HC Deb 09 July 1969 vol 786 cc1474-6
Mr. Ridley

I beg to move Amendment No. 13, in page 3, line 27, after 'years', insert: 'and within a period not exceeding two weeks following a determination or direction in compliance with section 2 of this Act'. The Clause relates to the capitalisation of reserves. In Standing Committee, we debated the full implications of the rather odd importation into nationalised industry legislation of the public bonus issue, as it has been dubbed, which device has been copied from private industry in order to try to reflect more accurately the true worth of the equity of the Corporation. The declaration of the dividend and the decision as to how much to put to reserve go hand-in-hand. They are the same operation, and they are part of the annual apportionment of the profits of the Corporation as a whole. When a private company makes its fundamental financial decisions, it allocates a certain amount of profits to its reserves and a certain amount, as dividends, to the shareholders, but it does both operations at the same time.

9.30 p.m.

If we are going to copy these devices, if we are to play at tycoonery in the public sector, we must do so properly and completely. Of course, the capitalisation of reserves is part of the same operation as the declaration of a dividend, so this modest Amendment would simply require the Minister to make his decision about capitalisation of reserves within two weeks of the declaration of any dividend on the public dividend capital.

There cannot be much difficulty in accepting this principle, since it would clearly be wrong to give the Minister power to force the Corporation to capitalise its reserves at some late stage in the financial year. It could even be used as an act of chastisement by the Minister, suddenly stalking into the Corporation's offices in a fit of petulant fury and capitalising some of its reserves. We seek to protect the Corporation from such high-handed action. The right hon. Gentleman would not dream of doing such a thing himself, of course, but the Government have been doing some strange things lately—we saw an example earlier today—and some action like this in future would not surprise us.

What we seek is that declaration of the dividend should go hand in hand with any capitalisation of reserves which might be contemplated. The two weeks' grace is simply to allow the Minister time to consider the dividend which has been declared and then to declare any capitalisation. This is a useful Amendment, and I pay tribute to my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton) for having devised it. It is a slight protection for the Corporation and a correct addition to the practice. I have no doubt that the Government will want to accept it, and I look forward to hearing that from them.

Mr. Stainton

I support my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). It strikes me forcibly that the dividend decision under Clause 2(2) runs exactly in parallel with the capitalisation requirements under Clause 4. Both the capitalisation of reserves and the declaration of a dividend, by definition, come within the same pool of available profits in the Corporation's accounts. What one is seeking to do in this small Amendment is to protect the Corporation so that, in effect, the capitalisation decision is made, if not simultaneously with the dividend decision, at least very rapidly thereafter—and that it is for the financial year.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Free-son)

There is no basic difference between us here. I suspect that the tabling of this Amendment, which pursues a point discussed in Committee, chiefly on the initiative of the hon. Member for Sudbury and Woodbridge (Mr. Stainton), arises perhaps from a slight misunderstanding of the position, which I thought I had dealt with satisfactorily in Committee. In our sitting on 24th June, I explained that there was not a need for such a narrow time limit within which a direction under this Clause could be made, because …the Corporation does not need to know what notional additions are to be made to public dividend capital until immediately before the end of a financial year…"— [OFFICIAL REPORT, Standing Committee A, 24th June, 1969, c. 301.] Perhaps I did not explain clearly enough in Committee that any capitalisation of reserves will become part of the p.d.c. return for the forthcoming year whereas the p.d.c. return referred to in Clause 2(2) relates to the current year when one is looking at the reserves under consideration for capitalisation.

Mr. Stainton

I suggest that, although Clause 2(2) refers to the year, there will be a theme about dividend decisions. It is in this context that I am anxious to marry the capitalisation with the dividend decision.

Mr. Freeson

There is no difference on this point. The link between capitalisation of reserves and the p.d.c. return which the Minister will have to decide annually is to be taken as occurring over a period. One does not necessarily relate the capitalisation within a given 12 months to the p.d.c. return which the Minister has required for that 12 months. Therefore, it is undesirable to relate the capitalisation to the two weeks within which a determination will be made by the Minister.

Although I have been a little convoluted, I hope that I have clarified the points which were raised.

Amendment negatived.

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