Chapter V (3)

[82] _Hansard_, vol. civ, pp. 22-54.

[83] During the interval, Mr. Reynolds, member for Dublin, who had
obtained the Committee originally, became Lord Mayor of Dublin,
and Mr. Gibson Craig became Sir W. Gibson Craig. Mr. J. A. Smith
was appointed chairman on each occasion.

[84] For example, in August, 1852, Mr. Reynolds again brought the
subject before the House by proposing that the remaining money due
to depositors should be paid by the State. On this occasion he
told how he had had the honour, in 1846, placing Her Majesty's
Government twice in the same night in a minority on this subject;
but, unlike other members who had done the same thing, he had not
received Her Majesty's commands to form a new ministry. This style
of banter was scarcely suited to his subject, but more serious
appeals were equally unavailing.

[85] The following remark had already been made from the judicial
bench: "I find that country gentlemen, &c. were willing to lend
their names as trustees, in the establishment of banks for the
deposits of saving of the poor, but were negligent, in too many
instances, in giving their personal services, whereby the business
fell almost entirely under the exclusive management of the person
appointed as actuary."--_Sir John Cross._

[86] "Nearly all the frauds, and all the loss which had occurred
in Savings Banks," said the Chancellor, "were owing to the actuary
or secretary receiving money irregularly, sometimes at his own
house, and very often out of office hours."

[87] Even in seaport towns this inspection of pass-books might be
accomplished without much trouble; if there was any difficulty in
getting in the books, such an inspection might be made as would be
sufficient to test the general accuracy of the accounts. Thus at
Cork, the year before (1849), 6,623 pass-books had been sent in
for examination, and only 1,164 did not come in. The accuracy of
the larger number was ample test of the accuracy of all.

[88] The Chancellor here pointed out that the _average_ rate of
interest given to depositors at that time (1850) was but 2_l._
18_s._ 4_d._ and that the reduction would be scarcely felt by any
class; that reduction, however, would not only provide against the
Government losing any more money, but would meet the expense of
the proposed Government treasurers of Savings Banks.

[89] _Hansard_, vol. cx., third series; and _Times_, 1850.

[90] It must not be assumed that there was no difference of
opinion on these points, even among Savings Bank managers. The
following letter, read by Sir Charles Wood during his speech in
1850, is conclusive to the contrary. The writer, who was manager
of a large provincial Savings Bank, wrote: "I have had occasion to
remark that the chief inducement to deposit money by those for
whom Savings Banks are intended, consists in having a _safe place_
for deposit, and that the amount of interest for the most part is
but a secondary consideration; whereas those persons whose means
are greater, and who do not actually require Savings Banks, use
them to suit their convenience when the Funds are high, and take
out their money from the Savings Banks to invest in the Funds when
low, just at that very time when the withdrawal occasions loss to
the country." He then expressed an opinion almost identical with
one which Mr. Tidd Pratt has often given, that "20_l._ would be
quite sufficient to allow a person to deposit in one year," and
that, "when the deposits reach 100_l._ there is no necessity to
allow further deposits to be made." Again, the Rev. W. Rowan,
Treasurer of the Tralee Bank, when asked in the Committee of 1849,
if he thought changes were necessary in Savings Banks, answered
that, "The Savings Bank system must either become a general
failure, and the funds invested in them withdrawn, or you must
place it upon an entirely different footing with respect to
inspection and working."

[91] A bill to continue the Act of 1848, "for Amending the Laws
relating to Savings Banks in Ireland," was carried through
Parliament in this session.

[92] The gentleman to whom reference was here made is the present
Comptroller-General, the veteran public servant Sir Alexander
Young Spearman. This gentleman, of whom all parties speak as a man
of irreproachable character and eminent abilities, has now (1866)
been fifty-eight years in the public service. To him is no little
owing the efficiency with which his department is now managed, and
the increased facilities which have been given to the public in
all things connected with the provident habits of the people. It
may not be out of place here to state, with reference to the
office held by this gentleman, that it was formed about the
commencement of the present century, whereas the Commissioners
date from the creation of the Sinking Fund in 1786. Sir Alexander
Spearman succeeded Mr. Higham in the position. As more than one of
the witnesses at the Committee of 1858 did not know who formed the
Board of Commissioners, of whom they were constantly speaking, and
another did not know whether the Board ever met, it may be new to
some readers, if we say that the Commissioners for the Reduction
of the National Debt consist of the Speaker of the House of
Commons, the Master of the Rolls, the Chief Baron of the
Exchequer, the Chancellor of the Exchequer, the Accountant-General
of the Court of Chancery, and the Governor and Deputy-Governor of
the Bank of England. The Board held a meeting once in each
quarter. Three Commissioners form a quorum, and their powers are
defined by Act of Parliament. The Comptroller-General acts in the
capacity of Secretary to the Board, and is entrusted with the
carrying out of its orders. The expenditure of the National Debt
Office amounted, in 1856, to about 14,000_l._; but must have
increased considerably since that date.

[93] "To amend the Laws relating to Savings Banks, and, in certain
cases, to give the guarantee of Government to the depositors for
the repayment of the sums legally deposited in such Savings
Banks."

[94] In a long petition to the House of Commons from the Trustees
and Managers of the St. Martin's Place Savings Bank, this bill is
strongly opposed, thus showing that Mr. Gladstone had not
succeeded with the managers of that institution. Speaking of the
direct Government guarantee proposed to be given, the managers say
that they "find the proposed change fettered with such a variety
of intricate and cumbersome official regulations, as cannot fail
in practice to prove greatly annoying and vexatious to depositors,
and perplexing to the managers of the banks and their officers,
upon whom will still devolve duties and responsibilities
ill-defined under the provisions of this bill, and not capable of
being sufficiently understood or explained; subversive, as the
proposed change will also prove, in this and many other
well-regulated Savings Banks, of those systems of entry and check
under which their present accuracy of accounts is so admirably and
indisputably maintained." They objected to the reduction in the
rate of interest, treated of several other minor matters, and
again prayed that a full inquiry should be made by a committee
before any bill was passed.

[95] "You take the money of these depositors, and you give them
the entire security of the State for their money. They cannot have
a better security; and if you give them that, they have no
interest in the employment of the money: it does not signify to
them if you fling it to the bottom of the sea. So long as the
Treasury of the country is sound, it does not matter one rush what
the Chancellor of the Exchequer does with the money. If he invests
it well, they are no richer; and if he plays all the tricks of the
mountebank, or disposes of it with the artifice of the swindler,
they are none the poorer. The depositor in Savings Banks have
nothing to do with the question, and it is only weakening and
impairing their position to make them depend upon the prudence of
the minister, instead of upon the credit of the British public."
Savings Bank managers held a strong opinion against what they
called jobbing with their funds. They said Mr. Goulburn had
promised that the practice should be stopped; and it was, in 1844;
but that Mr. Gladstone had revived the practice illegally in 1853.
These bills were not introduced in 1855.

[96] _Hansard_, vol. cxxxvi. 1854.

[97] _Hansard_, vol. cxliv, p. 1292.

[98] A clause was added to the bill now introduced to prohibit the
assumption of the title of "Savings Banks," by institutions not
established under the Savings Bank Acts.

[99] A few days after this, Sir George Lewis gave a pledge to
Viscount Goderich that, if the bill passed, the Committee should
be appointed to consider every question that Sir H. Willoughby had
raised.

[100] The trustees of the principal Savings Banks again petitioned
against the bill. The petition from the St. Martin's Place
institution prayed "your honourable House to pause ere you pass
such an Act as would assuredly compel your petitioners, and, in
their view, all parties similarly situated, to resign the charge
which they have hitherto had so much pleasure in fulfilling, and,
as they may venture to assert, with entire satisfaction to the
parties pecuniarily interested." In their opinion "considerably
more importance has been attached to the terms 'Government
security,' and 'Government guarantee,' than the facts of the case
would require."

[101] Mr. Sikes said (2,628), "I believe that one great essential
for the future progress and prosperity of Savings Banks would be
the guarantee of the Government for every deposit duly made in the
hours of business." Mr. Wortley said (1,570) that he thought it a
desirable thing, and also Government auditors or inspectors. Mr.
Hope Nield (1,937) thought it "desirable decidedly, if it can be
obtained without trammelling or destroying the operations of the
banks." Mr. Maitland "had no doubt whatever about it being a
desirable thing, if it can be safely given" (2,153). Sir Alexander
Spearman gave his opinion at greater length (4,368). "There will
be no satisfactory amendment of the law unless the security of
Government is given to depositors. I think it is impossible that
the present state of things should be allowed to continue. The
question has often been discussed, and depositors in many cases
have believed that they had the security of Government, and found
to their cost that they had not; complaints are constantly
arising; applications are constantly made to know whether they
have the security of Government or not. I think myself that
depositors are entitled to have the real protection of a
Government security, but I think also that it will be quite
impossible to give this security without at the same time giving
to the officers of Government a very different power of dealing
with the management of Savings Banks. It would be idle to talk of
the one without the other." So weighty are the conclusions to
which the Committee of Inquiry came on the subject of this
guarantee that we present them here _in extenso_. "A very general
impression prevails throughout the country that the Government is
bound to make good a deficiency whenever a deficiency occurs; a
claim accordingly has been made, in several instances, on
Parliament to replace the money of depositors in cases of
defalcation. This impression is not warranted by the laws which
regulate Savings Banks. It is difficult, however, to maintain that
Parliament, having released local trustees from their liability,
should not be bound to provide some other guarantee for the money
of depositors, who have no share themselves in the management of
their bank. It appears to your Committee that an alternative ought
to be given, and freely offered to the choice of trustees, either
to secure the guarantee of Parliament upon such conditions as the
commission shall prescribe, or themselves to undergo the same
liability in regard to Savings Banks as was enacted by 9 Geo. IV.
c. 92, s. 9. The able actuaries connected with various large
banks, who have attended your Committee, have detailed various
methods by which imposition and error may be rendered almost
impossible in large establishments; but in the case of the smaller
banks, where the funds are not adequate to provide a staff of paid
officers, it will be for the Commission to see what arrangements
they can make to check misconduct, and to afford to depositors, at
least once a year, a certainty that their money has been duly
lodged with the Government, for which purpose some valuable
suggestions were made by several of the witnesses experienced in
the practical management of banks. In one point all the witnesses
concur; and your Committee must record their own opinion to the
same effect, that the most effectual restraint upon malversation
is to be found in the presence of a second party in every
transaction where money is paid or received; and that a rule to
this effect ought to be imperative in all banks, under a penalty
on its infringement."

[102] The Committee sat six days deliberating on their Report
after all the witnesses had been examined. Draft reports were
proposed by Mr. Ayrton, Sir Henry Willoughby, and the Chairman,
the report ultimately carried, after a few emendations, being that
by Mr. Estcourt.

[103] Sir Alexander Spearman, who clearly explained the facts to
the Committee of 1858, also described the routine gone through
when Savings Banks made investments with Government. They first
certify the appointment of trustees; then, appoint an agent in
London, generally a banker, through whose hands the money passes.
When the trustees of a Savings Bank wish to invest, they send up a
notice to their agent, who presents it at the National Debt
Office, where an order is given to the Bank of England to receive
the stipulated sum and place it to the account of the fund for the
Banks for Savings. Next morning a receipt is sent from the Bank of
England to the National Debt Office, and from thence to the
trustees who remitted the money. A somewhat similar proceeding
takes place on the trustees of any Savings Bank wishing to
withdraw money. It is done through the agent, who gives the
necessary notice of withdrawal. No money is paid or received at
the National Debt Office, but at the Bank of England, the
Commissioner simply keeping the accounts.

[104] "Suppose any bank should question the way in which their
funds had been invested?"--"My answer would be," said Sir A.
Spearman (4,029), "that this was a matter which did not in the
least concern them. I am not aware that the Act of Parliament in
any shape or in any manner makes the Commissioners or their
officers responsible in the slightest degree to the trustees of
Savings Banks." When asked if, "Supposing the money were used for
financial purposes, or not invested at all, or invested so as to
produce little interest, would Savings banks have a right to
complain?" this witness answered, he "did not think so. What the
Commissioners are responsible for is, to repay to the trustees of
Savings Banks the amount received from them, together with the
amount of interest due, whenever they call for it." "They are
responsible for that, and nothing more."

[105] A little prior to this, Lord Monteagle had spoken at great
length and with great animation on the same subject in the House
of Lords. He then went the length of saying, that, "now the money
was coveted not so much on account of inculcating the growth of
provident habits, but that it should afford the Chancellor of the
Exchequer a large capital, which might be sold, bought, exchanged,
or invested in Exchequer bills, or in stock, at the will and
pleasure of the financial minister; and, consequently, that he
could thus be enabled, as he saw fit, to influence the
Money-market to an extent which no individual or combination of
capitalists could possibly either equal or counteract." He added,
that he could have no objection to the mere buying and selling of
securities, so far as the Savings Banks were concerned; what he
objected to was, that these transactions should be so carried on
as to affect the value of the public securities and influence the
Stock-Market--"rig the market," as a member of the House of
Commons said at the same time.

[106] Sir Francis Baring, Sir Charles Wood, Mr. Gladstone, Mr.
Disraeli, and Sir George C. Lewis.

[107] Exchequer-bill purchases, as we gather from the evidence
taken before the Committee of Inquiry, are made in two modes. If
the purchases are to be made in the market, the Cashier of the
bank is directed in the same manner as when he is told to purchase
Stock; pays for the bills out of the Savings Bank fund, and
carries them to the credit of the Commissioners. The other mode
is, by the issue of temporary Exchequer bills, such as Deficiency
bills, or Ways and Means bills. Deficiency bills are bills issued
under the authority of 57 George III., to enable the Government to
provide for a temporary deficiency of money in the Exchequer.
Deficiency bills are issued either to the Bank of England, or held
temporarily by the National Debt Commissioners through the bank,
the bank paying the money to the Exchequer, and paying itself the
next day out of the Savings Bank fund. Ways and Means bills are of
a pretty similar character, but chargeable to the revenue of the
next succeeding quarter, and not, as in the former case, of the
current one. Supply bills are of a still more permanent character,
and are often held on from year to year, and are exchanged from
year to year.

[108] Mr. Boodle was for allowing part of the money to be
otherwise invested than with Government. He suggested land
drainage. Mr. Sturrock and Mr. Sikes were for keeping one-third of
the money in the hands of trustees, to be invested "in freehold
securities of unquestionable character," or in railway debentures.
Mr. Deaker, Mr. Jameson, and Mr. Finney agreed. Lord Monteagle was
"driven to the conclusion" of saying that in investing Savings
Bank deposits, "you ought to deal in State securities and nothing
else." The opinion of the Committee on the subject may of course
be gathered from the digest of their report already given.

[109] The indefatigable bank managers of London again sent round
petitions against the proposals, and when they were presented to
the House, one member, Mr. Hubbard, remarked they "were all
apparently from one mint:" and indeed no secret was made of its
being so.

[110] So convinced was one individual organ--accustomed to treat
largely of such subjects--that the bill now proposed would fail to
accomplish any good, that it insisted upon its being called a
"Bill to provide for the speedy extinction of all old Savings
Banks, and to give a heavy blow and great discouragement to the
trustees and managers thereof."

[111] _Hansard_, vol. clxvi. p. 1394.

[112] _Hansard_, vol. clxvi. p. 1974. It is not often that Mr.
Griffith speaks the sentiments of the generality of English
people, but he almost did so in this instance. No amount of
tinkering could now make the old banks as simple, secure, and
efficacious as those on the new plan. Mr. Griffith not having gone
the length of mentioning any time, his prophecy was eminently a
safe one. No one is more to blame, if indeed any one is to blame
at all for such a state of things, than the authorities of Savings
Banks themselves. Whilst they were systematically opposing with
suicidal obstructiveness every measure of amendment, the whole
ground was suddenly cut from under them by the institution of
Postal Banks.

[113] Appendix B.