[179] Hand Catalogue of Postage-Stamps, Introduction, p. 5.
[CHAPTER V.]
POST-OFFICE SAVINGS' BANKS.
The idea of Savings' Banks for the industrial classes was first started at the commencement of the present century. They are said to owe their origin to the Rev. Joseph Smith, of Wendover, who in 1799, circulated proposals among his poorer parishioners to receive any of their spare sums during the summer, and return the amounts at the Christmas following. To the original sum, Mr. Smith proposed to add one-third of the whole amount, as a reward for the forethought of the depositor. This rate of interest, ruinous to the projector, proves that the transactions must have been of small extent, and charity, a large element in the work. The first savings' bank really answering to the name was established at Tottenham, Middlesex, in 1804, by some benevolent people in the place, and called the Charitable Bank. Five per cent. interest was allowed to depositors, though for many years this rate was a great drain on the benevolence of the founders. In 1817, these banks had increased in England and Wales to the number of seventy-four. During that year Acts of Parliament were passed offering every encouragement to such institutions, and making arrangements to take all moneys deposited, and place them in the public funds. From 1804 to 1861, the savings' banks of the United Kingdom increased to 638.
A reference to the various deficiencies of the old banks for savings, and the steps which led to the formation of those now under consideration, will not be out of place here. We have said that, in the early part of this century, successive governments offered every inducement and facility to the savings' bank scheme. Such encouragement was indispensable to their success. When first started, Government granted interest to the trustees at the rate of 4½l. per cent. This rate, reduced to 4l. as the banks became more established, now stands at 3l. 5s. per cent. Of this sum depositors receive 3l. per cent.; the difference paying the expenses of management. The encouragement which the Legislature has given to the savings' banks of the country since their commencement, has entailed a loss of about four and a half millions sterling on the public exchequer. From 1817 to 1841, a loss of nearly two millions sterling had been incurred by reason of the rate of interest which was allowed by Government, being greater than that yielded by the securities in which the deposits had been invested.
Savings' banks have suffered most severely from frauds in the management, and the feeling of insecurity which these frauds have engendered from time to time has gone far to mar their usefulness. Government is only responsible to the trustees for the amounts actually placed in its hands. The law, previous to 1844, gave the depositor a remedy against the trustees in case of wilful neglect or default. In 1844, the Legislature thought right to make a most important change in the law, by which trustees of savings' banks were released from all liability, except where it was voluntarily assumed. It remains a most significant fact, that all the great frauds with this class of banks have occurred since that date. We have, indeed, to thank only the influential gentlemen, who, as a rule, take upon themselves the management of savings' banks, that such cases have been so rare as they have.[180] The known frauds in savings' banks are calculated to have swallowed up a quarter of a million of hard-earned money. The fraud in the Cuffe Street bank, in Dublin, amounted to 56,000l.; the Tralee bank stopped payment in 1848 with liabilities to depositors to the extent of 36,768l., and only 1,660l. of available assets; in the same year, the Killarney savings' bank stopped with liabilities of 36,000l., and assets of only half that amount. About the same time, the Rochdale bank frauds became known, and losses to the extent of 40,000l. were the result.
There can be no doubt that the state of the law is still most anomalous, and that the great majority of the people of this country are under the impression that there is Government security for each deposit in every savings' bank. Year by year, changes have been proposed in the Legislature for giving more security to depositors, but the body of managers have hitherto been successful in their opposition. Whilst legislation is thus deferred, the risks to the provident poor still continue. In the report of a Government Commission appointed during one of these annual discussions "on the savings of the middle and working classes," several well-known authorities in such matters, such as Mr. J. Stuart Mill, and Mr. Bellenden Kerr, expressed decided opinions of the insecurity of savings'-bank deposits. Mr. J. Malcom Ludlow spoke to the feeling of the working-classes themselves: "I should say the great reason why the working-classes turn away from savings' banks, is the feeling of insecurity so largely prevailing amongst them."
Mr. J. S. Mill, when asked for any suggestion on the subject, said: "I think it would be very useful to provide some scheme to make the nation responsible for all amounts deposited. Certainly the general opinion among the depositors is, that the nation is responsible; they are not aware that they have only the responsibility of the trustees to rely upon."
Some change, or some new system, had long been regarded as absolutely necessary. In 1861, the number of savings' banks on the old plan was 638; yet out of this number there were no less than fourteen counties in the United Kingdom without a bank at all. Even in England, when the test was applied to towns, all, for instance, of a size containing upwards of 10,000 inhabitants, it was found that there were at least twenty-four without savings'-bank accommodation of any sort. Nor was this all. Even where savings' banks already existed, 355 were open only once a-week, and that for a few hours; some twice a-week; but very few—only twenty, in fact—were open for a few hours every day. When, added to all this want of accommodation and absence of facility, we remember the unsatisfactory state of the law concerning them, there can be no wonder that public attention was called to the subject from time to time. So early as 1807, Mr. Whitbread introduced a Bill into Parliament to make the money-order office at the post-office available for collecting sums from all parts of the country, and transmitting them to a central bank which should be established in London. At that time, the money-order department of the Post-Office had not arrived at the state of efficiency to which it subsequently attained, and the Bill was withdrawn. Other proposals shared the same fate, till, in 1860, Mr. Sykes of Huddersfield, engaged in the savings' bank of that town, addressed Mr. Gladstone on the deficiencies of the existing system. Through his practical acquaintance with the old plan of working, he was able to demonstrate that increased facilities for depositing at any time, and almost at any place, were great desiderata amongst the poorer classes. The same facilities were necessary for withdrawing deposits. Mr. Sykes proposed that a bank for savings should be opened at every money-order office in the kingdom; that each postmaster should be authorized to receive deposits; and that all the offices should have immediate connexion with a central bank in London. The general principle of this scheme was at once seen to be useful and practicable, though, again, the mode of working was evidently unsatisfactory. Mr. Sykes, for instance, proposed that all payments and withdrawals should be severally effected by means of money-orders to be drawn for each separate undertaking. Any one at all acquainted with the machinery of the money-order office was aware that this would of necessity be a slow and complex, as well as expensive plan. Mr. Sykes's idea was, that no deposit should be less in amount than twenty shillings. This arrangement, again, would have gone far to negative the merits of the whole plan, and especially to interfere with its usefulness amongst the classes which the measure was really intended to benefit. For a few months this scheme, like those preceding it, exhibited signs of suspended animation, when it was referred to the practical officers of the revenue department of the Post-Office, and by them resolved into the simple and comprehensive measure which the Chancellor of the Exchequer proposed in 1861, and which was the crowning effort of the legislative session of that year.
This Bill, entitled "An Act to grant additional facilities for depositing small savings at interest, with the security of Government for the due repayment thereof," became law on the 17th of May, 1861.