HC Deb 23 April 1940 vol 360 cc86-7

I have one other announcement to make. There is a further contribution to this end which I have in mind and which will be contained in a Bill that will shortly be introduced. It is not strictly a financial measure, but it is complementary to the whole economic policy that I have just outlined. The Excess Profits Tax is at a heavy rate, but it leaves a certain proportion of increased profits in the hands of the businesses which make them. That is advisable as a reasonable incentive both to business economy and to increased output. I think that these increased profits where they occur are valuable in proportion as they remain in the businesses concerned and that they lose a great deal of their value if they are distributed freely as dividends. They will be very useful if they are available to sustain the industries in the very difficult period of adjustment which will follow at the end of the war. They are far less valuable if they are used for increased distributions into the hands of shareholders who may be tempted to devote a good deal of them to purposes of consumption. I propose accordingly to provide for the limitation of dividends paid by public companies during the war period. [An Hon. Member: "What about private companies?"] There are very great difficulties, which I am sure the lion. Gentleman appreciates. The Bill will propose that a public company shall not distribute a greater dividend on ordinary shares than was distributed in any one of three pre-war years. That is to say, a business which has been able to distribute in the past a big dividend will not be prevented from doing so again, but it cannot increase it. But a minimum rate of dividend will be allowed in the case of companies which in the recent past have been unable to pay that minimum, and where there are no complications such as participating rights of other shares, the minimum will be the equivalent of 4 per cent. There will have to be provision for exceptions for new companies and a general dispensing power for hard cases to be exercised by the Treasury on the advice of the Capital Issues Committee.

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