Extension of Municipal Banking
In Chapter 1, Part Three, of his book Britain's First Municipal Savings Bank, the Bank's first General Manager (J P Hilton) describes  'How the Demand for Municipal Banks is Spreading'. This book was published in 1927, and the chapter therefore relates to the position at that time.
In January 1928, the Report of the Committee on Municipal Savings Banks set up by the Chancellor of the Exchequer was issued. Detailed comments on this report were produced by the Bank's Committee and presented to the City Council on June 12th 1928.
The story regarding the demand for Municipal Banks in other towns, and for branches of the Birmingham Municipal Bank in areas adjoining Birmingham, was taken up in the Bank's Annual Reports, starting with 1928:
In January last a Departmental Committee appointed by the Chancellor of the Exchequer to consider the question of an extension of municipal banks to other towns issued their report. The committee are of the opinion that any such extension might cause embarrassment to national finance, particularly within the next ten years, and consequently they do not recommend extension. The report may not satisfy other municipalities, but the testimony paid to the Birmingham Municipal Bank is very satisfactory. Being the only Municipal Bank in the country, established by Act of Parliament, it was natural that a searching examination should be made by the Departmental Committee into the working and achievements of the Birmingham Municipal Bank. Evidence was given before the Committee by the Chairman, who was accompanied by the General Manager, and the Treasurer of the Bank (Mr J R Johnson).
The following appreciative paragraph appears in the report: 'The results achieved by the Bank are very remarkable, and have considerably exceeded anticipations. While it will appear from the later part of our report that care must be exercised in drawing inferences from these results, there can be no doubt that, thanks to the enthusiasm and efficiency of its direction, and to the sentiment of civic pride to which it has appealed, the Bank has achieved a success of which Birmingham is justly proud'
In reaching their conclusion the Departmental Committee state: '…. the Birmingham Bank is undoubtedly rendering very real service to thrift in an area in which the pre-existing facilities were less fully developed than in other parts of the country. Moreover it is now a living institution with a vigorous individuality of its own; within a few years, thanks to the energy and ability devoted to its service, it has come to hold a high place in the minds of a great number of the citizens. Such an institution claims respect for itself ….'
The theme was continued in the 1929 Annual Report by again quoting from the above report:
Birmingham is still the only town to possess a Municipal Bank, and has every justification for pride in its possession. The Bank has been referred to as a 'living institution with a vigorous individuality of its own'. The citizens of Birmingham have made it a 'living institution'; they realise it belongs to them and is managed and controlled for their benefit by their elected representatives. The Bank inspires confidence, and indeed affection, in the minds of the citizens, and the Committee trust it may long retain that confidence and affection.
The 1930 Annual Report described the current situation in regard to other towns wishing to establish municipal banks:
There are signs of increased activity on the part of municipalities in connection with the establishment of Municipal Banks. Cardiff, after a long debate on the floor of the House of Commons, succeeded with their application for powers, and Birkenhead are following that example. Municipal administrators, generally would do well to obtain a copy of the debate in the House of Commons on the Cardiff Bill (Official Report, Vol. 238, No 128, Wednesday, 30th April, 1930), and to read the speech of the Right Honourable Neville Chamberlain, MP, who is entitled to speak with first-hand knowledge and experience of the working and results of the Birmingham Municipal Bank. His warm support to the application made by Cardiff, should do much towards encouraging other towns to follow the examples of Cardiff and Birkenhead.
The aspirations to create Municipal Banks in Cardiff and Birkenhead appear to have foundered soon after this date, probably due to the opposition of the Government. No English or Welsh local authorities seem to have been prepared to circumvent Government sanctions by following the 'limited liability' route used by those Scottish councils referred to in Chapter 1, Part Three, of Britain's First Municipal Savings Bank: Kirkintilloch; Clydebank; Johnstone; Irvine; Peebles; Selkirk; and Motherwell.
Scottish Municipal Banks survived (albeit under different names following local government reorganisations) into the 21st-century, but remain small in size and limited in the services provided. In general, all the funds of the banks are invested with their administering local authority, only passbook-based savings accounts are offered, and the majority of depositors are council employees. By 2001 the approximate number of active accounts at each bank was as follows: North Lanarkshire 11,000; East Dumbartonshire 2,500; North Ayrshire (Irvine) 2,250; Clydebank 1,700; West Lothian 1,000; East Ayrshire (Cumnock) 12.
The desire of certain local authorities to emulate Birmingham in establishing a municipal bank was not always matched by local opinion, as expressed by the local press. Opposition was also voiced on the basis that municipal banks were part of a plot to promote socialism. Two examples of this opposition to municipal banks are as follows:

South Wales News: January 14th 1927


The good people of Aberdeen may not distinguish themselves on flag-days, and the appearance of a flag-seller may be regarded in that northern latitude as the approach of a plague, but there are few cities in the whole world in which so many of the population are able to answer the abstruse question – How many beans make five? In the sphere of pure philanthropy we should not regard them as entitled to a place amongst the highest authorities, but in all that pertains to the art and habit of saving the bawbees and getting the maximum interest on the investment, we hazard the conjecture that even our Palestinian friends would not dispute their remarkable prestige. When, therefore, two of Aberdeen’s most highly qualified experts express the considered criticism that municipal banking is both unnecessary and inefficient, Swansea ratepayers who have been rather attracted by the suggestion that the borough should have a municipal bank ought to sit up and take notice. Our own attitude in the recent discussion has been clearly defined. There are a few districts where banking facilities have been less than they should be and where the working classes have lacked encouragement to thrift on an attractive basis. But until the Swansea Corporation decided to ask for power to enter into competition with local banks and bankers, we had not regarded the borough as being in that predicament. For a great number of years the Swansea Savings Bank has been regarded locally with very much favour and confidence. It is in every sense a well-tried and well managed institution, which has always endeavoured to encourage thrift, and provide as a return for the exercise of that virtue the maximum reward. We felt surprise, therefore, when the proposal to provide a Municipal Savings Bank received the support of all the political parties represented on the Swansea Council. But in face of the report of the Aberdeen experts, we are forced to wonder whether Swansea’s expectations are well founded. Everybody is agreed that the community should be provided with the maximum facilities and encouragement for thrift; but before embarking upon a new venture it is well to be ensured that it promises better conditions than those which already exist. Up to the present we have failed to discover how a municipal bank at Swansea could offer more incentives to the thrifty than is now offered be existing institutions. The men on the spot appear to think that it could and would. They are impressed by the Birmingham experiment; but it may prove fallacious to assume that what has succeeded in the special circumstances of the Midland city will yield equally satisfactory results in the circumstances which exist at Swansea. The whole point is: Does the Swansea Corporation want a municipal bank in order to encourage thrift, and provide for the exercise of that virtue a better return than is obtainable from any existing local institution? Or is it prompted by the motive that a municipal bank would be particularly advantageous to the municipality? Is it thinking of others or of itself? Does it wish to borrow money more cheaply for its own needs, or to offer better terms to local investors than they can get at present? We must suppose that the Corporation has faced these questions, and is actuated by something more than selfish considerations for its own interest. But the ratepayers have not been vouchsafed any information which warrants them in sharing this confidence. By all means, as we have said, let Swansea and every other industrial centre have all possible facilities and encouragements to save money, but let there be no pretence in this matter. The ratepayers have a right to know whether the proposal is what it professes to be, or merely an ingenious device of the Corporation to borrow money on its own terms.

The Yorkshire Evening Post; November 25th 1926


‘Ware Municipal Banks by Walter Townsend, FRSA


Chief among some of the fantastic aims of the Labour party is the introduction of Municipal Banks. In every municipal election, where labour candidates stand, prominence is given to these institutions as a means of increasing thrift and prosperity among the working classes.


The idea is, according to its formulators, to run a savings bank by the municipal authorities, into which citizens may pay their deposits and withdraw in the same manner as they do with ordinary commercial or trustee savings banks.


The great advantages claimed are:

The bank is run for the people by the people.

A board will be elected by depositors who will ‘run’ the bank.

These delegates will not receive remuneration, and thus the bank will pay good interest,

                   for there will be little expense in administration.

There will be no dividends to shareholders.

The Labour party’s funds can be invested with the bank.

Facilities will be specially given to small depositors.


Quite good advantages really, but what need is there to enter into serious rivalry with the already well-established and thoroughly reliable trustee savings banks, as well as the commercial banks which are as strong as the Bank of England? Will not the municipal bank be founded on a sandy basis?


Banks cannot be run on experimental lines. Where this has been done in the past what have been the results? The ghastly failures of the last ten years surely ought to have taught us all to avoid experimental banking systems.


Again what Board can run a bank without remuneration? Banking is one of the most scientific industries in the world, and none but experts with a life training in finance can hope to conduct a bank successfully. What banker would give his services to a municipal bank?


Then what real need does such a bank fulfil? Our existing banking system, including Joint Stock Banks, Trustee Savings Banks, Post Office Savings Bank, and the numerous War Savings Associations, offer every convenience to small depositors. Why withdraw our money from them to invest or deposit in experimental communal banks?


As to our industries, what business with a huge turnover will entrust its banking to a municipal bank? Truly, the municipal banks would not get the support necessary for their successful organisation.


Of course, the whole ‘top and bottom’ of the scheme is to strengthen the finances of the Socialist Movement. With a strong bank in each city, all the board of directors have to do is to vote that a certain amount of money shall be devoted to such and such an object, and the depositors would be powerless to intervene.


If, for instance, a general strike happened again, the directors of the municipal bank could refuse to honour cheques or pay out withdrawals if they were required for averting or smashing the strikers’ power.


The aim of Socialism is, amongst other things, financial equality, but the large depositor in a municipal bank would automatically become a capitalist and thus would become an opponent of the aims of the bank. Should deposits be limited, well then the aim of the bank as a people’s bank would fail.


If a levy were extracted from all deposits over a certain amount, who would patronise the municipal bank to have their money confiscated when they can obtain useful interest in existing banks?


Banking is the mainstream of capitalism; so how can it be used for the furtherance of Socialism, unless there is some hidden reason for the gathering together of small depositors’ money?


This is a question which every worker should ask himself before he supports the municipal bank idea.
The remainder of this article relates to the extension of municipal banking beyond Birmingham's boundaries, but to much closer locations, ie areas adjoining the City. Under the  Birmingham Corporation (General Powers) Act of 1929, with the permission of the local authorities concerned, the Bank was given the power to open branches in areas adjoining the city. The BMB's 1931 Annual Report had two paragraphs dealing with this topic:
We have purchased premises in Birmingham Street, Oldbury, with the intention of establishing a Branch Bank. At the moment the premises are occupied as a labour exchange but will shortly become available. The negotiations for the establishment of a Branch Bank in Oldbury were very friendly, and our thanks are due to the members of the Oldbury Urban District Council and their Clerk for the assistance given. For the time being, residents in Oldbury are at liberty to use any of the branches of the bank already established, and those residents who are contemplating the purchase of houses in the Oldbury area can obtain advances from the Bank.
On the 1st April last the area of the City was extended by the inclusion of parts of Castle Bromwich, Minworth and Sheldon, and an invitation is accordingly extended to residents in these districts to make use of our Bank. In the course of time we hope to provide branch facilities for these areas, but until such facilities are available the residents in the newly acquired districts can use any of our branches.
The 1932 Report provided further information:
Since the end of the financial year the bank has opened at Oldbury its first branch outside the City area, and it is evident from the business which has already been transacted that the residents in the locality will make full use of the facilities offered. This branch was established at the request of the Urban District of Oldbury, and no doubt, when other adjoining areas see how much the Bank is appreciated in Oldbury, they will seriously consider the advisability of securing similar privileges for their own residents.
The subject of branches in areas adjoining the city was continued in the 1933 Annual Report:
The Oldbury Branch, which is the first to be established outside the area of the City, has met with a gratifying response from the residents of Oldbury, and the Committee of Management look forward to the progress being continued.
Negotiations have been successfully concluded for the establishment of a Branch or Branches in the area of the Solihull Urban District Council, and it is hoped during the present year to make such provision.
Although the Bank's Annual report for 1934 was much concerned with the opening of the new Head Offices in Broad Street, the following paragraph also appeared:
By arrangement with the Solihull District Council the activities of the Bank now extend to the area of such Council, and Branches have been opened at Shirley and Solihull. Residents of these areas are invited to make use of the two Branch Offices and are reminded that the guarantee of the Birmingham Corporation in respect of deposits and interest thereon applies to these external Branches to the same extent as it applies to Branches within the area of the City of Birmingham.
The 'arrangement with Solihull District Council' was made despite fears being expressed by some Solihull councillors that the introduction of a branch of the Bank was merely the precursor to Birmingham taking over Solihull - see Solihull Branch.
Extension beyond the city boundary continued, as detailed in the 1935 Report:
Arrangements have now been made whereby the facilities of the Bank will be available to residents of Sutton Coldfield, and steps have been taken to acquire a site on which will be erected a Branch bank. Pending the erection of this new building, the business of the Bank will be conducted in St Peter's Hall, Maney, commencing on the 24th June, 1935.
The 1935 Report also commented that: The citizens of Birmingham, and the residents of neighbouring authorities, who are able to enrol as depositors, may regard themselves as fortunate in having a Municipal Bank at their disposal. This Bank still remains the only one of its character in Great Britain. Its success has been phenomenal, and its progress has fully justified the confidence of those who were responsible for its establishment in 1919.
Although the Bank's 1937 Report did not have any news regarding branches to be established in adjoining districts, it did clarify the position regarding the areas in which houses could be purchased with the aid of a BMB mortgage:
Advances are not restricted to houses in the City of Birmingham or other areas in which a Bank Branch has been established, but can be made on the security of any freehold or leasehold property which is situate in the area of any county or county borough which adjoins Birmingham. The two county boroughs adjoining Birmingham are West Bromwich and Smethwick, and the counties are those of Warwick, Stafford and Worcester.
This extension of the Bank's lending powers followed the amendment of the 'Objects of the Bank' in its 1930 Regulations 'To advance money to any depositor desiring to purchase or acquire a dwelling house or dwelling houses in the City of Birmingham, and in any adjoining area with the consent of the local authority thereof, or any interest therein'.
The 1939 Report stated that:
Continuing the policy of opening Branches in areas adjacent to the City of Birmingham, the Committee are pleased to announce that arrangements have been made with the Local Authorities concerned to open Branches in Halesowen and Rubery.
At around the same time, the two branches in Solihull that were located in temporary premises were formally opened in permanent offices: Solihull (July 20th 1938) and Shirley (January 18th 1940).
The next branches to be opened outside the City's boundaries were Smethwick (October 23rd 1940) and Halesowen (December 17th 1940). The minutes of a meeting of Halesowen Borough Council provide an example of how terms were agreed between Birmingham and an adjoining authority. On February 20th 1943, a part-time sub-branch in a temporary wooden building, was opened at Pheasey - although this office was linked to Kingstanding which is in the City, and had a Birmingham address, Pheasey was just over the City boundary in Staffordshire. Pheasey branch was not a success, and was closed in 1959.
By arrangement with Bromsgrove Urban District Council, a branch of the Bank was opened at Rubery on January 30th 1950 (although a temporary, short-lived, part-time office had been opened at Cock Hill Lane, Rubery on February 6th 1925), bringing the total of branches (excluding Pheasey) outside Birmingham's boundaries to seven.
In 1963, planning permission was given by Warwickshire County Council for the building of a Birmingham overspill housing estate at Chelmsley Wood. Subsequently, the Bank opened a branch on the estate in 1969; Chelmsley Wood became part of Solihull under the provisions of the Local Government Act, 1972. The next agreement with an adjoining local authority was with the County Borough of Warley, who approved the opening of a branch at Blackheath in July 1971.
The Local Government Act of 1972 brought the Royal Borough of Sutton Coldfield within Birmingham's boundaries. The opening of branches at Boldmere (June 23rd 1975) and Four Oaks (November 1976) in Sutton Coldfield were therefore within the City's limits.
The Bradbury Committee