Incentives (Hansard, 24 February 1977)

§ 7. Mr. Bulmer
asked the Chancellor of the Exchequer what steps he will take to restore incentive to those who work and those who save.

§ Mr. Healey
I am aware of the case for such incentive. The hon. Member will have to await the Budget. If I answered his Question this afternoon, someone else would be presenting the Budget—and I am not sure who.

§ Mr. Bulmer
Will the Chancellor explain why it is in the interest of trade unionists that British companies, and not least nationalised industries, should be 1617 prevented from competing with foreign interests for the best management available? Will the Chancellor also explain why the maintenance of dividend control is in the interest of trade unionists since such arrangements are so clearly prejudicial to investment, jobs, pensions and the public purse?

§ Mr. Healey
I do not think that there is any significant evidence that dividend control is prejudicial to investment or jobs. On the contrary, it is an essential condition of a satisfactory pay policy, which the whole of industry, at any rate, agrees to be the single most important factor in creating business confidence.
There is something in what the hon. Gentleman says about competition for efficient management between nationalised industries and foreign or private interests. That is one of the many questions that I am bearing in mind during the approach to the forthcoming Budget.

§ Mr. Molloy
Is the Chancellor aware that there are millions of ordinary people who work hard and who cannot afford to save because they are honouring the social contract while there has been a massive increase in prices? Will the Chancellor confer with the Secretary of State for Prices and Consumer Protection to see that this dangerous situation is quickly brought to heel, so that in the next round of negotiations people will understand that the Government take all things into consideration, not merely the holding of wages, but a real holding-down of prices?

§ Mr. Healey
Of course I agree about that, but there are two comments I would make. The first is that my hon. Friend will realise when he has had time to consider my right hon. Friend's new proposals for prices policy in the forthcoming year that they are likely to have a more important effect on the level of prices than is the existing prices policy. My second point is that the main influence on the level of prices—as I said in my Answer to an earlier Question today—is the level of wages and import costs.
A pay policy is an essential component in tackling inflation, and that is recognised by the overwhelming majority of trade unionists. The level of import prices has largely depended in recent years on the movement of the exchange 1618 rate, but I am sure that my hon. Friend takes the same satisfaction as I do—and perhaps a great deal more satisfaction than our hon. Friend the Member for Southampton, Test (Mr. Gould)—in the stability of sterling over the last few months.

§ Mr. Fairbairn
Will not the Chancellor, if he is not willing to alter the tax on unearned income—in other words, the tax on those who save—at least, with his well-known record of honesty and accuracy, get the names of these taxes right? Will he rename the tax on unearned income a tax on income from savings, and then perhaps have a tax on what is genuinely unearned income, namely inflation-proofed pensions and benefits? That would be a tax on those who are protected from the ravages of inflation.

§ Mr. Healey
I regard the hon. and learned Gentleman's skill as a lexicographer as almost equal to his taste in dress, so I shall take very careful account of what he has said.

§ Mr. Skinner
Can the Chancellor explain why Sir Arnold Weinstock has been able to pocket for himself scores of thousands of pounds included in the £178 million granted to GEC by the recent issue? Is he aware that it has been suggested by the 11 trade unions in that business that this has breached dividend control? What answer does he give to the trade unionists who are protesting about this flagrant breach of so-called dividend control?

§ Mr. Healey
I well understand my hon. Friend's feelings about the distribution from the share premium account made recently by GEC, but that was not a breach of dividend control. Establishing control on the distribution of capital shares requires control to be established over all capital issues, and this would be a major undertaking which could have only a negative effect on real investment in this country, at least in the short run. I do not think that my hon. Friend would wish to face the consequences of such a step.

§ Mr. David Howell
In considering the need to restore management incentives, can the Chancellor give an assurance that there is no question of restricting mortgage interest relief to the standard rate 1619 of income tax in his Budget, because that would be a disaster for middle management?

§ Mr. Healey
I fear that I must resist every temptation from the Opposition Front Bench to talk myself out of office. f cannot answer that question at present.