§ 46. Sir John Mellorasked the Chancellor of the Exchequer what instructions he has given to the Capital Issues Committee about proposals to capitalise reserves; why he refuses to disclose reasons 1289 for decisions, either in general or in particular cases; and if he will now permit reserves to be converted into permanent capital without restriction.
§ Mr. GaitskellThe instructions are those set out in a letter dated 13th December, 1949, to the Chairman of the Capital Issues Committee from my predecessor, who quoted it in reply to a question by Mr. Collins on 15th December, 1949. [OFFICIAL REPORT, 15th December, 1949; Vol. 470, c.295.] Permission to make bonus issues is withheld in cases which do not fall within the scope of these instructions; I am not prepared to permit such issues without restriction.
§ Sir J. MellorIs not the Chancellor actuated by political prejudice? As no real money is involved ought not companies to be encouraged to plough back profits when they have them?
§ Mr. GaitskellThere is no political motive here, but there is an inflationary danger.
§ Sir H. WilliamsHow does a bonus cause inflation, since it only involves a book entry?
§ Mr. GaitskellBecause of benefits through increased dividends and possible capital appreciation to shareholders.
§ Mr. Oliver LytteltonWill the right hon. Gentleman look into these instructions, because many anomalous positions are arising and I suggest that the time has come when the instructions require drastic alteration?
§ Mr. GaitskellWe keep a matter of this kind under continuous review.
§ Sir J. MellorDoes the right hon. Gentleman not think it desirable that companies should be able to bring their issued capital into closer relation to their assets?
§ Mr. GaitskellThat is an argument on that side, but there are also some powerful arguments the other way.