HC Deb 14 May 1968 vol 764 cc1009-13
3. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer if he will issue a White Paper defining his Department's attitude to dividend increases by public companies.

The Chief Secretary to the Treasury (Mr. John Diamond)

There have already been several Ministerial statements on the subject, including a section of a White Paper.

Mr. Bruce-Gardyne

If the Chief Secretary is referring to paragraph 54 of Cmnd. 3590, I suggest that he reads it again, as it does not define anything. Is it not a fact that the blackmail which the Government have been exercising against companies in this matter has been abritrary, pointless and time-wasting to date, and will the right hon. Gentleman confirm that the Government neither have nor intend to take powers to compel public companies to disregard their prime obligations to their owners in the matter of distributions?

Mr. Diamond

There has been no blackmail, and I am astonished that the hon. Gentleman thinks fit to use such a term. There has been a voluntary dividend restraint scheme, which has been accepted by industry in 100 per cent. of the cases.

Mr. Dickens

Does not my right hon. Friend agree that a voluntary dividend restraint scheme is simply a postponement of the payment of unearned income? Would it not be far better to go back to the earlier idea of the present Chancellor of the Exchequer that there should be a compulsory, permanent statutory dividend limitation for all shareholders?

Mr. Diamond

I recognise that a dividend restraint scheme and a wages restraint scheme are not on all fours; but, as I have previously explained in this Chamber, different questions arise as regards restraining or restricting a dividend and paying it out. A company frequently finds, as it has more liquid funds, that it is useful to make investments with those funds rather than distribute them in the form of dividend in a subsequent year.

Mr. Frederic Harris

How can the right hon. Gentleman possibly call it a voluntary dividend restraint scheme when the Treasury give directions to company after company on the maximum dividend they can pay?

Mr. Diamond

I call it a voluntary dividend restraint scheme because up to the present there have been no powers and there has been complete correspondence with the Treasury's suggestions.

16. Mr. Stratton Mills

asked the Chancellor of the Exchequer to what extent in his refusal to allow Lex Garages Limited to increase their dividend from 14 per cent. to 24 per cent. he took into account the assurances given by the company at the time of placing on the market a large block of shares in October, 1967.

Mr. Diamond

There has been no action by this company which amounts to a firm pre-Budget commitment of the limited kind which might justify a departure from the voluntary dividend restraint scheme.

Mr. Stratton Mills

Can the right hon. Gentleman clear up the question of whether or not an assurance was given by the directors of Lex Garages Limited when a substantial block of shares was placed privately last October?

Mr. Diamond

No commitment was given of the kind which would compel a dividend declaration out of line with the dividend restraint scheme.

Mr. Ridley

Would not the right hon. Gentleman agree that he has no power to make Lex do this? Will he make it publicly clear that the firm is in no sense bound to follow his guidance?

Mr. Diamond

I have already given an Answer to that. This is a voluntary restraint scheme. There have been many discussions between companies intending to declare dividends and the Treasury, and in all cases they have been satisfied that it is in the general interest that the view of the Treasury should be accepted.

Mr. Patrick Jenkin

Is the right hon. Gentleman now saying that there is a distinction between a representation given privately by the directors of a company on the issue of shares and the representation given publicly by the issue of a prospectus?

Mr. Diamond

I say nothing of the sort. I did not and do not draw such a distinction. I drew a distinction between a commitment and the lack of a commitment.

Mr. Stratton Mills

On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

23. Mr. Ridley

asked the Chancellor of the Exchequer what arrangements will be made under Her Majesty's Government's incomes and prices policy to prevent persons receiving dividends from shares in foreign companies more than 3½ per cent. greater than the dividends of previous years.

Mr. Diamond

None, Sir.

Mr. Ridley

As the prices and incomes legislation cannot possibly apply to foreign-owned companies and companies operating abroad, is not this a direct incentive to investors to invest outside the country, totally contrary to the Government's policy in this matter?

Mr. Diamond

No, Sir. That branch of policy is dealt with by other methods and no part of the intention of dividend restraint is affected.

25. Mr. Ridley

asked the Chancellor of the Exchequer by what authority he is restraining increases in dividends.

Mr. Diamond

The Government have asked companies voluntarily to restrain dividends. Guidance is given by the Treasury as necessary on how to comply with this request.

Mr. Ridley

Is the Chief Secretary aware that Parliament has the function of preventing the Executive from doing things for which it has no authority, and that in these circumstances the fatuous and totally irrelevant things which the Government are doing about dividends shows how wise it would have been if Parliament had been allowed to debate these measures before they were put into practice?

Mr. Diamond

Parliament was given full opportunity to debate these proposals, in the sense that my right hon. Friend made a statement in his Budget speech and I made a very long and detailed statement in my contribution to the Budget debate when contributions were made from both sides of the House. There was, therefore, ample opportunity to debate whether this should be a voluntary scheme. I am glad to say that the whole of industry so far concerned takes a view diametrically opposed to that of the hon. Gentleman.

Mr. Higgins

As the Treasury has said that a percentage increase in productivity justifies an equal percentage increase in wages, is the Treasury giving the same direction about dividends?

Mr. Diamond

We are giving guidance of the kind which is fully detailed in hand-outs.

Mr. Peyton

Does not the hon. Gentleman realise that what Parliament—certainly the Opposition—objects to is government by guidance? That is totally wrong.

Mr. Diamond

I am glad to say that that is not the view reflected by industry, which is most anxious that, even when powers exist under an Act, they should not be motivated and that the whole scheme should depend on voluntary co-operation.

Mr. Ridley

On a point of order. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on the Adjournment.

28. Mr. Mikardo

asked the Chancellor of the Exchequer whether Her Majesty's Government's policy of restriction' on non-employment incomes in 1968 and 1969 applies to unit trusts, investment trusts, companies owned wholly or partly by United Kingdom citizens but incorporated outside the United Kingdom, and to all close companies.

Mr. Diamond

Unit and investment trusts, whose main income derives from companies which are themselves subject to dividend restraint, and companies not incorporated under the law of the United Kingdom, are wholly exempt from the policy. Close companies may exceed the maximum permissible level of distribution to the extent necessary to meet the requirements of the Finance Act, 1965.

Mr. Mikardo

I thank my right hon. Friend for that reply. Will he be kind enough to draw it to the attention of his hon. Friend the Financial Secretary who, on 24th April, at column 396 of the OFFICIAL REPORT, told the House that there were no exceptions to dividend restraint?

Mr. Diamond

My hon. Friend the Financial Secretary has listened very carefully to what my hon. Friend the Member for Poplar (Mr. Mikardo) has said, and has whispered in my ear—and I would not dream of repeating it—that he himself said nothing of the sort.