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Debate on Gladstone's motion to establish Post Office Savings Banks (8 February 1861)

Hansard, 3/CLVI, cols. 262-267

The Chancellor of the Exchequer [Gladstone] said he would take occasion to state that, in submitting the Resolution to the notice of the Committee, he did not seek to pledge hon. Members to an approval of either the principle or the details of the Bill which it was his intention to found upon it. The object which he had in view in dealing with the question was to afford facilities for the deposit of savings of small amount to those who did not possess them, or possessed them but imperfectly under the present system of savings banks. The establishment of savings banks had undoubtedly been of immense service to the humbler classes throughout the country; but, while it was the wish of the Government so to improve their constitution as to render them still more advantageous, the mode of doing so was a problem which they found extremely difficult to solve. The main question, that of the liability of the trustees to the depositors, was one which had up to that time baffled the skill of those who had attempted to deal with it. Under those circumstances, they proposed to avail themselves of another description of machinery already in existence, simple in form, and recommended by its incomparable convenience, for the purpose of carrying out more effectually the objects for which savings banks had been set on foot. Of those institutions there were only about 600 scattered throughout the country, and of that number but a small proportion were open for a sufficient number of hours in the week. Looking, however, to the Post Office Department, he found that it comprised between 2,000 and 3,000 money order offices; that the number of postmasters was perfectly adequate to the transaction of increased money business; that they held their situations under pecuniary responsibility, and that every one of their offices was open six days in the week for not less than eight or ten hours each day. Now, there was a machinery ready to hand and admirably adapted for extending the usefulness of the savings bank system. The experience, he might add, of the present winter must have demonstrated to anybody who thought upon the subject that the resources of the labouring population of the country had not of late years increased in proportion to the increase in the rate of their wages and the improvement in their standard of living. A smaller proportion of their gross income was laid by at that moment than was laid by twenty years before. He did not, however, think he was indulging in too sanguine an expectation in supposing that if readier means of laying by their small savings were afforded them than they now possessed, those savings would become much larger in amount, and their ability to cope with periods of distress consequently greater. He did not, of course, intend to proposed that the machinery of the Post Office should be applied at once and wholesale to the purpose of affording to the working classes the facilities of which he spoke. The scheme to which he was about to invite the assent of the Committee would, it was true, be worked through the agency of the Postmaster General and not that of the National Debt Commissioners, whose duty it would be simply to receive and hold the funds handed over to them by the Post Office for investment; but then the new arrangements would in no way interfere with the primary objects, for the attainment of which that important branch of the public service was established. He proposed that the Post Office should receive and return deposits with interest in the same way as money orders were now dealt with, charging merely a fair remunerative price for the work thus performed. He might further observe that the principle upon which his scheme was founded differed in some respects from that on which savings banks were based. Those institutions had been established with the notion that the State might very fairly offer to the labouring classes a certain premium by way of inducing them to make deposits; but while he was far from desiring to cast any censure upon that principle, he did not deem it right in the present case to hold out to depositors the expectation of obtaining any high rate of interest. All, then, that he meant to do was to give a fair and moderate premium to the depositors of small savings, and that premium, he hoped to be able to pay them without imposing any additional burden on the State, by turning to account the very extensive and extremely economical machinery of the Post Office. The rate of interest which was now paid on deposits in savings banks stood at the somewhat high rate of £3 5s. per cent, and he proposed that under the operation of the scheme to which he was asking the assent of the Committee it should be fixed at £2 10s., with power to increase that amount within certain limits. Inasmuch as there were great difficulties in the way of dealing with the finances of savings banks and of attempting to alter their form of constitution, the Government proposed for the moment to pass over those difficulties, and to ask the assent of Parliament to a plan which, avoiding any competition with the existing savings banks, would greatly enlarge the facilities of making small deposits. The main difficulty in the present savings bank system was its imperfect organisation in regard to the responsibility of the State. The State could only be responsible for the acts of its own officers, and as no plan had yet been devised by which the State could participate in all the proceedings of the savings banks, it was impossible to carry out the principle of a perfect Government guarantee. The State now only became responsible for the money of the depositors at the moment it received it from the savings banks' authorities. But as in this case the money would be received by the officers of the Government it would be inexcusable not to give a Government guarantee; and he proposed, therefore, to give a Government guarantee in the only effective technical form, by providing that if any difficulty arose in the means of meeting the demands of any lawful depositor it should be charged upon the Consolidated Fund. He hoped the notion of a Government guarantee would not cause any alarm in the minds of the hon. Gentlemen, for he had expressly stated that the basis of this new arrangement was that it should be self-supporting. The right hon. Gentleman concluded by moving a Resolution:-

That it is expedient to charge upon the Consolidated Fund of the United Kingdom of Great Britain and Ireland the deficiency, if any such should arise, in the sums which may be held on accounts of Post Office Savings, to meet the lawful demands of depositors in such Banks, in the event of their being established by law.

Mr Frank Crossley said, he thought it was impossible to overestimate the advantages that would accrue to certain classes in the country from the proposition of the right hon. Gentleman the Chancellor of the Exchequer. There were no less than fifteen counties in England without a savings bank. There were also many important towns containing a population of 10,000 to 30,000 without such a thing as a savings bank. Many of the savings banks in existence were only open about one or two hours a week, and at a period of the day when the working people could not visit them. A great deal of fault had been found with the improvidence of the working people in not saving money, but let them first see what was done by the Government. The State provided beer-shops in every street for working men to spend their money in as fast as they earned it; but hitherto it had not been sufficiently forward in giving them facilities for saving money. Working men were often very much afraid to let their masters know that they were saving money from a notion that it would lead to a reduction of their wages, and under the present system the masters were very often concerned in the management of these banks and could know exactly how each man's account stood. By this new arrangement each account would be a secret between the depositor and the postmaster. He felt very much indebted to the attention which the right hon. Gentleman had given to the representations addressed to him on the subject by Mr. Sykes of Huddersfield. He did not think the Government ought to make a profit on the business, nor ought they to lose by it, for the working classes of this country did not want charity. All they wanted was a fair field and no favour, and he was glad to find they were to have it. He hoped that if it were found at any time that without putting a charge on the country, the rate of interest could be increased, it would be done.

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