War savings certificates were introduced by the government in June 1916. They were designed to be simple, down-to-earth and affordable for ordinary people. A £1 certificate cost 15s 6d to buy and could be redeemed, free of income tax, five years later. They were only available to individual buyers or, with special permission, charities and provident societies, and ownership was limited to a maximum of £500. They could be bought from local war savings associations, the post office or banks.
For small investors, the guaranteed £1 for every 15s 6d spent represented a very attractive return of 29% in five years. Lending to the government was the most secure investment anyone could hope for – assuming Britain won the war – and it also had the appeal of being a contribution to the patriotic cause.
For the government, war savings certificates were a way to attract war finance from a previously unreached section of the population; people who weren’t used to investing money, and hadn’t been drawn into the war loans of 1914 and 1915. Unlike war loans, they also had the benefit of bringing money into government coffers in a constant stream, rather than in sudden peaks.
Under normal circumstances, banks would have seen savings certificates as a competitor, since at least some of the money used to buy them would otherwise have been in bank deposit accounts. With the war on, however, they were glad to be part of the patriotic effort. They put significant staff time and expense into handling certificate sales, in recompense for which they received commission of 2s 6d per £100 sold, or 0.125%.
Despite their support, in 1918 the Scottish banks became annoyed by a series of war savings advertisements that pitched war investments as a better alternative to leaving money ‘idle in the bank’. They pointed out in a letter to Sir Robert Kindersley, the head of the savings movement, that they had worked tirelessly to sell war bonds, loans and savings certificates, and had themselves invested heavily. Even their much-diminished cash reserves were at the day-to-day disposal of the government. In other words, there was no money sitting ‘idle’; whether in a bank, a bond, a certificate or loan stock, it was all being fed into the war effort.
The banks remained committed to selling war savings certificates. Several introduced schemes to help their own staff participate, buying certificates and allowing staff to pay for them in instalments afterwards. London County & Westminster Bank’s scheme attracted 2,300 participants – more than two thirds of the entire staff – and raised over £42,000.
By the end of the war, £207m war savings certificates had been sold. After the war they continued to be sold, but were renamed national savings certificates, and were used to fund house building and other reconstruction and development projects. National savings products have remained on the market ever since, and are still used today as a way of funding public borrowing requirements.