The Lower Rates Demand Association
and the
Campaign for Extended Powers for the BMB
The leaflet reproduced below (left), which appears to have been published in the 1960s, makes some interesting proposals regarding the future of the Bank at that time, and its ability to 'save our City Millions of Pounds per year in loan charges'. This campaign to reduce the annual demand on the city's ratepayers was not unprecedented, as a letter published in 1938 (below right) illustrates.
In the course of the correspondence which has been running on lower rates, the question of the Birmingham Municipal Bank was raised and the suggestion made that such a bank would lend to its Corporation more cheaply than any other financial institution. I have therefore been in touch with Birmingham and obtained the following data which may interest your readers.

The last available report and accounts covers the year to the 31st March, 1937, and was published in June of last year. I understand the current report and accounts to the 31st March, 1938 is at present in hand and likely to be issued any day, but I have been informed on enquiry at the Municipal Bank that the general picture which I propose to put before your readers now has not been materially altered in 1938 on 1937.

At 31st March, 1937, the Birmingham Municipal Bank owed to depositors a few pounds short of £24 million. It had employed this money as to, £2 million in advances for house purchase, ie building society business; it had as cash-in-hand something just over £1 million and it has cash on deposit with Birmingham Corporation, that is to say, it had lent money to various Corporation departments in effect, to the extent of nearly £21 million. Of this £21 million a shade over £11 million was invested in British Government Securities leaving the Birmingham Corporation itself with the employment of something either side of £9 million.

Its income and expenditure account disclosed it had received in interest £779,000 during the year. Advances in the house purchase department are made at a minimum rate of 4½ per cent with up to 5 per cent in a few cases; the interest, therefore, charges on these advances would account for about £90,000 which would leave nearly £700,000 in interest received on the loans amounting to £21 million to the Birmingham Corporation. This gives an interest rate of a shade over 3 per cent.

Your readers will appreciate that these are only round figures as I do not wish to take up your space be asking you to set out all the odd shillings and pence which come into this calculation, nor such items as £135,000 which has been spent in land and buildings for head offices and on furniture etc.

The main point, however, which emerges clearly from these figures is that with all the experience behind the Birmingham Municipal Bank and with all the undoubted skill with which it is operated, Birmingham Corporation is obviously not borrowing money from its own municipal bank at anything under 3 per cent.

In view of the fact, of course, that over £11 million is invested in British Government and other trustee securities on which it is difficult to obtain a yield of 3 per cent during the period under review, it is obvious that on the remaining £9,000,000 which have stayed with various corporation departments, something over 3 per cent is actually being paid.

This bears very favourable comparison with the loan recently floated on the Stock Exchange by Southgate Borough Council at 3½ per cent; in fact, if it were possible to work the Birmingham figures with any greater exactitude the difference between the rate of interest paid by the two municipalities would be found to be more or less negligible.

I don’t know how much comfort the Lower Rates Demand Association will be able to extract from these published results of the work of the Birmingham Municipal Bank, but it does, at any rate, clearly show that even a municipal bank cannot afford to lend its own corporation at so much below the current lending rate as the association would have your readers believe.

Yours faithfully


Vicars Moor Lane
Winchmore Hill