Henry Duncan and the Savings Bank Movement in the UK Michael MOSS March 2011 World Savings Banks Institute - aisbl – European Savings Banks Group – aisbl Rue Marie-Thérèse, 11 ￭ B-1000 Bruxelles ￭ Tel: + 32 2 211 11 11 ￭ Fax: + 32 2 211 11 99 E-mail: first [email protected] ￭ Website: www.savings-banks.com HENRY DUNCAN AND THE SAVINGS BANK MOVEMENT IN THE UK Michael Moss, Professor Archival Studies, University of Glasgow Michael Moss is a professor of archival studies in the School of Humanities at the University of Glasgow. He was responsible for surveying and rescuing the records of the savings bank movement in Scotland and England before flotation. In collaboration with Iain Russell, he was commissioned by Sir Nicholas Goodison, Chairman of the TSB, to write a history of the movement, which was published by Weidenfeld and Nicolson in 1994 as An Invaluable Treasure: A History of the TSB. In 2000 he published a history of Standard Life, the Edinburgh life assurance company, which had similar values to those of the savings bank movement. He is a member of the board of the National Archives of Scotland and of the Advisory Council on Records and Archives. Reverend Henry Duncan was born at Lochrutton, Kirkcudbrightshire, on 8 October 1774, the third son of the minister Reverend George Duncan. Lochrutton is about six miles south-west of Dumfries in south-west Scotland. In the late 18th century it had a population of some 550 people, who were engaged mostly in farming. Reverend George Duncan complained that the landowners showed no enthusiasm for Reverend Henry Duncan. improving the agriculture of the parish, even though there was a flourishing export trade with the west coast of England. Henry Duncan was educated at Dumfries Academy before attending St Andrews University for two sessions from 1788 to 1790. At the time it was common for children as young as 14 to go to university, and for young men in general to spend a year or two at university before entering a trade. 11 He left St Andrews in 1790 to take up a position as a junior clerk in the Liverpool banking house of Arthur Heywood Sons & Co. The attraction of Liverpool for Henry Duncan was that his two brothers were already working there. However, unlike his brothers, he did not find the world of commerce to his liking. His employers complained he devoted too much time to literary pursuits and theological study. Deciding to follow his father into the church, he returned to Scotland to take classes at Edinburgh and Glasgow Universities where he was influenced by the jurist John Miller and the moral philosopher Dugald Stewart. He went back to Lochrutton in 1798 and the following year he was appointed minister of Ruthwell where he was to remain for the rest of his life. The church in Ruthwell, where Henry Duncan was minister. The weather in 1799 and 1800 in much of Scotland was cold and wet and the harvest poor. Henry Duncan responded to the plight of his congregation by arranging with his brothers to send supplies of Indian corn from Liverpool, which he sold to the needy at cost price. In a spirit of self-help, he encouraged women to take up spinning woollen yarn to supplement their family income and employed destitute labourers on his own land. 12 Recognising that such measures offered only partial solutions to the problems of poverty, he revived the local friendly society that had been founded in 1795 and had quickly become moribund. He rewrote the rules and regulations and improved its management. So successful was this initiative that he formed another society specifically for women. Soon over a quarter of the parish, some 300 people, were members of the two societies. Opposed to compulsory taxation, to provide relief to the poor and destitute, he was a passionate supporter of “self-help”. Such attitudes begged the serious question as to whether the very poor had sufficient marginal income to save, even in good times – a debate that still continues between those who are committed to state-sponsored social welfare and those who oppose it or at least wish to curtail the level of spending. After the resumption of the war with France in 1803, the price of food climbed and hardship, particularly in rural areas, became more acute. From 1808 Henry Duncan tried to inculcate ideals of thrift in the local community by publishing a series of tracts and articles in the Dumfries and Galloway Courier, which he had created with financial support from his brothers. These had a strong moral message – the provident and well- behaved could look forward to a secure independent future, while the improvident and dissolute, especially the intemperate, could anticipate ruin and destitution. Such moralising has continued to this day. Despite the success of the friendly societies, Duncan was not convinced that their rules and regulations, which required regular subscriptions, were appropriate, for they entailed collecting the uncertain savings of the poor. This led him to propose that savings banks with very simple regulations should be opened in every parish in Scotland. Although Scotland’s banking system, with interest bearing accounts, was more advanced than those of other countries, it did not provide services to individuals with only small amounts to deposit, and who were thus often obliged to keep their savings in cash or lend them in the local money market, which could be very risky. In May 1810 Henry Duncan opened the Ruthwell Savings Bank in the Friendly Society’s rooms. 13 Deposits were invested in commercial bank interest-bearing accounts. In a practice that became familiar in Scotland, the Kirk Session (the church elders) and the minister were trustees, while prominent locals were Deposit box of the Ruthwell Parish Bank. extraordinary members of the court of directors. Ordinary members had to make an initial deposit of GBP 1, while extraordinary members had to pay GBP 2 and honorary members GBP 5. This was very prescient of Henry Duncan, as the better-off depositors made only occasional additional deposits and almost no withdrawals, while ordinary members could be expected to make a large number of small deposits. The subsidy of small depositors by those with large balances persisted and was eventually a factor in the erosion of the savings bank ideal that led inexorably to privatisation. In deciding to open the Ruthwell Savings Bank, Henry Duncan drew on the experience of other savings schemes and friendly societies. In 1797 the utilitarian philosopher Jeremy Bentham proposed the establishment of what he called “Frugality Banks” or savings banks that would pay interest on deposits and that would be built The Wakefield family, with Mrs Priscilla and managed by a proposed Wakefield who created the ‘first distinct National Charity Company. Bank for Savings publicly set on foot for The following year Mrs Priscilla the benefit of the lower classes’. Wakefield established a Female Benefits Club incorporating a Children’s Bank in the parish of Tottenham to the north of London. Anybody could open an account for a child by making regular monthly contributions of a penny or more. At the turn of the century she converted her Female Benefit Club into a Benefit Bank, recognised at the time “as the first distinct Bank for Savings publicly set on foot for the benefit of the lower classes”. The Wakefields were a remarkable family. Her son Edward Gibbon Wakefield pioneered emigration to the Antipodes as a way of reducing the cost of poor relief. 14 The political economist Thomas Malthus, in the second edition of his celebrated 1803 Essay on the Principles of Population, writes, “To facilitate the saving of small sums of money for this purpose [he is referring to the purchase of a cow] and to encourage young labourers to economise their earnings with a view to a provision for marriage, it might be extremely useful to have County Banks, where the smallest sums would be received and a fair interest granted for them”. He elaborated on these ideas in the 1817 fifth edition, going so far as to suggest that by postponing marriage until sufficient capital had been accumulated there would be less need for the state to support needy families, as there would be fewer of them. Although he admitted that such a transition could not be effected quickly, his concept of “saving a portion of present earnings for future contingencies” has remained the bedrock of much of the rhetoric of thrift and providence ever since. Nevertheless, he later recognised that “the principle of saving taken to excess would destroy the motive to production”. While he extolled saving “as a most sacred private duty”, he had doubts about its public application, which a century later economist J. M. Keynes crystallised into his well known paradox of thrift: “a private virtue and a public vice”. In 1804 George Rose, a member of Parliament for Christchurch and vice- president of the board of trade, called for imaginative ideas to help solve the intractable problem of poverty. He was later to play a crucial role in promoting the savings bank ideal. Within a year John Bone responded to this challenge by advocating the abolition of poor relief and, along with what amounted to sheltered accommodation for old people, suggested that “a Bank should be opened to receive the small savings of the youth of both sexes, who have no dependence but their labour and economy, and to return them on the day of their marriage with the interest and premiums proportional to the amount”. With wartime inflation running high, Patrick Colquhoun, a stipendiary magistrate in London, expanded on these ideas by outlining a scheme for a National Deposit Bank for Parochial Savings managed and guaranteed by the government.