Finance and banking during the Occupation
This article by Mary Gibb was published in the 2012 Annual Bulletin of La Société Jersiaise. Despite its title, the article covers a much wider field than finance and banking, and records many aspects of life during the Occupation, including postage, rationing, the mechanics of government, supplies of essential commodities, taxation, preparations for life after the Occupation and post-war debt.
The article sketches over all these subjects and does not cover any new ground. However, considering that only four articles on such an important period in Jersey's history had previously been published in the Annual Bulletin, this addition is a welcome addition. Of the previous four, A much more comprehensive article on the impact of the Occupation on personal finances, banking and the States, by former Economic Adviser to the States Colin Powell, was published in the 1995 Annual Bulletin.
On Thursday 20 June 1940 the panic about leaving the island was at its height. There were crowds and queues everywhere, especially at the banks, which were forced to restrict withdrawals to £25 per head, as they were likely to run out of cash. The bank staff were also busy listing and packing into sacks all the negotiable bonds and other documents (worth millions of pounds) for removal to England.
These were put on one of the last mail-steamers to leave the island, in the charge of one or two English bank clerks. All the registers of securities had already gone, leaving the banks to rely on staff to remember what they had held on behalf of their customers.
These actions subsequently protected their customers from considerable losses. The last telephone message from London came just before the surrender of the islands, when the managers were told that they would be in sole control. To which they replied that they would be all right.
On Sunday 30 June the Germans landed at the Airport to occupy the island. The bank managers immediately destroyed codes, specimen signatures and mandates which might have been useful to the Germans. The first German orders told the banks to continue business as usual, and that Reichsmarks would be the currency in the island at a rate of five to the pound.
The Germans arrived with plentiful supplies of Reichsmarks, the currency used in all German occupied territories. All Jersey banks and businesses were told that Reichsmarks would be the official currency in the island. This caused problems as, although there was Sterling still around, the Germans brought in Reichsmarks, The initial exchange rate of five to the pound became eight, and then 9.36. This was a gross over-valuation of the Reichsmark, which should have been more like eleven to the pound. The Jersey banks kept all their accounts in Sterling, which meant a constant battle with exchange rates.
I have tried to discover the rationale behind the German use of a special currency for occupied territories. It was certainly a financial advantage. The stated policy was to use the natural and manufacturing resources of the occupied territories to supply Germany with what was needed to prosecute the war. The Deutsch Mark had to remain an internationally traded currency, so that Germany could buy from neutral countries. A different currency that the German government could manipulate to suit themselves meant that they could buy and sell within the occupied territories at a cheaper rate.
During the 1930s the German government, like the Soviet Union, had geared its economy to rearmament. Consequently the general public in both countries were deprived of luxuries as well as of choice of necessary goods. When the soldiers arrived in Jersey and in France, they bought for themselves and their families back home, what to them were luxury goods, all at the cheaper Reichsmark rate.
Bank accounts in sterling
The banks started to have Marks pouring in, all of which were credited to customers' accounts in Sterling at the going rate. The banks kept their accounts in Sterling, which remained a more valuable currency throughout the Occupation. People started to hoard what Sterling they could get hold of, while using Marks as the everyday currency. Some people withdrew their money and buried it. This made for great problems when shopping because prices were mostly quoted in Sterling and paid in Marks.
One Mark equalled two shillings and one penny. If you wrote a cheque for ten pounds to withdraw cash from the bank you received 93 Marks and 60 pfennigs. The bank clerk's burden was enormous.
Change-giving in shops became more and more difficult because silver coinage started to disappear. To solve this problem the States of both Jersey and Guernsey arranged to print and issue notes for six pence, a shilling and ten shillings. Mr Lethiby of the Bank of England was sent one of the six-penny notes in 1944 and he called it 'a very horrid little thing'. The ten shilling note was a lovely design by Edmund Blampied, as was the one-shilling note, but the paper and the printing were not very good quality.
When shopping you might get your change in a mixture of Sterling and Reichsmarks and pfennigs. The ten-pfennig piece was worth about two and a half pence.
In January 1942 Hans-Joachim Caesar, Commissary Administrator of Enemy Banks, with headquarters in Paris, wrote to Lloyd's Bank announcing a visit to all Jersey banks, with the aim of controlling administration and getting information on accounts and property held for customers. Jurat Dorey wrote to the Bailiff pointing out that the clearing banks in Jersey were all part of limited companies registered in England under English law. Therefore any attempt to control the banks by either the Germans or the States would raise legal and other complications.
In December 1941 Caesar had written from Paris asking for information on quarterly balances and the value of English and American business accounts. He also asked social questions, including asking for the nationality of all the banks' customers. The banks replied that they were not in the habit of asking their customers such questions.
Herr Caesar wanted to be entered in the register of companies as administrator of the banks. Jurat Dorey and the Bailiff pointed out that this was not legally possible. In the end Caesar had to be content with details of quarterly balances, after which he never came back again. When his office in Paris was taken, after the Liberation, all these forms were found neatly filed away.
Letters could only be sent within or between the islands, but by the end of 1940 the Jersey Post Office had run out of stamps. Afterinitially letting people bring in their letters with cash, the German authorities ordered local stamps to be designed and the designs were approved and printed. Major N V L Rybot designed the penny and 5d stamps. He put tiny As in the corners. These meant Ad Avernum Adolphe Atrox, which translates 'To Hell with atrocious Adolph'. The 5d stamp had two As and two Bs, which stood for 'Atrocious Adolph and 'Bloody Benito' (Mussolini). The Germans never noticed and collected them in quantities as souvenirs.
The next series was designed by Edmund Blampied and featured attractive Jersey scenes. Thesewere engraved and printed in France and were rather more professional, although the colours ran. All these stamps became collectors' items. The 3d stamp had the letters GR incorporated into the scrollwork. As Guernsey had no penny stamps they took to cutting 2d stamps in half diagonally.
The first ration cards were issued on 14 October 1940. From then on, nearly all foodstuffs were rationed, including tobacco and livestock fodder. In November advertisements began to appear in the Evening Post for exchange of goods; sale of livestock and bartering became a way of life for most people.
The States Department of Essential Commodities would set the maximum price for all the rationed goods. Bread, for instance: the 1lb loaf was priced at 2 1/2d - one pfennig, the 2lb loaf at 4 1/2 d and the 4 lb loaf at 9d. By the beginning of 1941 bread rationing amounts were set and maximum prices announced for vegetables and fruit.
Both wholesale and retail prices were listed in the Evening Post. Meat rationing began in earnest in February 1941. Everyone had to register with a butcher, who took coupons in return for price-controlled meat. Beef, for instance, was five pence per pound and pork 1s 9d.
By this time the States department had set up communal kitchens, where a nourishing meat stew could be obtained in return for meat coupons. Salt was rationed to two ounces a week in 1941 and later salt water, for boiling to make salt, or use for cooking vegetables, was offered for sale.
Life became almost impossible for pensioners who lived on pensions coming from England. Their only resource was to borrow from the bank. Then, in 1940, the States agreed to pay them a fixed allowance. In February 1941 the States agreed to pay French military allowances and pensions to those entitled to them. In the end the States Treasury was reimbursed when the banks in England paid the pensions into customer accounts there.
The Bailiff and the States created a body called the Superior Council, which was a kind of cabinet government with the Bailiff at its head. Deputy Edward Le Quesne was in charge of labour. As many men had been thrown out of work when the Germans arrived, he had the daunting task of finding work and pay for them.
Wage rates were fixed by the Council at no more than £3 per week for all work. The Germans tried to encourage men to work for them at a higher rate. Many were patriotic enough to refuse, but some were not. It is difficult to blame them when they were faced with feeding a family on inadequate rations during a period of steady inflation.
The Germans appear to have increased the amount of Reichsmarks in circulation whenever they felt it necessary. In addition, the island paid a large sum towards the cost of billeting and feeding the occupying troops.
The Superior Council began to worry about finances. There was no income from exports or tourism, and income tax could not be raised sufficiently to cover all their expenses. The solution was to borrow from the banks. The bank managers were as certain as nearly everyone else that Britain would win the war and the British Government would be able to sort things out. By the end of the Occupation the States owed the bank in Jersey £5,750,000.
By mid-1941 Exchange and Mart advertisements in the Evening Post were in full swing:'Roasting cockerel in exchange for bicycle tyre@, '15 lb of poultry food in exchange for soap', 'Six nine-week-old rabbits for 5 lb of poultrty food or soap'.
A forestry order was registered: trees could only be felled with authorisation. In June 1941 timber was priced at 10s per ton if roots were not removed. Wood blocks were £3 5s per ton delivered. Each week a small addition to the rations was issued, such as semolina at 12 4d per pound, soap at 2d per tablet or saccharin at 100 tablets for 1s.
Further advertisements in the Evening Post included: F Le Gallais advertising a flat to rent in St Saviour;s Road for £52 per annum, a three-bedroom house at La Rocque for sale at £1,500 and two bungalows at La Mare at £850 for the two.
Sources of supply
Before the war nearly all the island's supplies came from England and farmers were not used to growing crops such as cereals or raising animals for meat. There were dairy cattle and a few pigs and hens for family consumption, but no sheep. The States of both Jersey and Guernsey realised that something must be done to get supplies from France.
Early in the Occupation a purchasing commission for the islands was set up in Granville. The first purchasers went in July 1940, when France was still in a state of chaos, so they had little success.
However, cereal seed was obtained so that farmers could start to grow wheat for bread. Gradually the purchasing commission became more successful and their efforts enabled the population to avoid starvation. As well as foodstuffs, the commission had to try to get hold of clothing, materials for making clothes and shoes and boots.
All imports from France were paid for in Reichsmarks by the States, perhaps an excellent way of 'laundering' this currency, of which there was too much in the island's banks.
Price fixing by the Department of Essential Commodities began very early in the Occupation. Everything that was rationed had its price fixed. Even unrationed vegetables had their prices fixed. But enabling working people and pensioners to have a basic food supply could allow a black-market to flourish. France was the source of a large quantity of black-market goods. The captains and crews of the boats bringing necessities to the islands would also bring things which they had acquired in France and which they knew they could sell at a profit. In 1940 Deputy Edward Le Quesne spoke of buying French butter and camembert, as well as treacle, which he knew had come from one of the crews.
At the end of 1941 textiles and footwear were rationed. A pair of shoes was sold for five coupons at a fixed price. The purchasing commission not only had difficulty finding any to buy in France, but the price had risen threefold. Prices of everything from France were rising out of control, even though the German Command in France helped the purchasing commission by allowing the Jersey population to be on the same rations as the French.
The two men who ran the purchasing activities, Mr Falla from Guernsey and Jean-Louis Jouault from Jersey, did a brilliant job. Prices were rising so fast that, in effect, the States were subsidising the price of rations all the time, as well as subsidising other imports such as fuel and building materials.
The island was doing its best to provide necessities from its own resources. Deputy Edward Le Quesne found that as well as having men to put to work there were also many young women in need of a job. The Summerland factory became a most valuable enterprise as it not only gave employment to some 250 women in 1940, but produced clothing, as well as boots and clogs.
The price of putting beech soles on working boots was 72 6d for men's boots, 6s 6d for women's, 5s 6d for youths' and 5s 6d or 4s 6d for children's. Almost everything Summerland produced was sold as soon as it was made and prices had to be increased Sometimes tomatoes were exchanged for clothes. Wool came from France and a welcome profit was made from selling surplus garments to Guernsey.
All farm produce and production methods were subject to German monitoring, but farmers were often able to hid some produce to increase their own rations and to sell on the black market. They constantly harried the Superior Council about price control because they wanted to maximise their profits. The Bailiff and the Council accused them of doing all they could to hinder the work of the government. The Bailiff threatened to let the Germans take full control of their farms.
Jurat Dorey went as far as to tell the Constable of St Ouen that he was a 'bloody skunk'.
Not all farmers were profiteers; some were kindly and patriotic. But some sold produce on the black market to both Germans and Jersey people and some produce was bartered, rather than sold, eggs and butter being notable examples.
Butter in 1940 cost 1s 6d a pound, in 1944 £1 10s a pound; tea went from 2s 8d per pound to £25; sugar from 4s 5d to 16s. In 1944 one tablet of soap cost £6 14s 7d. The price of a bicycle rose from 5s to £50.
The legal rations available in 1944 averaged 3s per person per week. It is no surprise that many people agreed to work for the Germans because, in 1940 a farm worker got under £2 per week, most labourers between £2 and £3, and a maid working in a house 12s 6d a week plus food and accommodation.
Both German and local police did their best to stop profiteering from black market dealing. When farmers were caught and tried for not registering their animals or poultry they had to pay large fines: £500 in the case of a farmer who killed a horse for meat and £200 for failing to register five pigs.
Edward Chapman was rescued from prison by a German officer who knew that he ran a lucrative business buying from the Germans and reselling to islanders at a profit.
Income tax was 4d in the pound in the 1930s, went up to 9d at the start of the Occupation, then went to 20%, with an additional tax of 2s on all salaries after 1940, which lasted for two years. In an effort to control profiteering the States introduced a swingeing tax of 80% on casual transactions, 60% on property transactions, and made all profits on currency transactions forfeit.
The States badly needed money but it was difficult to make people account for such profits, or prove that they existed. Bank staff coped amazingly well considering the problems of accounting for everything in Sterling. Their real heroism came when the Germans wanted to take all the Sterling held in the islands, and the French refused to take any more Reichsmarks for the goods being bought in France. These problems arose because the German Deutschmark was no longer an international currency of any value and Germany could not pay for its desperately needed imports from neutral countries. Sterling remained an internationally valuable currency and the French had reverted to using francs.
To pay for goods from France the banks persuaded the German authorities in Paris to insist that the French allow Jersey to use a system of bank credits. This debt had to be paid off eventually and an exchange rate was fixed at 187.20 francs to the pound.
In mid-1943 the Germans insisted that they examine all customer deed boxes in order to remove tangible assets. Bank staff had hidden most things of value and satisfied the Germans by saying that everything of value had been removed to England in 1940 by order of their headquarters.
he next problem was that the Germans wanted to remove all Sterling currency held by the banks and give marks in exchange. The Hague convention was invoked. Then the managers suddenly found it necessary to make large Sterling payments to the States. Then the States and banks joined together to make formal protests. As a last resort the banks all refused to take marks in exchange and would not sign a receipt. Finally, at a meeting at which the bank managers were virtually under arrest, they agreed to sign a receipt the wording of which indicated that they accepted the German payment but 'with all reserve'. The Germans agreed to this and certainly won a moral victory. Midland Bank alone lost £42,000 or more.
The bank staffs' problems with lack of electricity added to their difficulties. They had to work by candle light, and candles were disappearing, even from the black market. At one point the banks managed to get a licence to buy candles; two for each for three months. Another problem arose when the French tried to launder their unwanted Reichsmarks by sending them to Jersey to set up bank accounts, so that they would be converted into Sterling. The managers soon stopped this.
In April 1944 London representatives of the five clearing banks met and sent a memorandum to the Treasury via the Bank of England, asking for advice and help should the islands by freed. It was mentioned that before the Occupation the States accounts were in credit, as were the client balances. They were aware that the States had borrowed heavily from the banks. The banks in England were effectively asking whether the Treasury would help the States to pay back their borrowing; also whether the Treasury would accept the Reichsmarks held by Jersey banks and the States in exchange for Sterling. The memo also asked questions about compensation for damage to property and transport of securities, bonds and other material which had been evacuated to England.
In May 1944 there was a third draft of a directive to a Mr Bickmore, who had been appointed Controller of Finance and Accounts on the staff of the Chief Civil Affairs Officer, Channel Islands, at the War Office, which told him what he was to do when dealing with the island authorities, the banks and the Post Office. His job was mainly to find all accounts and holdings. He was told that the military force would bring Sterling cash for use in the islands, but that Reichsmarks could still be used until arrangements could be made to withdraw them in exchange for Sterling.
Prices and wages were to be pegged at existing levels and supplies brought in by the relieving force should be paid for by islanders, but any who could not afford to pay should be helped out with cash.
On 9 June 1944 there was a memorandum of a meeting between heads of clearing banks in England, Bank of England representatives, Treasury officials and Mr Bickmore. This gave the first intimation that arrangements were to be made for getting Sterling to the islands and how the exchange rate should be set. £1 million was suggested.
Sir Charles Lidbury, who was chief of the Westminster Bank, said that he did not want to make a loss for the bank, but that he did not mind not making a profit. But he failed to get the Treasury officials to agree to ensure that the banks would not make a loss.
On 12 June another memo from the banks in London referred to arrangements to be made for what was called the 'third lift', which was when the banks were to send records and staff to the islands to set about reconciling accounts in England with those kept in Jersey and Guernsey. Another question discussed was that of the States debt to the banks. This included possible interest rates and possible help from the Treasury to liquidate those debts.
On 17 June another memo from the banks was sent to Mr Bickmore, in which there was discussion about the need to arrange transport to the islands of both staff and records as soon as possible, because it was known that bank staff in the islands would be depleted and overtired. It is obvious from this memo that it was thought that the islands would be freed quite soon, probably as a follow-up from D-Day. Sadly another year was to pass before this happened.
Some Sterling bank notes were marked to make them useless to the enemy. There is correspondence about such notes having been taken from Lloyds Bank and the Savings Banks. There were £5,000 of overprinted notes withdrawn from circulation and £2,200 notes had been destroyed before the Germans could take them, but all these appear to have come from Guernsey. There were also £8,355 in notes taken from the Jersey Savings Bank and £11,000 in notes taken from the Jersey Treasury. The correspondence is about whether the Bank of England would honour these notes and what happened to them after they were sent to Paris. Strangely, £700 of them were sold on the black market.
When Liberation finally came, much planning had already been done by the banks in London, where it was decided that Reichsmarks could be exchanged for Sterling at the 9.36 rate prevailing. There was no Sterling cash left in the bank vaults in Jersey, so it had to be supplied from London. It was arranged that £1 million be sent to Jersey in notes and coins.
This was loaded on to an unmarked and unguarded lorry and put on one of the first big American landing craft to come to the island. The drivers kept their load a secret and it was taken to a fenced site at Plemont for the night. The following day it was delivered to Midland Bank, because it had the biggest vaults, and from there it was distributed to other banks.
Other arrivals by landing craft were a large number of bank officials and clerks with details of all the Channel Island accounts which had been kept in London. After much work to reconcile all the accounts, which involved shutting the banks for a while, normal banking was resumed. The London headquarters were amazed that the managers and staff in Jersey had managed to keep such meticulous accounts all through the Occupation.
The Jersey Post Office, with Oscar Mourant in charge, ran a penny savings bank giving the same interest as other banks. it also organised pension books and the paying out of pensions, as well as the ordinary post and parcel services. Deliveries became a headache with even bicycles and their tyres becoming unobtainable. In addition to their other duties, the postmen often steamed open letters to the German authorities which they suspected were from informers. If they were, they were not delivered. Many were saved from punishment in this way.
In 1943 a child allowance was introduced by the States. A married man with an income of £2 15s a week and a single person whose income did not exceed £2 a week was allowed 4s a week for a child under 15. Higher incomes received proportionally less.
Weekly rations in 1944, just before the Red Cross ship Vega arrived were 4lb 4oz of bread for men and women, 6oz of flour, 2oz of butter, 4oz of horsemeat and some vegetables. When the Vega came with Red Cross parcels for everyone, the gratitude of the population was such that when a fund was started for the Red Cross, money poured in. At one point the bread ration ceased altogether; there was no more flour until the Vega arrived with supplies.
Starvation, by the beginning of 1943, was faced by Germans and islanders alike. Stealing was rife and it was almost impossible for the police and the German authorities to keep control. Even on 8 May 1945 the Royal Court was sitting to try offenders for overcharging for two eggs and thefts of Red Cross foodstuffs.
By the end of the Occupation the States of Jersey owed the banks £5,750,000. On 30 November 1945 there was a meeting at the Treasury, chaired by Sir William Easy, with the British Government. It was stated that the Government was fully behind the idea of helping the Channel Island authorities to liquidate the debt. After further meetings the banks agreed to waive the amount of interest owed in return for the Treasury giving the States of Jersey £4.2 million and the States of Guernsey £3.3 million. The remaining debt was to be discharged by issuing States bonds, which were to bear 2% interest from 31 December 1946.
This was agreed with the Home Secretary, Chuter Ede, on 27 March 1946 at a meeting at the Home Office in London, attended by the Bailiffs and Lieut-Governors of both islands.
Jersey's economy recovered remarkably quickly, thanks to the enterprise of its inhabitants and continued good government by the States.