1922 Encyclopædia Britannica/Savings Movement

SAVINGS MOVEMENT. The origin and development of what became known in England as the &ldquo;War Savings Movement&rdquo; provides the subject-matter of one of the most interesting chapters in the economic history of the World War. In the United States, to which reference is made in a subsequent section, the Savings and Economy movement was no less remarkable.

Institutions for the normal encouragement of thrift on the part of the people of the United Kingdom were making steady progress up to the date of the outbreak of the war in 1914. From that date onwards the pace of their advance was materially accelerated. The amount due to depositors in the Post Office Savings Bank increased 28% in the decade 1903-13, while during the five years 1913-8 they increased by 42%. The amount due to depositors in the Trustee Savings Banks increased 3.2% in the decade 1903-13, while during the years 1913-20 it increased by 12.5%. These figures give a general indication of the growth of the savings of the people during the war period, but they do not tell the whole story. In the atmosphere created by the War Savings movement, and in the circumstances which for a time materially improved the financial position of the wage-earning classes, not only did existing savings institutions develop rapidly, but a new national thrift machinery was brought into being and its operations met with remarkable success.

Cost of the World War. &mdash; Within six months of the outbreak of hostilities in Aug. 1914, it became evident to those who were more closely in touch with realities that the World War would be a prolonged struggle, in which it would be necessary for the combatant nations to marshal their entire resources of production. Modern warfare was seen to demand not only that there should be a high percentage of the population in the fighting forces, but also large numbers of civilians producing on a huge scale military equipment of the most varied character. The enormous volume of goods and services which had to be requisitioned is best expressed in terms of the national expenditure. The largest amount spent by Great Britain in war in a single year before 1914 was £71,000,000. The Revolutionary and Napoleonic wars cost in the aggregate £831,000,000 spread

over 20 years, an average annual expenditure of £42,000,000; the Crimean War cost £675,000,000 in three financial years, or an average annual expenditure of £225,000,000; while the S. African War of 1899-1902 cost £211,000,000 spread over four years. In the face of the expenditure during the World War of 1914-9, these figures are insignificant. The money spent by the Government of Great Britain during the five financial years cannot be placed at less than from £8,000,000,000 to 9,000,000,000. At one period the average daily expenditure rose to the enormous figure of nearly 7,000,000 sterling.

It was not, however, till the year 1915 was well advanced that the full meaning of the cost of the World War in terms of goods and services began to be appreciated, even by those in high places. During the first few months of the war the inevitable dislocation of industry caused by the calling-up of men of military age and the interference with the normal markets led to a considerable amount of unemployment, and steps were taken by the Government and by the public for the relief of distress. This period of unemployment lasted but a short time and far less distress was caused than had been anticipated. The increased demand for men for the fighting forces and the rapid organization of special war work in many directions quickly absorbed the unemployed. Women were drafted into industry in ever-increasing numbers. In the meantime, the normal production of goods was reduced and stocks diminished. Prices rose rapidly owing to the excess of demand over supply and wages were raised sympathetically. Gradually a large amount of overtime became general, and, in many instances, owing to several members of the same family being in receipt of good wages and on account of overtime, the incomes of working-class families reached very substantial figures. By the summer of 1915 the purchasing power of the people of the country had been very considerably increased.

With the increased demand for goods which followed this rise of the purchasing power of the masses, prices mounted still higher; and with the growth of credit, which was required to cover the increased payments of wages, a dangerous situation was created. By the middle of 1915 it was obvious that it was of paramount importance that the personal expenditure of the people of the country should be checked, and that, in fact, the stopping of individual expenditure was quite as important as the raising of money for the war. It was seen that while from the financial point of view it was desirable that the expenditure on the war should be covered as far as possible by monies raised by taxation, and next by loans from money saved by the people of the country, it was equally important that the mass of the people should reduce their personal expenditure in order to release the resources of the country in capital and labour for the production of the essentials of war. The military advisers of the nation were calling for still larger numbers of men for the fighting forces. Recruiting became more and more urgent. The war factories were crying out for tens of thousands of hands for the production of the vast stores needed on all the fighting fronts. At the same time, the demand of the people through their daily expenditure, stimulated by high wages and big incomes, was automatically retaining labour in the production of things which were not only not necessary for their subsistence, but were often mere luxuries. Again, the expenditure of individuals tended to increase the purchase of imported goods, necessitating either increased exports demanding labour for their production, or adversely affecting the Exchanges and necessitating the export of gold or the sale of foreign securities. The real difficulty of the situation was seen to be the scarcity of human labour to produce the necessaries of war rather than the finding of money to pay for them. Thus the exigencies of the recruiting agencies and national factories led directly to the &ldquo;goods and services&rdquo; point of view and to an imperative demand for personal saving.

The dangers of the situation were emphasized by Mr. Lloyd George in May 1915, and it soon became evident that drastic steps would have to be taken to enforce economy throughout all ranks of the community and particularly among the wage-earners, whose aggregate purchasing power had reached

which made their personal expenditure the largest factor in the situation.

Early Efforts for Saving. &mdash; During the autumn of 1915, a vigorous mission was undertaken by a voluntary body known as the United Workers, who by the holding of lectures and meetings throughout the country did much to explain the facts to the people and prepared the ground for more concentrated effort later. About the same date a Parliamentary War Savings Committee was established, and through its efforts local war thrift committees were set up in a number of the larger towns of the country. All these efforts were, however, to a large extent ineffective, owing to the absence of any form of investment security specially adapted for persons of small means. The machinery of the Post Office Savings Bank and the Trustee Savings Banks, allowing for deposits at low interest, was inadequate to cope with the situation.

The history of the Post Office Savings Bank during the first year of the war fairly accurately indicates the trend of events. The outbreak of the war saw a sharp run on the Post Office Savings Bank deposits, a run accentuated by the actual shortage of coinage which persisted even up to the end of August. The net withdrawals from the Post Office Savings Bank Department from the declaration of war to the end of Aug. were £2,500,000 in excess of deposits. After Aug. 1914 confidence was quickly restored and deposits began to come in freely. Before the end of Sept. they had exceeded the withdrawals, and so completely did the tide turn that the deposits for the three months ended April 30 1915 exceeded the withdrawals by £4,400,000, or were £3,000,000 in excess of deposits in the corresponding quarter of 1914. For the five months from Jan. 1 1915 to May 31 1915, the balance due to depositors increased by over £6,500,000 as compared with an increase of £1,700,000 during the corresponding period of 1914.

Good as these results were in themselves, it became, however, increasingly clear that the Post Office Savings Bank alone, with the rate of interest on deposits at 2½%, was not sufficient to stimulate saving in the country to the extent that was necessary. Several times pressure was brought to bear on the Government with a view to getting the interest on the savings bank deposits increased, but this pressure was resisted. Other small attempts were made to attract saving. During the issue of the 4½% War Loan in June 1915, scrip vouchers of 5s. and 10s. and scrip certificates of £1 and £5 were issued by the Post Office. The scrip vouchers, when they amounted to £5 or a multiple of £5, and the scrip certificates could be exchanged at any money order post-office during the first fortnight of Dec. 1915, the owner being duly registered as a holder of a corresponding amount of War Loan and being given a stock certificate. Interest was allowed on the scrip vouchers according to the month of purchase and provision was made for repurchase by the Post Office at face value of any vouchers in excess of the £5 multiple. The aggregate result was that, between Nov. 1915 and Dec. 1920, scrip certificates amounting to £3,967,965 and scrip vouchers amounting to £1,049,838 were exchanged for 4½% or 5% War Loan or Exchequer bonds. The £5 scrip certificates were only exchangeable for 45 % War Loan, but the scrip vouchers could be held for subsequent loans. These were the chief official steps taken to facilitate saving by the people up to the end of 1915. In Nov. of that year the Government was pressed to increase the maximum sum which depositors might pay into the Post Office Savings Bank in any one year, but it was pointed out that this would require fresh legislation, the existing limits having been fixed by the Savings Bank Acts of 1891 and 1893.

Expression had been given to the need for action in a letter to The Times in the summer of 1915 from &ldquo;A Banker.&rdquo; The force of his contentions was widely recognized, and this letter may be regarded as the germ from which the War Savings movement was started. This was followed by an important manifesto signed by some of the foremost men in the world of business published in The Times in November. It was a

statement calling the nation to thrift and urging concentration on the production of essentials only, eschewing non-essentials by universal personal economy.

Montagu Report. &mdash; Finally, in Dec. 1915, the Chancellor of the Exchequer (Mr. R. M&rsquo;Kenna) set up a Committee under the chairmanship of the financial secretary to the Treasury (Mr. E. S. Montagu) to consider the question of getting contributions to War Loans from the working-classes. The final report of this Committee (Cd. 8179), dated Jan. 26 1916, marked the birth of the War Savings movement as a national organization.

An interim report had been issued on Dec. 28 1915, recommending the removal for the period of the war and six months after of the restrictions which limited the amount deposited by any one depositor in the Post Office and Trustee Savings Banks to £50 in any one year and £200 in all. The Committee also recommended that Exchequer bonds of the denominations of £5, £20 and £50 should be placed on sale at all post-offices, provision being made for the deposit of the bonds at the post-office and the issue of books in which the deposit of the bonds would be recorded. The Chancellor of the Exchequer recommended the adoption of these proposals and they were concurred in by a Treasury minute of the same date. Two series of bonds, with interest at the rate of 5% per annum and 6% per annum respectively, were on sale in 1916 and brought into the Exchequer nearly £44,000,000.

The final report of the Committee pointed out that there were two separate objects to be attained by the successful solution of the problem of the small investor: (a) the reduction of general consumption, which would tend to check the rise in prices; and (b) the raising of a certain amount of money for the prosecution of the war. The needs of the small investor were described as being: (a) a simple method of investing savings; (b) a guarantee that the capital value of the investment will not depreciate; (c) the ability to withdraw savings at short notice; and (d) the knowledge that as high a rate of interest is paid on the money of the small investor as on that of the large. It was further pointed out that both propaganda and organization were essential to success in making any appeal for savings. The report recommended the appointment of two committees one to carry on propaganda and to establish on a large scale voluntary War Savings associations for coöperative saving, and the second to devise and approve various schemes of saving and to safeguard their financial soundness. In order to meet the needs of the small investor the Committee recommended the issue of a new form of Government security in the shape of &ldquo;War Savings Deposits&rdquo; of 15s. 6d. each, each deposit entitling the subscriber to receive £1 on the fifth anniversary of the date of the deposit.

National War Savings Committees. &mdash; The Chancellor of the Exchequer adopted the recommendations, and on Feb. 8 1916 the two committees were appointed. (These two committees were amalgamated in the following April under the title of the &ldquo;National War Savings Committee,&rdquo; separate committees being established for Scotland and Ireland.)

War Savings Certificates. &mdash; On Feb. 19 1916, the projected savings deposits were issued under the revised title of &ldquo;War Savings Certificates.&rdquo; The War Savings certificate must rank as one of the most ingenious and successful financial instruments ever conceived. For the first time in history a security was offered to the people which by its nature tended to concentrate the mind on the growth of capital value through the accumulation of interest, rather than on the annual return in the form of dividends. This feature of the &ldquo;small investor's Treasury bill,&rdquo; as it has been called, has had, undoubtedly, a far-reaching psychological effect. It may be said to have projected the mind of the investor towards an ultimate personal use of the accumulated proceeds of his investment after a considerable term of years, and to have reduced the motive of investment merely as a means of providing an annual sum to be spent on its arrival. To the intrinsic merits of the certificate the success of the War Savings movement is, to a great extent, attributable. The certificates were purchasable for 15s. 6d. and could be cashed at

any time. At the end of 12 months a certificate could be cashed for 15s. 9d. After this period its cash value increased by a penny a month, and at the end of five years it could be cashed for £1; that is to say, an additional 3d. was added to the value at the end of the fifth year beyond the increase of a penny a month. Subsequently, by Section 4 of the War Loans Act, 1919, the life of the certificates issued, or to be issued, was automatically increased to ten years, the value of the certificates rising after the end of the fifth year by a penny a month until the end of the tenth year, when a further 1s. would be added, making the final encashment value 26s. By the Finance Act, 1918, Section 41, and the War Loans Act, 1919, Section 4, it was provided that the encashment of certificates held by any individual owner could be postponed beyond the period of maturity until the maturity of the last-dated certificate in his possession, such certificates held over increasing in value at a flat rate of a penny a month. Section 42 of the Finance Act, 1916, provided that the accumulated interest payable in respect to any War Savings certificate issued by the Treasury through the Post Office, under which the purchaser by virtue of an immediate payment of 15s. 6d. became entitled after five years to receive the sum of £1, should not be liable to income tax so long as the amount of the certificates held by the purchaser did not exceed the amount for the time being authorized to be held under regulations made by the Treasury. To avoid the serious consequences which would result to the revenue if income taxpayers generally were to use this form of investment, it was originally arranged to confine the issue of War Savings certificates to persons whose total income from all sources did not exceed £300 a year. Experience, however, showed this limitation to be undesirable. The necessity for a declaration as to income at the time of the purchase of the certificates caused administrative difficulties, and by reason of the income limit many wage-earners who were temporarily drawing large wages were unable to buy certificates. In view of these facts, the Committee recommended the Treasury to abolish the income limit, and the restriction was removed on June 10 1916. All formalities in regard to deduction and recovery, proof of exemption or title to abatement from income tax were dispensed with, and a limit of 500 certificates was put on the number allowed to be held by any one person.

By the Finance Act of 1918, it was provided that if a person's holding was brought by inheritance above 500 £1 certificates or their equivalent, the excess might be held without liability to any penalty or to income tax, so long as the person did not purchase for his own benefit, or have purchased for him, any further certificates while holding more than 500 certificates in all.

The savings certificate formed the basis of the operations of the War Savings associations, which were established under the auspices of local War Savings committees and affiliated to the National War Savings Committee.

War Savings Associations. &mdash; Not less important than the War Savings certificate was the system of association, or club, proposed by the Montagu Committee. In their final report the Committee pointed out that the would-be investor should not, if it could be avoided, be left to himself to seek for an investment. Facilities for investment should be provided by agencies in close touch with him; and these agencies, having succeeded in inducing him to save, should endeavour by careful propaganda and by thorough organization to persuade him to make the continuance of saving a matter of habit. The Committee emphasized the advantages of placing an agency between the small investor and the State which could collect and manage the savings of the small investor. It was pointed out that the Government could enter into no contractual relationship with the individual investor, unless it assumed complete control over the schemes adopted and also supervised in detail the actual administration of the societies themselves. They added that the organization of such control and supervision would require the creation of a new Government department, which, apart from the question of the expense involved, it would have been impossible to staff during the war. Also, the rigidity of procedure which a State system would inevitably involve would be fatal to the free local initiative on which the success of such a scheme would depend. At the same time, if societies, many of which have at their command no expert financial knowledge, were left free to develop schemes without supervision or control, some of them would not unlikely become insolvent. The problem was to obtain the best safeguards which could be secured for the financial soundness and efficient administration of the different schemes, while leaving the responsibility for both administration and results with the societies themselves, and they recommended that the committee which should be appointed by the Government, and to which the various investment societies might be affiliated, should be regarded, not as representing the Government, but as an independent body of experts acting on behalf of the societies themselves. Its duties would be primarily of an advisory character, but it could properly refuse to recognize any society the constitution and rules of which it did not approve and withdraw recognition from any society which might fail to satisfy the committee that it was being properly administered. The committee could, if it saw fit, organize a system of inspection and audit of the operations and accounts of the affiliated societies and by these means secure a very substantial measure of control over their operations.

Local War Savings Committees. &mdash; In accordance with these views, the War Savings Committee embarked upon a widespread scheme for the promotion of savings associations, delegating the propagandist work in a large measure to local committees which were set up throughout the country. Before the war was over there were in existence in England and Wales 60 county committees and 1,840 local war savings committees acting as propagandist agencies under the general control of the central body, while the War Savings associations set up under their auspices numbered over 40,000 with a membership of approximately 4,000,000 people. (At the end of 1920 there were still 1,701 local committees and over 28,000 associations.) A savings association could be formed by any number of people who were willing to work together to secure the attainment of its objects. In practice it was found that an association could readily be formed by those who were already corporate in some way; for example, by those who were members of a trade union, a friendly society or a coöperative society, by fellow workers in a shop or factory, or by the members of a church, chapel or social club. Each association had its governing committee, secretary and treasurer.

Scotland and Ireland, with their separate organizations, developed the movement on similar lines. The total number of voluntary workers in the movement was estimated to be between 200,000 and 250,000.

Official Agents. &mdash; By the end of 1917, when nearly 30,000 War Savings associations had been affiliated, there had been established on an average one association for every 1,200 inhabitants in England and Wales. Most of the social and industrial groups were covered, but it was realized that a large section of the wage-earning population and, possibly, the most highly paid, did not readily join War Savings associations. Many employees objected to joining associations to whose books their employers might have access. They were of opinion that knowledge of the fact that they were saving money might tend to diminish the force of any claim they might make for enhanced wages on account of the increased cost of living. With a view to reaching the prospective small investors of this class, it was decided to add to the number of places where War Savings certificates and National War Bonds could be bought. Certificates were on sale at all money order offices and at most banks, but the majority of the class of persons under consideration had no banking account and had no reason to enter a bank. The Post Office staff was obviously unable to make any special effort to push the sale of Government securities, having regard to the heavy mortgage on their time caused by the manifold additional duties which the exigencies of the war period cast upon them. It was therefore arranged to license certain tradesmen and firms as official agents for the sale of certificates and bonds. These agents purchased the securities outright with their own funds and received the certificates and bonds dated, but unregistered. They then resold the certificates and bonds to their customers and others. By the end of the war, these securities were on sale at more than 14,000 shops and other establishments throughout the country. Very large numbers of certificates in the aggregate were sold in this way. The success of the system is noteworthy in that it involved the sacrifice by the official agents of the interest upon the capital used for the purchase of stocks of certificates between the dates of purchase and sale.

Savings Schemes. &mdash; The National Committee, following the guidance of the Montagu Committee, had also set itself the task of preparing various model schemes of coöperative saving to meet the requirements of the people. The following schemes were evolved at various times: &mdash;

Municipal Savings Banks. &mdash; The Municipal Savings Bank (War Loan Investment) Act, 1916, authorized the establishment, subject to certain restrictions, of municipal savings banks in municipal boroughs with populations exceeding 250,000. The only municipality to adopt this Act was Birmingham, where a bank was started at the end of Sept. 1916. The &ldquo;Birmingham Corporation Act, 1919&rdquo; extended the powers of the Corporation and authorized it to establish a savings and housing bank.

Navy, Army and Air Services. &mdash; Although military savings banks and facilities for saving in the army had existed since 1859, with the recruiting of large numbers of civilians for the new armies it was found that the normal methods of saving were insufficient to attract very large sums of money.

On the issue of the 4½% War Loan in June 1915 it was felt right that due facilities should be afforded the men in the army for making their investments through the Post Office issue of the Loan. Arrangements were accordingly made for any soldier whose pay account was sufficiently in credit to invest by instalments of 5s., 10s., £1 or £5, the amount being debited to his account and transferred to the Post Office through the regimental paymaster. Similar arrangements were made for the navy and the scheme was found to work so smoothly that it was eventually extended to Exchequer bonds and War Savings certificates as they became available, and ultimately for deposits

in the Post Office Savings Bank. The Post Office undertook the safe custody of the War Savings certificates and bonds for the investors. Later in 1916, by arrangement with the War Office, a special officer was entrusted with the work of establishing war savings associations in the army, with very satisfactory results. In 1917, £186,682 was saved through the army associations; in 1918, £3,162,975; in 1919, £1,804,380; and in 1920, over £1,000,000, making a grand total of £6,000,000. In June 1920 the Army Council, finding the savings associations had such a beneficial effect, made an order that all units both at home and abroad should form savings associations, and arrangements were made for command paymasters stationed abroad to hold stocks of certificates. The Air Ministry at the same time issued an order on similar lines. The War Savings movement was also carried into the navy and merchant service, suitable arrangements being made for remittance of monies through the paymasters and pay offices.

Schools. &mdash; It would be impossible to give even the briefest summary of the War Savings movement without reference to the work done by the savings associations in the schools of the country. Thanks to the influence of the Board of Education, and, particularly, to the efforts of a number of inspectors of the Board who were lent for service with the National Committee and who acted as the secretaries of the county committees and as local representatives of the Committee in the provinces, but, above all, thanks to the whole-hearted efforts of thousands of schoolmasters and mistresses throughout the country, there was scarcely an elementary school in the United Kingdom without an efficient and vigorous association. Before the war a very large number of schools had their penny banks. No attempt was made to supplant these. With the coöperation of the savings banks in connexion with which these penny banks were operated, arrangements were made to continue the penny bank system with the savings association methods, and often the two systems were carried on in the same school side by side. The old penny bank system as a &ldquo;short term&rdquo; saving machinery had a value which it would have been undesirable to destroy, while it naturally led by stages to the &ldquo;long term&rdquo; saving by means of the certificate. Most of the schools continued their banks and associations after the Armistice, and in no section of the community is the movement more alive and progressive to-day. It is impossible to say what proportion of the savings of the country stand in the names of the children, but it must amount to many millions sterling and this alone must have an incalculable effect on the future.

Propaganda. &mdash; The human machine created by the National Savings Committee was stimulated, from time to time, by every kind of publicity method. Thousands of public meetings were held and lectures given; educational pamphlets and leaflets dealing with the elements of economics were distributed; special campaigns with such stimulating machinery as &ldquo;tank banks&rdquo; were inaugurated; a system of commissioners and organizers in touch with headquarters kept closely in touch with the local committees; special organizations dealt with the army and the navy, munition works and other factories. The local authorities rendered invaluable assistance to the local committees by the loan of staff, the provision of office accommodation and in many other ways. The London and provincial press were consistently sympathetic to the movement and gave freely of their space to record its activities and assist its campaigns. During the war the organization was, from time to time, utilized by the Chancellor of the Exchequer to assist in the public issues of War Bonds and War Loans. During these periods invaluable help was given by leading press experts, who, in cooperation with the National War Savings Committee, undertook the control of special publicity campaigns (see ). These campaigns for the special issues greatly stimulated the small investor. On each occasion of the issue of a great public loan numbers of new associations came into being and the weekly purchases of certificates were very much increased. One of the most significant results of the adoption of these methods of publicity and propaganda was the great extension

of the numbers of individual citizens holding Government securities. Whereas before the war it was estimated that there were some 345,000 holders of Government securities, it is calculated that no less than 17 million people have to-day a holding in some form of State loan; while the aggregate amount subscribed by small investors through the Post Office for War Loans and other Government securities, including savings certificates, was nearly £500,000,000 at the end of 1920.

Withdrawals. &mdash; The Montagu Committee laid emphasis on the fact that the small investor wishes to be able to withdraw his savings at short notice without loss of capital. &ldquo;The financial emergencies of life come upon the working man with startling suddenness. He may be thrown out of employment, or an illness or death in the family may result in an immediate call. He has not the facilities for credit which the wealthy or even the middle classes enjoy and money only obtainable at six or twelve months' notice is of little use to him.&rdquo; There is no doubt that the losses sustained by the working-classes from their investments through the Post Office in Consols and other similar long-dated securities through the automatic fall in capital value due to the rise in the general rate of interest has had in the past an adverse influence on thrift. Hence the arrangements that War Savings certificates should be repayable at a definite value which is never less than the amount invested, and within two or three days of demand, that is to say, allowing time for identification of the registered holder to avoid payment to a wrongful possessor.

Post-Armistice Period. &mdash; In 1917 a committee was appointed by the National Committee to consider what facilities for saving should be provided for the small investor after the war. The committee in their report stated that the habit of saving had, as a result of the War Savings movement, been formed by many people of all classes who had not previously acquired it, and that this habit ought not to be allowed to lapse and that the State should continue to encourage saving after the war by continuing to offer special facilities to the small investor. They saw no reason to suppose that the State would at any time be unable to use profitably the money of the small investor. They pointed out that the ordinary borrowing capacity of the State would be severely taxed by the necessity for renewing and, when possible, consolidating the floating debt, and they considered it worthy of serious consideration whether a plan might not be adopted for applying the proceeds of post-war borrowing from the small investor in order to secure funds for public utility services, such as the housing of the working-classes and other projects of social urgency, the funds for which it might be difficult, if not impossible, to raise otherwise for a considerable period. The committee strongly advised the preservation of the savings machinery established during the war and recommended the permanent continuance, subject to modifications, of the War Savings certificate. The continuance of the savings organization was also recommended by the &ldquo;Committee on Financial Facilities&rdquo; appointed in 1917. In their report, dated Nov. 21 1918, they said: &mdash;

In addition the undermentioned Savings Associations were affiliated under special schemes:&mdash;

N.B. &mdash; During the year ending Dec. 31 1920, 57, 787,499 certificates of a cash value of £44,785,311 were sold, and repayments, including exchange for War Loans, etc. (excluding interest), amounted to £31,829,879.

Immediately after the Armistice steps were taken to consolidate the position of the organization and to render permanent the machinery which had been set up during the previous three years. The county committees were disbanded, their work having been delegated to local committees which they had formed in practically every local area in the country. Steps were taken to devise a complete representative system throughout the organization. Adopting the association, or savings club, as the fundamental unit of the movement, steps were taken to ensure representation of the associations on the local committees. The local committees in their turn elected representatives on a new body called &ldquo;The National Savings Assembly,&rdquo; which was to meet twice a year to discuss questions relative to the movement and at one of these meetings to elect representatives on the National Savings Committee, which, by the authority of the Government, dropped the word &ldquo;war&rdquo; out of its title. At the same time the personnel of the National Committee was considerably strengthened. In 1921 it formed a powerful body composed of representatives of Government departments and corporations and interests connected with thrift, together with representatives of the savings organizations in London and the provinces elected ort a wide franchise, so that its continued influence could not fail to be beneficial to the community.

Savings and Local Government Finance. &mdash; In the summer of 1920 a step was taken which might well have far-reaching effects on the relations between local and Imperial finance.

The Finance Act 1920, Section 59, provided that 50% of the proceeds of the sales of savings certificates could be invested through the National Debt commissioners in local loans stock or bonds on the security of the local loans fund. Half the proceeds of the gross sales after Oct. 1 1920, in the area of each local authority, would be available, if required, for loans to meet authorized expenditure in connexion with the assisted housing scheme of that authority. These loans were to be made, irrespective of the ratable value of the local authority, by the Public Works Loan commissioners, on the terms in force for the time being for ordinary loans to local authorities from the local loans fund for subsidized housing schemes. In the first instance, such loans would be restricted to housing purposes, but it was hoped that, when the existing difficulties with regard to housing finance had been overcome, the scheme would be given a more general application and that the system would become a permanent feature of local finance, bringing to the aid of local authorities a new source of capital which many of them had long been seeking. The authorities derive the greater part of

the benefit under the scheme, since, although they receive only half the proceeds of the certificates sold, they are not responsible for finding any of the money required to meet withdrawals.

A critic of the ordinary savings bank in the last century said: &ldquo;The savings bank is after all only a slot in the wall, with a sure grasp, but no tongue to advise it. Having no fructifying use for the money that comes to it from productive employment it closes over it like a grave and effectually sterilizes it&rdquo;; and Sir E. Brabrook, Chief Registrar of Friendly Societies in 1897, said he &ldquo;could look upon ordinary savings banks merely as infantile efforts in thrift.&rdquo; He regarded &ldquo;a person who deposited his money in a savings bank so that it should be kept safe for him by someone else as very much less worthy of encouragement than a person who used his savings in some way in coöperation with other people for his own benefit or the benefit of others.&rdquo; He &ldquo;did not look upon the progress of the savings bank with unalloyed satisfaction, but only as one step to self-help.&rdquo;

The system of linking up National Savings certificates with local finance becomes, in effect, a national credit bank spread over the whole country. The credits of the small investor, even the half-pennies and pennies saved by the school-children, are rendered, through the machinery of the savings certificates, the Post Office, the National Debt commissioners, the Treasury, the local loans fund and the local authorities, available for investment in social and beneficial enterprise for the good of the people themselves. Owing to the widespread area from which the money is raised, short-term borrowing can be used for long-term loans with the minimum of risk, while saving is stimulated amongst the very class to whom in the past it has been most difficult to teach economy and saving. The linking-up of &ldquo;saving&rdquo; with the definite use of the money saved continues effectually the teaching of the war and inculcates the lessons of economy, and goes far to meet Sir E. Brabrook's criticism of the savings bank. The system is certain to stimulate the interest of the small investors in local finance generally. Not only will this be a source of financial strength to the local authorities, but educationally it will be a great advantage, and the active coöperation of the local authorities and the savings committee should do much to stimulate habits of thrift and saving.

(Author:Theodore Gervase Chambers)

Upon the declaration of war by the United States in April 1917 it became evident that the nation must practise strict economy if the huge war-time expenditures were to be successfully financed and material aid given to the Allies. Not merely in money, but in consumption (which means money), the resulting movement for economy among the American people was vigorously taken up. As a first step toward conservation, President Wilson on May 19 1917 outlined a food control programme and appointed Herbert Hoover Food Administrator, and Congress passed the law commonly known as the Lever Act, effective Aug. 10 1917 &mdash; &ldquo;an Act to provide further for the national security and defence, by encouraging the production and conservation of supply and controlling the distribution of food products and fuel.&rdquo; The administration of the Act was under the direction of a U.S. Food Administrator and a U.S. Fuel Administrator. The Food Administration summed up its purpose in the motto: &ldquo;Food will win the war.&rdquo; The following specific ends were sought: (1) to save food and eliminate waste; (2) to distribute food equitably and cheaply; (3) to stimulate production; (4) to prevent hoarding; (5) to save transportation; (6) to provide for the needs of the U.S. army and navy; (7) to secure the largest possible amount of food for the Allies.

The universal response by the people of the United States to the request that they lend money to the Government to provide necessary funds for the prosecution of the war was one of the most significant things of the war period. Millions of people purchased Liberty Bonds and Victory Notes in various denominations from $50 to $10,000 (see ), and other millions invested in the smaller War Savings securities. Early in the war President Wilson made the statement: &ldquo;I doubt that many good by-products can come out of a war, but if our people learn from this war to save, then the war is worth all it has cost us in money and material.&rdquo; This statement, together with the desirability of having the entire nation participate in financing the war, suggested the underlying purpose behind the war savings movement, which was put into operation in Dec. 1917. Section 6 of the Second Liberty Bond Act, approved Sept. 24 1917, authorized the Secretary of the Treasury &ldquo;to borrow from time to time on the credit of the United States for the purpose of this Act and to meet public expenditures authorized by law, such sums as in his judgment may be necessary and to issue therefor at such price or prices and upon such terms and conditions as he may determine War Savings Certificates of the United States on which interest to maturity may be discounted in advance at such rate or rates and computed in such manner as he may prescribe.&rdquo; The Act further provided that &ldquo;each War Savings Certificate so issued shall be payable at such time, not exceeding five years from the date of its issue, and may be redeemable before maturity, upon such terms and conditions as the Secretary of the Treasury may prescribe.&rdquo; A limitation of $2,000,000,000 was placed by the Act upon the amount of War Savings Certificates which might be outstanding at any one time; it also provided that no person should be sold at any one time certificates amounting to more than $100, and it also placed a $1,000 limitation upon the amount of certificates which might be held by any one person. The original Act was amended by the Act approved Sept. 24 1918, which increased the amount of certificates which might be issued from $2,000,000,000 to $4,000,000,000, removed the $100 limitation on the amount of certificates which might be sold to any one person at any one time, and also altered the previous Act by allowing persons to hold an amount not to exceed $1,000 worth of any series of certificates.

Pursuant to the authorization contained in the original Act, the Secretary of the Treasury appointed a committee of five, with Frank A. Vanderlip as chairman, to confer with him as to the form of security and the terms on which it should be issued. Following the recommendation of this committee, the Secretary of the Treasury offered for sale on Dec. 3 1917 an issue of War Savings Certificate Stamps, Series of 1918. Each certificate stamp when affixed to a War Savings Certificate (a folder with spaces for 20 stamps) would have a fixed maturity value of $5, with the date of maturity not to exceed five years, the purchase price to vary one cent each month throughout the year of issue, beginning in Jan. at $4.12, increasing to $4.23 in December. The stamps might be redeemed before maturity, their redemption value increasing one cent each month. There were also provided 25-cent Thrift Stamps, bearing no interest and not redeemable for cash, but to be accumulated on a Thrift Card until there were 16, when they could be exchanged for a War Savings Certificate Stamp by paying the additional odd cents necessary to cover the current price of the War Savings

Stamp. Succeeding issues of War Savings Certificate Stamps were on Jan. 1 1919, Jan. 1 1920 and Jan. 1 1921.

In addition to the original securities there were offered in July 1919 Treasury Savings Certificates, one of $100 and the other $1,000 maturity value. Treasury Savings Certificates were registered at the Treasury Department at the time of purchase and increased in redemption value monthly on the same interest basis as War Savings Certificate Stamps. In Jan. 1921 there were offered for sale $1 non-interest-bearing Treasury Savings Stamps and $25 Treasury Savings Certificates, in addition to the other Treasury Savings Securities.

Following the working out of the types of securities in 1917, an organization for their sale was effected. In addition to the- National War Savings Committee, consisting of the chairman and four members, the Secretary of the Treasury appointed six Federal directors, each having general supervision over approximately two Federal Reserve Districts; and 52 state directors, each of whom had complete charge of War Savings activities in his state or part thereof. The National War Savings Committee and the six Federal directors functioned at the National War Savings Committee headquarters in Washington. It was the duty of this sales organization to obtain coöperation from the heads of all enterprises operating nationally and then to decentralize the work through the Federal directors to the respective state directors coming under their jurisdiction, the ultimate goal being to offer every man, woman and child in the United States the privilege of aiding the Government by investing in Government securities, and at the same time to develop habits of thrift. The War Savings securities were put on sale at every post-office, at banks and in thousands of voluntary agencies. House-to-house canvass for their sale was made by postmen, boy scouts, representatives of insurance companies and members of women's organizations. In the autumn of 1918 the Treasury Department created a Savings Division of the War Loan Organization, which took over the work previously carried on by the National War Savings Committee, so that the people of the country might be taught for their peace-time value the lessons of thrift and saving learned during the war. The specific ends sought were: (1) to develop and protect all war issues of Government securities; (2) to sell Treasury Savings securities; (3) to make permanent the habits of regular saving and investment in U.S. Government securities. The Savings Division was placed in charge of a Director of Savings, with an organization in Washington, and one in each of the 12 Federal Reserve Districts.

School Government Savings systems were established. Instruction in thrift, saving and the principles of sound finance was introduced in schools throughout the nation. At the annual convention of the National Education Association in July 1920 a committee of state superintendents was appointed to work out with the Savings Division the best plans for placing the savings movement permanently in the American school system. The American Federation of Labor and various labour bodies passed resolutions commending the work of the Savings Division and calling on the Government to make permanent the policy of issuing small securities. Many local labour organizations invested their reserve funds in Government securities. In industrial plants throughout the country Government Savings Associations were established and the employees put aside small amounts regularly each week in Government Savings securities. Women's organizations of the country during the years 1919 and 1920 created the office of thrift chairman in their boards of officials. They took up the study of finance at club meetings, promoted the use of the household budget and with the savings thus effected purchased Government securities.

The total sale of War Savings securities from Dec. 3 1917 to Jan. 1 1921 amounted in round figures to $1,176,111,000. The total redemption of War Savings securities for the same period amounted to $415,174,000. (Author:William Mather Lewis)