A History of Banks for Savings in Great Britain and Ireland

by William Lewins

Reverting to the consideration of the actual Post Office Bank rate, it is perhaps unlikely that the small tradesmen class—except where such persons lodge their money at the Post Office merely for security—feels satisfied with it. Happily, however, this is a class which does not need to be considered, and which scarcely will be considered. The Government offers no factitious allurements or inducements to any class of the population; and if it did, would be certain to confine the inducements to those portions of the poorer classes who stand most in need of encouragement. And as for the rest, the Post Office Banks do not in any way interfere, as Mr. Gladstone has recently said, “with the labouring man's liberty of choice, or the liberty of choice enjoyed by anybody else; if he thinks he can do better with his money than by carrying it to the Government Savings Bank, by all means let him do better with it.” A low rate of interest is given for the principal deposited; but then that principal is guarded with uncommon security, and can be moved, added to, or withdrawn from, with the greatest possible convenience. And these terms, theoretically and practically, suit the industrious classes, whoever else they do not suit. Practically they meet the wants and satisfy the demands of a large section of depositors, or the banks would not have shown such an extraordinary amount of success. Nor are we in want of authorities who assumed, theoretically, that this would be so. “If Government give security,” said a shrewd witness before the Savings Bank Committee of 1858, “they should pay less interest, on the principle that Chubb's locks cost more than the ordinary ones.”

Dr. Chalmers took great interest, as our readers must already know, in Savings Banks. His argument was, that the ready receipt and payment of small sums together with safe custody was everything, and the rate of interest quite unimportant; he more than once said, that “the result of high interest had been to swamp our Savings Banks as a national system.” This question of interest was largely discussed in Mr. Slaney's Committee of 1850. In that Committee Mr. John Stuart Mill was asked whether perfect security or a high rate of profit was most sought after by the industrious classes; to which he replied: “In the case of the working classes no doubt security is the main object, and it is so in the case of all whose savings are small.” In the same Committee, Mr. J. M. Ludlow, an eminent barrister, gave it as his opinion that “the poorer a man is, the more important to him is the safety of his investment, independently of the question of profits;” and in answer to a similar question addressed to him, the secretary of a working man's building society said, that “the certainty of security is the most powerful inducement to investments among the working population.”

Thus, while it doubtless admits of question more than the other details, no serious fault need be found with that clause which provides the rate of interest to be given. Equalization in the rate of interest of all Savings Banks connected with the Government is far more necessary than that the standard of the one should be raised to the standard of the other. The days have gone by when any dole of charity should be held out to working men as an inducement to save: it is more than questionable whether those days should ever have arrived. The working classes do not want charity at the hands of the public; they long wanted security and reasonable facilities: and when these were provided, as they have been, they were willing that the rest should be left to themselves. All interest given more than the money actually produces or may fairly earn, is repugnant to them; or if it is not, it ought to be made repugnant to them.

The deficiencies, if we may so call them, of the Post Office Savings Bank system, to which we promised to allude in closing this chapter, are those features which have been inherited from the parent system, and consist, of restrictions which, we think, are now as unnecessary and undesirable as they are hampering and vexatious. By section 14 of the Post Office Savings Bank bill it was ordered that “All the provisions of the Acts now in force relating to Savings Banks as to matters for which no other provision is made by this Act, shall be deemed applicable to this Act so far as the same are not repugnant thereto.” Under this legislation all the restrictions which were thought—especially during the earlier history of Savings Banks—to be necessary to confine these institutions to the poorer classes, have been continued down to the present time. The principal regulations to which we refer are, the Declaration which is required from any one opening an account, and the limitation of deposits to 30l. in any one year, and 150l. in all; and that when deposit and interest together reach 200l. all further interest shall cease. The reader who may have followed us through our account will be aware of the reasons which actuated the Legislature in making these arrangements.[194] These reasons do not now obtain. No steps are taken (and we have never heard that it is intended ever to take such steps) to confine the benefits of the Post Office Banks to the labouring classes. Why, therefore, these classes, or any other class allowed to deposit in these banks, should be restricted to any amount—or, at any rate, such a small one—it is difficult to understand. To the poor this restriction forms a barrier to saving habits; with regard to any other class, the amount might be as unlimited as it is in the Funds. As a set-off against the unremunerative character, to say the least, of small deposits, no limit should be placed on large ones. It is obvious, that the larger the sums invested the greater will be the success and the profits of the scheme, the more remote will be any prospect of loss, and the more certain will be the creation of a permanent marketable stock of Two and a Half Per Cents.

We are glad to find that this restriction has not escaped the notice of many who are entitled to be heard on the subject.

The Rev. G. H. Hamilton, who made, perhaps, the earliest modern proposals for Post Office Banks, suggested that the limit should be “from one shilling to ten pounds per day;” and since the passing of the Act he has made exertions, hitherto without success, to get the limitation extended to include those sums. Mr. Bullar, also equally entitled to respectful attention, has likewise made subsequent proposals having in view, to some extent, the granting of facilities for investing larger sums.

It is interesting to find that the Post Office Savings Bank system has just been introduced into our Australian colonies and not a little curious and instructive to find that some of the provisions go much further than we have yet ventured at home. The main feature of the “Post Office Statute, 1865,” is an echo of the English Act, but in several of its provisions its scope far exceeds the latter in liberality. No declaration is needed; instead of 30l. in any one year, the colonial depositor in Victoria is only debarred from exceeding 50l. in a fortnight, and the interest given, which is at the rate of four per cent., is not withheld to any deposited amount under 1,000l. Liberal as are the colonial authorities in Victoria, those at Queensland far surpass them. In the Post Office Banks at Queensland there is no limit whatever to the amount which may be deposited; interest is allowed at the rate of five per cent.; and this rate of interest is paid on all deposits without limitation of any sort. Making all due allowances with respect to the relative position of our colonial possessions at the antipodes and the mother country, it seems clear that the former have advantages over us in the matter of their Government Banks, and we commend the example of the Victorian Legislature to our own, and trust that the only marked defect in our Act may soon be remedied.

[177] Whenever the Post Office of a village or hamlet is advanced to the dignity of a Money Order Office, it will also be opened for Savings Bank business.

[178] Up to the end of February last the total sum reached exceeded twelve millions sterling,—a sum which it took the original old banks, with no competition, eight years to realize.

[179] Thus, as we learn from an authentic account, in Bristol the old Savings Banks lost 700 and the Post Office Banks gained 2000 depositors; in Dublin the same relative proportions were 400 loss and 1,400 gain; in the county of Kent there was a loss on the one hand of 3,500, and a gain on the other of 9,300 depositors; in Middlesex, the old banks lost 12,000, and the Post Office Banks gained 42,000 depositors.