Chapter VII (2)

Mr. Sikes, after thus recapitulating in his able pamphlet the imperfections in the organization and management of Savings Banks, advocated the following improvements, viz.:--That the State should give a perfect guarantee; that there should be a central bank in London to control the whole system, in the same way that the central Money Order Office controlled all money-order operations at the Post Office; that there should be a vigilant and general audit of all accounts; that there should be a great extension of the hours during which Savings Banks were open; a great increase in the number of such banks--the services of private and joint-stock banks to be called into requisition in cases where such arrangement was likely to prove economical and advantageous; that there should be an increase in the facilities for the deposit and withdrawal of money; that one-fourth of the capital of Savings Banks should be employed in first-class landed securities and railway mortgage bonds, yielding four per cent. Mr. Sikes further proposed that the rate of interest on sums up to 100_l._ should be three per cent., and two and a half per cent. on all sums beyond. Mr. Sikes felt the difficulty of providing that essential Government guarantee for every deposit, without which any reform in Savings Banks was scarcely worth the name; but he strongly insisted on the point that if a Savings Bank department was established in London, which should, on its part, insist upon weekly returns, a good and uniform system of book-keeping, and a liability to unapprised visits by inspectors from the London office, the entire staff of Savings Bank officials in the country might, to a great extent, be kept honest. Bearing in mind, however, that errors and losses would occur to the best regulated department, he further proposed that the treasury might be made safe by the establishment of a "General Guarantee Fund,"[148] to which contributions should be made from the "Separate Surplus Fund." These suggestions, if carried out, Mr. Sikes believed would help to form the basis of a system that would restore Savings Banks to the estimation in which they were held during the first twenty years of their existence; and there can be no doubt of it. The difficulty was, however, in getting such recommendations adopted--either because the then Chancellor of the Exchequer (Sir G. C. Lewis) did not bring his extraordinary powers to bear upon the subject, or else there was still something lacking to give a more practical turn to the questions at issue. As subsequent events have proved, it is more likely to have been for the latter reason that the matter was not persevered in.

Everything that an ingenious marshalling of figures, an array of argument, and even eloquence could do, Mr. Sikes did; but all appears to have been equally unavailing. The Chancellor of the Exchequer made attempts, as we have before seen, in the House of Commons, to improve the organization of Savings Banks, but without success.

When the Committee on Savings Banks was appointed, in 1858, Mr. Sikes was called as a witness. He again described the plans which he had suggested in 1856, and which had undergone little or no modification since that time, and urged the adoption of some of them,--with what success is already known. And here it will be best to dispose of the Committee of 1858, and to show how little it effected, and how little it was calculated to effect. So far as the providing of additional and much required facilities was concerned, it is necessary to describe with minuteness the Committee's deliberations. The Report itself, to which the Committee put their names, has been given. It provided, as our readers will remember, for a new Government management of Savings Banks, advised that increased power should be given to the Commission, and provided actual security for the deposits. This Report was not acted upon; but even had it been, the reform would only have been partial. So far as relates to the increase of facilities, it left the question almost untouched. Indeed, with the conflicting evidence given, the Committee acted wisely in confining their labours to the rectification of existing abuses, and in making as perfect as possible, without increasing, the existing accommodation. The witnesses examined before the Committee were by far the most prominent authorities on Savings Bank management in the kingdom, and yet on no single point could they all agree. This is, we think, no unimportant phase of the subject; on the contrary, it is highly important, as showing how very little could be effected for the body of Savings Banks in the absence of any thing like unanimity amongst those who best understood the subject. On the question of Government security and Government supervision, we have already spoken. With regard to the necessity for a uniform system of management, and of course a uniform system of accounts, there was certainly an appearance of general agreement; but little attempt to bring it about. _Mr. Hope Nield_ "thought it would be very advisable to assimilate the practice of the different banks more than at present exists (1,895)." _Mr. Maitland_ and _Mr. Wortley_ would like uniformity, and would give the Commissioners power to enforce it; "nothing less would remedy the loose system of so many of the banks." "The system of keeping the books," said _Mr. Craig_, of Cork, "in some of the country banks, is most abominable. I speak of the vast majority of banks; some are exceedingly well managed; but I say, that from the way they make out their accounts for the National Debt Office, not one in ten is honestly or fairly made out (3,759)." Had the Committee deliberated upon a uniform system, which they did not, for all the banks, and had they decided--(a very difficult matter, seeing that each of the seven largest banks in the kingdom had different systems of book-keeping)--to recommend some one system, the difficulty would only be half over. Each Savings Bank was independent, and completely irresponsible to any one in such matters as these; but supposing, which was very unlikely, that the trustees could be got to look upon the matter with favour, all would not yet be smooth sailing. The difficulty of introducing real improvements into Saving Bank management was more than once spoken of and illustrated. Thus, _Mr. Boodle_ told how he encountered great opposition from his own subordinates, in introducing something new into the excellent establishment at St. Martin's Lane. For six months after he started a new system of book-keeping, a conspiracy lasted among the clerks to prevent any change; wilful mistakes were constantly made, to show that the work under any new system could not be done; and this continued till a great number of clerks were dismissed, and new officials appointed in their place. Much to the same point was the evidence of _Mr. Craig_, who described in a vigorous and amusing way, which must have done much to relieve the tedium and heaviness of the investigation, the introduction of his system into the Cork bank, and the necessity for it:--

"I saw at once," said he, "that there was nothing for it
but sweeping every book out of the bank, and I did so.
They (the trustees) gave me authority to do what I liked,
and I did. It was all done by me without any interference;
and I managed it in such a way that if the clerks stuck in
the middle of it they would have lost their salaries; they
had either to go on with it, or stick fast. I went there
myself, with a Mr. Ballard on the opposite side of me, and
a manager with each, determined to start them fairly. I
remained there for a month. I saw that the clerks were
very anxious that it should miscarry. I immediately saw
what they were about; I observed that all the books were
coming to my side, and few to the other; they thought to
smother me with books. The moment I saw this, I said to
little Mr. Abel (who is now dead), 'Do not chatter; work
away; they are playing a trick upon us.' We dashed through
the work; and, one of the book-keepers coming down after
he thought he had well supplied us with a wheelbarrowful
of books, expecting to find them all in arrear, I said to
him: 'Why the deuce don't you send us books!' When they
found they were all done, that stopped all further
opposition; and thus I taught them to do it, just as you
would teach a puppy to swim--if you tumble him into the
water, never fear that he will get out."

Granting that Savings Bank clerks may be subdued after Mr. Craig's or some other fashion, it would still appear that the indispensable requisites to a complete uniformity of accounts must be something like uniformity in the distinctive principles and practices of Savings Banks. We refer to such matters as the limitation in the amount of deposits, the rate of interest, notices of withdrawal, &c. The question of the limit of deposits was discussed before the Committee. _Mr. Meikle_ and _Mr. Sturrock_ objected to any alteration in the limit of deposits which for many years had stood at 30_l._ for any one year, and 150_l._ in all. _Mr. Boodle_ thought the annual limit should be increased to 50_l._, and the total deposits to 250_l._ _Mr. Finney_ wished it to be at 50_l._ and 200_l._ respectively. _Mr. Saintsbury_ and _Mr. Maitland_ agreed with Mr. Boodle, provided the rate of interest were reduced, and there were ready access to the public funds. Then as to the rate of interest itself, _Mr. Maitland_ said that the highest rate of interest that can safely be offered should be given for small savings, "though," he said, "_lowering_ the rate would bring Savings Banks back more to what they were intended to be." He also thought the rate should vary according to the market rate of interest. _Mr. Boodle_ objected to a fluctuating rate. _Mr. Meikle_ was of opinion that a fixed rate of three per cent. should be given. _Mr. Craig_ said a rate of 2_l._ 17_s._ or 2_l._ 18_s._ was satisfactory to depositors. _Mr. Wortley_ thought three per cent. a fair rate of interest. _Mr. C. W. Sikes_ suggested that the interest to depositors should be three per cent. on sums up to 100_l._, and two per cent. over that sum. He thought a low rate of interest would not deter the working man from Savings Banks. If we turn from this theorizing to what was the practice of different Savings Banks in this and other particulars, we shall find diversities of operation which not only account for so much difference of opinion, but which rendered unanimity of action almost impossible. It was then, and is still, a very popular notion, that the Savings Banks proper pay a uniform rate of interest of three per cent. per annum; nothing can be more mistaken. When the enactment was passed establishing the still existing rate, it was generally considered in Parliament that five shillings per cent. was ample enough to pay all expenses of management; but the fact is, double that amount has not sufficed in some cases. In 1857 there were, according to a Parliamentary Return, no less than thirty-two different rates of interest paid by Savings Banks managers, and had the Return embraced a much more recent period the same diversity would have been shown. Thus, in that year--

banks £ s. d.
31 paid interest to depositors at the maxm rate of 3 0 10 per cent.
107 " at the rate of 3 0 0 "
215 " " 2 18 4 "
11 " " 2 13 6 "
24 " " 2 17 1 "
12 " " 2 16 8 "
78 " " 2 15 6-1/2 "
35 " " 2 15 0 "
2 " " 2 10 0 "

added to which smaller numbers paid other rates, making thirty-two separate rates.[149] In accordance with the above table the average cost of management per cent. was, in 1857,--in Scotland 7_s._ 8_d._, in Ireland 9_s._, and in England 6_s._ 7_d._; in Middlesex, however, it was as much as 9_s._ 2_d._ Confining ourselves to individual banks, we find that the Manchester Savings Bank cost at the same period, in expenses, an average sum of 1_s._ 3-3/4_d._ per account, the Bloomfield bank 1_s._ 9_d._, the St. Martin's Place 2_s._ 0-1/2_d._, the Liverpool bank 2_s._ 5-1/4_d._, and the Cork bank 3_s._ 2_d._ per account.

The greatest expense was shown to be incurred in those banks which dealt largely in small accounts; hence some of the actuaries openly sought to discourage the taking of small sums. _Mr. Meikle_ thought it was the interest of the banks rather to discourage small depositors and encourage large ones. _Mr. Finney_ showed that they _were_ discouraged at the Marylebone bank, where a less interest was given to small amounts. _Mr. Craig_, however, went to great lengths on this point, and grounded his opinions on such facts as the following (3,752):--"The average cost of a transaction that enters a bank is more than a shilling; there is not a transaction entered in any Savings Bank that does not cost a shilling and a fraction. Now, if you allow a man to deposit a shilling, which costs the bank a shilling, it comes to this, that the manager might as well say to him, 'There is a shilling for you; pray do not come here again.' The Committee are about seeing whether Government can or not safely undertake to make itself responsible for the transactions of 600 Savings Banks scattered all over the country. If so, they must only take such sums and in such ways as will be safe for the public. It will not do to allow people's sympathies to run away with them by the mere clap-trap of saying, 'We will take a shilling.' I say that to take these small sums, instead of being a benefit to the people, is merely encouraging them to waste their time." We need not here go out of our way to expose the fallacy of such an argument, further than to point out how entirely Mr. Craig overlooked the fact that he had previously advocated a system of uniformity of accounts, which would have made this and other reforms practicable. What was required of the Committee before which he gave evidence, was, the suggestion of such a change in the nature of the institution as that this shilling's worth of thrift should not be sent about its business in the very summary manner so graphically described by this gentleman. That the Savings Banks should give such rude discouragements to the budding of provident habits was nothing short of a defect; that it was perfectly possible as well as expedient to offer encouragements to the poorest classes has since been abundantly proved, as we shall soon have to show.

We have referred to the varying notices for the withdrawal of money required by different banks; some required a week, some a month, while in the great majority of banks a fortnight was required. _Mr. Meikle_ expressed himself strongly opposed to the English system of giving notice: he said, the Scotch banks required no notice at all, though they held a discretionary power in certain instances. _Mr. Saintsbury_ urged "a reasonable period." _Mr. Wortley_ thought the notice was a protection against Savings Banks being used for other purposes than for accumulating savings. _Mr. Sikes_ strongly recommended that deposits should not be repayable "except after sufficient notice," the extent of which neither he nor Mr. Saintsbury ventured to state.

Once more the attention of the Committee was called to the necessity of opening out new banks in localities not well supplied with them. No one, however, was prepared with any scheme for giving extra facilities of this kind, and those hints which were thrown out by members of the Committee themselves were either not taken up, or if noticed, only in such a way as to attest the difficulty, rather than the ease or expediency with which any movement towards this end would be attended. _Mr. Wortley_ said small banks were exceedingly unsafe; branch banks under the cognizance of a head office _might_ answer. _Mr. Meikle_ agreed, and said that at first new banks were seldom self-supporting. _Mr. Nield_ said it would be impossible that the agency system of Exeter (the only scheme recommended) could be introduced into Lancashire; the branch banks under the Manchester Savings Bank could not support themselves except they had gratuitous service.

Finally, we think the difference of opinion and the diversities of operation in the larger and best managed banks[150] of the kingdom could not be better shown than by the following Return.[151] If anything could demonstrate the want of some uniform and inexpensive system of Savings Banks, we think a careful examination of the inequalities of every sort shown there might have that effect.

Thus we have, we hope, succeeded in showing that at the stage to which we have arrived (and, indeed, much later,) the existing Savings Bank system, as a system, laboured under three or four essential and almost incurable and irremoveable defects: 1, They professed and were expected to give a Government guarantee for all the money deposited with them, and yet they did not. The real distinction in the matter, to which we need only allude, was and is well enough understood by educated people; but it was not, we may almost say cannot, be mastered by the poor who were depositors. A depositor paying in his money to the Savings Bank had no means of knowing what was done with it. 2, The country was most inadequately and most disproportionately supplied with banks, and the facilities given by existing banks were also most inadequate and disproportionate. Farther, and most important, the number could not be increased on the same footing, and no attempt was made to increase the number. Such increase presupposed a certain amount of local philanthropy and even assuming that this sort of philanthropy is an unmixed good, an adequate provision of Savings Banks presupposes an equal amount of philanthropic zeal in every quarter of the country. And 3, Savings Banks were a serious loss to the country. "Taking the average price," said Sir A. Spearman, "of Government Securities for each year since 1817, the only years in which prices appear to have been such as to produce a rate of interest equal to that paid were 1847 and 1848." Government, in relation to Savings Bank money, had necessarily to invest when money was most plentiful, and therefore when securities were dear, and to sell out when they were cheap. To make up for such loss, it is true, Government took to using Savings Bank money to aid it in its own financial operations, to save borrowing or to postpone borrowing; but though care was always had to keep a sufficient banking reserve in an available shape, this set-off was not allowed, as we have already seen, without many complaints on the part of the managers of Savings Banks.

RETURN relating to the Ten principal Savings Banks of the Country. (1861.)

+-------------------+------------+-----------+------------+------------+
| | | | | |
| | | + | Rate of |
| Name of Bank |Total Amount| Number of | Average | Interest |
| | owing to |Depositors.| Amount of | paid to |
| | Depositors.| | Deposit. | Depositor. |
| | | | | |
+-------------------+------------+-----------+------------+------------+
| | £ | | £ _s._ _d._| £ _s._ _d._|
|St. Martin's Place | 1,780,725 | 61,736 | 6 2 1 | 2 18 1 |
|Manchester | 1,306,329 | 50,231 | 4 5 5 | 3 0 0 |
|Exeter | 1,087,773 | 40,776 | 5 1 9 | 3 0 0 |
|Bishopsgate | 1,032,513 | 53,737 | 4 3 8 | 2 17 6 |
|Glasgow | 927,427 | 42,122 | 3 3 1 | 3 0 0 |
|Liverpool | 872,253 | 29,123 | 9 4 7 | 3 0 0 |
|Bloomsbury | 583,453 | 23,524 | 4 6 9 | 2 18 4 |
|Edinburgh | 566,076 | 30,426 | 3 5 5 | 2 17 9 |
|Birmingham | 563,870 | 31,238 | 4 0 3 | 3 0 0 |
|Marylebone | 395,561 | 23,024 | 4 0 3 |{2 17 4 |
| | | | |{2 15 0 |
+-------------------+------------+-----------+------------+------------+

+-------------------+---------------------------------+
| | ANNUAL EXPENSES. |
| |------------+------------+-------+
| Name of Bank | | | |
| |Per Account.|Per Cent. of| TOTAL.|
| | | Capital. | |
| | | | |
+-------------------+------------+------------+-------+
| | _s._ _d._ | _s._ _d._ | £ |
|St. Martin's Place | 1 5-1/2| 5 11 | 5,380 |
|Manchester | 1 3 | 5 3 | 3,206 |
|Exeter | 1 6 | 4 11 | 2,702 |
|Bishopsgate | 1 6 | 7 4 | 3,830 |
|Glasgow | 1 2 | 5 6 | 2,595 |
|Liverpool | 2 2 | 5 3 | 2,359 |
|Bloomsbury | 1 11 | 7 9 | 2,283 |
|Edinburgh | 1 8 | 9 0 | 2,558 |
|Birmingham | 1 3 | 6 8 | 1,908 |
|Marylebone | 1 9 | 11 1 | 2,212 |
| | | | |
+-------------------+------------+------------+-------+

[134] Compiled from Returns presented by the Statistical
Department of the Board of Trade.

[135] It is very difficult to obtain correct and complete
statistics on this subject. It is to be regretted that a valuable
suggestion which Dr. Farr made before the last Census was not
acted upon. He recommended that facts connected with the rate of
wages should be collected during the Census. Had it been attended
to, much might have been stated here with precision which will
only admit of approximation.

[136] Subsequently Mr. Bright went the length of saying, that
Savings Banks were "nothing less than traps for the people who
subscribed to them. There was a universal belief that Government
was responsible."

[137] Since writing the above, it is only fair to say, that we
find this writer has taken no pains at all over the matter, but
has simply benefited by the industry of another, without in any
way acknowledging his obligations. Mr. Edward Taylor of Rochdale,
in a pamphlet now before us, published several years before Mr.
Scratchley's book, entitled "Savings Bank: ought Government to
make good past losses in Savings Banks?" supplies the whole of the
quotations given, and even the setting for them.

[138] The preamble of the first Act (Act 57 George III. c. 130,
1817) runs thus: "Whereas certain Provident Institutions or Banks
for Savings have been established in England, for the safe custody
and increase of small savings belonging to the industrious
classes; and it is expedient _to give protection to such
institutions, and the funds established thereby_," &c. &c. The
preamble of the Act of 1828 runs exactly to the same effect.

[139] Much to the same purpose a well-known writer in the _London
Review_ says: "As long as Savings Banks are Savings Banks, based,
on the one hand, on the confidence of the poor, and, on the other,
on the benevolence of the local clergy and gentry, acting as
trustees and managers without fee and reward, and therefore
without such bounden obligations as men can be called to account
upon, so long will frauds periodically arise, opening up great
gulfs of deficits, strewing thorns upon the pillows of the poor,
and driving sharp pangs of despair into their hearts." Dr.
Hancock, in one of his admirable pamphlets, alluding to the system
of checks relied on by the managers of many banks, says: "It is
impossible, in the nature of things, to devise a perfect system of
checks. So long as the work has to be done by human agency there
must always be some risk. To secure the performance of actions by
human agents, three forces commonly operate: 1, A morel sense of
duty; 2, A fear of large pecuniary loss from liability, in case of
the non-performance of duty; and 3, A fear of judicial punishment,
if non-performance be made a penal offence. The limit placed on
the liability of the managers effectually took away or reduced to
a minimum the fear of loss and of punishment, and the divided
responsibility there has always been between Government and the
trustees, by weakening the sense of duty, did the rest."

[140] The case of the Edinburgh Savings Bank, another excellently
managed institution, is still more to the point, where unusual
facilities produced an unusual amount of depositors and deposits.

[141] According to an excellent authority, Mr. Smiles, to whose
admirable article in the _Quarterly Review_ (Oct. 1859) we are
indebted for some of our particulars of the history of this
movement, it would appear that the first proposal for Regimental
Savings Banks was made in 1816 by Paymaster Fairfowl, but allowed
to drop; it was taken up again in 1827, when Colonel Oglander,
commanding a regiment of Cameronians, brought the project under
the notice of the Duke of Wellington. The Duke could not see any
benefit to be derived from the proposal, and wrote the following
characteristic memorandum upon the papers: "There is nothing that
I know of to prevent a soldier, equally with others of his
Majesty's subjects, from investing his money in Savings Banks. If
there be any impediment, it should be taken away; but I doubt the
expediency of going further." He added something further, however,
which, also eminently characteristic, opened up a new feature in
the case, and closed the door to such proposals till after the
Duke had left the service. "Has a soldier," continued he, "more
pay than he requires? If he has, it should be lowered, not to
those now in the service, but to those enlisted hereafter."
Colonel Oglander had no idea that the soldier should have less
than his "thirteen pence a day, and a penny beer money," and
therefore suffered his proposals to be simply negatived.

[142] The deposits in Seamen's Savings Banks--
In 1861 were £17,112, and withdrawals £12,681
1862 " 17,089 " " 15,343
1863 " 17,098 " " 14,090

[143] To the Honorary Secretary of this bank, Mr. W. W. Morrell,
we are greatly indebted for much information on the Penny Bank
movement; and, as an ardent Savings Bank reformer, for much
information on our subject generally.

[144] Any of our readers who may desire fuller information on the
subject of Penny Banks, or particulars as to their
management--information which we should have been glad to have
furnished, had our space permitted--could not do better than get
an admirable little pamphlet on "Penny Banks," by the Rev. J. E.
Clarke, of Derby. (Bell and Daldy, 1859.) Mr. Smiles, in his
_Workmen's Earnings, Strikes, and Savings_, also devotes a short
chapter to describing, in his usually effective way, their results
on the provident poor.

[145] The first Preliminary Savings Bank in Scotland was started
at Annan, in Dumfriesshire, and Mr. Sikes was consulted about it.
A correspondent writing to Mr. Sikes a few years ago, says: "It
may gratify you to know that I some time since met with the Rev.
James Mackenzie of Dunfermline, formerly of Annan, who told me
that he had ten Penny Banks at work at Dunfermline! I believe the
Annan one was father to them all, and you to the Annan one, so
that your family is spreading rapidly, and becoming a great
multitude throughout the entire kingdom!"

[146] Groombridge & Co. London.

[147] Reference is due to another gentleman, Mr. Maitland, actuary
and subsequently treasurer of the Edinburgh Savings Bank, who now
seems to have urged, even before Mr. Sikes did so, English Savings
Bank managers to give to depositors more of the facilities granted
by Savings Banks in Scotland. Speaking of 1843-5, Mr. Maitland
says, "I met with no sympathy when I urged the duty of cultivating
the small deposits of the _really_ labouring classes. I was
bitterly opposed in my advocacy of giving more hours weekly to the
public, and was deemed almost _mad_ when I insisted that we should
all pay on demand, _at all events_ sums under 10_l._"--_Letter
from Mr. Maitland to Mr. Sikes_, February, 1857.

[148] This proposition was revised in 1862 by Mr. Scratchley in
the last edition of his _Practical Treatise_, but without in any
way mentioning the name of Mr. Sikes as the original suggestor of
the plan.

[149] The Marylebone bank up to 1860 only allowed two per cent. on
sums below 30_l._, but this arrangement has since been modified.

[150] So well managed indeed, that we hope it may be long before
they are superseded, however desirable it may be that bulk of the
existing Savings Banks should become merged in a better system.

[151] See next page.