I enjoyed the article “Heart of Old Quinton” by Keith McDonald in Oracle No.18. His mention of the Quinton Municipal Bank brought on the following.
Taken from “Britain’s First Municipal Savings Bank”
Published in 1927 by J. P. Hilton, the first Manager of the Bank in 1916.
It was in 1915 when Neville Chamberlain, then Lord Mayor of Birmingham, first thought of the idea of a Municipal Bank. He frequently received appeals from London to raise money on behalf of the war effort, but felt that none of them was aimed at the ordinary workers, to give them the chance to support the war effort.
He thought that civic pride might well aid the success of a Municipal Bank, and considered the machinery for collecting small contributions and the provision of a reserve which would help these contributors if there was a period of industrial depression after the end of the war. Accordingly, he met with the local Trade Unions, outlined his ideas and asked for their considered opinions. The response was enthusiastic. The scheme was examined by leading bankers and other financial experts and given fair and helpful criticism.
In April 1916 Mr Chamberlain formally brought the scheme before Birmingham City Council Finance Committee. The main idea was that the Corporation should open a savings bank in which workpeople could make deposits by deductions from their wages. It was aimed at employees in any factory, shop or office in the city, at the people who had never acquired the desire or the habit of saving. The money would be invested with the Government but the investors could withdraw their money at any time without loss of principal or interest. The response was enthusiastic.
Statutory powers for the Corporation had to be obtained. They applied for temporary powers (for the length of the war) but from the start they hoped it would be successful enough to be made permanent. Later that month a special Bill was introduced in Parliament to authorise local authorities with a population of 50,000 or more to establish Municipal Savings Banks to help investment of savings in securities for the purposes of the war. These Banks were not to be carried on for longer than the last fixed repayment date of any securities invested in the Fund. Hopes were high but the Joint Stock Banks took fright at what they saw as an incursion into their monopoly, and the Bill was dropped.
It seemed to be a disaster, but the Lord Mayor met with the Banks, made concessions, and renewed negotiations with the Treasury, until all the difficulties were removed. An amended Bill was introduced into Parliament in July 1916 – population requirement increased to a minimum of 250,000, deposits to be received from employed people only, whether by deduction from wages or not, £200 maximum total investment, £1 limit on withdrawals on demand, Bank’s life restricted to 3 months after the end of the war and other limiting factors – and the Royal Assent was given on 23rd August 1916. (Note the speed of all this!) There were many enthusiastic helpers in this project, but without the persistence and efforts of Neville Chamberlain it could not have succeeded.
Their first office was a small portion of the semi-basement in the Council House, occupied by part of the water department – a counter about 15 feet long with a screened-off part behind of about 9 feet by 5 feet. On the 18th September 1916 the committee appointed Mr. J. P. Hilton as Manager and decided to open for business on 29th September, with fixed hours, and circularised 2,350 employers and other places.
Many workers feared that their employers would in some way take advantage of any knowledge gained of their financial affairs. Because of this, enthusiasts produced a flood of propaganda exhorting people to save, and both workers and employers became keen; the latter allowing meetings in working time to explain the scheme to the workers. Neville Chamberlain addressing one meeting said, “ Although under existing powers the Bank has to be wound up 3 months after the termination of the war, I promise you that if it is really shown to meet a need, not all the bankers in Lombard Street will prevent it becoming a permanent part of the municipal undertaking.”
At first one shilling (5p) coupons were used as a savings method. The employee stated how much he wanted to save and the employer bought the coupons from his Bank. The employee then received the coupon(s) with his cash in his wage packet.(See sketches below).
Twenty gummed coupons were stuck on a card which was then taken to the Municipal Bank and exchanged for a £1 entry in a passbook.
By 1918 the growth of the Bank made it necessary to find more premises. They tried Branch banks in works, to deal with coupon cards, pass books and withdrawals. Amongst these places were B.S.A., Austin, Wolseley, Dunlop, G.K.N. and Cadbury’s.
The Bill under which the Bank was established contained financial restrictions on their investments, limiting them to certain classes of funds. These gave reducing returns until the interest received equalled the interest paid to customers. When the Treasury would not change the restrictions (from which they benefited) the Bank Committee recommended that the City Council honour their promise to underwrite any loss. This they did.
This temporary Bank ceased to take deposits on 31st October 1919. After 3 years and 1 month it had had 24,400 depositors who paid in roughly £603,300 and withdrew £295,700. It closed with a deficit of almost £7,150, which was paid by the Borough fund and subsequently repaid to the Borough fund by the new Bank.
Between the end of the war and the closing of the temporary Bank, moves went ahead to seek permission in the House of Commons for a permanent Municipal Bank, with less restrictions on investments, a Housing Department, a removal of maximum total deposits limit, cutting out employers’ participation (to give more privacy to savers) and removal of the requirement for depositors to be employed persons.
The Royal Assent was received on 28th August, and having already approved draft rules, etc., on 1st September 1919 the Bank opened with a Head Office and 17 branches, 5 of which were opened each day and others part-time. These decisions were guided by the number of depositors at the temporary Banks in each area. The properties were either rented or leased at first, until they knew whether they had chosen good positions. The modesty of the premises was approved by most of the depositors as prudent. When the temporary Bank had to close, all the depositors were invited to transfer their funds to the new permanent Bank and out of 24,400 open accounts, almost 22,600 did so.
The old accounts had to be closed and new ones opened and a name given to the new Bank. The coupon system was abandoned in favour of cash over the counter at the Branches. For the new Housing Department, officials visited existing schemes in other towns before choosing their own.
The success of the Bank meant that Head Office needed more space than could be allowed them in the Council House and in 1925 they moved to 6 and 8 Edmund Street. By 1927 the need for bigger premises was again becoming urgent. The Savings Bank Dept. grew from 17,000 plus in March 1920 to 36,000 in March 1927 and transactions nearly doubled to 3,000 per week. Mortgages went from 130 to 530 during the same period – a time when very few working people even considered the possibility of owning their own homes.
The ‘home safe’ was introduced in 1922 and became very popular (See sketch below). In March 1923 almost 2,500 were in use and by 1927 about 18,400, having brought in £154,000 and 6,900 new accounts. The school savings bank had been in existence for many years but now children were being encouraged to put any balance due to them when they left school into an account with the Municipal Bank.
The new Housing Department faced lots of decisions about how to tackle things within its regulations. How much can it advance on a property and when can it offer a mortgage on more than one property? Can a mortgage be given to a married woman without her husband being a party to it? What about leaseholds and insurance? In 1922 the Council decided to allow Council tenants to buy their own homes on helpful terms, the money from such sales to go towards the erection of more homes. Then, to ease the housing situation (and increase the Bank’s business) it decided its rules allowed it to advance stage payments to persons building houses on freehold land within the city. Originally it advanced money only on completed buildings, but now it was advancing money for the part which was built.
Ed’s comment – Thank you Stella for sending me this article by J P Hilton published in 1927 I am sure it has given everyone an insight into the BMB. Hopefully, next month I will include Stella’s experiences of working in BMB-Quinton branch and beyond.
© QLHS – Stella Linnington 2003
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