consider erroneous, and may condemn the vicious principle of allowing deficit to accumulate year after year without any attempt being made to curb its increase; but even although the replacement of the accumulated losses of sixty years has fallen almost entirely upon the present generation, grumble though we may at the costliness of our grandfathers' charity, we are bound by the "dead hand " just as truly as in the case of the national debt, the bequest of our race.

Had the Post Office Savings Bank been instituted in 1807 when Mr. Whitbread brought a Bill into the House of Commons "for promoting and encouraging industry amongst the labouring classes of the community," in which the Post Office was to have been the agent through whose intervention one great national institution in the nature of a bank was to be established, the Post Office Savings Bank Fund would in all probability have had as chequered a history as its precursor. The former had the immeasurable advantage of inauguration at a time when the effects of the subsidising of thrift by the grant of impossible rates of interest had at length been forced under the serious notice of successive Chancellors of the Exchequer, when habits of thrift had been formed partly, at least, at the expense of the Trustee Savings Bank Fund, and of being founded on a strictly commercial basis with intent at least to be no cost to the State.

It is very necessary when treating on the subject of the deficiency to define the position of the National Debt Commissioners. They are either trustees or bankers, but which? If the former, it is surely anomalous to forbid the trustees to participate in the profits of the Savings Banks or receive any remuneration for their services, while the State itself for which the Commissioners act, is bound by no such rule. Had the Post Office Savings Bank Fund not been mulcted to the extent of £1,500,000 by the abstraction of surplus interest, the Duke of Norfolk would not have had cause to lament the deficiency of the last two years. Even the poverty stricken Trustee Savings Bank Fund might have been £100,000 better off and the interest deficiency during the last seven years have been the less by the interest on that sum had not the State taken toll from both the Funds. If they are trustees it is no excuse to urge the fact of the heavy losses entailed by the older Savings Bank Fund. That was established by our grandfathers and received most grandmotherly attention, with the natural result that later it turned out a prodigal and came to be in want.

If, on the other hand, the Commissioners lay claim to the designation of bankers, it is largely invalidated by the fact that they do little else but charity banking. The first concern of a banker is to make a living, or in the case of a joint stock bank to pay a dividend to its shareholders. It is the manifest duty, therefore, of the banker, to himself or his shareholders, as soon as money on deposit is unable to earn sufficient interest to allow of a profit being made, to decrease the rate of interest on deposit money. The British public who are the share

holders in the case of the National Debt Commissioners have not only had no dividends for three years but have had to meet a call for money to meet deficiencies.

At the present time the crux of the whole Savings Bank question is the subject of the investments made by the Commissioners for the reduction of the National Debt. Their task is an extremely difficult and by no means an enviable one. By the very name they bear, they are engaged in denuding the market for cancelment of just those stocks which are required for the investments of the two great Savings Bank Funds. On both hands, therefore, they make the market against themselves. The amount of the Funded Debt at March 31, 1899, appears from the Budget speech to have been £627,505,000, of which no less than 33 per cent. was held by Government departments. When allowance is made for the large amount of such stocks held by banks, insurance companies, and trustees generally, it follows that the margin of free Consols is a rapidly diminishing quantity. Unless, therefore, steps be taken either to divert the national savings into other channels, or to widen the field of the Commissioners' investments, the vanishing point will inevitably be reached. Even at the present time Debt is being cancelled at a very heavy premium, and investments are made which do not even yield the rate of interest allowed to depositors, let alone management expenses. The Commissioners have, in fact, for some years been doing what many a bankrupt does, without being in that hapless position-living upon their past.

The investments made in Consols and other securities on account of the Post Office Savings Bank Fund during the last five years, appear to have been as follows:

TABLE VI.-POST OFFICE SAVINGS BANK INVESTMENTS.

It is impossible for the writer to estimate what rate of interest was earned on the investments other than consols or stocks, but bearing in mind the fact that they are all Government guaranteed securities, it would probably be well within the mark to reckon their earning powers at about 23 per cent. In the succeeding table, therefore, only the investments in Consols are considered.

TABLE VII.-POST OFFICE SAVINGS BANKS.

Average Rate of Interest and Management Expenses, and of Interest on
Consol Investments.

The average rate of interest allowed to depositors in the second column is obtained by dividing the gross amount of interest allowed to depositors by the gross amount of deposits at the end of the year, first deducting from the latter the amount of interest. The rate per cent. of expenses is stated in the Postmaster-General's Report. Allowing for the large investments made in securities other than Consols in the years 1893 and 1894, it is probable that the interest upon investments in these years may have exceeded the cost per cent. for interest and management of the deposits of the same period. It may well be doubted if such were the case in 1895, while in 1896 and 1897 when the investments in securities other than Consols were comparatively small, it becomes evident that upon the business of these years a very considerable loss must have been made. As the deficiency in interest for the year 1898 was only £450 greater than it was in 1897, it may be surmised that the National Debt Commissioners have bought Consols sparingly for the Post Office Savings Bank Fund during the last twelve months. Wherein lies the secret of the success of their investments, and what form these have taken can only be known on the publication of the PostmasterGeneral's next Report. So far, however, as the 21.3 million pounds of deposits are concerned, which were during 1896 and 1897 invested in Consols, even a reduction of the interest allowed to depositors to 21 per cent. in 1903 when interest upon Consols falls automatically to 2 per cent., would be insufficient to permit of that investment earning enough to pay interest to depositors and management expenses, unless indeed the rate allowed were reduced to 2 per cent. The same unpleasant truth of course holds good for every purchase of Consols when the price is above 110, and is naturally exemplified in the balance Sheet of the Trustee Savings Bank Fund as well. On that account in the years 1895-97 the following purchases of Consols (shown on p. 581) were made

To every one connected in any way with Trustee Savings Banks, these figures are of the greatest interest; nay, more, they are a dismal

portent, for upon the earning power of the investments made on behalf of the trustees, depends not only the rate of interest allowed to depositors, but the very existence of the institutions which the trustees have fostered, and to which for many a long year they have devoted time and service with but little thanks, and with no reward but barren honour added to a certain amount of risk. It is one of the highest proofs of national character perhaps, that men can be found to labour thus for the public weal with no hope whatever of personal profit in any shape or form.

On account of the two Savings Bank Funds, therefore, in 1896 and 1897, a sum of more than 29 million sterling has been invested in Consols, which will not in 1903 be able to earn sufficient to pay the cost of management and the interest to depositors, unless the rate of interest allowed be reduced by a half per cent., viz., to 2 per cent. To that must be added Consols purchased in the intervening period for which a very moderate estimate would be six million pounds per annum-unless, indeed, war should break out, in which case the position of the National Debt Commissioners with no gold reserve, would be even more unenviable than at present.

The question of gold reserve, however, appears also about to be taken into consideration to judge from the following quotation from the Manchester Guardian in reference to the speech of the Chancellor of the Exchequer at the bankers' dinner on the 28th June last.

"It had been suggested that if that [a wide area for investment] were given a certain amount of the Savings Bank deposits might be held in gold. He had no doubt if a change could be made so as to aid in the maintenance of a cash reserve in the country sufficient to meet the real requirements of the community Parliament would be prepared to give such a proposal the serious attention it deserved."

There appear to be four methods of relieving the Commissioners from their difficulties. First by the enlargement of the area of their investments at least to include certain classes of trustee stocks. Having had the honour for many years past of serving his fellow townsmen upon their town council, the writer is to some small extent conversant with the rates of interest charged on loans by the Public Works Commissioners. Outside their borrowers, too, profitable rateguaranteed investment can be obtained. Only the other day it was reported in the papers that the London County Council was arranging to lend the London School Board, £200,000 at 2 per cent. Might not

such loans be made direct from one or other of the two great Funds, instead of the National Debt Commissioners buying Local Loans Stock at fancy prices? It would at least postpone the evil day of the reduction of depositors' interest. As such loans are generally for periods varying from thirty to fifty years, and the danger of locking up a large proportion of the funds in these long-term unmarketable securities should be avoided, a maximum would have to be fixed for this class of investment, say 20 per cent. of the total amount. It is probable that such a proportion would represent very little beyond the amount of unclaimed deposits, together with those deposits which have remained untouched for years. The cases of default by large towns in this country are certainly most exceptional, if indeed such has ever occurred, and the possible loss to be made good to the two Savings Bank Funds by the State could not well under such a system of loans be greater than it is at present. From the reply of the Chancellor of the Exchequer to a question in the House last year upon this very subject, it is evident that the Government has a deeply-rooted objection to any legislation in the direction of widening the area of the Commissioners investments, and yet the supporters of the present Government never call in question the wisdom of such an outside investment as the Suez Canal Shares.

The second method to relieve the Commissioners, that of an immediate decrease of interest, has also hitherto received no support from the present Ministry. A third would be the reduction of the annual and gross maximum allowed to be deposited-retrogressive legislation not likely to find favour with any Government, which has sooner or later to appeal to the suffrage of the millions of depositors.

But means might be found to deflect the savings of depositors to other investments without enhancing the liabilities of the already over-burdened Commissioners. What appears to be required now is not simply an adaptation of methods which have existed for half a century or more, and have been amply sufficient for conditions which are rapidly changing. A fresh constructive policy must be sought in line with the more modern ideas of the relationship between the State and the individual.

Government has promised two Bills, the one to amend the law relating to Joint Stock Companies, in connection with which it may be noted in passing that Mr. Stewart, the late Official Receiver in Bankruptcy, calculated the annual loss to the investing public to be about twenty million sterling, a large proportion of which finds its way into the pockets of dishonest promoters. The second Bill is intended to curtail the powers of the money-lenders. So far as the Trustee Savings Banks are concerned, power might be given to the Trustees to extend the business of these institutions by the inauguration of a scheme analogous to the People's Banks of Germany. Depositors might be allowed to assign a portion of their savings-in the experimental stages the maximum should not be in excess of £20-—for loans