When the housing boom of the 1930s started it was unlikely that many of what have been called the lower-earning classes of working-class origins, and who were to become buyers of the new houses, were either shareholders of, or depositors with, a building society. The working-class economy was essentially one based on cash, and surplus income would usually have been converted to portable possessions. Of the people interviewed by the author, none of those who bought houses during the 1930s had been building society customers or shareholders prior to that time. Some had been small investors with provident societies or social clubs and all had held industrial policies with the big insurance societies. ‘Heavy insurances cover the cost of a good burial…become a form of banking for the general renewal of the wardrobe item.’
The holding of bank accounts was not common in British homes at the time. Banking existed essentially for businesses and the professions; it was not aimed at what the banks now call the retail market. In any event the banks were not as widely based as the building societies who had a network of agents in every town in the United Kingdom. The societies had few local offices but many thousands of solicitors, estate agents, accountants and even bank managers who were paid commissions to collect deposits and introduce new business. Using the established offices of local professional people reduced the cost of expansion for the societies and it also brought captive business to them. The standard rate was around ,1 per £100 paid for every mortgage granted through their offices, and in the order of 0.25 per cent to 0.5 per cent on funds collected from depositors. These local offices were given enormous powers by most societies when it came to the approval of loan applications. The offices of the estate agents or the builders they represented processed the loan application forms and the societies dealt with them almost immediately they were submitted. Douglas Davenport, the former general manager of the Woolwich and past president of the Building Societies’ Institute remarked that the process was like a ‘sausage machine’. They would receive twelve applications from a developer on a Monday morning following site visits by potential purchasers over the weekend; they would be approved by Tuesday and returned to the applicant and the developer. The minute book of the Halifax building society showed that at one of its fortnightly meetings on 20 February 1935 1,550 applications for mortgages were considered and 1,500 granted.
The large southern societies, namely the Abbey Road and the Woolwich, ‘had been reckoned to be among the fiercest competitors in the market. Both had forged special contracts with builders, estate agents and lawyers in the fight for new mortgage business’. Such relationships were to assist their growth, but at the same time it was to cause resentment from the majority of the northern societies who did not like the habit of paying commissions and wished for a free market when it came to selling their mortgages. As an example, Harry Chaplin of Hilbery Chaplin and Co. who owned a firm of estate agents, based in Essex, was to build in the order of two thousand houses in partnership with local builders but only because he was able to be assured of a good supply of mortgage funds from the Woolwich and the Abbey.
The dominant position of the Abbey, operating through agents, is illustrated by the fact that between 1926 and 1936 they increased their numbers of borrowers almost nine times from 9,364 to 82,000 yet with only five sub-offices in addition to their head office in Baker Street.
The tied agent who was paid on commissions was very common; the societies were often paying between £5 and £10 per customer, introductions came from estate agents, solicitors, accountants and bank managers. This custom of bank managers being paid commissions was only stopped by Barclays Bank in June 1949. Commissions were an accepted way for professionals to supplement their personal income. Sir Enoch Hill had an insurance agency which collected the commissions on all business conducted by the Halifax. This included both corporate business and that conducted on behalf of the mortgagees who had mortgages from the Halifax. All mortgagees were obliged to insure their houses through his agency and the commissions ran to tens of thousands of pounds per annum. This practice stopped in 1936 and from that time the commissions came to the Halifax. Even branch managers of Midland Bank took personal commissions from insurance companies and building societies for introducing new business. If moved from the branch, either the bank or the ingoing manager would have to buy the commission book from them at about twice the earnings.
In the mid-1930s Sir Harold Bellman of the Abbey Road Building Society, along with many of the larger societies, was to fight for the introduction of a code of ethics. It was felt by some of the societies that a code was needed to regulate the conduct of the societies in view of complaints made by some societies against other societies. The driving force behind the formation of the code of conduct was the bigger societies, especially those based in the south of England. There was some resentment by the smaller northern societies in the way that the Abbey and the Woolwich had tied up estate agents and builders, clause 5 of the code forbade societies from quoting better terms to builders than had already been agreed to by other societies. Therefore, those societies who had existing arrangements were in a stronger position than societies which were just starting their expansion programme. As the General Manager of the Temperance Building Society, A.W. Betts, said at the meeting on 26 June 1936 called to approve the code ‘those who dissented were not co-operating because they were hostile but because they found that they were losing business to some of them who were the greatest exponents of co-operation’. The Code and the building societies will be discussed fully in chapter three. The 1939 Building Societies Act stopped collusion between societies with a clause which disallowed payment of commission by a society for the introduction of mortgage business. .
(33) These were the so-called penny policies which were meant to cover death benefits. All of the established insurance and life companies issued such policies, and they were often the only source of large sums of money flowing into working-class homes. The sum insured was usually sufficient to not only pay for a funeral but to buy suitable clothes for some of the family. This explains the fact that almost all of the working-class women seen in photographs of the period are shown in sombre black coats and hats, no matter what the occasion.
(34) H.Hoggart.The Uses of Literacy(London 1957), p.96
(35) In 1930 the Co-op Permanent Society had 500 agents but only 12 branches. M. Cassell, Inside Nationwide, One Hundred Years of Co-operation (London, 1984), p. 46.
(36) Confirmed in a discussion on 3 January 1993 with Mr R.Rushworth, the former general manager and secretary of the Burnley Building Society.
(37) The writer interviewed Douglas Davenport in January 1994. He was born in 1911 and joined the Woolwich in 1928. He saw the relationship with the societies and the developers at close quarters. He was the manager of the branch at Finsbury Park which covered the whole of England, north of Finsbury Park and included Northern Ireland and Scotland.
(38) R. Redden, A History of the Britannia,1856-1985 (London, 1986), p. 37.
(39) From information from former directors of the Woolwich who opened an office in Ilford to handle the applications from Chaplin. Also J.D. Burdock, Speculative House builder and Some Aspects of the Activities of the Speculative Builder Within the Greater London Outer Suburbs, 1919-1939 (M.Phil thesis, University of Kent, 1974), p. 675.
(40) From an advertisement in The Economist (8 May 1937), p. 14.
(41) Head Office Circular, S114 (13 June 1949).
(42) Hill had an agency before he joined the Halifax Building Society, Eighty Years of Home Building-The Halifax Plan (Halifax, 1937), p. 48. It would appear that the agency continued when he worked as general manager of the Halifax. From an interview in February 1994 between the writer and Leonard Harvey who grew up in Leek, where Hill was born. Leonard Harvey was at one time president of the Building Societies’ Institution.
(43) From the correspondence files between head office, branch managers and area managers during 1935-36 in the archives of Midland Bank. Filed under head office to branch manager, General Correspondence (1934, 1935, 1936).
(44) From an interview and a letter dated 8 February 1994 to the writer from Charles Morgan, formerly with the Bristol and West, who was at the meeting.
(45) The Building Societies Act 1939, 2 and 3 Geo.Ch 55