I beg to move, "That the Bill be now read a Second time."
The main object of this Bill is to facilitate the further expansion of trustee savings banks, and to effect simplifications in the administration of these banks. I need hardly remind the House that these trustee savings banks are among the oldest and most valuable instruments of thrift to be found in this country. Some of them have been in existence for more than 100 years. Originally established locally as voluntary organisations by public-spirited citizens, they came for the first time—
These institutions were originally established as voluntary institutions, and they came under a measure of Government control in 1817. Since that time many Acts have been passed regulating the administration of these banks and the manner in which the funds of the depositors are invested, but throughout all this legislation the principle that these trustee savings banks should be administered by local persons, controlled by local bodies of unpaid trustees, has been maintained unimpaired. It is largely to this feature of local control and local management by people who are known in the districts in which these trustee banks operate that they owe the great success which they have attained as instruments of thrift.
The House is probably aware that these trustee savings banks are divided into two departments. There is, firstly, the Ordinary Department, the funds of which are invested with the National Debt Commissioners, who guarantee a fixed rate of interest, the trustees being able to obtain from the National Debt Commissioners repayment of the principal, if and when called upon by the depositors, as and when required. There is also a Special Investment Department, in which depositors who have £50 in the Ordinary Department may deposit money in addition to their ordinary deposits. The funds of this Investment Department are invested in Government securities which have a life of not more than three years, and on looking through the list I find that few of these departments of trustee banks pay a rate of interest lower than 4 per cent. These funds, also, may he and are to a large degree invested in local securities secured on the rates, but the currency in that case must not be longer than six months.
Yes, I think I can give them, though only roughly, from memory. I think there are 119 banks, with 450 offices, and, still speaking from memory at this short notice, I believe the total amount deposited is about £82,000,000 in the Ordinary Department and £38,000,000 or slightly more in the Investment Department. The figure that I have in mind is a total of about £120,000,000 deposited.
These banks are not organised to deal in witticisms. As I have said, there is a long series of Acts governing the operation of these trustee savings banks, and they have contained a number of administrative provisions which are inconvenient and hamper development arid expansion. Clause of this Bill amends the present law as to security to be given by an officer of a bank. This will enable the banks to take fidelity guarantees as a whole, covering all their officers, instead of, as is at present the case, its being necessary to take out a separate fidelity guarantee policy for each separate officer. Clause 16 deals with another of the difficulties that are hampering the work of these banks. The property of these banks is vested in numerous trustees, and Clause 16 will simplify the dealings of the banks in property of all kinds, whether real or personal property. It will vest all property in four custodian trustees, and it will in future not be necessary for every one of an existing body of many trustees to have to sign all documents and be responsible for all transactions.
Clause 17, which deals with accounts presented by the National Debt Commissioners with respect to trustee savings banks, will enable the accounts to be prepared in a more informative way. Clause 18 (Regulations as to form and execution of documents) is a Clause which will sweep away some cry hampering regulations. It will enable the. National Debt Commissioners to prescribe the appropriate persons who may sign the numerous documents and returns which are prepared by the trustee savings banks. This Clause alone is almost a consolidating Clause simplifying as it will the regulations contained in no less than 30 Acts of Parliament carried in the last 100 years.
In order to assist the greater development of these trustee savings banks, we propose in Clause 7 that
Where the Commissioners, in pursuance of Section two of the Trustee Savings Banks Act, 1863, approve the formation of a new trustee savings bank, the Commissioners may, after consultation with the Association and the Inspection Committee, advance to the trustees of that bank out of such part of the separate surplus fund as stands to the credit of closed trustee savings banks such sums as they think fit for the purpose of providing for expenses incurred in connection with the formation and the initial working of the bank, and any such advance may be made on such terms and conditions and for such period as the Commissioners with the consent of the Treasury may determine.
That empowers the Commissioners of the National Debt to lend certain surplus moneys in their hands, which now amount roughly to £200,000, for the purpose of meeting the preliminary expenditure involved in opening a new bank.
Clause 8 (Power to apply surplus special investment capital for land and buildings) will permit the banks to use part of their surplus money of the Special Investment Departments to provide buildings for the purposes of the trustee savings banks. In Clause 6, we also take power to permit the opening of Special Investment Departments in exceptional circumstances. Normally such a department cannot he opened unless there are £200,000 in deposits in the ordinary department. We widen somewhat the scope of the securities in which the deposits in these Departments may be invested. Clause 2 is designed to prevent the closing of any trustee savings bank until it is found quite impossible to discover suitable persons willing to carry it on. Clause 4 (Expenses of National Debt Commissioners and Inspection Committee to be defrayed out of surplus interest) charges on the surplus income of the savings bank fund the administrative expenses which have been incurred by the National Debt Commissioners in connection with these banks, which are at present not recovered by the National Debt Commissioners. It similarly provides for the recovery of the expenses of the inspection committee.
Clause 5 affects only the Post Office Savings Bank and will remove an anomaly, to which attention was called in 1927 by a Committee which sat under the chairmanship of the Comptroller and Auditor-General. It carries out the recommendations of that Committee. Clause 6 contains Amendments as to special investments. If the House desires, I will read the Clause:
6.—(1) Notwithstanding anything in paragraph (d) of Sub-section (2) of Section 1 of the Trustee Savings Bank Act, 1918, the Commissioners may, if they think fit, on the application of the trustees of any trustee savings bank, authorise not more than 20 per cent. of the moneys received by the trustees in respect of special investments to be invested in any Government securities which will mature for payment not later than 20 years after the date of the investment.
(2) It shall not be necessary for the Commissioners, before authorising the trustees of a trustee savings bank in pursuance of Sub-section (1) of Section 6 of the Savings Banks Act, 1904, to make special investments, to be satisfied that the bank has an aggregate cash liability to its depositors, irrespective of the amount of any special investments, of not less than two hundred thousand pounds, if
That is Clause 6. If the hon. Members would like me to explain it still further, I will do so.
It is not within the Title of the Bill. The hon. Member has asked me for an explanation of Clause 7. As I read it, if money is desired to open a new trustee savings bank the initial money has to be found for the purpose by the trustees, and the present position of affairs makes it very difficult to open new trustee savings banks. I am not dealing with municipal savings banks, but with the trustee banks referred to in this Bill. Under this Clause, the National Debt Commissioners may lend money out of surplus funds for the purpose of opening new trustee banks. It comes out of a fund standing to the credit of the banks closed during the last 100 years, and the terms of any loans will be subject to Treasury approval. The fund now amounts to £219,000.
The question was answered last year by the decision taken at the time when the principle or idea which the hon. Member has at the back of his mind and upon which his question is based came up in connection with municipal savings banks and was rejected by a vote of this House. If hon. Members would like any further explanation of the various Clauses, I am at their service and will try to give it. I ought to say in conclusion that there have been many meetings between the National Debt Commissioners and the representatives of the Trustee Savings Banks Association and that this Bill is the outcome of those meetings and is accepted by the Trustee Savings Banks Association.
It gives me considerable pleasure to support this Bill, the reason being that, as a representative of the City of Glasgow, which has one of the largest savings banks in the country, I have the authority of the Glasgow Security Savings Bank for stating that this Bill has their hearty support and that they desire in the interests of the depositors that the Measure should become law. The hon. and gallant Member for North Aberdeen (Mr. Benn), in a facetious way, inquired if the savings banks have the right to report progress. They have such authority, because the Glasgow Security Savings Bank at their last meeting reported progress to the extent of an increase of £1,000,000 in their deposits. The total deposits of that bank at the present time are £23,000,000, which shows the saving and thrifty nature of the working-classes of the City of Glasgow. Incidentally, it is a very able support to the national funds in which the funds of that bank are invested. The depositors there, though getting only a small rate of interest—½ per cent.—on their deposits are satisfied with that interest because of the ample and certain security they have in knowing that their money is safe in the hands of the trustees of such a responsible bank.
While the interest may be only 2½ per cent., by thrift the depositor can increase the amount of his deposit up to £100 or £400 and the interest, instead of being lower as the principal increases, is increased, and he can get up to 4 per cent. on his deposits. That is done with the object of encouraging saving throughout the community. It not only encourages saving among the poorest of the community, but among the youngest children who come in themselves with their pass book and account. It also encourages the Penny Savings Bank, who keep their accounts with the Glasgow Security Savings Bank. That all leads to saving, and it is a very creditable thing, in these dire times when unemployment is so rife in our great industrial centres, that, in an industrial centre which has suffered so much as Glasgow, the people should have increased their savings and deposits by £1,000,000.
I do not think the hon. Member for Dundee (Mr. Johnston) has quite grasped the position. It is not a loan at all; it is a deposit. On a deposit, a person is bound to get a return. On small sums it is 2½ per cent., but in order to induce increased deposits, the rate of interest is correspondingly increased. Otherwise commercial people used to handling money would naturally withdraw their money and place it elsewhere in order to get a higher rate of interest. Money is left in the hands of the savings bank because of the certainty that depositors will obtain security for their principal. The trustees of these banks are men of reputation who carry out their duties without any remuneration solely to protect and look after in every possible way the interests of the poorer people who have not the knowledge required to handle large sums. When a bank like City of Glasgow Savings Bank can gather together from the savings of the people, £23,000,000 sterling, I think they ought to have the encouragement and support of everyone, whether they represent the Labour, Unionist or Liberal party in this House.
I would not have risen to intervene in this Debate had it not been for the remarks of the hon. Member for Maryhill (Mr. Couper) and for some of the remarks made by the hon. Gentleman the Financial Secretary to the Treasury. The whole question of the relationship of trustees savings banks to the national Treasury is profoundly unsatisfactory. The poor people of this country deposit money or lend money to these savings banks, the Post Office Savings Bank and trustee savings banks, at 2½ per cent. interest. When these poor people desire, through their local authorities, to build houses they have to borrow their own money from the national Treasury, not at 2½ per cent. at which they lend their money, but at 5 per cent. What is happening is that the national Treasury and the rich taxpayers in the country are using the low rate of interest of these trustee savings banks to make profits for themselves and their class. Whenever this House gets an opportunity of raising the whole question of the relationship of trustee savings banks to the national Treasury, I trust that it will take advantage of it.
The hon. Gentleman who introduced this Bill was very careful not to explain why it was that these facilities are to apply to private trustee savings banks, if I may so call them, and not to municipal savings banks. He refrained altogether from giving any reason why local authorities and public institutions should not be empowered to set up trustee savings banks in order to encourage thrift, to allow the poor people a higher percentage than they get now, to lower the rate of interest for municipal borrowing, and generally to secure the results which have been secured in the City of Birmingham under the very able direction of the Minister of Health.
The Financial Secretary to the Treasury and the representatives of the Government have never in this House given any adequate reason, as far as I know, why other cities should be precluded from having the advantages which Birmingham secured as a result of an Act of Parliament. I do not intend to divide the House against this Bill or to do anything to obstruct it. I merely want to say that as far as I and many Members on this side of the House are concerned, we are profoundly dissatisfied at the way the Treasury deals with the savings of the poor of this country, and we trust that at an early date we shall be in a position properly to amend these laws.
Sir HILTON YOUNG:
By an accident in the procedure of the House, we have really had time to-day to discuss a matter of first-rate importance, which is not a frequent occurrence. Otherwise we might not have had an opportunity of doing it. The matter has already been raised in the observations of my hon. Friend the Member for Maryhill (Mr. Couper), who spoke of the wonderful efforts of the Glasgow Savings Bank, and by the hon. Gentleman the Member for Dundee (Mr. Johnston). There can be no doubt to the attentive mind that we are rapidly approaching a crisis in the history of the savings' bank movement, a crisis in which these invaluable institutions will need the most careful guidance for their preservation in the service of the country. I do not entirely put aside the fascinating question of municipal savings banks raised by the hon. Gentleman the Member for Dundee. I suppose that the short answer in many minds to his appeal on behalf of those institutions is that municipalities can generally find plenty to do without running a bank. To return to the actual Measure before us, it raises a question, which surely needs attention, in the guardianship of savings banks. The peculiar danger in the position of the savings bank is that, owing to the cost of banking under modern conditions, it must inevitably be run at a loss if it is to fulfil the guarantee to the depositors, that is, as long as the earlier procedure of investing only in Government securities or securities of a similar gilt-edged nature continues. In the desire to avoid the constantly accruing loss there is an inducement to indulge in more enterprising investments, and that we see in
this Bill, if we look at Clause 3. It says:
Section five of the Savings Banks Investment Act, 1863 (which provides that one-half of the securities held by the Commissioners for savings banks shall consist of securities the interest of which is chargeable on the Consolidated Fund), shall cease to have effect.
We have a symptom of the modern tendency to allow more rope to the savings banks to give a higher rate of interest in the discharge of their very difficult and heavy obligations. In the great commercial banks that modern tendency is safeguarded by the growth of the science of investment which enables a more enterprising policy of investment to be carried on with complete safety. But the specific difficulty in the case of these most valuable and small institutions is that they cannot command the same area of investment or the services of the experts in the science and art of investment to the same extent. I would like to ask the Financial Secretary to the Treasury, who has given such careful attention to this Measure, whether it is in the contemplation of His Majesty's Treasury to make some effort to ensure that as these increased powers of investment are given to the managers of the savings banks, their use shall be safeguarded by putting at the disposal of these managers the best obtainable advice in the financial world, and that the adoption of that best advice by managers of the smaller institutions shall be enforced by the regulations from His Majesty's Treasury. Of course, sigh institutions as those to which my hon. Friend the Member for Maryhill referred need no attention in regard to this matter, but the specific character of the institutions with which this Bill deals is that they are the survivors of an earlier date.
Perhaps I may assist my right hon. Friend. I have made a careful note of the valuable suggestion which he has made. It is a Committee point, and he can rest assured that after the Debate, is over, I will see into the matter, and deal with the suggestion and give it full consideration.
I was surprised to see the Labour party accept this Bill with so little criticism, because we all know that they have very strong views on savings banks. In looking at the earlier Clauses—Clauses 2, 3 and 4 —I am not surprised that in the Bill power is given to close some of these banks after due consideration. Clause 2, Sub-section (2) says:
The consent of the Commissioners under this Section shall not be given unless and until they have satisfied themselves, after consultation with the Inspection Committee and the Association, that there are no proper persons able and willing to act as trustees and managers of the bank.
I do not think that under that Clause the Commissioners are really acting as widely as they might in regard to proper managers for such a bank. If they have not already found them in the service themselves, I suggest that they should ask the bankers and other people specially skilled in banking to find people whom they can recommend. It would be a great calamity if at any time these banks were closed because the people already chosen were not sufficiently able to manage them. If we go on to Clause 3, I think the suggestion that one-half of the funds shall be invested in Government funds is almost unwise. I would suggest that it would be much better to say that all the funds should be invested in Government funds, because in that case, if, as we hope, the savings bank habit increases, we might almost have the whole of the savings bank funds in Government securities, and by that way we might be able to reduce the rates that the Government have to pay in regard to loans. I think that there are many points to criticise in this Bill.