A History of Banks for Savings in Great Britain and Ireland

by William Lewins

“In the case of the Post Office Savings Banks,” said the right hon. gentleman, “we had to deal with Loan Societies offering the most attractive terms to the public, promising them a rate of interest which could not possibly be paid under any sound and honest management, and then ending in disappointment or ruin. We did not attempt the foolish task of prescribing laws by which all Loan Societies should be regulated, and under which alone the poorer classes of the community should be permitted to lend their money. That was utterly impossible. You could not possibly defend the poor man against the abuses and dangers into which he might choose to run head foremost with his eyes open; but what you did was this:—you said, 'It is but just to them, and it is expedient and politic in the highest sense, in discharge of the most sacred duty of the Legislature, that we should give to the poor man, to the owner of small savings, the advantage of a scheme which will possess no meretricious attractions, which will not promise a high rate of interest—on the contrary, the rate will be a low one—but which will offer an absolutely certain security.' That is precisely the basis of the scheme now before the House.”

After describing the success of the Postal Banks, and speaking of those who had taken the principal part in carrying the measure into practical operation, and arguing from their success, their ability, and their judgment, that the same persons were entitled to the confidence of Parliament, Mr. Gladstone went on to rebut many of the objections and arguments which had been advanced against the plan. He showed that the Post Office could, equally with the great majority of existing Insurance Societies, attend to the selection of good lives; that the attitude of the leading Societies in regard to his proposals was either that of neutrality or favour. He said that the smaller Societies had protested loud enough; but, he asked, what cause had they to be afraid of Government competition? “We cannot possibly offer such terms as they can; on the contrary, we must exact such conditions as few private Societies ask.” He offered, however, perfect security; and if that was a thing valued by the people, there was no reason why it should be withheld. Besides, however, this perfect security, Mr. Gladstone pointed to two other considerable advantages which the Government would offer, viz., more favourable terms on the dropping in of policies, and facilities for the migratory portion of the population, similar to those we have seen depositors possess in the case of the Post Office Banks.

After speaking of the steps which would have to be taken to guard the Government against loss, and to make the measure entirely self-supporting; after referring to what he called the “fugitive character” of many insurance companies, and eloquently denouncing their proceedings; to the failure of numerous Friendly Societies,[199] and the ruin and disappointment entailed on thousands thereby, Mr. Gladstone brought his long and remarkable speech to a conclusion by summing up as follows:[200]—

“I have endeavoured to prove that Parliament by legislation is seriously compromised and responsible for the present state of things, and is bound to do what it believes to be best to mitigate the evils of that state of things. I have endeavoured to show that the plan which I propose, if it does compete with sound institutions, must so compete with them at a disadvantage from the essential conditions under which it is right and proper we must work. I have endeavoured to show that the wide field of the labouring classes is not occupied by sound institutions—nay, that it is not fully occupied even by sound and unsound institutions, such is the enormous breadth of the subject. I have shown, I think, that the present condition of many of these Friendly Societies—indeed, I might go further, and, speaking generally, might say that the present condition of these Societies is more or less unsatisfactory. Some of them we cannot call merely unsatisfactory, but must term them either rotten or fraudulent. It is impossible for the State to assume the direction and regulation of these Societies so as to secure in the management of their affairs a safe method of assurance; and what we propose is, I believe, the most prudent, the safest, and the most satisfactory mode of proceeding that can be adopted. I make my appeal not to any one class, or to any party. I forget that I am a member of the Government, except so far as regards my responsibility as such. I recollect the sacred trust we have in hand, and I entreat honourable members to keep in view the serious nature of that trust, the importance of the object, and the consequences involved; and I am certain they will not be prevented by any sentiment of political or party feeling, or of hostility to the Government, from giving their careful consideration to this question, and from determining in their own minds and hearts how the British Legislature can best acquit itself of this important part of its obligations to the mass of the British people.”

Mr. Sheridan, after replying vehemently to what he called a personal attack on himself on the part of the Chancellor of the Exchequer when dealing with unsound societies, disputed the need for the measure no less than the principle upon which it was founded. As the spokesman of Insurance Offices and Friendly Societies, Mr. Sheridan further contended that the Post Office would never be able to manage all the details of the business, and that, even if it did, the Government must eventually be losers. “They might shut their eyes for a time,” said the member for Dudley, “but Government would ultimately have to come to that House with shame, and with something like humiliation, to confess that their experiment in commerce had failed, and that the result had been to saddle the shareholders with a loss—those shareholders being the already overburdened taxpayers of the country.”

Lord Stanley avowed his approval of the principles of the bill. He thought it a great experiment, but an experiment which might very possibly result in a reduction of pauperism. He urged the fullest discussion; said it would do the bill no harm, but might on the contrary tend to perfect its provisions. The speech of Mr. Gladstone too, he thought, was a reason why the matter should not be hurried. Mr. Gladstone had made statements which, however true they might be—“and I am afraid that there is a good deal of truth in them—I wish I did not think so,”—might require to be answered, and to give an opportunity to answer them would only be fair play. After pointing out one or two defects in the provisions, Lord Stanley promised his valuable aid by saying, that he should be prepared to go into Committee on the bill with a very sincere hope that it would pass, and that they might find it, or make it, a workable scheme. Mr. Hibbert and Mr. Roebuck both warned the House against suffering a “Constitutional Government” to be converted into what was termed a “Paternal Government.” In a characteristic speech, the latter gentleman held that whatever concerned the individual was best left to be done by the individual himself; that the Government was sure to fail, as it had failed before, in interfering in matters of this kind; and that the effect of such measures would be to make the people a set of helpless imbeciles totally incapable of attending to their own interests. Mr. Newdegate and Mr. W. E. Forster approved the measure, but urged full consideration of it. Mr. Bovill spoke very strongly in favour. He believed, from the facts which had come within his own knowledge and had been elicited in courts of law, that Mr. Gladstone had rather understated than overstated the delinquencies of Friendly Societies and Insurances Companies. One of the effects of the Chancellor's speech, he thought, would be that a cloud of error and prejudice which had been raised against the bill would be dispelled. On the other hand, Sir Minto Farquhar, Mr. Ayrton, Mr. Urquhart, Mr. Henley, Mr. Baines and others, either expressed strong objections to the bill as a whole, or else took exceptions to some of its provisions. The debate was then adjourned.

During the interval, and when the bill was under discussion in the House, a great meeting of the working classes was called in London, and held in Exeter Hall, Mr. Ayrton presiding. The object of the gathering was to petition against the measure; but independent working men—by which is meant those who had no interested motives in opposing the scheme—mustered so strongly on the other side, that the Chairman could not decide on which side the majority lay. There were other public meetings held, some in favour, others in opposition; and although hundreds of petitions were presented from members of Friendly Societies, most of which were got up on one form, there were many others of a far more important character emanating from Corporations and Boards of Guardians, who expressed a hope that the House would not withhold so great a boon to the working classes.

On the 17th of March, Sir Minto Farquhar, in a long speech, moved that the bill should be referred to a Select Committee. Mr. Horsfall seconded the motion. Both members replied to Mr. Gladstone's attack on Friendly Societies, though with little effect. Several members warmly supported Mr. Gladstone, and thought no cause had been shown for delay. Mr. Estcourt, while approving the principles of the measure, saw great difficulties about it, and thought it ought to be referred to a Committee. Mr. Göschen, in an able speech, which showed that he had mastered the subject in all its bearings, answered the objections which had been raised to the bill, and said that though he represented in that House more insurance managers and directors than any other member, he was not afraid to say that the opposition to the bill was entirely owing to the efforts of those who fancied it would deal a blow at their private interests. He was convinced of the wisdom and policy of the measure, which was well worthy of the character of the right honourable gentleman who had proposed it, and which would without doubt leave a mark on the history of the session. The debate was again adjourned.

A month afterwards the debate was resumed by Mr. Ayrton in a very long speech, during which he attacked the Post Office Savings Bank system; stated that just when they were most prosperous, 1859 and 1860, Government had brought out their scheme, which was working and would continue to work with telling effect upon the old banks. So with the present proposals; they would interfere with safe private agencies. “The Government would pursue a much better plan,” continued Mr. Ayrton, “if they were to encourage the establishment of associations among the people themselves; for it was through the exercise of local administration that a nation became most fitted for the enjoyment of political rights.” In place of this, “they proposed to place a stipendiary of the Crown in every parish and hamlet to institute an examination into the private affairs of individuals.” Mr. Hubbard thought the proposed measure one which they ought and might very well entertain. He looked upon it simply as an extension of the principle of the Post Office Savings Banks, which had now received the sanction of the entire country.

Mr. Gladstone then replied. After referring to some of the objections that had been made to the measure itself, he said he would not object to submit it to a Select Committee; but he could not consent to refer the whole subject-matter to a Committee, as that would indefinitely postpone legislation on it. He believed that the public were growing more and more in favour of the plan, and that this feeling would be increased as its objects and provisions became better understood. He also stated that, during his long public life, he himself had never received so many letters as he had upon this measure from all classes of the community, and all expressing approval and gratitude for it. A few days afterwards a Committee was appointed, to consist of Mr. Gladstone, Mr. S. Estcourt, Mr. M. Gibson, Mr. Henley, Sir M. Farquhar, Sir S. Northcote, Mr. Horsfall, Mr. Göschen, Mr. Charles Turner, Mr. H. Herbert, Mr. Hubbard, Mr. Sheridan, Mr. Ayrton, Mr. Hodgkinson, and Mr. Paget.[201] After an ineffectual attempt to enlarge the scope of the inquiry, which partook of the nature almost of a party struggle,—104 members voting with Sir M. Farquhar, and 127 with the Government—the Committee commenced its sittings.