§ 2. Mr. PearsonTo ask the Chancellor of the Exchequer what representations he has received regarding the use of special dividends in takeover bids; and if he will make a statement. [12673]
§ The Financial Secretary to the Treasury (Mr. Michael Jack)My right hon. and learned Friend the Chancellor has received a handful of letters on this subject, including one from the hon. Gentleman. These are receiving attention.
§ Mr. PearsonWhen City financiers freely admit that the use of huge special dividends is a tax abuse, when the Financial Times says that no public interest in served by the loophole whereby the taxpayer subsidises corporate raiders and when The Times calls the practice an outrage and a state bribe, why are the Government doing nothing about it? When will they act to close the loophole which may already have cost the British taxpayer £200 million?
§ Mr. JackI understand the concerns that the hon. Gentleman articulates, on behalf of those who may not understand the basis on which the mechanism is used. He will realise that, put simply, any dividend, whether special or not, is paid out of already taxed profits. So there cannot be the tax loophole that he identifies. If he is uncomfortable about the process of bids being made by one company to take over another, that shows his fundamental discomfort with the marketplace.
§ Mr. Harry GreenwayDoes my hon. Friend agree that the fact that there are many more shareholders in this country than there were when the Conservative party came to office is a very welcome development in our society?
§ Mr. JackMy hon. Friend is, as always, absolutely right on that point. When we came to office, there were 3 million shareholders; there are now 10 million. All the policies that enabled that increase to take place were opposed by Labour. Those shareholders now look forward to dividends without double taxation—a policy introduced by the Conservative Government. The Labour Government, on the other hand, believed in double taxation on dividends.