Income from the rating system (ie a tax on property), which had been established by the Poor Law Act of 1572, was used to provide relief for the poor at local parish level (workhouses, etc) and had evolved over the next three centuries to fund other local government services. The collection of the money raised by this tax was the responsibility of the Overseers (who were often unpaid) and the regulations under which they operated was laid down by law. The restrictions of this ancient law proved to be a hindrance to the efficient payment of the rates bills when an attempt was made to allow such payments to be made at the Bank. J P Hilton commented as follows in his book 'Britain's First Municipal Savings Bank':
The question of collection of rates presented a difficulty owing to the special requirements and responsibilities of the Overseers, who were a separate local authority. The Bank could not deal with rate demand notes in the same way as Corporation accounts were dealt with, because the regulations required the demand notes to be receipted by a duly appointed assistant overseer.
To meet the wishes of a few depositors, however, a scheme was devised for payment of rates through the personal accounts of the depositors, and in February, 1921, this scheme was instituted. Depositors signed a form authorising the amount to be paid over to the Overseers, the authority acting as a receipt for money withdrawn from the depositor's account. The demand note was left at the Bank, and transmitted to the Overseers at the end of the day, who, in due course, receipted the note and returned it by post to the depositor.
The idea of Rates Accounts being paid through the Bank seems to have originated with the Overseers, as indicated by the following report to a special meeting of the Finance and General Purposes Sub-Committee, made by the [General] Manager on Thursday, September 22nd 1921:
Payment of Rates at Offices of the Birmingham Municipal Bank.
(1) According to the Reports of the Overseers' Meeting which appeared in the local papers on September 16th and 17th, 1921, it is proposed to provide facilities for the payment of Rates at Offices of the Bank. The arrangement sought, according to the reports, is that ratepayers paying their rates direct should place in a deposit account weekly or otherwise amounts to suit their convenience towards the Rate, and that at the request of the depositor the Bank should remit to the Rates Office the amount to meet the demand. It is further reported that a notice explaining the arrangement will be issued with next half-year's demand for Rates, setting forth the details in simple terms. The paragraphs refer to collecting "Rates by instalment".
(2) It is a question of policy as to whether the Committee are satisfied that the association of rate-collecting will not have a deterrent effect on the successful working of the Bank. It is true that the collection of Water Accounts has been agreed to, but there is an important difference between associating the Bank with the payment of Water or Gas Accounts and the payment of Rates. The latter has always produced a feeling of annoyance which is not met with in Water Accounts to anything like the same extent.
As regards any of these extraneous duties it would be deplorable if, in dealing with them, the celerity of the ordinary Bank transactions were delayed, and above all, it would be a mistake to allow the Bank premises to become a gathering ground for complaints or arguments affecting the Rates.
(3) A point arises in considering this matter as to whether the existing powers of the Bank will extend to the suggested arrangements, or whether it will be necessary to obtain powers.
(4) The Rules do not permit any depositor to have more than one account, and if it is intended to have a separate account for this purpose, a rule would seem to be necessary.
(5) If the depositor's ordinary account is to be used for the purpose, is it intended that the deposits are to be ear-marked for the purpose or not? There are serious objections to ear-marking deposits for any particular purpose, and to do so would entail the keeping of additional records which would be equivalent to a separate account.
(6) It is presumed that the demand note would be issued by the Rates Office in the ordinary way direct to the ratepayer.
(7) To enable the Bank to carry out the proposal of paying the Rate direct to the Rates Office, the depositor would have (1) to transmit the demand note to the Bank, and (2) give a signed authority to the Bank to pay the same. In the latter case it would either have to be left to the depositors to decide the date when payment is to be made, or to authorise the payment whenever there is sufficient in the account to meet the demand.
The Rules provide that all deposits and repayments are to be regularly entered in the pass book, and that the pass book must be produced whenever any business is transacted. Thus, the pass book of the depositors would be required whenever a repayment was made, ie, when the money was withdrawn to meet the demand note. The depositor, therefore, would have to attend or send his pass book. The Bank could not be expected to notify him when to appear, and it is possible that some delay would arise on this account.
(8) The Bank would have to transmit the amount with the demand note and a schedule of the same, and a receipt would have to be given by the Rates Office for the same independent of separate receipts which would in due course go to the ratepayers from the Rates Office.
(9) The question of giving a Bank official power to operate a depositor's account is a serious matter of policy. It is a step which opens a wide door to temptation of a character which the Manager does not think it is wise to place before an officer without grave consideration on the part of the Committee. The Regulations require to be considered as to the liability (if any) upon an officer of the Bank for failing to account for any sums dealt with in the manner suggested, and whether it will be necessary to set up such liability. Also, whether the existing Regulations as to Settlement of Disputes are sufficient to cover a disputed account in this connection.
(10) Certain expenditure would be involved in the printing of (a) authorisation forms, (b) schedules for payment, and (c) receipt forms for the Bank, which it is presumed the Overseers would meet.
(11) The question of machinery to be set up is also to be considered. The present Branch Staff could not undertake the duties of transmitting the amounts to the Rate Collector's Office, and it would mean either (a) the Rate Collector calling periodically at the Branch to pick up the amounts, or (b) the business being dealt with at Head Office. To meet (a) money would have to be kept at the Branches to cover the demand notes (which is an objectionable practice), or in the case of (b) the demand notes would have to be sent in to Head Office by the Branches with a certificate that the amount had been deducted from the account, and orders could then be drawn upon the Treasurer weekly to correspond with the total of the demand note.
(12) Whichever method referred to in (11) above is adopted it will mean additional staff. So far as the Daily Branches are concerned it is quite clear that unless the arrangement is limited to Wednesdays, Thursdays or Fridays, it cannot be undertaken without detriment to the ordinary business of the Bank, while at such Branches as Aston and Lozells it will mean extra help. If the matter is dealt with at Head Office the question of staff will also have to be faced. The Evening Branches could not cope with more business unless the hours are extended or extra staff provided.
(13) The Manager would respectfully submit two alternative arrangements, viz:- (1) The ratepayer should be encouraged to make weekly deposits sufficient to meet the demand when due, and should draw from his account himself when he desires to do so. He could then deal direct with the Rate Collector. This would obviate any expense. (2) The ratepayer should deposit weekly to meet his demand, and should present his demand note with his pass book and sign as receiving the money from the Bank, and the Bank should receipt the demand note in the same way as the arrangements apply to the Water Department, the Bank forwarding schedules to the Rates Office and paying the money to the credit of the Treasurer of the Overseers. This would be a simpler method - the ratepayer would get his demand note receipted at once, - the Bank officers would not require to operate the depositor's account themselves, - and the Rates Office would be saved the necessity of making out two receipts.
The Town Clerk's opinion might be sought as to whether a Resolution of the Overseers appointing the Bank officials to act as Rate Collectors (as distinct from Assistant Overseers) would not be sufficient authority; or failing this, whether an order in the matter from the Ministry of Health could not be obtained.
(14) The question of payment for services rendered by the Bank in this connection will be to consider. Various methods could be adopted, as follows:-
(a) The Overseers to pay an agreed sum per year.
(b) The Overseers to pay according to the number of transactions, with a guaranteed minimum payment per year.
(c) The depositors should be credited with a lower rate of interest to cover the cost of working the system. This method is adopted by the Copenhagen Savings Bank.
After discussion of the report, the members of the Sub-Committee resolved (under Minute number 498) that, with the object of pointing out the advantages of the Bank as a means of saving money to meet Rate demands, this Sub-Committee agree to an advertisement for that purpose being issued with the Demand Notes for the October Rate, subject to the approval of the Birmingham and Handsworth Overseers;
498a The following draft circular was submitted and approved:-
The question of meeting the convenience of small ratepayers by providing facilities for the payment of rates has been raised in many parts of the Country, and the Overseers for the Parishes of Birmingham and Handsworth have made arrangements with the Birmingham Municipal Bank by which this object can be obtained.
Full particulars may be obtained on application at any of the following Branches of the Municipal Bank:-
(List and times of attendance)
This intention of the Sub-Committee was soon overtaken by the events of a few days later when a further special meeting of the same Sub-Committee was held in the Water Department's Committee Room on Friday, September 30th 1921. Present at the meeting were Alderman Lovsey, Councillors Appleby, Gelling, Keatley & Ward (for the Bank) and Sir William Bowater and Mr J R Woodward (Chief Assistant Overseers).
Councillor Appleby stated that the meeting had been called to more clearly determine the nature of the facilities to be afforded by the Bank to depositors in connection with the payment of rates, and to confer with representatives of the Overseers. After discussion it was resolved that Minute No. 498A be rescinded, and that an alternative notice be approved for circulation with the Demand Notes for the October Rate; and that the [General] Manager be instructed to take the necessary steps for affording the facility for any depositor wishing his rates to be paid directly out of his Bank account, to give a signed authority and produce his Rate demand note and Bank passbook, in order that the amount paid over may be entered as a withdrawal.
The Overseers being unable to accept the rates by instalments, the Birmingham Municipal Bank provides a simple and convenient method of saving week by week to meet the Rate Demand. Depositors can then draw on the amount paid in and deal with the Rate Demand themselves, or the Bank will at their signed request pay the amount to the Rates Department.
The Overseers' representatives agreed to the method outlined above, the content of the notice to be sent out with the Rate Demand, that the cost of printing the notice would be borne by the Rates Department, and that the question of any administration charges incurred by the Bank would be considered at a later date in the light of experience in carrying out the arrangements agreed.
Events moved quickly and the [General] Manager presented the following report to the Finance & General Purposes Sub-Committee on December 12th 1921:
Collection of Rates.
The form of authority and receipt has now been settled with the Town Clerk, and instructions have been issued to Bank Officials governing the procedure to be followed, a copy of which instructions is submitted herewith.
The Auditors to the Bank (Messrs Agar Bates Neal & Co.) have been consulted, and have expressed their agreement with the procedure laid down.
It has been decided that these transactions can only take place at Daily Branches on Tuesdays, Wednesdays, Thursdays and Fridays, it being found impossible to place further duties upon such Branches on Mondays and Saturdays without appointing additional staff.
As regards evening branches it is difficult to foretell what expense will be incurred, as it all depends on the extent to which the facilities are taken advantage of, but it has been arranged that at those Branches which are open three evenings per week, the extra assistance necessary shall be provided on the Friday evening by members of the permanent staff at the rate of 4/- per attendance. In cases where Branches are only open on one evening or two evenings per week, the extra assistance will have to be found from outside sources at the same rate.
The necessary printing has been put in hand at the Bank's expense in the first instance, but the whole scheme will be reviewed at the end of the present rate when the Committee will have had the experience of the Scheme, and particulars of the cost will then be submitted.
At the start of 1922 the Bank had been taking Water accounts across its counters for a few months, and by March 31st these had numbered almost 6,000. Many fewer transactions were involved for three minor (and short-lived) arrangements: the sale of National Savings Certificates; the cashing of interest coupons in respect of local housing bonds; and advances to land settlers. Of these three, only in the case of advances to land settlers was the sanction of HM Treasury obtained for the Bank to undertake 'non-bank' transactions.
Perhaps, however, with the pending arrangement for the collection of Rates accounts, the Bank's management chose to raise the matter at a meeting with the Treasury on June 15th 1922. The meeting covered a number of topics, including the Investment of Funds; Rates of Interest on Mortgages; Income Tax Liability in respect of Interest allowed to Depositors; the Payment of Corporation Salaries into BMB accounts; the Rate of Interest paid on Deposits; and Facilities for the Payment of Rates. A Memorandum was produced for use at the interview with the Financial Secretary to HM Treasury and this included the following in regard to the Payment of Rates:
On account of the increased rents many tenants whose houses were previously in the compound, and whose rates were paid by the landlord, have now to pay their own rates. From the citizens' standpoint this is undoubtedly an advantage, as the fact of direct payment necessarily interests the tenant in the government of the City and in the expenditure. The difficulty is that many tenants find it impossible to pay in one sum the amount of the half-year's demand for the Rates. In order to solve the difficulty some municipalities have adopted the system of collection by means of stamps, others by appointment of collectors; but no satisfactory method has yet been found.
The Municipal Bank provides the necessary machinery for a rate-payer to become a depositor, pay in a small sum weekly, and thus accumulate the amount necessary to pay the rate when it is due.
A scheme is at present time being worked through the Municipal Bank on these lines, and there appears every probability that it will be a great success. It may be necessary for the Treasury's sanction to be given to this development, and it is suggested that the Regulations should be amended by extending the powers of the Bank to the "receipt and payment of moneys on behalf of the Corporation".
Another example of the method by which the work of the Corporation Departments can be reduced and the citizens assisted is by the collection of the Water Rates. The area of Birmingham is over 40,000 acres, and the number of individual Water Rate payers is about 46,000. The concentration of this work in one Department at two periods of the year has created staff difficulties and inconvenience to the ratepayers. An arrangement has been made by which the Water Department contribute a sum towards the expenses of the Bank, and the Water rate payers pay their accounts at the Branch most convenient to them, and the money is then remitted to the Water Department.
On July 6th 1922, a letter replying to the points raised by the Bank was sent from the Treasury to J P Hilton; this contained the following paragraphs under the heading "Facilities for payment of Rates":
The Corporation suggest that the Regulations shall be amended as to extend the powers of the Bank to include "the receipt and payment of monies on behalf of the Corporation".
On this My Lords would point out that Section 11 of the Birmingham Corporation Act of 1919, in permitting the establishment of a Bank, specifically describes the Bank as a Savings Bank and provides for the receipt of deposits and the guarantee of the payment of interest on and the repayment of such deposits. Any alteration, therefore, of the Regulations on the lines suggested would be ultra vires as repugnant to the intention of the Act. Nor would Their Lordships be prepared to approve any extension of the functions of the Bank by legislation. In Their view it is important that a Savings Bank shall be confined to Savings Bank business and shall be carried on with the sole and single aim of benefitting the depositors. That this has also been the view of the legislators is proved by the various enactments regarding Savings Bank.
For the reasons above stated, it appears to Their Lordships that the arrangement under which a ratepayer, after accumulating by weekly deposits the amount payable by him in rates, gives an order to the Bank to pay that sum to the Corporation and also the arrangements for the collection of Water Rates are not covered by the powers which Parliament has conferred upon the Bank, and must be discontinued.