Britain's First Municipal Savings Bank
Part One: The History of Birmingham Corporation Savings Bank
Birmingham Corporation
Savings Bank

Crossing Chamberlain Square one memorable day in the dark period of 1915, the Right Hon. Neville Chamberlain, M.P. (then Lord Mayor of the City), has told us that the thought of having a Municipal Bank first flashed across his mind. While it may have been, and probably was, the outcome of previous reflection on the subject, it is certain that the inspiration born that day accounts for his subsequent actions. It may be that the surroundings, named after his distinguished father, urged him on to do the big thing, for we must concede that it was a big thing to which he set his mind and devoted his energies.

Like other heads of Municipalities, Mr. Chamberlain, as Lord Mayor, received constant appeals from London for efforts to be made in connection with various funds to which the public were urged to subscribe for the successful prosecution of the war. All these appeals struck him as being more directed to, and more suitable for, those who were in the habit of investing money in Government securities of one kind or another. He felt that there was no organisation or system of raising funds which particularly appealed to the workers, and thought the opportunity to help their comrades-in-arms and their country should not be denied them. The national war savings certificate had not then been introduced.

Reared in an atmosphere of faith in the Municipality, Mr. Chamberlain was convinced that civic pride existed amongst the populace, not only in Birmingham but elsewhere, and his conviction led him to conclude that a Municipal Bank would, by its name and definite contact with the Municipality, appeal more strongly than any other scheme. Two objects appear to have been in his mind at that time, viz., (1) the provision of machinery for the collection of small contributions towards the successful prosecution of the war, and (2) the provision of a reserve for those contributors which would help them during a period of industrial depression, which it was thought might arise when the war was over.

Realising the necessity of carrying with him working-class opinion, Mr. Chamberlain's first thought was to consult the local Trade Unions; and, accordingly, he summoned a meeting, at which he described the idea, which he had in his mind, and asked them to give him their considered opinion as to whether it was deserving of support. An essential feature of the scheme, as outlined at that time, was the deduction of savings weekly from wages by employers, in accordance with a resolution to be passed by the workers themselves. This, and other features of the scheme, were discussed at the first meeting, which was followed by further conferences with the leaders, prominent amongst whom must be mentioned Councillor Eldred Hallas and Councillor Joseph Gregory (secretaries of the Amalgamated Society of Gas, Municipal and General Workers), and Councillor John Beard (president of the Workers' Union). Not only did they welcome the suggestion of the Lord Mayor with enthusiasm, but they were prepared with suggestions for carrying it out; and Councillor Hallas, in particular, submitted in December, 1915, a plan for collecting deposits by means of coupons, which was subsequently adopted, and is described in a later chapter of this book.

The scheme was discussed with prominent members of the City Council, amongst whom must be named Councillor C. T. Appleby, a chartered accountant by profession, and a gentleman destined to take a very prominent part in the work of the Bank. The scheme was also examined by leading bankers and other financial experts, notably Sir William Schooling, whose work in connection with the national war savings certificate scheme is so well known. The criticisms offered were fair and, indeed, helpful - no attempt was made at destructive criticism.

Convinced that he was in the right, Mr. Chamberlain brought the scheme formally before the Finance Committee, who reported to the City Council on the 4th April, 1916, in the following terms:-
The necessity of reducing all expenditure that does not conduce to the winning of the war and of placing the savings made thereby at the disposal of the State has been impressed upon the public by many speakers and writers during the last few months.
The various war loans and Government securities have offered ample opportunity for the ordinary investor, and the Post Office Savings Bank and the schemes prepared by the Central Advisory Committee on war savings provide ways whereby the person of small means may accumulate his savings and at the same time help the national cause.
There is, however, a large number of people who have never acquired either the desire or habit of saving, and no plan hitherto suggested seems exactly to fit their case.
It has been suggested to your committee by the Lord Mayor that the Corporation would be serving a useful purpose if they could induce this type of man to place a portion of his earnings at the service of the State, and in so doing to learn the satisfaction and acquire the habit of saving. The committee most cordially support this view, and have given careful consideration to a scheme that the Lord Mayor has placed before them.
The scheme is intended to appeal to people who would not be attracted by the proposals of the Government.
It is open to the employees in any factory, shop, or office in the city, and it depends for success on the goodwill of the workpeople and the co-operation of the employers and the banks. The main principle is that the Corporation should open a savings bank in which workpeople can make deposits derived by deductions from their wages.
The money will be invested with the Government, but the scheme differs from other proposals in the fact that depositors may withdraw their money at any time without loss of principal or interest.
The scheme cannot come into operation until statutory powers have been obtained by the Corporation, but your committee trust that the Government will shortly obtain from Parliament the necessary authority.

The intimate connection that the Corporation will have with the scheme will secure a driving force that could not be secured in Birmingham through any other agency, and will give more prospect of success than if the scheme depended on the advocacy of any outside body.
The interest of the Lord Mayor will, it is believed, secure the adhesion of all classes, and will promote smoothness and continuity in the working.
With so many societies and committees in existence, the avoidance of the formation of any further associations is to be desired. Time, labour, and expense will be saved, and the bank will have a status that could not be secured by any ordinary club or money society, and will meet with more confidence.
To the Corporation there is no direct advantage, but very little risk. There will be some additional labour, but if those of the working-classes who are now spending practically all their earnings can be induced to save a portion of them by means of this scheme, undoubtedly the city will stand to gain after the war, when employment may be irregular.
In addition, this scheme might become a permanent part of municipal administration, although it is now only suggested as a war-time expedient, and it must exercise a highly beneficial effect in educating people who have never saved before to a sense of the value of making provision for the future.

The scheme referred to provided that the Corporation should open a savings Bank and receive deposits from employed persons, associations or societies. Interest at the rate of 3 per cent. was to be allowed on deposits and arrangements were to be made for approximately 80 per cent. of the amounts received into the Bank to be invested in Government securities. The method of saving was to be by deduction from wages, coupons representing the value of the deduction being paid with wages.

The Council approved the scheme and appointed a special committee to bring it into effect, such committee consisting of :-
     The Lord Mayor (Alderman Neville Chamberlain, J.P.).
     Alderman J. H. Lloyd, J.P.
     Alderman T. O. Williams.
     Councillor C. T. Appleby.
     Councillor J. Beard.
     Councillor E. Hallas.
Promises of help and co-operation in the scheme were tendered by the managers of joint stock banks in the city, and the approval of the Central Advisory Committee on war savings was obtained.

So far as the city was concerned, everything was now ready to begin; but before a start could be made, legislative sanction was necessary, for, up to this time, no municipality had any statutory authority to set up a savings Bank. From the beginning, the idea of the Lord Mayor and his colleagues had not been to confine their proposal to Birmingham. On the contrary, they believed that they had discovered a plan capable of wide application throughout the country, and likely to attract working-class savings, which, with the high wages then current, might easily reach a considerable volume, to the support of the war, on the successful termination of which the national existence depended. The Lord Mayor, accordingly set himself to obtain the approval of the Government for the Birmingham plan, and with this view he applied to the late Mr. Edwin Montagu, who was at that time Financial Secretary to the Treasury. Mr. Montagu listened with interest to the proposals, which soon won his warm approval and support, as well as that of his chief, the then Chancellor of the Exchequer. It was at first thought that the necessary powers might be given by inserting a clause in the Local Government Emergency Provisions Bill, during the committee stage; but, as this could not be arranged, a special Bill was drafted and introduced by Mr. Montagu into the House of Commons, on the 11th day of April, 1916.

This Bill authorised local authorities having a population of 50,000 or over to establish Municipal Savings Banks with the object of facilitating the investment of savings in securities issued for the purposes of the war. These Banks were not to be carried on for a period longer than the last date fixed for repayment of any of the securities in which the funds were invested.

The way now seemed clear to success, and the hopes of Birmingham rose high. Unhappily, however, the joint stock banks took fright at the introduction of the Bill, which, rightly or wrongly, seemed to them to be an alarming excursion into a field of which they had hitherto had the sole occupation. So hotly and effectively did they press their objections that, with the cares of other business on their shoulders, the Government did not feel able to proceed with their Bill; which was, accordingly, dropped in the course of the summer.

The disappearance of the Bill was indeed a disaster, and with it seemed also to have disappeared all hopes of the possibility of establishing a Municipal Savings Bank. The Lord Mayor, however, was not to be discouraged by such a rebuff. He set himself to see the representatives of the joint stock banks, and to endeavour to meet their objections by concessions as to the form and scope of the powers to be given to local authorities. Conferences took place with Mr. Vassar Smith, chairman of Lloyds Bank, and Sir Edward Holden (head of the London City and Midland Bank), both of whom were represented on the Clearing House Committee, and, at the same time, renewed negotiations were carried on with the Treasury and the Local Government Board. Mr. Chamberlain was at last able to announce to the Treasury that all difficulties had been removed; and Mr. McKinnon Wood, who had succeeded Mr. Montagu at the Treasury, introduced a new Bill into the House of Commons on the 12th day of July, 1916, which was the fruit of these various parleys.

This second Bill was much more restrictive in its provisions than the first Bill; thus we find that it applied only to local authorities having a population of 250,000 or over, instead of 50,000 in the original Bill. Then there was a definite restriction in respect of deposits being accepted from employed persons only, either by way of deductions from wages or otherwise; a limit of 200 as the maximum which a depositor might accumulate in the Bank; investment of funds controlled by the National Debt Commissioners; earning capacity of invested funds controlled by the Treasury; withdrawals on demand limited to one pound, and lastly, the Bank's life limited to three months after the termination of the war.

The second reading took place on the 15th August, 1916, the committee stage was passed, and the Bill read a third time in the House of Commons on the 16th August, 1916. Opposition was raised on the third reading, but not sufficient to challenge a division. In the House of Lords opposition was encountered in the committee stage, but the Bill ultimately emerged, and the Royal Assent was given on the 23rd August, 1916.

Thus, at last, Parliamentary approval was given to the principle of Municipal Banks, and another break made with tradition. To say the result was largely due to the efforts of Mr. Chamberlain would only be paying a mild compliment. Had it not been for his perseverance persistence, the day of Municipal Banks would not have arrived. Tribute must also be paid to our local trade union leaders who had supported the Lord Mayor throughout.

Although the battle had been won, it was not without cost; the price of victory was a series of concessions which had been made to the fears of the joint stock banks, and which, if they did not stifle, certainly seriously hampered the growth and development of the infant Bank. Moreover, regulations which, in accordance with the Act, had been drafted by the Treasury, allowed very little elasticity. It will be seen in the later chapters how seriously these provisions militated against the free growth of the Bank.

The next step was to find offices for the Bank, and obtain the necessary coupons and other printed books and forms. The accommodation provided consisted of a small portion of the semi-basement premises occupied by the service-laying section of the water department. But what accommodation it was! Imagine a counter, some five yards long, with a screened-off portion of the office behind measuring some nine feet by five feet, and you have an idea of the first Head Office of this great Bank. The National War Savings Committee agreed to supply the coupons, coupon cards, etc.

The committee met on the 8th September, 1916, and appointed a manager, their choice falling upon the writer, who held several public appointments in West Bromwich, and who had had experience with the system worked by the Yorkshire Penny, Bank. Arrangements were made so that the writer was able to take up his duties on the 18th September, 1916.

The Council having approved the rules, the committee decided to open the Bank on the 29th September, 1916, fixed the hours of business, and circularised employers and others.

The pace was fast during those eleven days prior to the opening; our American cousins would have said it was "some hustle." On the 22nd September it was announced that circulars had been despatched to 2,350 employers, and that coupons would be to hand the following day. Then, commenced a whirlwind campaign in works, factories, clubs, offices, or any other place where workers could be gathered together.