HC Deb 05 March 1954 vol 524 cc1697-708

1.41 p.m.

Mr. Dryden Brook (Halifax)

I beg to move, That this House notes with regret the recent increases in company dividends and the effect this is having on wages; and therefore presses the Government to take the necessary steps to stop these increases by introducing legislation for the statutory limitation of dividends. I am well aware that a debate took place in this House on Wednesday which covered a good deal of the ground to which this Motion relates, but when 1 tabled my Motion I had no idea that that debate would take place, and I hope that in the course of my remarks I shall approach the problem from a somewhat different angle from that from which it was approached in the debate on Wednesday.

This problem raises the most fundamental issue which divides the two sides of the House—namely, what is the relationship between capital and labour in industry? That is not an isolated part of the philosophies which divide the two main parties in this House. It is part of a whole concept of government, and we on this side of the House have a fundamental opposition to the concept of government which is held on the benches opposite.

The definition of this concept which is held by the party opposite can be summed up in the Prime Minister's own words—" Set the people free." We should ask what that phrase means when it is applied to industrial relations. The Tory Press interprets that phrase by saying that industrial relations, with respect to both capital and labour, should be left to the workings of what is now called the price mechanism. What is meant by this phrase—freedom for what in industry? This conception leads us back to a period in history about 100 years ago.

The interpretation of that phrase—and it held sway up to the outbreak of the Second World War—was that Parliament must not interfere in the relationship between capital and labour in regard to profits, prices or wages. All that Parliament had to do was to maintain the ring in which people engaged in industry had the freedom to struggle for the major portion of what industry produced. Freedom in that sense meant a free-for-all as to who should get the biggest share of the cake that was produced. That conception of freedom means the freedom of the strong to exploit the weak.

Sir Herbert Williams (Croydon, East)

Who were the strong?

Mr. Brook

In the 19th Century there is no doubt who were the strong.

In the 19th Century the plea in support of the implementation of that idea was "Leave things to the workings of natural law, the law of supply and demand." The result in industry and in social life was so bad, the wages of working people were so low, that the law of supply and demand stank in the nostrils of almost every working man in this country. It became an object of ridicule and loathing on the part of the workers.

Now we have the same conception under a new guise, a new name—the price mechanism—but that new name for the old idea is no less objectionable to the working people than it was 100 years ago. No one could defend the results, of its working up to the end of the 1930s.

I remember a well-known professor of history at a northern university saying between the two wars, "The history of the 19th Century is the history of a period when the verdict of history went against the working class." The struggle of organised labour during the last century has been a struggle to right that wrong verdict. The righting of that wrong verdict cannot be done on the principles which are accepted today by the party opposite as axiomatic. It cannot be done by means of price mechanism ideas.

I have been asked who were the strong. Up to the end of the Second World War labour was always at the weak end of the stick. Therefore, the price of labour was always cheap, and any struggle by the workers was always defeated. Indeed, it was a period in which wages were always following prices. Then pressure—humanitarian pressure as well as the strength of the organised workers— gradually forced upon Parliament a different conception of the function of government. It was that new conception which reached fruition in 1945, when Labour for the first time held office with power.

From 1945 until 1951 much was done to right that wrong verdict of history which had been growing up during the previous century. Much that is done cannot be undone, although I am well aware that the proportions of the national income which went to capital and labour were radically altered in the period between 1945 and 1950. In 1928 the proportion that went to wages was 37.6 per cent. In 1938 the proportion that went to what might be called the profit-earning group was 34.8. In 1949 the share of wages had grown to 45.45 per cent., and the share that was going to profits and dividends had dwindled to 26.31 per cent.

Sir H. Williams

Who got the rest? Those percentages do not add up to 100.

Mr. Brook

I can give the hon. Member the figures for all the groups, but I was merely selecting those two because they are germane to the case which I am making, and because I do not want to detain the House.

The tendency for wages to rise is a move in the right direction, and it ought to go further. But the tendencies which are likely to be let loose under the new dispensation will take us in the opposite direction. A few days ago my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) gave figures of the increase in wages and the increase in dividends during the four quarters of the year 1952–53. In the first quarter wages rose by 5 per cent, and dividends by 5 per cent.; in the second quarter, wages rose by 4 per cent, and dividends by 6 per cent.; in the third quarter wages rose by 4 per cent, and dividends rose by 7 per cent., and in the fourth quarter wages rose by 3 per cent, and dividends by 9 per cent. My right hon. Friend also quoted the figure for January, 1954, which showed that dividends were being paid at a rate 15 per cent, above that of January, 1953.

Over the four quarters of that year the rise in wages was gradually dwindling and the rise in dividends progressively increasing. That arises from the view of the Government that those who own capital shall be free to distribute as well as to earn as much profit as they can. That brings me to a point which has been debated more than once in this House. It is admitted that the percentage going to dividends is not so great as it was some time ago, but in the period 1952–53, although profits fell, the amount of gross dividends shared out amongst the shareholders rose.

When there is a greater amount of capital on which dividends have to be paid it is as well that we should ask ourselves how that increase in real capital has been made. Has it all come from new money put into the industry by new shareholders, or is it the capitalisation of reserves of past profit achieved by industry? I suggest that it is the latter, because we cannot open a newspaper without finding some record of bonus shares being distributed. Almost every morning last week the Press contained reports of bonus shares issued to shareholders by one company after another. As I read the "Economist" coming down in the train on Monday, I noticed that Imperial Chemical Industries are capitalising £50 million of their reserves.

Mr. G. P. Stevens (Portsmouth, Langstone)

Would the hon. Member be good enough to explain to the House just how a bonus share is distributed? Can he explain how the mechanism works?

Mr. Brook

Yes, I shall be glad to do so. To the workers it means that a firm which has accumulated reserves out of profits issues a bonus share of one share to each shareholder. That means that it has doubled its capital. The next year it may pay the same dividend of 10 per cent., but it is now 20 per cent, on the original capital.

Mr. Stevens

If that company makes so much profit that it can pay the same dividend of 10 per cent, on double the capital, could it not equally have paid twice the dividend on the original capital? Is there any difference?

Mr. Brook

There is a psychological difference, which I shall explain shortly.

If we assume that the accumulation of reserves has taken place since the war, as some of it must have done, we must consider what has happened to wages in the same period. One Chancellor of the Exchequer after another has appealed to the organised workers to restrict wage claims. To a certain extent there has been a wage freeze in industry. If the workers had demanded wage increases during that period the profits would obviously have been less. The fact is that the bonus shares, in part, at any rate, contain some portion which might have been taken in wages if the organised workers had been prepared to use their strength.

Mr. Stevens

The hon. Member talks about a wage freeze, but there has been no wage freeze. Ever since the war there have been wage increases, which have been greater than the increase in dividends. Is not that so?

Mr. Brook

Could not the organised workers have demanded and got more wages if they had not been prepared to exercise restraint?

Colonel O. E. Crosthwaite-Eyre (New Forest)

Is it not a fact that the capital profits to which the hon. Member is referring are not profits in the normal sense, but money ploughed back by way of new buildings and machinery, thus providing better employment and a better chance for everyone to earn a livelihood? Is it not also a fact that since the war wages have risen by 60 per cent.?

Mr. Brook

I agree that the profits are ploughed back, but they are profits, and not new capital which shareholders have paid in. They have been made as profits in the first place, and I am saying that if the organised workers had been prepared to use their full power they could have claimed further increases in wages. If shareholders are given the power to claim additional interest it has a psychological effect upon the workers.

Mr. Stevens

This is a very important point. Are not those profits which are ploughed back into the business a form of savings, and is it not frequently urged by hon. Members opposite that corporate saving by companies has now taken the place of individual saving?

Mr. Brook

I agree, but the fact remains that they are now being used as a lever, whereby more profits can be distributed as dividends.

Mr. Stevens

More profits can be earned.

Mr. Brook

I am differentiating between "earned" and "distributed." If a firm pays a dividend of 10 per cent, on a capital of £50,000, and then increases that capital to £100,000 by the distribution of bonus shares, and still pays 10 per cent., the person who is receiving the dividend receives exactly double the amount of money, which he can spend as he likes.

Workpeople today are not so ignorant as they once were about events in the industrial world. The Government tend to minimise the economic effects, but the real problem is a psychological one. The problem of dividends is only one aspect of the whole. There are other factors which affect workers in relation to their wage claims. The idea of leaving everything to the price mechanism affects not merely profits and dividends, but prices, which have a relationship to wages.

There have been many debates and Questions asked in this House about the cost of living, and about the Ministry of Labour index figures. It has often been said, and the Economic Secretary to the Treasury said on Wednesday, that the Ministry of Labour index was not intended as a measure of the cost of living, but merely as an index of a wide variety of prices many of which enter into everyday life. However, although the Economic Secretary was denying the validity of the argument that that index is a measure of the cost of living he subsequently, in the same speech, several times referred to it as the measure of the cost of living.

The Economic Secretary to the Treasury (Mr R. Maudling)

I certainly did not intend to say anything of the kind. The Interim Index of Retail Prices, I was arguing, is a fair index of the movement of prices of things normally consumed by working-class households, based on statistics in 1950 which were carefully collected. It is, therefore, a very good measure of the cost of living, in my opinion.

Mr. Brook

The problem is a very much more complex one than that. It is an index of prices of a large conglomeration of goods that may enter an average working class household but many of which do not. There is a wide variety of goods which do not enter working class households every day. Moreover, even amongst working class families circumstances vary. Despite all the debates that have taken place in this House and all the Questions asked and answered on the subject, it seems to me that the two sides have never really come to grips with it.

In the debate on Wednesday, my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) mentioned the prices of certain foodstuffs given in the index in groups. In the index those groups of commodities are shown to have come down in price, but in fact individual items in them have risen in price. It may be that a family buys more of an article that has gone up in price than of another whose price has come down. Prices affect individual families in an entirely different way from what is supposed to be the effect upon families generally.

My hon. Friend the Member for West Ham, North (Mr. Lewis) gave a list of about a dozen different commodities the prices of which have risen steeply. Those happen to be staple commodities that enter every week into the working class budget. It is no satisfaction to a working class household to know, for instance, that the price of boiled ham has come down while the price of bacon has gone up since 1951, because the average working class household at the present time is not able to buy boiled ham anyway. It is the prices of that small range of foodstuffs that enter every week into working class homes the prices of which have risen markedly.

Mr. Hannar Nicholls (Peterborough)

I thank the hon. Gentleman for giving way. He has been kind about giving way. He will admit, surely, that it is fair to put alongside the commodities the price of which have gone up the commodities the prices of which have come down? Admittedly beef, butter, margarine, sugar and tea have risen slightly in price, but bacon, eggs, mutton, rabbits, vegetables have come down, and they are all equally used in ordinary households.

Mr. A. C. Manuel (Central Ayrshire)

Can my hon. Friend say how many of the commodities that have come down in price are consumed by old-age pensioners?

Mr. Brook

I am trying to illustrate the cleavage there is between the two sides of the House on this matter, to show the width of the gap between us. It is all very well as an economic exercise to say that what is gained on the swings is lost on the roundabouts, but what the working-class housewife is interested in is what she has to buy in the shops out of the money her husband earns, things she has to buy every week, and she knows that they have gone up steeply in price. The things that have come down in price are, on the whole, the things she does not need to buy. [HON. MEMBERS: "Oh."] It is the psychological effect on the housewife that I am trying to bring clearly before the House.

We were told the other day that between October, 1951. and January, 1954, the price of butter, for instance, had gone up from 2s. 6d. to 3s. 4d.; of margarine from Is. 2d. to Is. 6d.; of cooking fats from Is. 4d. to Is. 8d.; of National bread from Is. to Is. 3d. per 3½lb. loaf. Those are the kinds of commodities that affect households, and that enter into households every week. That is the problem as it affects the the households of working men.

I know that there has been a drop in the prices of other commodities, of textiles, for example. I am not a trade unionist but a businessman. In my business the price of wool for making blankets has dropped from 200d. two years or so ago to less than 70d. now. The price of blankets in the shops has probably dropped 25 per cent, in the same period, but housewives buy blankets only once in 10 or 20 years. They are not things which she buys every week of her life.

The central fact in the industrial field since the end of the war is the shift in the balance of power. Full employment means that for the first time in the history of this country the strong end of the stick is held by the working class. It is the biggest factor in this problem of freedom for the working people that they have ever known. The strong end of the stick is held by real people working in industry, not by the inanimate factors of capital and profits. The Prime Minister talks about setting the people free. Full employment has made the greatest contribution in history to real freedom for the mass of the people of this country.

I well remember some correspondence that was going on in a local newspaper during the 1950 General Election. One contribution from the Labour point of view was written by a man who was an overlooker in a factory. He was replying to two other writers, employers for whom he himself had previously worked. The outstanding point about his letter was the last sentence, in which he said that if that correspondence had taken place before the war he would not have dared to have signed his name to his letter.

Sir H. Williams

Rot.

Mr. Brook

It is true. It is no use the hon. Gentleman protesting. Anyone who has been associated with the working people knows that is true.

Sir H. Williams

When I was an employee I wrote many dozens of letters without ever looking over my shoulder. Why should I have done?

Mr. Brook

I will leave the House to judge the value of that interjection.

Sir H. Williams

I thank the hon. Member.

Mr. Brook

I wonder, when hon. Members opposite talk about leaving everything in industry, and good rela tions in industry, to the workings of the price mechanism, where they stop. The price mechanism means leaving people free to struggle for what they can get. We have here a situation which has never occurred in the country before—the organised workers, as the sellers of labour, hold the determining power in industry and, if the workers care to use that power, the price of labour can be what they themselves determine.

Let us consider the two aspects of the problem. In relation to distributed profits, the Government say that the only people who shall decide the rate of distribution are those engaged in the distribution. Do they apply the same yardstick when they determine the price of labour for the workman? The Economic Secretary nods his head, but I would remind him of the facts. Even today, all wages are the subject of negotiations between the opposite sides who are parties to the claim, and in the last resort, although arbitration may be voluntary, the Minister of Labour can step in. As far as I know, the Chancellor of the Exchequer has refused to do the same thing with employers in the distribution of profits. Is that a fact or is it not?

Mr. Maudling

The Government's position is quite clear. We do not think that the Government should intervene in negotiations on wages between employers and workpeople, nor do we believe in any form of compulsory intervention on the level of the distribution of dividends, but the Chancellor has made it plain more than once that he considers it of great importance that there should be continuing voluntary restraint in personal incomes from all sources.

Mr. Brook

If the Chancellor is of that opinion and he sees, as he must see every day, that in almost every company report issued, even where profits may have fallen, there is an announcement of higher dividends, is it not time he did something more than make pious appeals to these people? Is it accurate to say that the Government do nothing more than make pious appeals about wage claims? Surely the hon. Member knows that, on the application of either party to a dispute, the Minister of Labour can intervene and order an inquiry. Is not that something more than what the Chancellor has been willing to do about the distribution of dividends?

If capital is to be free to make what profits it can without reference to any ethical principle, surely labour must be allowed to adopt the same ethical standards. Whether the price mechanism is an efficient economic weapon or not is arguable, but it must surely be obvious that, however effective the price mechanism may be in the economic field, the price mechanism and the law of supply and demand comprise a completely non-moral force. If we are seeking justice towards the two sides in industry we should try to remove this force, which is completely non-moral, for, if not, surely we are expecting something ethical to come out of something which has no ethical application at all.

The logical outcome, it seems to me, is one of two alternatives. Either we must sacrifice full employment or we must find some other basis by which the relationship between capital and labour in industry can be governed. If full employment were to give the workers the power to demand whatever wages they willed, of their own volition, that would be a position, it seems to me, which we on this side of the House would not welcome. But the Government are in an entirely different position because over and over again they have staked their belief in the workings of the price mechanism. It is, therefore, up to them to face the alternative—that, under full employment, what I have described is likely to happen.

That compels us to face another problem. In spite of their protestations, do hon. Members opposite really believe in full employment? During the 1950 Election the Prime Minister was very careful in the phrases which he used. I do not

think he ever used the phrase "full employment" but spoke of "a high level of employment." I can well remember what the Tory and Liberal newspapers said. The "Manchester Guardian," on the first day of 1950, said in a leading article that we could not face the year with an unemployment figure as low as it was then but that we must have more unemployment, a moderate dose of unemployment, in order to give greater flexibility in industry. The "Economist" over and over again made the same remarks in almost identical terms.

This leads me to believe that full employment, as we on this side of the House understand it, is not so sincerely or firmly held as a belief by the party opposite, and I ask myself this question, just as I ask hon. Members to put it to themselves: what would happen if, as we heard an hour ago from the hon. and gallant Member for Down, South (Captain Orr), the unemployment figure were 9 per cent.? He said the unemployment figure in Northern Ireland was 9 per cent. Supposing that was the figure in this country. What would happen in relation to the problems of dividends and wages?

In 1919, I attended a summer school at Oxford and I there met a farmer from the backblocks of New Zealand who had cut out his own sheep farm. This man kept himself abreast of modern reading. He sent me a pamphlet which he had written and, as closely as I can remember, the pamphlet—

Notice taken that 40 Members were not present; House counted, and 40 Members not being present, the House was adjourned at Twenty Minutes past Two o'clock till Monday next.