A UNIQUE BAROMETER

Evening Post, Volume CXXVIII, Issue 1, 1 July 1939, Page 8

A UNIQUE BAROMETER

.When Post Office Savings Bank deposits were rising, members of the Government pointed proudly to the fact and said: "It is the best baro-

meter you can have. It means prosperity." Now that there has been a heavy fall and the Minister of Health and Education is asked what the barometer, indicates, he still says: "Prosperity—diffused prosperity." He attempts to justify this by stating that the withdrawals; hays been principally from the big accounts kept by ' business people at call in the Post Office and earning interest Accounts in the highest interestearning category (£IOGO-£2000), he states, fell in number last year from 8193 to 7078 and involved an amount of £1,672,000. But at March 31, 1937, depositors in, this class numbered only 7325 and in that year deposits* exceeded withdrawals by £3,634,966. It requires more than the loss (as between March 1937 and March 1539) of 247 big depositors to explain away a change of almost £,8,000,000 in the flow of funds—from £3,600,000 excess deppsits to over £4,000,000 excess withdrawals. If the better industrial condition of the country attracted the money to industry in 1938-39, as the Minister suggests, why was there not' the same attraction in 1937-38 or 1936-37? Mr. Fraser's suggestion that some of the money found its way into the recent internal loan does not explain withdrawals in the year ended March 31, 1939. The loan was not.issued until six weeks later. No doubt the internal loan will account for withdrawals in the current year, but it was not a factor last year.

We can agree with the Minister, however, that the Post Office Savings Bank is a good barometer; where we differ is in our reading of it. The Savings Bank is. pre-eminently a bank for savers, not investors, nor largely business men. It gives what savers want-—security, the security of the country, with the resources of the Reserve Bank which can enlist the cooperation of the trading banks. When, therefore, its funds decline it is an indication that the savers,' or some of them, have less to save, The Minister showed thatthe number of depositors had increased but he did not give the amount of the average account. Had he done so we think it would have been seen that there.was a decline in funds to the credit of depositors in the medium grade—say, from £200 to £300— showing that, with higher costs, these people had not -put by as much as formerly. It may be also that they did not try to do so, The Minister. | said that many old people had with' drawn balances to provide them* ! selves with homes as they knew they were secure under the Social Security, This may be so, too, and it may go further than the Minister guggestecl, It may account for the decline of deposits through the withdrawal of money, not only for home purchases, but in order to qualify fully for the age benefit under the means test. .

Various of the Government in the past have decried individual thrift and favoured com-, munal provision for age, sickness, and the misfortunes of life. It is possible that many people have taken this to heart—especially when , encouraged by means ; test Social Security—and ;have resolved to eat, drink, and be merry for tomorrow the Government will provide. If so, it has a double effect—*the individual has less savings and the community has less capital. And capital, as Mr. Nash pointed but to the Labour Conference, is essential for industrial progress. The loss of individual savings, moreover, is not counteracted by an increase in communal or group savings as in real superannuation and insurance schemes. In these, a big joint fund replaces numerous small funds. But the Social Security scheme has no capital fund and none is proposed for it. It just draws upon, or. should we say drains, revenue., This is an effect which was probably not foreseen, except by those who consider all capital un» necessary and would have the con> munity.substitute something they call credit. It is not an effect that can l|e welcomed except by those who would discourage thrift and bring in new and dangerous fancy monetary schemes.