Chapter VIII (2)

The Chancellor of the Exchequer moved the second and principal reading of the bill on the 18th of March, 1861. _Mr. Estcourt_, whose intimate acquaintance with such subjects made his remarks carry considerable weight, made a long speech. He first expressed his doubts whether the persons employed by the Post Office would ever be able to perform the additional and important duties which would be assigned to them. Government were undertaking a great risk. "No doubt the plan would become popular, for several reasons; the Post Office Banks would absorb not only all future deposits, but also a great part, if not all, of those which had been made in the existing banks themselves."[170] It would be for the House to decide whether this result would be good or bad, or what could be done that the two kinds of banks need not come into collision. Mr. Estcourt threw out several hints as to how this might be done. They might, for example, limit the sum to be received at post offices, so that the new might not come into competition with the old class; or they might dovetail the new system into the old, by making the Post Office Banks auxiliary and subsidiary to the existing banks. Much had been done in the way of trying to amend the constitution of the old class of banks, without effect; and he thought that, looking to the probable result of the new arrangement, it would be far better to look the evil fairly in the face, and supersede at once the old by the new kind of banks, or at least say which of the two ought to be retained. This speaker further apprehended that the Post Office Banks would not take root in the villages, where they were most wanted, and would be almost exclusively confined to the towns where they were least needed, and where they would overthrow the existing Savings Banks by drawing away their deposits. Though Mr. Estcourt seemed to feel strongly on the different points touched upon by him, he concluded by stating that he should not oppose the second reading of the bill. _Mr. W. E. Forster_ said, in his opinion the scheme would provide good Savings Banks where none now existed, and, a very desirable matter, _safe_ banks where they did exist. He thought it was not possible that the one class of banks could dovetail into the other; and if it was, it was not desirable. Where Government took the responsibility, it ought to have the control. _Mr. Thompson Hankey_ hoped that the proposed scheme, if found practicable, would entirely supersede the existing banks, and the sooner the better. _Mr. Baines_ followed in the same strain; he would not regret if the new banks superseded the old, inasmuch as that result could only be brought about by the proved superiority of the new system. The member for Leeds said, "he had been assured by Sir Rowland Hill, and all the gentlemen whose departments at the Post Office would be charged with the carrying out of the plan, that it would work exceedingly well;" and he could state that, though it differed materially from his plan, Mr. Sikes of Huddersfield was a "hearty supporter" of the scheme which the Post Office had adopted.[171]

_Mr. Gladstone_ could not say whether the old would suffer from the new banks; if they did, it would only be because the latter were the safest and the best. Whether or no, the object of the bill was not competition with the old banks. He wanted to supply facilities which at present did not exist, and the first duty of the Postmaster-General would be to look to the establishment of Savings Banks in those places where no banks existed, or where the accommodation was very narrow. As to their application to the Money Order Offices of the country, it would be gradual and slow, and so as not in any way to endanger the machinery of the Post Office; the Postmaster-General would select at first a moderate number to be opened, and extend them in proportion as he found occasion, the test and index of the occasion being the demand for such banks by the public. Mr. Gladstone then referred to the rate of interest which would be allowed, and said that in this respect the Post Office Banks would have somewhat less attraction; "the present banks were established on the principle of giving a bonus; the new system must be strictly self-supporting." He would not feed them at the expense of the Post Office, or any other revenue, and in that case the rate of interest must be such as can be safely paid. With regard to the forebodings of Mr. Estcourt relating to the risks which Government would run, Mr. Gladstone stated that the system of Savings Banks had been established for forty-five years, during which time they had had every description of speculation, the severity of a commercial crisis, the pressure of a dreadful famine, and almost every trial that could befal a new system; and although the Government was always holding a great amount of money at call, there had been but a small pecuniary loss, in comparison with which loss the establishment and progress of such a system was immeasurably of greater value. After stating that he thought "the Post Office machinery admirably suited for the purposes of the new measure," the bill passed the second reading.

The bill was introduced into Committee on the 8th of April, 1861,[172] where trifling alterations were made in several of its clauses. _Mr. Slaney_, who had paid great attention to subjects of this nature, hoped that the deposits would not be restrained, as under the old system, he thought no limit should be placed upon the providence of the labouring classes. _Mr. Vance_, an Irish member, alluded, as he did on subsequent occasions, to what he considered the centralizing tendencies of the scheme. He thought Dublin ought to be the centre of operations for Ireland as under the Money Order system. The principal opponent of the measure on this occasion was _Mr. Ayrton_, the member for the Tower Hamlets, who in some quarters has been credited with the advocacy of the scheme before this period. In a long speech, Mr. Ayrton took exception to most of the details of the measure as they were now proposed, and to the principles of the measure as a whole. Mr. Ayrton held that data enough had not been presented to enable members to form an opinion as to whether the scheme would pay or not. "It was all very well to talk of subjects being self-sustaining, and even economical, but under such statements our expenses had gone on continually increasing." He adduced at length the case of the County Courts bill, and the Government Superannuation Allowances bill, which he said were introduced and passed under some such pretences. It would be the same with the Savings Banks; the Government would never be able to keep to the two and a half per cent., but would have to be guided by the rate allowed to other bankers. "The scheme of a national bank," continued the honourable member, "_however plausible_ it might look at the outset, would lead to the most serious consequences." The Committee which sat on the subject, and of which he, the speaker, was a member, came to the decided and unanimous conclusion that it was desirable to separate the operation of banking for the people from the National Treasury. It was thought that these national banks would act as a powerful inducement to the working men to entrust their money to the Government rather than to their own Benefit Societies, which were regarded as too much associated with Trade Societies. In his opinion Benefit Societies and Trade Societies had been the means of regenerating the people, and were eminently conservative; and it was not expedient to discourage these societies by means of the proposed banks. Nor was this all. It was desirable that the country gentlemen should take an interest in the welfare of the working people surrounding them; and to supersede their exertions by mere stipendiaries of the State would weaken that social system on which the liberties of the people were mainly founded. _Mr. Alderman Sidney_, "as one conversant with figures," ventured to say, that if the scheme were carried out, our national establishment must be greatly augmented; and if it proved successful, "the establishment that would be required would be of the same gigantic proportions as the Bank of England!" It was absurd to think that depositors would be satisfied with less interest than the national creditor. The scheme, he believed, was founded upon error; it would interfere with the self-working of existing establishments, and would entail a large expense upon the country at large. _The Chancellor of the Exchequer_ replied, especially aiming his powerful shafts at Mr. Ayrton. He said he would not follow that gentleman through his speech, as that was a task beyond his powers. Mr. Ayrton often gave the House notable examples of his discursive powers; but he (Mr. Gladstone) never knew an occasion on which the honourable gentleman had more signally distinguished himself than on the present occasion. "When he rose into the air on eagle wing, he passed over the limits of time and space, and was not subject to any of the conditions that bound the efforts of ordinary mortals." However, to confine himself to just that which bore on the subject before the Committee, he was strongly opposed to the principle of making the working classes pensioners on the Exchequer; he would do his best to provide against such a result. He did not know, and could not tell, what amount of business the banks would attract; he expected it would be gradual, and the development of the agency would be gradual. The extension of the system would be in precise proportion to the demand; and the expense would be throughout proportionate to the extension. The opinion of the Post Office authorities was, generally, that the work would be done much cheaper than in the ordinary banks; _for sixpence or sevenpence against one shilling for each transaction_. Some even thought that the work might be done cheaper than the work in the Money Order Office. Once started, any tendency to excess would, of course, be corrected; but it was impossible to argue on any assumed number of deposits. He had a sanguine hope that every statement he had made would be verified, and that the measure would entail no charge upon the public.

Again and again the question was asked and argued, whether it was meant that the new banks should be subversive or auxiliary to the old. To this question, which was asked on this occasion, Mr. Gladstone gave it as his opinion that the one class of depositors who preferred perfect security would patronize the new banks; whilst another class who wished to act under the immediate view of their local superiors, would prefer the existing banks. In reply to Mr. Briscoe, he said he would not limit the establishment of the new banks to those places where no other sort of banks existed,--though, of course, the Post Office would commence operations there first. Such an arrangement would exclude the great centres of trade and population,--our large towns--which were not sufficiently served with banks. An important discussion took place on the 10th clause of the Act relating to the investment of the fund deposited in the Post Office Banks. _Sir H. Willoughby_, as he so often did before, condemned the system of operating on the Stock-market with this money. Mr. Gladstone replied, that the loss which was so often dwelt upon in connexion with the old banks was nothing like loss; "the money so deposited with Government had enabled successive administrations to effect an economy in the management of the public money transcending ten times over the charge the State had been put to." He saw no reason whatever to alter the arrangements in this particular. The amendment which Sir H. Willoughby proposed was then negatived without a division. Three days afterwards the bill passed the third reading and was sent up to the Lords.

No time was lost in bringing the bill forward in the House of Lords. It was read a first time on the 15th of April, and a second time on that day week. The conduct of the bill in the Lords was naturally committed to the Postmaster-General, Lord Stanley of Alderley. On this occasion his lordship went over[173] the ground covered by the bill--the insufficiency in number, and the inadequacy of accommodation of existing banks, and the insecurity as regards repayment until the money had actually reached the hands of the National Debt Commissioners. Lord Stanley added that Savings Banks had by no means increased in number in proportion to the population, or to the increase of the money circulating among the working classes. He adduced several facts and a quantity of statistics on this head similar to those which we have already given to the reader. From these facts it was obvious, that when a working man formed a good intention to invest his small savings, there was a great danger that he would spend his money, if there were no means of his depositing it, or if he could not do it comparatively easily. He then spoke of the losses caused by the failures of Savings Banks. Referring to Mr. Whitbread's proposals in 1807, Lord Stanley stated that this measure was very like the scheme then proposed, which actually passed through the House of Commons in that year; that Mr. Sikes had originally proposed something similar in an admirable letter to Mr. Gladstone; and that the Government, with the assistance of two able gentlemen in the Post Office department, had matured the present plan, which he proceeded very clearly to describe. Lord Stanley, in concluding, said it was somewhat remarkable that nine-tenths of the depositors in Savings Banks were domestic servants and clerks, and that only one-tenth belonged to what are usually known as the "working classes;" yet large numbers of these latter are in receipt of wages far exceeding the incomes of many who possessed Savings Bank accounts.[174] He hoped that working men, when they received their wages, would be induced, before going home, to invest a portion of them at the receiving houses they would pass; if so, the result to them and the country could not but be highly beneficial. The banks must be looked upon as an experiment. If an extension should be demanded, it could only be by reason of the greater security and greater facilities they would offer.

Lord Colchester, an ex-Postmaster-General, admitted the merits of the plan, but doubted the ability of the Post Office officials to carry on the work in every town. Among the Lords, however, the strongest and bitterest opponent of the measure was Lord Monteagle of Brandon (once Chancellor of the Exchequer as Mr. Spring Rice).[175] He made a long speech on this occasion. He thought it was wrong to establish new banks, or to make them rest on the deficiencies of the old ones, inasmuch as it was easy to improve the latter. He went into the history of Savings Banks, and endeavoured to show that their progress up to 1850, (a fact which no one disputed,) had been far from slow. As, however, it was the period principally between 1850 and 1860 when they were most stationary, this was the time with which he should have dealt. He expressed an opinion that the Post Office would not be equal to the work. He strongly urged the inexpediency of giving increased funds to the Chancellor of the Exchequer, with which to speculate. And this measure would tend to destroy the healthy feeling which was growing up between the higher and the lower classes, through the medium of Savings Banks. Not only did the higher classes give their time and energy to the work of Savings Banks, but they gave their money too; and Lord Monteagle was unlucky enough to cite the case of several noble lords who paid a thousand pounds each to atone for their neglect in connexion with a Hertfordshire Savings Bank, and the fraud there, which we have previously described at length. "Such was the spirit," triumphantly exclaimed the noble lord, "which this bill proposed to crush." Not less unfortunate was Lord Monteagle, as the result has proved, in his endeavour to be amusing and prophetic. "The only comfort," said he, "which I have derived from the speech of the noble lord who moved the second reading, was his assurance that the measure was to be of an _experimental_ character." Under such circumstances he would not trouble the House with a division, as he would await without much anxiety the result of the "experiment!" Next year, they would see whether the working of the new system would compare with that "which for nearly half a century had been the glory of England, and had served as a model for all Europe." Lord Redesdale also strongly opposed the bill, but he did not bring to its consideration much of the practical knowledge of the preceding speaker. He "frankly owned" that, from what he understood "would be the manner of keeping the accounts, they would soon get into a state of confusion, out of which extrication would be almost impossible." From the confusion of the above sentence, it is not impossible that the attempt to understand the mode of keeping the accounts had confused the speaker. Curiously, too, the same speaker objected to one of the most convenient clauses of the bill. He called the proposed mode of transfer of deposits from one bank to another, an unnecessary arrangement, saying it would be _much better_ that the parties themselves should take it out of the one, and put it into the other bank. Acquaintance with the habits and wants of the poorer classes would have convinced Lord Redesdale to the contrary. Lord Redesdale said, in concluding, that "he was afraid the scheme would produce much disappointment to the public, and a great loss to the nation." _The Marquis of Clanricarde_ gave a very qualified and hesitating adhesion to the bill. Lord Stanley of Alderley satisfactorily replied to the arguments that had been adduced, and the bill was then referred to a Committee of the whole House.

On the 25th of April the bill passed the Committee. Four days afterwards, Lord Monteagle again opposed it, saying that he saw, "with great alarm and regret," what seemed to him to be meant to produce a break-up of existing Savings Banks, and the substitution of the action of a salaried Government department for what he might call a great public charity, directed by benevolent persons acting gratuitously in their own neighbourhood. He went over the ground he had taken only a few days before, but in a spirit very much more subdued and less confident; and when the bill passed, he entered a long and laboured "protest" against it (_vide_ _Hansard_, vol. clxii. page 1213, where many more of Lord Monteagle's "protests" may be found). The Post Office Savings Bank Act, which we give _in extenso_,[176] received the Royal Assent on the 17th of May, 1861.

[152] From this statement the ten or twelve principal banks in the
country, many of which are open every day, and all in a
flourishing financial condition, are of course excepted.

[153] _Tracts on Poor Laws and Pauper Management_, included in the
_Works of Jeremy Bentham_, edited by Sir John Bowring, vol. viii.
edit. 1843, page 408. The punctuation and the italics of the above
extract are Bentham's own.

[154] A little _Handy Book_ on the subject, published in 1861, by
Mr. H. Riseborough Sharman, one of the Editors of the _Insurance
Gazette_, and which deservedly had a large sale, went over very
ably, though in a way which produced considerable acrimony from
some portion of the public press, some of this ground. Though it
is open to question whether at so early a date it was not
premature, and, whether in the peculiar form of a manual for
intending depositors, it was wise to enter upon a discussion of
these points, it is certain that by means of this pamphlet and
other advocacy, Mr. Sharman laboured very hard and very zealously
to prepare the public mind for the adoption of the scheme of
Postal Banks, and to spread a knowledge of their benefits after
the measure had become law.

[155] _Duties of the Public with respect to Charitable Savings
Banks._ Dublin 1852.

[156] _On the present State of the Savings Bank Question._ Dublin,
1855.

[157] Mr. Sharman's _Handy Book_, p. 10, 2d edit.

[158] Mr. Sharman's _Handy Book_, p. 11, 2d edit.

[159] It is pretty generally known, that no profit whatever
accrues to the Post Office on orders for which threepence only is
charged; yet in spite, as it were, of this fact, we find that Mr.
Scratchley, in his _Practical Treatise_, takes up Mr. Ayrton's
proposals, and "recommends" that "Money Order officials receive
deposits on behalf of the nearest Savings Bank," and "that this
should be done at a cost to the depositor of one penny for any sum
not exceeding 5_l._" "It is also," adds Mr. Scratchley, "very
desirable that the valuable privilege of freedom from postage
recommended by Mr. Whitbread should be granted for the books and
documents required to be transmitted on behalf of Savings Banks."
Mr. Whitbread, it will remembered, made this one of the conditions
of his scheme of National Banks; and it is quite evident that none
but National institutions could obtain such a provision. "The
valuable privilege of freedom from postage," would, we should
think, be considered very desirable by a variety of different
societies and interests, if only they could obtain it!

[160] The following were the details of the reverend gentleman's
scheme, of the authenticity of which we have fully convinced
ourselves:--

1. That deposits from 1_s._ to 10_l._ be received
daily at every Post Office in the United Kingdom
at which Post Office Orders are now issued, and
the amount forwarded _daily_ to the National
Savings Bank, London.

2. That the Postmaster, upon receiving a deposit, do
issue a document of acknowledgment to the
depositor, with printed instructions attached
thereto, directing the depositor to write to the
London office, if a receipt be not received by
him through the Post from the London office
within ---- days.

The following advantages would follow:--

1. _Universality of operation_, by which the Savings
Bank system would be forthwith placed within the
reach of every member of the community.

2. _Cheapness of management._--All rents for offices,
and annual salaries to clerks, avoided.
Postmasters who are now enabled to issue Post
Office Orders, are already admitted to have
character sufficient to be entrusted with the
receipt of money, which by this system would
never exceed one day's deposits.

3. The only expenses of management would be, (1) the
London office, which ought to be as near the
General Post Office as possible; and (2) some
small payment to Postmasters upon each deposit. In
large towns, it may in time be necessary to employ
an additional clerk in the Post Office, but in
these cases the payment on each deposit would
suffice to enable the Postmaster to keep such
clerk.

4. It would not interfere with the existing Savings
Banks,--leaving it to the public to adopt either
the old or the new system as they please. By this
means the old system would probably be superseded
by slow degrees, and without hardship or
inconvenience to any one.
GEO. HANS HAMILTON.

[161] Like Mr. Hamilton, Mr. Bullar has subsequently proposed a
plan for giving increased facilities in one direction to
depositors, which will be referred to at the proper place.

[162] _Letter to the Chancellor of the Exchequer_, 1859.

[163] Mr. Rowland Hill to Mr. Baines, M.P., 2d August, 1859.

"MY DEAR SIR,--With modifications which could readily be
introduced, Mr. Sikes's plan is, in my opinion, practicable
so far as the Post Office is concerned.

"The plan also appears to me to be practicable in its other
parts; but on these I would suggest the expediency of taking
the opinion of some one thoroughly conversant with ordinary
banking business, and who is acquainted also with Savings
Banks.

"I need not add, that if carried into effect, the plan would
in my opinion prove highly useful to the public, and in some
degree advantageous to the revenue.

"I shall be most happy, when the time arrives for doing so,
to submit it for the approval of the Postmaster-General.

"Faithfully yours,
"ROWLAND HILL."

[164] Mr. Gladstone to Mr. Sikes, 30th November, 1859.

"DEAR SIR,--I have read with much interest your tract on Post
Office Savings Banks, and have discussed the subject with Sir
A. Spearman, who has also had some communication with the
Post Office authorities.

"The difficulties are very serious, chiefly in connexion with
the question of interest and the mode of account for it.

"At the same time there is so much of promise in the plan on
the face of it, that we are unwilling to let it drop without
a most careful examination.

"If you are likely to be in London, or were disposed to come
hither, personal communication on details might be of
advantage. Sir A. Spearman would be most ready to see you for
the purpose of entering into them fully, and I should be very
desirous myself to give any aid in my power at the proper
time."

[165] "The Council of the Statistical Society of Dublin having had
under their consideration the plan of Post Office Savings Banks
proposed by Mr. C. W. Sikes of Huddersfield, desire to record
their entire approval of the principles of his plan, and consider
it to be specially applicable to Ireland, where a well-founded
feeling of distrust in Savings Banks as now constituted has been
produced by its being demonstrated that the depositors have not
Government security for their money. That the Council believe that
Post Office Savings Banks with perfect Government security would
be very successful in Ireland, and could be readily managed with a
central Savings Bank in Dublin, as Government Stock is
transferable in the Bank of Ireland. That the Council direct the
Secretary to bring these resolutions under the consideration of
the Chief Secretary for Ireland, with a view to their being
transmitted by him to the Chancellor of the Exchequer. By order,

"W. NEILSON HANCOCK."

At the same meeting the Council elected Mr. Sikes a Corresponding
Member of the Society.

[166] Forms for doing so were immediately afterwards provided.

[167] Such, for example, as the extraordinary facilities now
enjoyed for the depositing and withdrawal of money--of which we
shall speak in the proper place. Suffice it to say here, that
these facilities had never been dreamt of for a moment outside the
Post Office; that they were such facilities as no agency but the
post-office ever attempted to give, and, more than that, could not
possibly have given.

[168] His speech on the occasion has not been reported _verbatim_,
or we would never have ventured to have given it in the third
person.

[169] _Hansard_, vol. clxi. p. 262; and _Times_ newspaper, 1861.

[170] _Hansard_, vol. clxi. p. 2190; and _Times_, 1861.

[171] That this was the case appears further from the circular
which Mr. Sikes addressed to every member of the House before the
second reading, in which he expressed his cordial approval of the
bill, and craved the support of members in carrying it through
Parliament.

[172] _Hansard_, vol. clxii. 1861.

[173] _Hansard_, vol. clxii. p. 880; and _Times_, April 23, 1861.

[174] The phrase "working classes," applied to the industrial
population, seems as inaccurate as the phrase "lower orders,"
applied generally fifty years ago, is obnoxious. The distinction
does not lie in this class being "working" while others are "idle"
people. Something very different indeed is the fact. The tendency
of late years has been that professional people should work
harder, and "working" people less, and very few men who live by
their profession work fewer hours than the handicraftsmen of our
towns. Lord Stanley might have gone even further in his comments
on the earnings of the industrial classes. Even putting aside the
important consideration of how much the professional man spends of
time and money in preparing himself to work at all, a great and
ever increasing number of the wage-receiving class have now as
good incomes as many hundreds of the less successful classes above
them, while their expected or necessary expenditure is in almost
all cases very much smaller.

[175] News of this able nobleman's death has just reached us; but,
though bearing in mind the spirit of the well-known maxim, we see
no reason to alter our text.

[176] See Appendix (F.)