The idea of Savings' Banks for the industrial classes was first started at the commencement of the present century. They are said to owe their origin to the Rev. Joseph Smith, of Wendover, who in 1799, circulated proposals among his poorer parishioners to receive any of their spare sums during the summer, and return the amounts at the Christmas following. To the original sum, Mr. Smith proposed to add one-third of the whole amount, as a reward for the forethought of the depositor. This rate of interest, ruinous to the projector, proves that the transactions must have been of small extent, and charity, a large element in the work. The first savings' bank really answering to the name was established at Tottenham, Middlesex, in 1804, by some benevolent people in the place, and called the Charitable Bank. Five per cent. interest was allowed to depositors, though for many years this rate was a great drain on the benevolence of the founders. In 1817, these banks had increased in England and Wales to the number of seventy-four. During that year Acts of Parliament were passed offering every encouragement to such institutions, and making arrangements to take all moneys deposited, and place them in the public funds. From 1804 to 1861, the savings' banks of the United Kingdom increased to 638.

A reference to the various deficiencies of the old banks for savings, and the steps which led to the formation of those now under consideration, will not be out of place here. We have said that, in the early part of this century, successive governments offered every inducement and facility to the savings' bank scheme. Such encouragement was indispensable to their success. When first started, Government granted interest to the trustees at the rate of 4½l. per cent. This rate, reduced to 4l. as the banks became more established, now stands at 3l. 5s. per cent. Of this sum depositors receive 3l. per cent.; the difference paying the expenses of management. The encouragement which the Legislature has given to the savings' banks of the country since their commencement, has entailed a loss of about four and a half millions sterling on the public exchequer. From 1817 to 1841, a loss of nearly two millions sterling had been incurred by reason of the rate of interest which was allowed by Government, being greater than that yielded by the securities in which the deposits had been invested.

Savings' banks have suffered most severely from frauds in the management, and the feeling of insecurity which these frauds have engendered from time to time has gone far to mar their usefulness. Government is only responsible to the trustees for the amounts actually placed in its hands. The law, previous to 1844, gave the depositor a remedy against the trustees in case of wilful neglect or default. In 1844, the Legislature thought right to make a most important change in the law, by which trustees of savings' banks were released from all liability, except where it was voluntarily assumed. It remains a most significant fact, that all the great frauds with this class of banks have occurred since that date. We have, indeed, to thank only the influential gentlemen, who, as a rule, take upon themselves the management of savings' banks, that such cases have been so rare as they have.[180] The known frauds in savings' banks are calculated to have swallowed up a quarter of a million of hard-earned money. The fraud in the Cuffe Street bank, in Dublin, amounted to 56,000l.; the Tralee bank stopped payment in 1848 with liabilities to depositors to the extent of 36,768l., and only 1,660l. of available assets; in the same year, the Killarney savings' bank stopped with liabilities of 36,000l., and assets of only half that amount. About the same time, the Rochdale bank frauds became known, and losses to the extent of 40,000l. were the result.

There can be no doubt that the state of the law is still most anomalous, and that the great majority of the people of this country are under the impression that there is Government security for each deposit in every savings' bank. Year by year, changes have been proposed in the Legislature for giving more security to depositors, but the body of managers have hitherto been successful in their opposition. Whilst legislation is thus deferred, the risks to the provident poor still continue. In the report of a Government Commission appointed during one of these annual discussions "on the savings of the middle and working classes," several well-known authorities in such matters, such as Mr. J. Stuart Mill, and Mr. Bellenden Kerr, expressed decided opinions of the insecurity of savings'-bank deposits. Mr. J. Malcom Ludlow spoke to the feeling of the working-classes themselves: "I should say the great reason why the working-classes turn away from savings' banks, is the feeling of insecurity so largely prevailing amongst them."

Mr. J. S. Mill, when asked for any suggestion on the subject, said: "I think it would be very useful to provide some scheme to make the nation responsible for all amounts deposited. Certainly the general opinion among the depositors is, that the nation is responsible; they are not aware that they have only the responsibility of the trustees to rely upon."

Some change, or some new system, had long been regarded as absolutely necessary. In 1861, the number of savings' banks on the old plan was 638; yet out of this number there were no less than fourteen counties in the United Kingdom without a bank at all. Even in England, when the test was applied to towns, all, for instance, of a size containing upwards of 10,000 inhabitants, it was found that there were at least twenty-four without savings'-bank accommodation of any sort. Nor was this all. Even where savings' banks already existed, 355 were open only once a-week, and that for a few hours; some twice a-week; but very few—only twenty, in fact—were open for a few hours every day. When, added to all this want of accommodation and absence of facility, we remember the unsatisfactory state of the law concerning them, there can be no wonder that public attention was called to the subject from time to time. So early as 1807, Mr. Whitbread introduced a Bill into Parliament to make the money-order office at the post-office available for collecting sums from all parts of the country, and transmitting them to a central bank which should be established in London. At that time, the money-order department of the Post-Office had not arrived at the state of efficiency to which it subsequently attained, and the Bill was withdrawn. Other proposals shared the same fate, till, in 1860, Mr. Sykes of Huddersfield, engaged in the savings' bank of that town, addressed Mr. Gladstone on the deficiencies of the existing system. Through his practical acquaintance with the old plan of working, he was able to demonstrate that increased facilities for depositing at any time, and almost at any place, were great desiderata amongst the poorer classes. The same facilities were necessary for withdrawing deposits. Mr. Sykes proposed that a bank for savings should be opened at every money-order office in the kingdom; that each postmaster should be authorized to receive deposits; and that all the offices should have immediate connexion with a central bank in London. The general principle of this scheme was at once seen to be useful and practicable, though, again, the mode of working was evidently unsatisfactory. Mr. Sykes, for instance, proposed that all payments and withdrawals should be severally effected by means of money-orders to be drawn for each separate undertaking. Any one at all acquainted with the machinery of the money-order office was aware that this would of necessity be a slow and complex, as well as expensive plan. Mr. Sykes's idea was, that no deposit should be less in amount than twenty shillings. This arrangement, again, would have gone far to negative the merits of the whole plan, and especially to interfere with its usefulness amongst the classes which the measure was really intended to benefit. For a few months this scheme, like those preceding it, exhibited signs of suspended animation, when it was referred to the practical officers of the revenue department of the Post-Office, and by them resolved into the simple and comprehensive measure which the Chancellor of the Exchequer proposed in 1861, and which was the crowning effort of the legislative session of that year.

This Bill, entitled "An Act to grant additional facilities for depositing small savings at interest, with the security of Government for the due repayment thereof," became law on the 17th of May, 1861.

The first savings' banks in connexion with the post-offices of the country were established on the 16th of September, 1861. A limited number was first organized, and in places where no accommodation of the kind had ever been afforded. The extension of the scheme to Ireland and Scotland was effected on the 3d and 17th of February respectively. Nearly all the 2,879 money-order offices of the United Kingdom are now post-office savings' banks. These banks are in regular working order, 2,000, in round numbers, existing in England and Wales, 450 in Ireland, and 400 in Scotland. Many of our largest towns have several banks. Thus, at the present time, January, 1864, we find five banks in Edinburgh, five in Glasgow, twelve in Dublin, ten in Liverpool, sixteen in Manchester, ten in Birmingham, and seven in Bristol. Only seventy of the entire number of new banks have failed to obtain depositors—a fact which sufficiently proves that the advantages offered by the Post-Office establishment are understood and appreciated throughout the kingdom. Up to the end of 1863, the total number of depositors in new banks had been 367,000, of which number no fewer than 307,000 then held accounts. At present (March, 1864), the weekly deposits amount, in the aggregate, to 40,000l., while the withdrawals are no more than one-third of that sum. The total amount intrusted to the post-office banks since their first opening has been 4,702,000l., of which sum no less than 3,263,000l. remain to the credit of depositors. The most gratifying fact in connexion with the new banks is, that they show a much larger proportion of small depositors than the old savings' banks have been able to attract, the average amount of a deposit being 3l. 1s. 9d. in the new, against 4l. 6s. 5d. in the old class of banks.

Between fifty and sixty old savings' banks, including the Birmingham Bank, closed their accounts during the last year (1863), great part of the business of each being transferred to the new banks. A sum amounting to over 500,000l. has already been transferred from these banks to the Post-Office by means of transfer certificates; whilst additional sums, the amount of which cannot be correctly ascertained, have been withdrawn from the old and paid into the post-office banks in cash.

With a view to facilitate the proceedings of the trustees of banks which have been or may hereafter be closed, an Act of Parliament was passed in the last session which will doubtless have the effect of winding up the affairs of many of the smaller banks under the old plan, and increasing the work of those on the new.

The modus operandi of this scheme is as simple as it is satisfactory. On making the first deposit, under the new arrangements, an account-book is presented to the depositor, in which is entered his name, address, and occupation. All the necessary printed regulations are given in this book. The amount of each deposit is inserted by the postmaster, and an impression of the dated stamp of the post-office is placed opposite the entry, thus making each transaction strictly official. At the close of each day's business, the postmaster must furnish to the Postmaster-General in London a full account of all the deposits that have been made in his office. By return of post an acknowledgment will be received by each depositor in the shape of a separate letter from the head office, the Postmaster-General thus becoming responsible for the amount. If such a letter does not arrive within ten days from the date of the deposit an inquiry is instituted, and the error rectified. An arrangement like the foregoing shows the boundless resources which the Government possesses in its Post-Office. The acknowledgment of every separate transaction in each of the money-order offices of the three kingdoms, which in any private undertaking would be an herculean labour, involving an enormous outlay in postage alone, is here accomplished with marvellous ease, and the whole mass of extra communications make but an imperceptible ripple on the stream of the nation's letters flowing nightly from St. Martin's-le-Grand.

When a depositor wishes to withdraw any of his money, he has only to apply to the nearest post-office for the necessary printed form, and to fill it up, stating his name and address, where his money is deposited, the amount he wishes to withdraw, and the place where he wishes it paid, and by return of post he will receive a warrant, in which the postmaster named is authorized to pay the amount applied for. In this respect post-office savings' banks offer peculiar advantages. A depositor, for instance, visiting the metropolis, and having—as he may easily do in London—run short of ready money, may, with a little timely notice to the authorities in London, draw out, in any of the hundred new banks in the metropolis, from his amount at home sufficient for his needs. Another person, leaving one town for another, may, without any expense, and no more trouble than a simple notice, have his account transferred to his future home, and continue it there under precisely similar circumstances as those to which he has been accustomed. Last year this power was largely used, there being no fewer than 20,872 deposits and 15,842 withdrawals made under these circumstances, e. g. at places where the depositor is temporarily residing.[181] The facilities offered by the Post-Office in this way are unique; no other banks can offer them; and such is the admirable system adopted by the Post-Office, that complicated accounts of this nature are reduced to a matter of the simplest routine. At the end of each month the accounts of the two offices concerned in transactions of this kind are reconciled by the addition or deduction of the amounts in question, which arrangement, so far from being an irksome one, enables the Department to obtain a very valuable check upon its gross transactions. Under the old system, a depositor could only effect a transfer of his account from Manchester to Liverpool by withdrawing it from the one, under the usual long notice, and taking it to the other. This course was not only troublesome to the parties concerned, but the depositor ran the risk of losing his money, or, perhaps, of spending the whole or part of it. Under the Post-Office system, however, the transfer may be effected in a day or two, without the depositor even seeing the money, and without the smallest risk of loss. Suppose a depositor wishes to transfer his account from a bank under the old plan to one under the new, or vice versÂ, the matter is one of equally simple arrangement. He has only to apply to the old savings' bank for a certificate to enable him to transfer his deposits in that bank to that belonging to the Post-Office, and when he obtains such certificate he may present it to any postmaster who transacts savings'-bank business. The postmaster receives it as if it were so much money, and issues a depositors' book, treating the case as if the amount had been handed over to him. A few days longer are required before an acknowledgment can be sent from London; but this is all the difference between the case and that of an ordinary savings'-bank deposit[182]

In the order of advantages which post-office savings' banks offer the depositor, we would rank next to their unquestionable security their peculiar convenience for deposit and withdrawal. Twelve months ago, a person might be the length of an English county distant from a bank for savings. Under the present arrangement, few persons will be a dozen miles distant from a money-order office, whilst nine-tenths of the entire community will find the necessary accommodation at their very doors. As new centres of population are formed, or as hamlets rise into flourishing villages, and the want of an office for money-orders becomes felt, the requirement will continue to be met, with the addition in each case of a companion savings' bank. Again, the expenses of management—amounting to a shilling in the old banks for each transaction, against something like half that amount in the new—will not allow of the ordinary banks being opened but at a few stated periods during the week. The post-office savings' bank, attached as it is to the post-office money-order office, is open to the public full eight hours of every working day.

Sums not below one shilling, and amounts not exceeding thirty pounds in any one year, may be deposited in these banks; depositors will not be put to any expense for books, postage, &c. and the rate of interest to be allowed will be 2½ per cent.—a sum which, though not large, is all which it is found the Government can pay without loss. It is not thought that this low rate of interest will deter the classes most sought after from investing in these banks. The poorer classes, as a rule, regard the question of a safe investment as a more important one than that of profits, and wisely think far more of their earnings being safe than of their receiving great returns for them.

This scheme, last and best of all, must help to foster independent habits among the working population. Their dealings with the post-office banks are pure matters of business, and no obligation of any sort is either given or received. The existing banks, on the other hand, partake largely of the nature of a charity. An objection frequently urged against savings' banks with much bitterness is, that many great employers of labour are on the directorate of such institutions, and that, consequently, they are able to exercise an oversight over their characters and savings, not always used for the best of purposes. In the Committee of Inquiry to which we have already alluded, cases—designated "rare," we are glad to add—were adduced, from which it appeared that provident workmen's wages had been reduced by their employers, upon the ground of their being already well enough off. No such considerations, however, can affect the new banks: postmasters are forbidden to divulge the names of any depositor, or any of the amounts which he or she may have placed in their hands.[183] The advantages of these banks are so obvious, and the arrangements under which they are worked are of such a simple nature, that they cannot help but be increasingly useful and successful. Moreover, they are so accessible, that the working man, especially, requires nothing but the will to do that which his everyday experience tells him is so necessary should be done for the comfort of his family and home.