7.0 p.m. Arrangements have also recently been introduced for repayment by a crossed warrant payable through a Bank the use of which makes it unnecessary to attend at a post office at all.

45. The total amount due to depositors in the Post Office Savings Bank on 1st January, 1927, was £283,658,417, and the total number of active accounts (excluding accounts with balances of less than £1 which have been dormant five years or upwards) was approximately 10,427,000, the average balance per active account being £27 2s. 9d. Receipts in 1925 (which is selected instead of 1926 as being industrially a more normal year) were £82,985,872 and interest £6,773,123, while withdrawals were £84,641,040. The average amount of each new deposit and the proportion of withdrawals to mean balances are lower than the similar figures for the Trustee Banks; this suggests that the Post Office has a larger proportion of small transactions and of comparatively inactive deposits. The rate of interest paid by the Post Office to depositors is 2 per cent. or effectively, in consequence of the exclusion in calculating interest of fractions of a pound and broken parts of a month, about £2 8s. per cent. Expenses of management (including all overhead charges) were in 1925 £1,301,768, or 9s. 1d. per cent. of total funds and 8.86d. per transaction.

46. The funds of the Bank after providing for current requirements are remitted to the National Debt Commissioners and invested by them on account of the "Post Office Savings Bank Fund" which is administered in the same manner as the Trustee Savings Banks Fund, except that if there is a balance on income account only 20 per cent. is set aside against depreciation and 80 per cent. is paid to the Exchequer. Since, however, the

Exchequer liability is directly to the depositor and not merely to the Bank, the National Debt Commissioners do not pay the Bank a fixed rate, but provide specifically the actual interest to depositors and the expenses of management, and no question of an internal profit arises.

Post Office and Trustee. Bank Stock Registers.

47. Both the Post Office and the Trustee Banks provide facilities for direct investment in Government securities. Investors have the advantage of being able to buy and sell stocks in this way at a low rate of commission, and dividends, which are generally paid without deduction of Income Tax at the source, may be credited to their Savings Bank accounts. The total nominal amount of stock held for the public through the Post Office at 1st January, 1927, was £184,562,661, and the total nominal amount held in the Stock Departments of the Trustee Savings Banks, including certain securities held on account of the Special Investment Departments, at 20th November, 1926, was £34,043,475.

The National Savings Movement and Savings Certificates.

48. The National Savings Movement is directed in England and Wales by the National Savings Committee and in Scotland by the Scottish Savings Committee, which work in close cooperation and on similar lines. The Movement was founded in February, 1916, as a result of the Report of the Montagu Committee on War Loans for the small investor. The Committee did not recommend any increase in the interest allowed on ordinary Savings Banks Deposits since they thought that 2 per cent. was fully as high a rate as the State could afford to pay under existing conditions, and that the allowance upon money at call of any rate of interest approximating to 5 per cent. might involve serious consequences. On the other hand, they observed that a wide discrepancy between the interest offered to the large and small investor gave a handle to criticism. With a view to reconciling these conflicting considerations they recommended the adoption of a scheme of War Savings Deposits, and the result was the introduction of War-afterwards National-Savings Certificates.

49. The immediate purpose of the Movement was, and is, to promote the sale of Savings Certificates. While a large number of Certificates would no doubt be sold independently of its work, it is clear that owing to its activities the sales of Certificates have been greatly increased and the encashments of Certificates have been less than they would otherwise have been. Of particular importance at the present time in view of the general situation of Government finance, referred to elsewhere in this Report, is the question of securing conversions of certificates of the First Series, which are now maturing in large numbers, into Certificates of the current issue or longer term securities. The Savings Movement is in a position to give considerable assistance in this direction, and it may appropriately be recalled that during the War it was entrusted with the conduct of the campaign in connection with the 5 per cent. War loan, to the great success of which its efforts contributed in no small part, and with similar work in connection with subsequent loan campaigns.

50. But besides encouraging the sale of Certificates, the Savings Movement has always endeavoured by its own literature, through the press and by numerous meetings, to form a public opinion in favour of saving, which will bring both increased ultimate satisfaction to the individual and increased prosperity to the community.

51. The National Savings Committee, which directs and controls the Movement in England and Wales, includes representatives of the Government Departments and the various other interests concerned and also members elected by the annual conferences of the twelve areas into which England and Wales are divided. The Committee is thus at once a Government

Department and a voluntary movement, and from this it derives a large part of its influence. The Scottish Savings Committee plays a similar part in Scotland.

52. Under the general direction of these Committees, and their headquarters staff, assisted by some sixty officers responsible for particular areas, the detailed work is carried on through some 26,000 Local Savings Associations in schools, workshops, offices, clubs and so on. These Associations, which are managed by a great number of enthusiastic voluntary workers and sell Certificates outright or by small weekly amounts under various schemes, are perhaps the most important part of the whole organisation; in addition practically the whole country is covered by local Savings Committees, of which the Mayor or the chief representative of the local authority is frequently the President. Numerous public meetings are also organised in connection with the Movement and annual conferences are held in each area.

53. We have thought it desirable to give some general account of the Savings Movement in order to emphasise that it has been and is much more than a mere selling agency for Savings Certificates and is well qualified further to extend its efforts in the future should this be advisable. We make reference to such fresh efforts in connection with the Post Office and Trustee Savings Banks (paragraphs 141-147).

54. Savings Certificates, as mentioned above, were first introduced on the recommendation of the Montagu Committee of 1916. They were specially designed to give the small saver freedom to withdraw his money in case of need, combined with a strong incentive to leave it undisturbed for a considerable time. This result was secured by providing for repayment of the original purchase price on demand, with the addition of interest at a very moderate rate after one year, increasing considerably if the certificate were held for a number of years. The terms offered have from time to time been modified in the light of changing conditions, but the main principle remains unaffected. The purchaser of a £1 certificate of the current (or third) issue, in return for an initial payment of 16s. is entitled to receive 24s. after ten years, this amount being reached by the addition of 3d. after one year, and a further 3d. every four months thereafter, with a bonus of 1s. at the end of the tenth year. Certificates are generally not transferable; the accumulated interest is exempt from income tax, but, in order to prevent abuse of this provision, the total number of £1 certificates that may be purchased by one person is limited to 500. The effective annual rate of compound interest, free of Income Tax, is £1 11s. 3d. if the certificate is held for one year, £3 15s. 4d. if it is held for five years, and £4 2s. 9d. if it is held for ten years.

55. The sale of certificates has continued on a large scale, though not at so great a rate as during the War, except during the last part of the year 1921-22 when the yield was high in

relation to the general rate of interest and notice had been given that the price of certificates would be raised after 31st March. Withdrawals have also, of course, increased as the total amount of certificates outstanding increased and especially as the earlier certificates reached maturity. The total number of certificates expressed in £1 units sold up to 31st March, 1927 (including sales in Ireland up to 1921-22) was 805,796,584, costing £630,247,017, and the total amount outstanding in respect of principal at that date was £371,823,329 to which should be added approximately £121,000,000 in respect of accrued interest.

56. It must, of course, be admitted that savings certificates have certain special attractions which no savings bank or other Government security possesses, and probably a considerable proportion is held by the investing classes. The Colwyn Committee on Taxation and the National Debt noted that the Montagu Committee of 1922 were only able to express the opinion that "at least half" of the total sold up to 31st March, 1922, represented subscriptions by those classes whose needs the certificates were primarily intended to meet, and added that it was certain that a very large volume was held by classes outside those they were considering (the working classes), but in the absence of statistics no very definite inferences could be drawn. At the same time it is clear that savings certificates and the National Savings Movement generally are among the most important agencies for the encouragement of thrift. Moreover, as General Seely, Chairman of the National Savings Committee, emphasised in evidence, what they encourage most of all is long range thrift, which is thrift of a particularly valuable kind. 57. Our attention was particularly drawn to the arrangement under which Local Authorities are allowed to apply to the Public Works Loan Board (without regard to the ordinary limitations) for loans amounting to 50 per cent. of the gross sales of savings certificates in their areas during the preceding 12 months. During the year 1926-27 359 loans were thus granted, amounting in all to £3,302,554, and the total amount of loans granted up to 31st March, 1927, amounted to £12,808,445. One of the objects of this arrangement is, of course, to enlist the support of local sentiment by giving Local Authorities a direct interest in the sale of certificates, and we refer to it again in the second part of this report.

Building Societies.

58. The primary object of building societies is to lend money for the purchase of houses, mainly for personal occupation. They began as small local associations whose members joined together to raise by periodical subscriptions a fund to assist each other in the purchase of houses, and were indeed closely related to Friendly Societies, but they have gradually come to perform

many of the functions of Housing Banks, and the savings and investment department of their business is now almost as important as the lending department. They still remain, however, in form, mutual associations under the control of the Registrar of Friendly Societies, reckoning among their members borrowers as well as investing shareholders; unlike ordinary banks, they have no capital other than the funds placed with them, or more exactly, these funds for the most part actually are their capital, being in the form of shares. While these shares are strictly shares only and not comparable to banking deposits (though many Societies accept as well a proportion of deposits proper), they can usually in practice be withdrawn on moderate notice and are largely used for small savings.

59. Though the Societies make returns to, and their rules require the approval of, the Registrar, they are substantially independent and their practice as regards shares, rates of interest and other terms, both to lenders and borrowers, varies greatly. The general practice appears to be to offer a substantial rate of interest, usually 4 per cent. or 5 per cent., upon share investments exceeding a minimum amount or accumulated by small regular instalments, and lower rates on deposits, which have a prior charge on assets over shares, and on small amounts generally, all rates being free of income tax. We were informed that the effective annual average rate in certain large groups of societies varied from £3 19s. 11d. to £4 13s. per cent. (free of income tax). The Societies' liabilities at 31st December, 1926 (or the date of the last balance sheet preceding that date) to shareholders and depositors (the latter including a comparatively small proportion of other creditors) amounted to £183,450,403, and their assets to £193,856,034, with total surpluses of £10,405,631.

60. As a result of the great demand for advances and the good terms offered to lenders, and with the assistance of a vigorous policy of advertisement, the Societies have made great progress in recent years. The average amount per account, which seems to be increasing yearly, is much higher than the average in the Savings Banks, and this suggests that the Societies obtain a much larger proportion of their funds from the investing classes, but the amount of small savings coming into their hands is undoubtedly substantial.

Employers' Savings Banks.

61. Many large employers of labour provide special savings banks or other facilities for the encouragement of thrift for their own workpeople. The largest of these special institutions are the Railway Savings Banks with 150,254 depositors and £15,239,331 deposits (average £101 8s. 6d. per account). There are also, of course, numerous pension funds and co-partnership schemes, prominent among the latter being the schemes of the