The Hastings Standard Published Daily FRIDAY, NOV. 5, 1897. INTEREST RATES.

Hastings Standard, Issue 469, 5 November 1897, Page 2

The Hastings Standard Published Daily

FRIDAY, NOV. 5, 1897. INTEREST RATES.

For the cause that lacks assistance, For the wrongs that need resistance, For the future in the distance, And the good that we can do.

Some members of Parliament appear to take exception to the action of the Colonial Treasurer 111 reducing the rates of interest on deposits in the Post Office Savings Bank, and we confess we cannot grasp their argument in the matter. The discontented members we fear do not or cannot appreciate the position of the Post Office Savings Bank. We take it that these institutions have been established to encourage the thrifty, and by accepting deposits of minute sums this object is fairly accomplished. Those who wish to save a few pounds and can only do so by putting away shillings and such small sums at a time find the Post Office Savings Bank extremely useful and convenient. These people could not go to the financial institutions and banks with these small sums, and the P. 0. Savings Bank therefore serves a legitimate and useful purpose. Besides the small savings of adults the P. O Savings Bank accept the deposits of minors and young children, so that it may be said truly enough to encourage thrift. But while this is justifiable there is no obligation on the part of the State to incur a loss in this work. By giving excessive interest loss is occasioned to the Department, and loss must be made good out of taxation ; it then amounts to this that the community is taxed as a whole for the benefit of a few individuals ayd that surely cannot be right or just. The interest rates hitherto paid by the P.O. Savings Bank have been Si per cent on sums up to £2OO, and 3 per cent on sums exceeding £2OO, but not exceeding £SOO. Since the lstinst. there has been a reduction of i per cent and it is this reduction that is being made a peg on which to hang some idiotic opinions of finance. The Government department and the ordinary trading bank are widely different in their methods, and while the former receives deposits which may be withdrawn at any moment the latter insists upon fixed periods, varying the interest according to the length of time for which the money is deposited. The trading institutions have a wide field for utilising this money at a profit, and with pre-arranged periods for repayment bankers know exactly how much of these deposits it would be safe to invest for extended periods. The Government Department cannot 4o this, and the money lodged with

the Post Office Savings Bank is invariably invested in Government securities which do not as a rule retain more than 3A per cent. If you borrow money at 8b per cent, and relend it at the same rate you are at the loss incurred by account keeping, and that is exactly what has been the position of the Post Office Savings Bank. The money lodged has been invested at Si per cent, and the clerical work has to be borne by the country. Under the reduced rates there is a prospect of the Government making the Post Office Savings Bank self-supporting.

There is another feature that requires consideration. While it is admitted to be the duty of the State to encourage the thrifty it was never contemplated that the Government should enter into competition with other banking institutions. The high rates which ruled up to a few days ago had this effect, and it is therefore obviously a step in the right direction to bring down the rate. The old rates had this effect also, that the P.O. Savings Banks were being used by small capitalists who iustaed of being encouraged to throw upon the State the responsibility of finding a safe and profitable outlet for their money should be forced to undertake this work for themselves. While rates are high at the Government guaranteed departments these small capitalists will always fly to them, but they should not be encouraged in this. It is the investments of small capitalists in industrial concerns that gives a spurt to business and pushes industrial development forward. Instead of Membersof Parliamant finding fault they ought, we thiuk, to applaud the Colonial Treasurer for having the courage to reduce the interest rates, and they would, if they were better, informed press the Colonial Treasurer to considerably reduce the maximum amount upon which interest should be paid. We should like to see the amount reduced from £SOO to £3OO. A person who has saved £BOO does not require to be encouraged to be thrifty for he has already shown that the bump of acquisitiveness is fully developed ; it is the smaller people if we may use the term who require the tender solicitude of the State.