Dividends (Hansard, 16 November 1954)

§ 25. Mr. Roy Jenkins
asked the Chancellor of the Exchequer whether he is now satisfied with the response to his recent appeal for more restraint in the distribution of company dividends.

§ Mr. R. A. Butler
My recent references to this question were equally concerned with the need for an increase in industrial investment. It is therefore too soon to say what effect they may have had.

§ Mr. Jenkins
Can we have a little more consistency and a little more frankness? Is the Chancellor not aware that figures recently published indicate that, in the month since he made his statement at the Chamber of Shipping dinner, the rate of dividend distribution seems to have continued, and are we to take it from his statement that he is satisfied with the present position?

§ Mr. Butler
In my statement on that occasion I drew attention, in addition to the point to which the hon. Member refers, to the need for greater industrial investment. That is the matter to which I attach most importance. In relation to dividend distribution, the policy of the Government has never been changed, namely, that a policy of restraint is advisable.

§ Mr. Jay
On the matter of dividend restraint, has the Chancellor detected any favourable response in any quarter to his speech?

§ Mr. Butler
I do not think that my speech could have been accused of lacking in frankness.

§ Mr. Gaitskell
Is the Chancellor really satisfied that a rate of dividend distribution at 20 per cent. greater than last year is consistent with his appeals for restraint in this matter?

§ Mr. Butler
One has to take into account the individual circumstances of each distribution. The difference perhaps between this side of the House and the other side is that we are prepared to leave this matter to individual companies in the light of the policy advocated by the Government and not to impose upon them a Government policy.

§ Mr. Gaitskell
Is it not clear from that answer that the Government have completely abandoned any policy of dividend restraint, and does not the Chancellor realise the very serious consequences which a statement of that kind may have on the industrial situation?

§ Mr. Butler
No, Sir. I think that the right hon. Gentleman has exaggerated. The important thing for companies to do in the light of the competition which we are facing and so forth is to put as much as possible into investment, and those—and there are only a few of them—which are not putting money to reserve should put money to reserve. I have indicated that that is my view, but I am not prepared to interfere with the discretion of companies which, in the circumstances, have put up a very good record in their production and general policy during the last 12 months.

§ Mr. Gaitskell
Is the Chancellor aware that the rate at which dividends are increasing now exceeds the rate at which profits are increasing and that therefore these increased dividends are, in fact, being paid at the expense of ploughing back into the businesses, and is this not directly contrary to the Chancellor's appeal? Will the right hon. Gentleman make it plain that, in his opinion, the present rate of dividend distribution is, on the whole, far too high?

§ Mr. Butler
After the speech to which the hon. Member for Stechford (Mr. Roy Jenkins) referred, considerable researches were done, and we found that a very considerable amount of profit is going back into reserves. The difficulty we found is that not enough is going into investment, which remains the really important thing for this country, and I would stress the need for further investment rather than answering in general terms the particular point raised by the right hon. Gentleman.

Several Hon. Members rose
——

§ Mr. Speaker
I think that there is scope here for a full-dress debate.