Mr P J Hannon has deemed it necessary to make some forcible comments on the speech delivered by Sir Percival Bower, on Wednesday, on the subject of municipal banking - and we may say at once that we are not surprised. Sir Percival himself spoke with force, but his zeal was quite inadequately tempered with discretion. He is, we suppose, a Socialist. His position as a leading light of the Labour Party in Birmingham indicates as much; and his angry attack upon the Treasury Committee headed by Lord Bradbury, might, no doubt, have been acceptable to fellow Socialists had it been delivered from a party platform; but as coming from a guest at a non-party social function it was sadly inappropriate - and even regarded as a party oration it was poor stuff. Lord Bradbury and his colleagues may have been right or wrong in their conclusions. As far as their observations on the Birmingham bank are concerned they would seem to have been pretty near the mark that "changes may be necessary". In any case, their reporting requiring to be taken seriously. It was judicial in tone, and closely reasoned. In its references to the Birmingham bank it was distinctly friendly. It was the outcome of high ability, ripened by long banking experience, and we, for our part, believe that successful professional bankers can generally be trusted to understand the essentials of their own business better than amateurs or outsiders. A report of this character is not to be summarily disposed of by complaint of its " laboured reasoning", by describing it as a thing "with little or no foundation in fact"; or even by suggestion that its authors "resist the development of municipal banks from motives that are not free from self interest". Sir Percival, indeed, went even further than this. He expressed indignation that a body of persons who "clearly indicate that they are not in agreement with the general policy which brought the Birmingham Municipal Bank into existence", should have been asked to report upon the expediency of extending the system. This, as we understand it, means that the Government which appointed them was aware before they started of the opinion which, in fact, they reached after careful examination of a mass of evidence from all sources; and that in Sir Percival Bower's view it ought to have appointed persons who could have been counted upon to bring in a report of a different character. It is, no doubt, a natural position for him to take up. He cherishes (in Mr Hannon's words) " a spacious ambition to see municipal banks established all over the country"; and he disapproves of anybody who seems to stand in the way. But even so, he should have been able to make his complaint, upon a proper occasion, without imputation of motives of self-interest.

Sir Percival Bower hopes to see municipality after municipality challenging any and every Government by promoting Bills seeking power to establish municipal banks. And so it becomes pertinent to remind him that while certain Corporations have certainly manifested some desire to follow Birmingham's example, others - including some of the most important - have taken, and continue to take, a different view of the advantages of that course. Swansea, Wigan, Tottenham, Stoke-on-Trent, and Bristol, are among those which have made proposals. Manchester, which at one time thought about a municipal bank on commercial lines, ended by abandoning the idea. The Liverpool Finance Committee "did not recommend the establishment of a Municipal Savings Bank". The Nottingham report, "while not desiring to condemn the principle", deemed it "undesirable, unnecessary, and impracticable" to establish such an institution locally. Dundee has considered the matter, without taking action. Aberdeen remains content with the Trustee Savings Bank which, in November, 1926, had lent the Corporation over £1,435,000. And Glasgow, having considered whether or not to offer evidence to the Bradbury Committee, finally resolved to take no action. No doubt it is open to Sir Percival Bower to say that these are all benighted and unprogressive places, destitute of "vision" and lacking in municipal zeal; but the fact of the matter is that between the value of the social service which a well-conducted municipal bank may fairly be expected to render and the development locally of other and older thrift agencies, there is a relation by no means fanciful. The Birmingham bank has flourished for one reason, because there exists no Trustee Savings Bank in the city. Elsewhere, where Trustee Savings Banks are already well established and popular, the idea of a municipal bank makes less appeal. And it is an absolutely reasonable remark of the committee that one cannot be quite certain that out of a number of municipal institutions not one will ever suffer serious embarrassment; as also it is reasonable on their part to point out that the serious embarrassment even of a single institution might have far-reaching effects.

We hope that Sir Percival Bower, when he next discusses the subject, will be content to leave alone the problem of general policy on which the Committee has expressed so decided n opinion with an authority so much superior to his own, and will explain, instead, how - if at all - the publication of the report will affect the operations of the Birmingham bank. Two questions would seem to arise. Speaking as bankers, Lord Bradbury and his associates declare that "had they been dealing with the matter entirely afresh", they would have been disposed to recommend certain safeguards, which they describe. Because they are anxious that any municipal bank in operation shall be in a position to rely, as joint stock banks do, entirely on its own resources, and because as bankers they realise more acutely than most people the disadvantages of investments not immediately convertible into cash, they lay much stress upon the principle of "liquidity". They "would have been disposed to recommend that the Bank should keep in cash and at its bankers a balance of 5 per cent of its deposits, that 40 per cent or 45 per cent, should be placed with the National Debt Commissioners, who would invest the money in short date securities . . . . and that the Corporation should have the use of the rest of the money . . . . paying interest on terms to be prescribed by statute or fixed by the Treasury". They would also have thought it "very desirable" to increase the stability of deposits by paying interest at a higher rate on "money that proved, in fact, long-term money". What has Sir Percival Bower to say to these suggestions? Is he prepared to accept all or any of them? Is he content that against loans from the Bank the Corporation should hold stocks or bonds, which, in the opinion of the Treasury Committee, include too small a proportion of short-date securities? And, incidentally - it is a point not made by the Committee - is he completely satisfied that the Bank should advance up to 99 per cent of the purchase price of Corporation houses, valued not by its own experts, but by the officials of another department? There is nothing in the Report which need cause uneasiness. Ratepayers and depositors alike may see in it a testimonial to the management of the Municipal Bank in general. But it does point out the possibility of bringing local municipal methods more closely into conformity with those accepted as desirable by professional bankers. And we hope Sir Percival will find it possible to tell us that these hints are being very seriously considered.

Municipal Journal: February 3rd 1928