Committee, one of these gentlemen submitting that the Committee could
sit on the general subject after the bill had passed into law. In
reply, Sir George Lewis took the latter view, and said he would be
glad to give every facility to the Committee in that case.[99] After
demolishing the man of straw which Mr. Ayrton had set up, the bill was
carried without a division. So far things went on prosperously, but
the opposition gathered in strength; Savings Bank managers again took
the matter up, and urged, by petition and otherwise, that nothing
should be done till a Committee inquired into the matter, and a bill
be founded on the result of their investigation. The Chancellor of the
Exchequer appointed several nights on which to proceed with the bill,
but each night there were so many notices given of motions with regard
to the subject--generally twenty or thirty--that the Government were
compelled by the pressure of other business again and again to defer
the consideration of it, and ultimately to withdraw it. In reply to
Mr. G. A. Hamilton, the Chancellor said, on the 21st of August, 1857,
that he had come to this latter conclusion mainly from the
considerable misunderstanding existing among the local administrators
of Savings Banks. He thought his proposals had not received the
approbation which he conceived their merits justified.[100] He would
offer no pledge for the future, however, further than this, that if
the House next session appeared to wish for a Select Committee, he
would agree to the appointment of one.
The House of Commons met in the November of the same year, when the
question being again raised, Sir George Lewis gave notice that
immediately after the holidays, he would propose a Committee of
Inquiry, who should be instructed to go into the entire subject. The
Committee which was appointed on the 9th of February, 1858, "to
inquire into the Acts relating to Savings Banks and the operation
thereof," consisted of the following members:--Mr. Sotheron Estcourt
(Chairman), Mr. Bouverie, Mr. Ayrton, Viscount Goderich, Sir Henry
Willoughby, Mr. Bonham Carter, Mr. E. Egerton, Mr. Fagan, Mr. Cowan,
Mr. Grogan, Mr. J. A. Turner, Mr. Henley, Mr. Whitbread, Mr.
Bramstone, Mr. Adderley, Mr. Gregson, and Mr. Thomas Baring. They sat
twenty-one days, and examined Sir Alexander Spearman, Mr. Tidd Pratt,
Lord Monteagle, Mr. C. W. Sikes, Mr. John Craig; and the following
eminent actuaries or other officials of the principal Savings Banks in
the kingdom:--Mr. Edward Boodle, of the St. Martin's Place bank; Mr.
Shopland, Exeter; Mr. Wortley, Finsbury bank; Mr. Saintsbury,
Moorfields bank; Mr. J. Hope Nield, Manchester; Mr. Maitland,
Edinburgh; Mr. Meikle, Glasgow; Mr. Sturrock, jun., Dundee; Mr.
Jameson, Perth; Mr. D. Finney, Marylebone bank; Mr. Hatton, Brighton;
Mr. Deaker, Dublin. Mr. W. H. Grey, a Government actuary, and Mr.
Edward Taylor, of Rochdale, attended to give evidence on the subject
of Savings Bank frauds. The Committee, as might be expected, from this
imposing array of names, collected a most interesting and important
body of evidence, and presented, pretty unanimously, an extremely
exhaustive and important report to the House.
Upon the report of this Committee we shall have to draw pretty largely
in more than one succeeding chapter, and will therefore content
ourselves with describing briefly the general nature of the evidence,
and with giving a summary of the Report presented with that evidence
to the House. Further on in the present chapter we propose to attempt
some account of the arguments used in the Committee with regard to the
investment of Savings Bank money, when, two years later, a bill
founded on the recommendation of the Committee was brought before the
House of Commons, where the subject was warmly discussed. In this way,
all the important conclusions come to by the Savings Bank Committee
will at one time or another be fairly noticed. The evidence itself may
be classified as follows. Mr. Tidd Pratt came on first, and gave
information of the course of legislation on the subject, and in other
ways the results of his long experience in such matters. Sir A.
Spearman gave a full account, in an examination lasting over four
days, of the mode in which investments were made at his office, and of
the principal financial operations connected with these investments.
Lord Monteagle, by permission of the House of Lords, attended and gave
the Committee the benefit of his long and intimate acquaintance with
such financial subjects. Mr. Boodle, who took the lead of the
actuaries, and who, while falling into several inaccuracies, showed
perhaps the greatest practical acquaintance with the subject in all
its different bearings, described not only the manner of conducting
the St. Martin's Place bank, but conveyed to the Committee the
prevailing impressions of Savings Bank officials on the subject of the
investment of their capital. Mr. Craig, of the Bank of Ireland,
explained at length his system of book-keeping, and humorously
described its introduction into the Cork Savings Bank. The other
actuaries described the peculiarities of the different banks they
represented; described frauds, and spoke of checks which had been
devised for preventing their recurrence; and gave their opinion, which
will be seen subsequently to have been anything but unanimous, on such
disputed points as the limits of deposits, the rate of interest,
making the audit, and regulating the expenditure. Few of the witnesses
left the box without offering some practical suggestion, or
recommending something of value. All the gentlemen agreed as to the
necessity of doing something. Most of them thought an independent
Commission should be appointed to manage the affairs of Savings Banks.
Every witness expressed his opinion that the one thing needful was a
Government guarantee for the absolute safety of all deposits; and
although Mr. Craig and others thought that this should be supplemented
by a staff of Government inspectors, regarded the change as
imperatively required.[101] It is impossible, however, that we can at
any greater length give the recommendations which were made on this
and other important matters of which the witnesses spoke. Nor indeed
can we do more than condense into the fewest possible words the full
and voluminous Report which the Committee made on the occasion. Seeing
that the demand for this Committee was so great, that so much pains
were taken to arrive at a just conclusion, and that the Report itself
was not without its effect on the institution of Savings Banks, we
doubt not that we shall be readily excused for giving prominence to
it, and for presenting the resolutions in which the principal points
of recommendation are embodied.[102]
1. That the laws relating to Savings Banks in the United
Kingdom require to be amended, and to be consolidated in
one Act.
2. That it is expedient to place the superintendence and
management of the general funds of the Savings Banks in a
Commission consisting of five members.
3. That it is desirable that this Commission be
constituted of the Chancellor of the Exchequer, the
Governor of the Bank of England, and three other persons
appointed by the Crown, all of whom shall be paid.
4. That all expenses of the Commission be paid out of the
moneys of Savings Banks; that the surplus fund shall be
invested in public securities, and the interest carried to
the account of the surplus fund, out of which such
expenses shall be defrayed.
5. That the powers and duties of the Commission shall be
defined by Act of Parliament; that provision be made for
the summoning and holding, at stated intervals, the
meetings of the Commission; that three shall be a quorum;
and the minutes of each meeting duly recorded and signed
by the Chairman.
6. That the Rules and Regulations relating to the receipt
and payment of all moneys, and to the purchases and sales
of stocks and all securities, be passed at meetings of the
Commission specially convened for that purpose, and shall
be subject to the approval of the Lords Commissioners of
Her Majesty's Treasury.
7. That the annual accounts of the Commission, containing
the receipts and payments of all moneys, and every detail
as to the sales and purchases of stocks and other
securities belonging to the Savings Banks, within the year
ending on November 20, in each year, be audited by the
Commissioners of Her Majesty's Audit.
8. That monthly accounts of the receipts and payments of
all moneys, and of sales and purchases of stocks and other
securities, be prepared by the Commissioners, and copies
of the monthly accounts shall be forwarded to the Lords
Commissioners of Her Majesty's Treasury, and to the
Governor of the Bank of England, within one week of the
following month.
9. That the annual accounts, containing the receipts and
payments of all moneys, and every detail as to the sales
and purchases of stock, and of other securities of the
Savings Banks, be laid before both Houses of Parliament in
the first week of February, if Parliament is sitting; and,
if Parliament is not sitting, then within ten days next
after the first sitting of Parliament.
10. That no sales, purchases, or exchanges of stocks or
securities held by the Commission shall be made, except as
required for the purposes of the Savings Banks, and that
no funding of Exchequer bills held by the Commission shall
in future be made without the special authority of an Act
of Parliament.
11. That the Commission should be empowered by Parliament
to invest a portion of such funds, not exceeding one-third
of the whole, in other securities than those now
authorized to be purchased with those funds; those
securities being such as are created or guaranteed under
an Act of Parliament.
12. That it is inexpedient that any existing deficiency of
the funds should be made the ground of reducing the
present rate of interest allowed to the banks, but the
whole subject of the estimated deficiency be referred to
the consideration of Parliament.
13. That any future surplus income of the Board shall be
carried to the credit of a guarantee fund, to meet any
casual charges, losses, or deficiency of income; but if
there shall be no surplus to meet such deficiency of
income, the rate of interest allowed to Savings Banks
shall be proportionately diminished.
14. That the Commission shall have power to frame
regulations respecting the accounts to be kept, and the
audit thereof, and respecting the receipt and payment of
deposits, on the adoption whereof by any Savings Bank such
bank shall acquire security for the deposits therein
guaranteed by Parliament, and that such Savings Bank shall
have a special title.
15. That the Commission may appoint such officers as may
be requisite for the proper audit and inspection of such
accounts, and for obtaining due compliance with such
regulations.
16. That no banking concerns should be permitted to assume
the name of Savings Banks, except such as have had their
rules duly certified.
17. The rules of every Savings Bank shall be in force only
after they have been certified by the Barrister, to whom
no fee shall be payable.
18. That the responsibility of trustees be enacted in the
same terms as in the Act 9 Geo. IV. c. 92.
19. That the present limits of yearly and total amounts of
deposits payable on demand be maintained.
20, and last. That whenever any deposit shall amount to
150_l._, the Commissioners may, with the consent of the
depositor, invest a portion of that deposit in the
purchase for the depositor of 100_l._ stock, the interest
on which shall be received by the Commissioners and placed
to the depositor's account.
Arrived at this point, and in order that the general reader may
properly understand the next attempt made at legislation on behalf of
Savings Banks, we ought to say something in the way of explanation as
to the disposition of the funds of Savings Banks after they reach the
hands of Government. By the 57 Geo. III. c. 105, the money paid in on
Savings Banks account was to be invested in Three-and-a-half per Cent.
Bank Annuities.[103] Subsequently, the law was altered, by which the
money might be invested in Bank Annuities or Exchequer bills. The
purchases of Stock are made upon the order of the Comptroller-General
by the Government broker; but no Exchequer bills are bought, except
under the special direction of the Chancellor of the Exchequer. The
practice is, when the balance at the bank appears to be larger than is
necessary, gradually to apply it to the purchase of Stock at the price
of the day. It appears that between 1828 and 1844 Stock was sold to
the amount of 8,166,511_l._, and purchased to the amount of
8,816,400_l._; Exchequer bills were bought to the amount of
19,888,100_l._, and sold to the extent of 13,041,500_l._ Sir Alexander
Spearman stated that he had, on his own authority, bought Stock from
time to time, as the state of the balance required it; he contended
that he had legally such authority by virtue of his office, and he did
not hold himself responsible to give any explanation of his
proceedings to the trustees or managers of banks.[104] This was just
what Savings Bank managers and trustees did not agree with, and it was
an interpretation put upon the statute which even experienced
statesmen disputed.
Mr. Wortley told the Committee of 1858 he considered the system of
mixing up the Savings Bank funds with the Government money very
injurious to Savings Banks. Mr. Boodle strongly objected to the
practice of dealing in Stock and Exchequer bills, and of exchanging
one for the other. He said Mr. Goulburn had been induced to
discontinue the practice, and to publish an account of the different
transactions, but that the practice had been revived in 1853, had
continued ever since, and in a worse form than ever. Lord Monteagle,
who spoke very strongly on these points, stated that the present use
of Savings Bank money was entirely at variance with the original
design; that the Commissioners had no power to change the securities,
and thus become active agents in the Stock Market.[105] Lord Monteagle
expressed strong objections also to the power of funding Exchequer
bills bought for the Savings Banks at the price of the quarter at
which they were bought. Sir A. Spearman, who was somewhat unfairly
left to bear all the brunt of every attack of this kind, on account of
the Committee neglecting to call upon any of those five members of the
House who were or had been Chancellors,[106] stated that the Savings
Bank fund on the 20th of November, 1857, was 34,399,082_l._ Stock;
whereas, if there had been no investment in Exchequer bills or bonds
since 1853, the amount would only have been 34,207,371_l._ Stock.[107]
Mr. Boodle dwelt upon the reputed losses which the country had
sustained through the Savings Banks, and declared that if there had
been any loss, it had been occasioned by the State not treating the
funds exclusively as Trust Funds. In this matter, Mr. Boodle
undoubtedly had the best of it. "Whenever any bill is introduced into
Parliament on Savings Banks," said this gentleman, "this loss is
thrown in the teeth of Savings Banks, and used as an argument,
sometimes for reducing the rate of interest, at other times for
reducing the limits of deposits, either annual or in gross. Therefore,
it acts most detrimentally to the depositors; and it has gone out that
the Savings Banks are an enormous expense, whereas we are perfectly
satisfied that, if this money were properly administered, there would
be no expense whatever.[108]"
That Savings Bank money was not only used for financial purposes, but
turned to extremely profitable use, there can be no doubt: hence
complaints of loss could only be made by persons but partially
acquainted with the facts. Mr. Hume indeed, had he been cognizant of
the profitable way the funds were used, could scarcely have complained
about the loss to the State so often as he did. Mr. Gladstone at this
time, and subsequently, never missed an opportunity of putting the
matter on the proper footing, and to set it forth that, instead of a
loss, the funds had been a source of considerable gain to the State.
In 1834, when Lord Althorp was Chancellor of the Exchequer, and Lord
Monteagle himself (as Mr. Spring Rice) Secretary of the Treasury, they
determined to reduce the interest on the Four per Cents. Those who
held money in the Funds and were dissatisfied with the reduction were
paid off out of the Savings Bank money (without which, indeed, the
reduction could not have been earned through), and a saving to the
country of 53,000_l_. a year was the result. Mr. Goulburn, using the
power he had in the same way, or with the money of Savings Banks to
fall back upon in case of need, effected a saving of 750,000_l._ a
year in reducing the rate of interest from four to three and a half,
then to three and a quarter, and eventually to three, per cent. Not
less useful were the funds of Savings Banks in the time of the Crimean
War. By means of Ways and Means bills, the Chancellor of the Exchequer
raised the necessary funds to meet the heavy demands, and thus
effected an enormous saving of money, which would have been sunk in
transacting a loan.
We have already made the reader acquainted with Mr. Gladstone's
opinion on the right of the State to use the money entrusted to it for
safe keeping; nothing could be more vigorous than his language already
quoted. Mr. Gladstone endeavoured to carry a change in the law
relating to the investment of Savings Bank moneys in 1855. He now, in
the session of 1860, came forward and offered a bill to remedy some of
the grievances complained of in the Committee. His proposals were now
substantially the same as those of 1855. He voluntarily proposed to be
shorn of his strength as Chancellor by the House agreeing to cancel
Savings Bank Stock to the amount of thirty-one millions of pounds; and
to open a new account for this money, to be called "State Deposit
Account, No. 1," virtually giving the money the fullest security of
the State, and placing it entirely beyond the reach of his operations.
The remaining amount, then about ten millions, Mr. Gladstone proposed
should be allowed to be invested at the pleasure of the finance
minister as heretofore. One would have thought that at any rate this
bill would have been allowed to pass quietly; but it was not to be.
The bill proposed was based on two of the recommendations of the
Committee of 1858,--namely, those which suggested that the power of
funding Deficiency and other bills should be done away, and that the
dealings in the stocks should be under the review of the House; but
members complained that a bill had not been prepared to embrace _all_
the recommendations. _Sir H. Willoughby_ and _Mr. Estcourt_ took this
view. In long speeches they both upheld the decision of the Committee,
and asked for a bill dealing with the entire subject; the latter
gentleman said that the "barren discussions in Parliament were acting
to the prejudice rather than to the support of the excellent
institutions with which they dealt. There were not above 600 of these
useful institutions in the whole kingdom, whereas they ought to ramify
through every parish and every village of the kingdom." _Mr. Malins_
and _Colonel Sykes_ followed, and complained that Government should
have neglected to deal with the entire subject. _Mr. Gladstone_ made
up for the lack of supporters by a long and able speech. He admitted
that it was most desirable to have a bill for the management of
Savings Banks, but the general subject had no relation to the mode in
which the money of Savings Banks was invested. Better at the end of a
session carry one or two points, and put an end to grievances which
had been loudly complained about, than bring in a measure only to
withdraw it again. He had been charged with ignoring the labours of
the Committee. He had not done so, for the bill was founded on part of
their labours; he _had_ considered the report, "but consideration does
not necessarily involve adoption." He was compelled to decline many of
the suggestions of the Committee. Where, however, he agreed with them,
he had lost no time in taking action: hence the proposed bill. "From
speeches of honourable gentlemen," concluded Mr. Gladstone, "it might
be supposed that a dreadful bill had been introduced, giving
exorbitant powers to the Chancellor of the Exchequer. The fact is,
however, that there is not a power given which he does not already
possess, and in one or two respects the surrender of powers is very
large." "It is impossible that Savings Bank funds can now be used by
Government as a trust; they must be reserved for the discretion of the
House." The bill for the first time gives a positive title in law to
the deposits in Savings Banks, and it will further provide a true
account,--"for nobody has ever yet seen a true account,"--of the
National Debt; and for these reasons Mr. Gladstone hoped it would be
allowed to pass into law. _Mr. Thomas Baring_, and _Mr. Ayrton_,
unconvinced by the Chancellor's arguments, opposed the bill; and _Mr.
T. Collins_ contented himself, as usual, with dividing the House on
his motion to throw it out. The motion was negatived by a majority of
twenty-four, and there was a similar majority on a motion for
adjournment made by Sir Henry Willoughby. On the 20th of July, 1860,
the bill was considered in Committee, and the discussion was taken on
the first clause--the existing stock to be cancelled--when Mr. Hubbard
approved of the measure. By the bill the greater part of the money of
Savings Banks, viz., that treated as a book debt, would be placed
beyond the reach of jobbery. Sir Francis Baring spoke in favour of,
and Sir H. Willoughby, Mr. Hankey, and Colonel Sykes again opposed,
the clause. The opposition to the measure had gathered strength since
the last occasion;[109] and on a division, the Savings Bank managers
once more triumphed by a majority of 38, in a morning sitting and a
House of 192 members.
A few days afterwards the _Chancellor of the Exchequer_ proposed the
fourth clause of the defeated bill, or that which gave the
Commissioners an uniform power of holding and dealing with all stocks
under Parliamentary guarantee, and stocks and securities, under
whatever name, that constituted the National Debt. At present, Mr.
Gladstone stated the Commissioners had power to hold Terminable
Annuities, but no power to sell them. There ought to be a uniformity
of power with regard to these securities, and this bill, which was
founded on the fourth clause, gave it. He had only been induced to
take the matter up again by finding an unanimous feeling in the House
for this proposition. _Mr. Estcourt_, in speaking for the clause,
hoped the Chancellor would soon bring in a measure on the general
subject. So he did, soon afterwards, but not the kind of measure Mr.
Estcourt desiderated. When this bill reached the Lords, it was rather
violently opposed by Lords Monteagle and Redesdale; and on a division
the voting was found to be equal. According to usage, the bill was
thrown out. The Government, however, re-introduced the measure, "as a
matter of urgency;" and though there was an outcry in the Lords
against it, no less than in the Commons, for interference with what
was considered a Money Bill, the clause passed, and received the Royal
Assent on the last day of Parliament.
Mr. Gladstone, thwarted in all his attempts, except in the last
insignificant case, to bring about a better state of things in
connexion with the management of Savings Banks, determined upon
another course of action altogether. He, and other statesmen who had
preceded him in his office, had tried their best to improve the
existing banks, but they had been persistently hindered and obstructed
by the force which Savings Bank officials could bring to bear. For
some time now Mr. Gladstone must have had under his eye several
proposals which went to the very root of the matter upon which so many
difficulties had from time to time arisen, and which promised a
thorough and substantial reform. He bent his great energies in this
direction; saw his way, not only out of a dilemma, but to the
origination of a simpler and more perfect system; and may be said
henceforth to have left the friends and partisans of the old Savings
Banks to look after their own interests. With the legislation relative
to the scheme of Post Office Savings Banks, with which Mr. Gladstone's
name will always be prominently associated, we shall deal in a special
chapter, and will therefore hasten to describe the remaining steps
which the Legislature has taken with regard to Savings Banks proper up
to the present time.
Left to themselves, the leading Savings Bank authorities in the
House--viz., Mr. Estcourt, Sir H. Willoughby, and Mr. Ayrton--obtained
leave, on the 11th of March, 1862, to bring in a bill "to Amend the
Laws relating to the Security and Management of Savings Banks."[110]
The points sought by the bill were, briefly, (1) to enforce upon all
local banks the regulations of the well-managed ones; (2) to repeal
the Act of 1844; (3) to force an auditor upon every bank and define
his duties; and, lastly, to provide for the security of the
depositors, by enacting that no transactions should take place except
at the office, during office hours, and in the presence and with the
signature of more than one person. Mr. Estcourt, who briefly explained
the drift of the bill, intimated that they were not desirous of
altering the relation in which Government stood to Savings Banks, or
of interfering in any way as to the disposition of the money. Mr.
Gladstone, after stating how completely Government had been baffled in
their attempts to alter the law regulating Savings Banks, expressed
approval of the bill, though he reserved the right of Government to
take any steps they chose at any subsequent stage.[111] On the 20th of
May this bill shared the fate of all preceding attempts to place these
institutions on a sound basis, by being withdrawn. Savings Bank
managers had again interfered, and this time they went against their
devoted friends. _Mr. Estcourt_, on withdrawing the bill, said he had
received numerous representations from managers that his measure was
"inapplicable" to them; and "only that day an influential body of
managers of great experience, and fully to be depended upon," had
waited upon him, requesting him to withdraw it; and if he would
consent to this course, _they_ would endeavour to devise some scheme
which should meet the requirements of the various establishments. Mr.
Estcourt's measure was unquestionably a good one, but it involved too
much trouble and risk to trustees: hence its defeat. _Mr. Gladstone_
thought it was high time that those gentlemen should take their turn
in devising a scheme. If they proposed a real improvement, Government
would make no objection. Referring to the Post Office Banks, Mr.
Gladstone said: "Undoubtedly, however, the main question had been
disposed of; they were now able to say to the people of England who
were disposed to lay by their savings, with a moderate interest and
with a perfect security, the Government had provided some 3,000 places
where these savings would be received." _Mr. Henley_ was much
discouraged with the difficulties everybody found in the way of
legislation. He was "disposed to think that the well-managed banks
might go on as usual," but rather than "tinker" at the others, "the
very small banks under the old system, which would not afford the
proper machinery for perfect management, ought to be urged to hand
over their business to the Post Office Banks." _Mr. D. Griffith_ "for
once agreed with the Chancellor of the Exchequer;" he was glad to hear
the Post Office Banks were working so well, and expressed his opinion
that "they would ultimately swallow up all the old banks."[112]
In March, 1863, Mr. Gladstone brought forward once more his
propositions relating to the investment of Savings Bank money. He
moved--
"That it is expedient to amend the laws relating to the
investment of the moneys of Saving Banks, and to create a
charge for such Savings Banks upon the Consolidated Fund,
in place of certain perpetual annuities now standing in
the names of the Commissioners of the National Debt; to
give the power for converting certain other amounts of
such perpetual annuities into certain other annuities, and
to provide for the due payment out of the Consolidated
Fund of any deficiency which may arise from insufficiency
of the securities to meet the legal claims of the trustees
of such Savings Banks."
After considerable discussion, the bill (26 and 27 Vict. c. 25) was
sent up to the Lords under the charge of Lord Stanley of Alderley, and
received the Royal Assent on the 8th of June, 1863.
We come now to the last item of legislation on the subject of Savings
Banks. On the 14th of April, 1863, Sir H. Willoughby and Mr. Ayrton
obtained leave to introduce the bill which, according to promise, had
been prepared by a convention of Savings Bank managers. To a great
extent this measure "to Consolidate and Amend the Laws relating to
Savings Banks," was identical with the one which Mr. Estcourt
introduced and withdrew during the previous session. The managers had
met during the recess, and had consolidated into one the eight Acts,
or parts of Acts, which then governed their establishments. Mr. Tidd
Pratt, on being consulted in the matter, certified that the new Act
"would constitute a fair and just measure of improvement." Mr.
Gladstone, too, it seems, had been furnished with a copy, had
suggested some trifling emendations, which had been frankly adopted
and embodied, and was therefore disposed to offer no captious
opposition to it. Not only so, but he thought it creditable to the
gentlemen who had it in charge, and, so far as it went, likely to be
effectual. Several clauses were altered, struck out, or inserted, and
the bill, known as the "Consolidation Act," received the Royal Assent
on the 28th of July, 1863. Of this Act (26 and 27 Vict. c. 87, a full
description of which will be found in the Appendix)[113] we shall
speak in a subsequent chapter, when we come to consider the law at
present regulating Savings Banks.
[69] In a case that arose out of the Carnarvon Bank fraud of 1824,
in the Court of Bankruptcy, both the Commissioners, Sir John Cross
and Sir George Rose, expressed very strong opinions on the point
as against trustees. The former judge, after giving a decision
against the trustees in the case, said, "The case could not be
made too public," and he "trusted that it would operate as a
warning to the trustees of Savings Banks generally." Sir George
Rose "fully concurred" in the observations of his colleague. He
thought "it should be borne in mind that deposits were made by
parties, not on the faith of the persons acting as actuary or
cashier, but upon the faith of the gentlemen who acted as
trustees; where such persons neglected the duties which were
incumbent upon them, their conduct was deeply deserving of
censure. If, therefore, the clerk, or other person employed by
them, were guilty of peculation, they were themselves liable for
any defalcation that might ensue."
[70] Speaking of Mr. Goulburn, when he first took office, a
contemporary said, "He possesses that degree of talent which
renders him highly respectable without exciting any invidious
feeling. He is content to be useful without aspiring to the
reputation of an innovator; and, if he shall introduce nothing
new, he will at least abstain from anything that is dangerous."
Mr. Goulburn's legislation for Savings Banks scarcely bears out
this estimate.
[71] This arrangement, which was quietly dropped before the bill
became law, owing to the pressure which managers of Savings Banks
brought to bear upon the House, was strongly urged by Mr. Tidd
Pratt. That gentleman and Mr. Higham, Comptroller of the National
Debt Office, prepared this bill. In the Committee of 1848, Mr.
Pratt gave it as his opinion (140), that no depositor should be
allowed to put in more than 10_l._ in one year, instead of 30_l._,
or it might go to 15_l._; "but I am quite sure that this latter
sum is as much as the small savings of the industrious classes can
amount to." He also proposed to limit the total amount to 100_l._
[72] In this same Committee, Mr. Pratt stated that in the course
of his investigations in Ireland he had found one man who had had
seventeen books out of one Savings Bank, and money to the extent
of 520_l._ lodged there, altogether his own property, but which he
represented himself as holding in trust.
[73] Only four sets of directors of banks, and these banks of very
insignificant size, made a declaration of the kind in question
between 1844 and 1848.
[74] It was during the passage of this bill that the managers and
trustees of the different Savings Banks in the country first
combined to influence the action of the Legislature. On this
occasion it can be shown that they made their influence felt, and
provoked several divisions in both Houses. With the House of Lords
they were most successful, owing, no doubt, to the great number of
peers who were honorary officers of Savings Banks. For example, in
the House of Commons they succeeded in dividing the House twice on
the question of the rate of interest. They wished no reduction to
be made in that rate; but, when it was decided that the rate
should be reduced, amendments making it 3_l._ 6_s._ 8_d._ to
trustees and 3_l._ 0_s._ 0_d._ to depositors, and 3_l._ 5_s._
0_d._ and 2_l._ 18_s._ 4_d._ were proposed against the Government
plan, eventually carried, of 3_l._ 5_s._ 0_d._ and 3_l._ 0_s._
10_d._ respectively. It was declared that the difference of 4_s._
2_d._ only would not defray the cost of management. It was
objected also, and not without reason, that the Government erred
in not naming the exact sum, instead not more than 3_l._ 0_s._
10_d._ per cent. which should be given to depositors; that this
was a matter which ought not to have been left in any sense to the
trustees. Much unpleasantness might have been saved if the sum had
been definitely stated, and instead of twenty or thirty different
rates of interest, all had been paid alike, and there had not been
left any doubt as to what depositors should consider their right
in the matter. Out of doors there was a regular combination;
deputations waited upon the Chancellor of the Exchequer, and
gentlemen from all the leading Savings Banks in England, Scotland,
and Ireland, met in London to concert those schemes of defence to
which we have just alluded. A meeting was held, at the important
institution in St. Martin's place, with Sir Henry Willoughby as
Chairman, when the following resolutions, among many others, were
agreed to by the deputies from banks representing 5,000,000_l._ of
deposits. Nothing could of course better show how the action of
the Legislature was regarded by the managers of the institutions
in question:--
1. "That the proposed reductions in the amount of
deposits from 30_l._ to 20_l._ in each year, and
the total amount of deposits from 150_l._ to
120_l._ will be highly injurious to the interests
of the depositors."
2d. "That the reduction in the rate of interest from
2-1/2_d._ per cent. per day to 2_d._ is far too
great, out of proportion to the reduction of the
interest in the Funds, and would be extremely
prejudicial to the depositors in all Savings
Banks, but more especially to those in the
smaller banks, throughout the kingdom."
3d. "That clause 7, requiring the production of the
books of every depositor once a year, will cause
annoyance to depositors, is not capable of being
enforced, and is no efficient security."
4th. "That the proposed alteration respecting the
liability of trustees and managers of Savings
Banks seems highly objectionable. The present
provision, of no trustee responsible except for
his wilful default or neglect, is well understood
as applicable to all cases of voluntary trusts,
and should undergo no alteration."
5th. "That it is not expedient that trust accounts be
altogether abolished, but that provision should
be introduced to meet the case of fictitious
deposits and the abuse of trusts."
And so on throughout almost all the clauses.
[75] On one occasion, about this time, Mr. Hume had complained of
the "impudent conduct" of some Government official, to which Sir
Robert Peel, as Premier, replied. Sir Robert said, he "would not
quarrel with the hon. gentleman," (an experiment he had often
tried without much success,) "considering him a good judge as to
how far impudence might be carried with impunity." Mr. Hume at
once owned the soft impeachment. "If I had not had the impudence
of the devil," said he, "I should never have done any good in this
House." _The Times_, the next day, give it to Mr. Hume smartly, as
was its wont, and congratulated him "on his generous, though
rather startling, acknowledgment of the source of all his
strength."
[76] His speech on the occasion does not seem to have been fully
reported.
[77] The trustees of four small banks made the declaration: those
of Tonbridge, Ashby-de-la-Zouch, Fareham, and Carshalton in
Surrey.
[78] At a meeting of the managers of the principal Savings Banks
held on the 29th of August, 1819, it was resolved: "That this
meeting has read with mingled feelings of pain and alarm the
clause in the proposed bill virtually requiring trustees and
managers of Savings Banks to give security or 100_l._ each, and
making such trustees and managers responsible to an indefinite
extent if they should neglect to limit their responsibility to
that sum, as pointed out in the Act."
[79] Mr. Brotherton, the member for Salford, soon after stated
that the managers of the Manchester Savings Bank, with 20,000
depositors, insisted upon every person bringing his book to the
office annually, as a precaution against fraud.
[80] The Committee of 1848 went very fully into the changes which
were needed in Ireland, and many witnesses were asked what they
would propose. For example (1579), Mr. W. Keating Clay was asked:
"Do you believe, in consequence of the Cuffe Street bank, the
deposits will decrease in Dublin and neighbourhood if the law is
not amended?" and replied, "I should say they will be altogether
withdrawn. I don't think the other Savings Banks in Dublin, which
have conducted their business faultlessly all through, can exist
another year under the present law." Another witness, in answer to
a similar question, said (1205): "I am quite satisfied that the
Savings Bank system in Ireland will crumble to dust unless there
is legislation." A third witness said, nothing would do but
trustees fully liable, and a system of Government inspection and
regular audit of the accounts.
[81] _The Times_ and _Morning Chronicle_ strongly advocated the
same view.
[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.