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

Montagu Report. Finally, in Dec. 1915, the Chancellor of the Exchequer (Mr. R. M'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, recom- mending 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, pro- vision 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 respec- tively, were on sale in 1916 and brought into the Exchequer nearly 44,000,000.

1 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 gen- eral consumption, which would tend to check the rise in prices; and (b) the raising of a certain amount of money for the prose- cution of the war. The needs of the small investor were described as being: (a) a simple method of investing savings; (b) a guar- antee that the capital value of the investment will not depre- ciate; (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 cooperative 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 " War Savings Deposits " of 155. 6d. each, each deposit entitling the subscriber to receive i on the fifth anniversary of the date of the deposit.

National War Savings Committees. 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 " National War Savings Committee," separate committees being established for Scotland and Ireland.)

War Savings Certificates. On Feb. 19 1916, the projected savings deposits were issued under the revised title of " War Savings Certificates." 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 accumula- tion of interest, rather than on the annual return in the form of dividends. This feature of the " small investor's Treasury bill," 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 accumu- lated 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 cer- tificates were purchasable for 153. 6d. and could be cashed at

any time. At the end of 12 months a certificate could be cashed for 155. 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 i; 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 is. would be added, making the final encashment value 265. By the Finance Act, 1918, Section 41, and the Wa'r 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 155. 6d. became entitled after five years to receive the sum of i, 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 author- ized 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 limi- tation 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 exemp- tion 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 i 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 pur- chase for his own benefit, or have purchased for him, any fur- ther certificates while holding more than 500 certificates in all.

The War Savings certificate was ingenious not only from the financial standpoint, but also in its form. The certificates were issued in books, upon the cover of which the name of the holder and his address had to be inscribed. The book was of no value except to the person whose name was written upon it. The certificate con- tained a small panel on its right-hand side, to which the receipt for the purchase price had to be affixed, and the certificate was not valia until this had been done. The receipt was printed on green paper, and each receipt had a number which became the official number of the certificate. The certificate was registered at the money order department of the Post Office as belonging to the par- ticular individual in whose name it was issued. It was necessary to have the signature of the owner to prevent the certificate being cashed by any unauthorized person. In order to provide for this, the receipt which was affixed to the certificate was only the left- hand portion of an original form of receipt, while the right-hand portion, having upon it the corresponding number, had to be filled in by the applicant and handed back to the postmaster. This por- tion contained the full name and address and signature of the pur- chaser and formed the basis of the registration system. When the certificate was cashed at a later date, the number on the certificate and the signature of the applicant on the request for repayment could be compared with that portion of the receipt which had been filed. Certificates might be bought by one person on behalf, and in the name of, another person, the signature of the beneficial owner being, if possible, supplied. A cut-out signature from a letter or other document was accepted, but if a signature was not available, it was obtained later by the Post Office. In the case of children under seven years of age the signature was not required. After the receipt had been stuck in the certificate book and a certificate had thus been completed, it could only be transferred to another person in exceptional circumstances and by permission of the Postmaster-