and not returnable, and also to grant annuities otherwise than through Savings Banks. It was said that the reason why the Act of 1833 had been practically inoperative was the want of such a clause: that the fact of only being able to buy a deferred annuity on the condition of money being returnable, not only caused many lapses, but made the tables heavier than they ought to be. Under the fresh clause better things were augured; any one purchasing such an annuity, it was argued, takes the chance of his not living to receive it, just as the member of a benefit society takes his chance of never being ill, and therefore never needing what he pays to secure if his health should fail. The benefit in return for this risk is, however, proportionally increased, inasmuch as the contributions of those who do not live to the term when the annuities commence, go to swell the contributions of those who may,—the purchase-money, in the case of money being returnable, being of course much larger than in the other, where more risk is run. We give the argument for what it is worth; but it is certainly curious that at a more recent date, when again the law regulating the purchase of annuities underwent alteration and amendment, a great outcry was raised, because the tables of rates, “with money returnable,” were temporarily kept back; one respectable organ of public opinion going so far as to say that the changes would be inoperative till these tables were produced. An opposition was got up during the progress of the measure in Parliament, owing to the clause empowering the Government to grant life assurance policies to those who should likewise buy annuities. It was said now, just as it was urged, though much more strongly, subsequently, that there were great objections to the Government becoming a trading community, or doing anything which could be carried out by a private company. “The system of life assurance,” said a well-known Scotch member, “was at present carried on so successfully and so judiciously by the ordinary life assurance societies, that it would be most unwise to interfere with them.” Another member argued that the annuities scheme had so lacked success that no amount of tinkering would make it applicable to the country. The Secretary of the Treasury explained that Government were not anxious about doing the business of insurance offices, but only desired to give facilities, which the law did not then allow, for the conversion of Savings Bank deposits into a satisfactory provision for want or old age. The bill was read a third time, with a majority of 28 in a House of 56 members, and soon afterwards passed without any further difficulty, and received the Royal Assent. Such a measure, whatever the poorer classes might think of it, was well calculated to spread the spirit of independence amongst them. The State did well to offer the opportunity of increased facilities; and if those for whose benefit such schemes were intended did not avail themselves of them to secure, by a very small amount of temporary sacrifice in seasons of health and prosperity, a provision against those risks to which all the poorer classes are liable, of falling through unexpected contingencies into poverty and pauperism, the blame would rest elsewhere than with the State.

As we have already said, the session of 1851 passed without any attempt at legislation, and in the beginning of 1852, there being still no sign of action on the part of the Executive, the late Mr. Herbert, so well known in connexion with the Irish banks, proposed a resolution to the effect—

“That this House has observed with regret the continued neglect of Her Majesty's Government to fulfil their promise of introducing a bill for the regulation of Savings Banks, by which those important institutions may be enabled to preserve their hold on the confidence of the country, and a due encouragement be thus given to the industry and providence of the working classes.”

There was every reason to believe that this resolution would have passed, until the Chancellor of the Exchequer rose. Sir Charles Wood admitted that the bill had been far too long delayed; but this was no fault of his. It was thrown out in 1850; he could not get it introduced in 1851: it was ready, however, and it should be brought forward this session. He had not given notice of it, because he had been engaged in consultation with several members in so preparing the measure as to ensure its passage through the House. His firm conviction was, that the delay in the present instance had tended not only to improve the bill, but to diminish the chances of opposition to it when introduced. During the last four years the greatest pains had been taken to frame such a measure as should effectually remove the evils that had been complained of; and within the past few months they had had the assistance of a new Comptroller of the National Debt Office, who had “devoted himself with great diligence to the subject.”[92] He submitted, in conclusion, that he was not deserving of the censure of the House, especially as it had been settled to try the measure again during the present session. Mr. Disraeli agreed with Sir Charles Wood, though the resolution before the House was apparently justified by the circumstances, it would not be becoming in them to divide the House after what had been promised. The question was surrounded with difficulties, but notwithstanding these difficulties it was the paramount duty of the Legislature to grapple with it; and an opportunity would be soon afforded. Mr. Disraeli at this time did not know how soon he was to be in a position to grapple with the subject himself. Sir Charles Wood's pledge was not kept. All such measures as those we are considering have suffered greatly from the vicissitudes of administrations, and it was so in this instance. Towards the end of 1852 Mr. Disraeli succeeded Sir Charles Wood as Chancellor of the Exchequer in Lord Derby's first Ministry; but he had scarcely time, supposing him to have had the disposition, to take up the matter where it had been left. When the Derby Administration gave place to the coalition Ministry of Lord Aberdeen, and Mr. Gladstone took the place of chief financial minister, there was soon a better prospect of some settlement. Even under his auspices, however, matters at first went on very slowly; so multiform were the questions and interests involved, that even Mr. Gladstone's powers were severely tried to clear the ground of the incumbrances which time and prejudice had reared. When Mr. Gladstone left office and was succeeded by Sir George Lewis much had been done; the necessary preliminary measure of a full investigation into the Savings Bank question by a Committee of the House of Commons had been decided; the real nature of the connexion existing between the Government and the Savings Banks was better understood: and when after a lapse of two or three years he returned to his old position, he took the matter up where it had been left, and carried the subject, by his unapproachable eloquence and energy to an easy and final solution. Mr. Gladstone's name will go down to posterity covered with honourable trophies of his great powers; but we question whether among the great schemes he has carried any will be remembered longer than those meant to increase among the lower classes the habits of prudence and frugality.

Early in 1853, and when he had but just succeeded to the office of Chancellor of the Exchequer, Mr. Gladstone gave notice that the subject must be taken up, and if possible settled. A bill[93] was allowed to pass the second reading without discussion; but when the subject came up before Committee in July of that year, Mr. Gladstone, compelled to succumb to the wish that Parliament should be prorogued, asked that this and other bills might be deferred till the next meeting of Parliament. He said he had made great progress with the bill since it was first introduced; he had sought to get the opinion of the different Savings Bank managers upon it, and he believed he had acquired a pretty accurate knowledge of the state of feeling in the country on the subject.[94] All this was favourable to the prospects of the bill; but now, as the House had lasted since November 1852, he feared that if it was pushed forward it might fail to pass. He should have liked to have got the question settled, but he now thought his object would be more speedily obtained by the delay proposed. Here the sagacious Minister was mistaken; the old adage of no time being better than the time present could often be well applied to proposals to defer desirable matters of legislation to a future session. No mention was made of the subject for nearly eighteen months; the country had more pressing, and, for the time, much more serious matters to consider, which it will be quite unnecessary to particularize.

On the 20th of December, 1854, Mr. Gladstone moved for and obtained leave to bring in two bills during the session of 1855: the one “to create a charge on the Consolidated Fund” of the money due on behalf of the depositors in Savings Banks, and the other, the bill for the management of Savings Banks which was withdrawn in 1853. In the former important proposal the Chancellor of the Exchequer desired to make the law more perfect as to the relation between the depositor and the State, by giving the latter a better title to the money invested with the State. He wished, in his own language, “to reduce the obligation and the contract of the State with the depositor to that simple form which is adopted by every banker.” He would propose, “as respects the bulk of the funds received from Savings Bank depositors, that they should be held in this country as they are held in other countries,” and not in the complicated form of Stock and other public securities. Mr. Gladstone's view, more than once expressed in strong terms, with respect to the State using the money belonging to Savings Banks, was that it was no matter to anybody what was done with the money,[95] providing it were ready at call and the stipulated interest were given,—the stability of the country being surely a sufficient guarantee for its safety. Savings Bank authorities, on the other hand, disputed the right of the Chancellor to use the money; would prefer to use it themselves in other investments, if the funds were applied otherwise than under statute in the purchase of Bank Annuities; and referred to the uncertain title in law which depositors had for the money according to the governing statute. Mr. Gladstone's bill proposed to give this title to every penny so deposited with the State, by throwing the burden of any deficiency arising on the Consolidated Fund, and so silence at any rate the last objection.[96]

Early in the session of 1857 the then Chancellor of the Exchequer (the late Sir George Lewis) was several times asked if the subject of Savings Banks had not to be brought forward and concluded. These questions led to his promising to bring in the Government measure which, often brought forward and as often withdrawn, was still waiting for a tide of popular favour to carry it into law. On the 27th of February in this year he gave notice of this intention, and earnestly trusted that the House would allow it to pass. In a short speech, the points of which we need not recapitulate—for it dealt with the same facts and came to the same conclusion as those speeches of previous Chancellors already described,—he proposed the first reading. Then came the dissolution of Parliament, and its forcible postponement for one more session.[97]