Finance—Public and Private

Cheques and the Public

As might have been anticipated, the plan of the Midland Bank for substituting " receipts for small cheques of under .t2 has excited quite a keen controversy and was the subject of a "statement in the House last week by the Chancellor of the Exchequer. In the last issue of the Spectator I referred to the plan which had been initiated by the Midland Bank, but in view, of the interest which has been aroused in the matter, it may be useful to place on record the exact-form of the " receipts "in question.

!NIS PIECE., MUST ONLY Mt %AID IOR Apt060,111 uNOCW £2.

0287 .ce‘kied,919 @AA/„WaiiiRaN,Zinete, . IIRAPICH

1/v-own/I

,de",e/eic4,9.47,71,6r.c..~n4

SPECIMEN OF MIDLAND BANK RECEIPT.

It may be recalled that when the original announcements appeared in the Press they were accompanied by the statement, on the authority of the Midland Bank, that the matter had been submitted to the Inland Revenue authorities, who had raised no objection whatever to the proposal. A _few days later Mr. Winston Churchill, in . the House of Commons replying to a question, said : "With reference to the new move of the Midland Bank as to non-stamped cheques for small sums, the general legal position of I hese receipts was primarily a matter for the consideration of those who issued them and these who wed-them:. Nevertheless a number of questions of public interest and the revenue aspects of the proposal were also important. Neither the Board of Inland Revenue nor the Treasury, still less BM. Government, had been consulted on or expressed any opinion upon the principles involved. The Government were consulting counsel on the question of the liability of these receipts to stamp duty. He was not yet in possession of the legal view, nor could he at present form any reliable estimate of the possible loss of revenue.

"He was prepared to say that should it be found necessary to safeguard the revenue from serious inroads detrimental to the finances of the year, there would be ample time to deal with the mat ter before the committee stage of the Finance Bill."

RECONCILING TIIE Two STATEMENTS.

It will be noted from the foregoing that the Chancellor's statement appeared to be very much at variance with the assurance given by the 11idland •Bank as to the consent of the Inland Revenue authorities having been obtained, but this point I should regard as Of Small iinportanee because both statements are doubtless . really accurate. In the judgment of the Chancellor of the Exchequer, real consent to such a proposal can doubtless, only be regarded as having been afforded when the permission has been given as a result of careful Consideration -by the entire -Inland Revenue Board, and, possibly, as .a result of conversation's between that Board and the Treasury. In the banking world, however, decisions on points connected with stamping have often to be obtained at short notice and usually under such circumstances the decision of some Inland Revenue official is regarded as .decisive and good enough to go upon. This point, therefore, as I have said, is comparatively unimportant, but Of-- much greater importance and interest is the, question of the desirability or otherwise of the free, use of these "' Receipts " in lieu of the cheque.

POINTS IN FAVOUR. •

There are, I think, two main points to be made in favour of the use of these "receipts." The first is the general conveRience to the public and the. avoidance of the twopenny stamp which in the case of cheques undet £2 is undoubtedly an onerous impost and one, moreover, which is not levied in a great banking country like the 'United States, so that it can fairly be urged that the public here and even small trade transactions are unneces- sarily harassed by the twopenny cheque stamp. Further, . there can be no question that if the small Receipts " • in lieu of cheques became extensively used there would be a considerable economy in the matter of Treasury Note circulation, while it is even conceivable that the movement might tend to popularize the opening of small banking accounts and prove an incentive to thrift.

SOME DRAWBACKS.

• But while these points in favour of the " chequelets," . as they have come to be called, can freely. be admitted, • there are undoubtedly other considerations which have _ to be borne in mind. In the first place, there would obviously be a heavy loss to the Treasury which would arise not only out of a reduction in the volume of stamped cheques circulated, but also in the number of Postal . Orders, inasmuch as it would be possible to fill in these " receipts " for • exact amounts for anything under £2. • Moreover, it is easy also to see ways in which the " receipts " might be abused and payments for over 12 be effected by the handing over of two "receipts instead of one stamped cheque for the full amount. Nor, of course, would there be the same protection to the public as in the case of a cheque, because there would be no system of crossing; -

..A.UTHORIZATION—NOT INSTRUCTION..

Here again, however, we arc up against another point of dissimilarity between the " receipts " and the cheque, because whereas the cheque is practically a coinmand to the bank to make the payment, the " receipt " is only an authorization, customers of the bank taking out these books of "receipts," signing, in the first Place, a form in which they authorize " the bank to pay out the various items on the " receipts " bearing the depositor', signature. This is an arrangement which presumably complies with the requirements of any system substituting the " receipt " for the cheque, but it seems to be a. point not without its practical application as regards the free convertibility of the "receipts." A further objection is one which concerns the banks rather than the general public, namely,- the vast amount of labour which seem, likely to be entailed by the number of small entries, to say nothing of the increased labour in the "clearings should the new "receipts " multiply.

DEFINITE RULING REQUIRED.

Having regard to all these circumstances, and espe- cially the uncertainty as to the legal status of the new documents in view of the Chancellor of the Exchequer s statements, it is certainly not surprising that thc authorities of the Clearing House should have deferred a decision with regard to the granting of clearing facilities. So far as may be judged at present, there would seem to be no question as to-the legality of the " receipts " as used between the bank and its own customers for amount, under £2, but the question as to their free use as a means for passing on payments to third parties seems likely to depend upon whether the Clearing House facilities are granted, and that, in its turn, will doubtless depend upon the final-decision given by the Chancellor of the Exchequer with regard to the legality of the " receipts " in payment to third parties without being stamped: A HURRIED PROPOSAL.

One could wish—though it does not seem very probable —that as a result of the interest which has been aroused by these proposed "receipts" ill lieu of small cheques the cheque stamp. itself might big :reduced to its old level Of one penny, when the motive for evasion Would be much less pronounced. I could also wish that before the plan had been published there-might have been the Advahtage of a full discussion of it and of its many complications by the clearing bankers as a whole, when it would have been. possible to have had, as. against -the purely official Treasury view, the considered opinion of the banking community as to the desirability of the innovation.

ARTHUR W. KIDDY.