Dividends

HC Deb 25 October 1966 vol 734 cc800-4

5. Mr. Winnick

asked the Chancellor of the Exchequer how many companies have issued increased dividends during the wages and incomes standstill.

15. Mr. Dickens

asked the Chancellor of the Exchequer how many public companies have paid higher dividends since 20th July, 1966; and what action he proposes to take.

Mr. Callaghan

I would refer my hon. Friends to the reply given to my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) on 20th October.

Mr. Winnick

Is my right hon. Friend aware that there is a very strong feeling in the country that the standstill is not being applied as strictly to dividend increases as to wages and salaries and, if this is so, is it not deplorable?

Mr. Callaghan

I am not aware of that feeling. If it is the case, I hope that my hon. Friend will help to dispel it by pointing out that, of the 628 companies that have declared dividends, 616 are within the standstill policy.

Mr. Dickens

Notwithsanding that reply, does my right hon. Friend accept that between 20th July and 19th October some 78 public companies announced increased dividends? Will he set out in the OFFICIAL REPORT a list of the categories of exemptions he has allowed under the dividend standstill, itemising against each category the number of companies which have received exemption?

Mr. Callaghan

I am not aware of the figures which my hon. Friend quotes. When he sent me a list before, I found that it was not altogether complete in a number of respects, but I am satisfied that the great majority of companies are conforming to the policy. It does not help the prices and incomes policy to pretend otherwise. All the evidence that I am examining shows that a great many public companies are doing their best and following the advice and request of the Treasury to make their policy conform.

Mr. Biffen

Can the Chancellor confirm that even under Part IV of the Prices and Incomes Act he has no legal authority to require a standstill on dividends?

Mr. Callaghan

Yes, Sir. It is the Government's view on this, as on other matters, that if voluntary co-operation can be secured it is the best way of achieving all these ends.

Mr. Crawshaw

Does my right hon. Friend realise that his policies would commend themselves more to hon. Members on this side of the House if it did not appear that some people are more equal than others? Could my right hon. Friend say that despite the figures he has given, the Government can take measures to ensure that these amounts of money are not given out in the future under the guise of bonus shares or by any other means?

Mr. Callaghan

I believe very strongly from what I have seen that the present pressure on profits and on the return on capital necessary to ensure that there is modernisation of plant and investment is not excessive and is' not likely to be excessive during the next 12 months.

6. Mr. Dickens

asked the Chancellor of the Exchequer what steps he is taking to ensure that private companies adhere to the incomes standstill in respect of distributions to shareholders.

Mr. Callaghan

The appeal for a voluntary standstill is addressed to all companies, but most private companies will be close companies and their dividends will have to take into account also the requirements of the tax rules.

Mr. Dickens

Is my right hon. Friend aware that there are about 16,000 public companies in this country and some 523,000 private companies? Will he set out for the House the arrangements he has made in the Treasury to exercise some supervision over this very large sector of industry? Can he tell us how many of the 523,000 private companies are close companies?

Mr. Callaghan

No, Sir. As I have already explained to my hon. Friend on other occasions, a close company is not a permanent position. It varies from year to year and, therefore, no central list can be drawn up. As to the proportion between public and private companies, it is true that public companies represent only 2 per cent. of the total, but they account for the overwhelming proportion of the total profits.

Sir C. Osborne

If in close companies like this the Chancellor requests that dividends shall be restricted, will he still allow the Inland Revenue to direct for Surtax purposes?

Mr. Callaghan

Yes, Sir, because that is the law, and it would be a means of tax avoidance if it were set aside. I should like some of my hon. Friends to understand that.

Mr. Costain

Does the Chancellor agree, and will he explain to his hon. Friends, that the object of getting the close companies to pay dividends is to enable him to collect Surtax? Would he not agree that, if these companies did not make profits, Income Tax for the rest of the population would have to rise?

Mr. Callaghan

The proper policy is that companies should make a fair return on capital which would enable them both to accumulate savings to modernise their plant and machinery and to give a reasonable return on what is employed. It is foolish to try to equate return on capital in this way with some other items in the economy.

28. Mr. William Hamilton

asked the Chancellor of the Exchequer what steps he has in mind to discourage or prevent any dividends now frozen by current policies from being paid in full immediately following the freeze.

Mr. Callaghan

There are fiscal powers and other means to prevent an excessive growth in dividends.

Mr. Hamilton

Does my right hon. Friend recognise the extreme vagueness of that Answer? Does not he recognise that a dividend payment frozen now is simply a payment deferred, whereas a wage frozen now is a wage lost for ever? It is this kind of vagueness which makes it difficult for far too many people to accept the justice of the Government's claim that the prices and incomes policy is just.

Mr. Callaghan

I do not know whether my hon. Friend was present when we had an earlier exchange on these matters.

Mr. Hamilton

I was.

Mr. Callaghan

In which case, my hon. Friend will have heard me say that there is a substantial pressure on costs now which will have a substantial reflection in profitability over the next 12 months. I do not believe that we are going to be concerned with a problem of an excessive return on dividends. We are going to be concerned with other problems apart from that.

Mr. McMaster

Is the Chancellor aware that the only way to increase investment is to increase savings, that entirely different considerations apply to saving and investment than to wages, and that the best way of increasing savings would be to allow dividends to rise?

Mr. Callaghan

I am all in favour of higher savings, both personal and in a corporate capacity. That is one reason why Corporation Tax has been fixed at the low rate of 40 per cent., whereas, of course, if profits are distributed in the form of dividends there is a higher rate of tax. That is also why I introduced the new National Savings Certificates, which are achieving very good results.

Mr. Molloy

Will my right hon. Friend acknowledge that, if there is a sudden upsurge of dividend releases during the severe restraint period—[HON. MEMBERS: "Oh."] This is important, and I know that hon. Members opposite consider it to be as well—all the appeals to wage earners to continue restraint will be totally ignored, with justification?

Mr. Callaghan

I accept that. That is why dividends were included in the White Paper on Prices. Incomes and Dividends. But what I am trying to point out is that this is not a genuine problem with which we are confronted at the present time. It is far more important that we should concentrate on problems which exist than problems which do not.