DIVIDEND CONTROL (Hansard, 10 July 1978)

§ Lord BOYD-CARPENTER
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)
My Lords, the Government are now considering what restrictions on ordinary dividends, if any, may be needed after 31st July when the current statutory controls lapse, and a Statement will be made at the appropriate time. Successive Governments of both Parties have taken the view that, when pay is being restrained, there should also be restraint on dividends.

§ Lord BOYD-CARPENTER
My Lords, does the noble Baroness fully appreciate that most companies take dividend decisions some months before the dividends are actually paid? Can she, in those circumstances, explain why the Government have now got to within three weeks of the lapsing of the present powers without telling companies and the country what they intend to do?

§ Baroness BIRK
My Lords, I accept that some companies may be put into difficulties with their planning in the absence of guidance on what would happen on 31st July, and the Government are well aware of this. But, as the noble Lord is aware, this is tied up with other negotiations which are going on at the present time.

§ Lord BOYD-CARPENTER
My Lords, can the noble Baroness explain, none the less, why the Government have let this get to within three weeks, regardless, apparently, of the consequences to industry? Can she at least, give an assurance that when the announcement is made it will not be made by means of a Written Answer in the Commons on a Friday afternoon?

§ Baroness BIRK
My Lords, I cannot give any answers about what is going to happen in another place on a Friday afternoon or any other afternoon. So far as the delay in making a Statement is concerned, a number of factors have to be carefully considered as part of the Government's general approach to counter inflation when the present pay round comes to an end. This is not something that one can look at in isolation.

§ Lord BYERS
My Lords, will the noble Baroness put to her colleagues when they consider this matter, the adverse effect which the control of dividends can have on pension funds, which is becoming quite an important factor?

§ Baroness BIRK
Yes, my Lords, we are aware of this, but I think that noble Lords must accept that, if one is asking for pay restraint on the part of the workers, then, at the same time, one must ask for dividend restraint.

§ Lord BYERS
My Lords, I appreciate that; but may I ask the noble Baroness whether or not she agrees that there comes a point in time when that is not an equality? What is going to happen with the present inflation is that pensions will be much more difficult to pay if dividends are restricted.

§ Baroness BIRK
My Lords, we are aware of the difficulties and the problems. This is why the matter is being looked at extremely carefully to get the balance that the noble Lord has expressed.

§ Lord PARGITER
My Lords, can the noble Baroness say whether or not it is the fact that the major pension schemes look to capital appreciation rather than to dividends?

§ Baroness BIRK
Yes, my Lords, I think so.

§ Lord ORR-EWING
My Lords, will the noble Baroness bear in mind that there is really no correlation between the rise in earnings and the permitted rise in dividends? In the last four years, earnings have risen more than 100 per cent. and dividends have been limited to 10 per cent. on 10 per cent. on 10 per cent. Does this not further create the anomaly that the best and most prosperous firms are not able to attract extra capital and therefore expand further and export better, whereas the moderate firms are treated in exactly the same way? The longer this dividend limitation goes on, the more arthritic our capitalist society will become and the less prosperous will be our nation.

§ Baroness BIRK
My Lords, I must, I am afraid, repeat that, while I take note (as do the Government) of the point that the noble Lord has made, some companies have already given a public indication of what they intend to do if controls on dividends disappear. Whatever the commercial justification may he (and there is some commercial justification here) large increases in dividends could seriously affect the climate of restraint on pay; and it is impossible for the Government not to be bound to take account of this.

§ Lord BOYD-CARPENTER
My Lords, can the noble Baroness explain what is the position of a company which, in view of the fact that no control is known to be being continued after 31st July, has already declared an increased dividend to be paid after that date? What is to happen?

§ Baroness BIRK
My Lords, I am hoping that very shortly there will be a Government Statement on this matter. The noble Lord will then be as much in the light as I shall be.

§ Lord GLENKINGLAS
My Lords, while I have sympathy with the difficulties that the Government have got themselves into, does the noble Baroness realise that they have known that July 31st was the operative date? It appears to many of us that they are playing this until the last moment so as to make the announcement after Parliament has risen. We may be wrong; but it looks as though this is the way that the Government are playing it.

§ Baroness BIRK
My Lords, I think, with respect, that that is wrong. The noble Lord started off his supplementary question by referring to the difficulties the Government have got into, but I may say that the Government have managed, with the co-operation of the unions, to keep pay demands down to quite a remarkable extent. Again—and I have to keep saying the same thing—this is part of the discussions on the next round of pay policy. The Government are conscious of this very unfortunate delay and I do not think there is anything more I can say about it.

§ Lord HEWLETT
My Lords, will the noble Baroness not take on board that the beneficiaries of the pensions are in many cases the employees whose pay increases are being restricted; so that they are in fact achieving not what they desire but precisely the opposite of what they desire?

§ Baroness BIRK
My Lords, we are aware that in some cases it has this effect. This is another point that is also being taken into consideration.