HL Deb 28 July 1978 vol 395 cc1072-119

11.34 a.m.

Brought from the Commons; read la.

Then, Standing Order No. 43 having been suspended (pursuant to Resolution):


My Lords, I beg to move that this Bill he now read a second time. This short Bill forms a significant part of the Government's counter-inflation policy. That policy is set forth in the White Paper (Cmnd. 7293) which was published last week. The intention to publish this Bill was announced in paragraph 30 and I should like to quote, if I may, two sentences from that paragraph: The Government intends to introduce a Bill to extend the statutory control for a further 12 months from 1 August 1978 on the present basis and with the present provisions for exceptions and with one addition. That is that from 1 August 1978 no company will be required by the controls to increase its dividend cover above the highest level achieved since the current controls began.". In amplification of that, may I remind your Lordships as to what the current position is and what the present machinery is. The machinery which this Bill is to continue in force was brought into being by the Counter Inflation Act of 1973, and it has been continued in force by successive Statutes since that time. Under the Act of 1973 an order was made (Order No. 659 of 1973) which was an order made by the previous Government. The policy which was administered under that Act and that order was the policy set forth in a White Paper published by that same Government in October 1973, with guidance from time to time given by the Treasury—guidance which I think invariably indicated some relaxation which was necessary in the light of experience. I know this Bill has been much criticised in another place and it may well be criticised today; but I should like to say to the critics that they have to explain why it is that they now criticise a system which is essentially a continuation of the system which they introduced when they were in office in 1973.

What the Government propose is that dividend controls should continue for a further 12 months. The limit will be 10 per cent. and all the existing provisions relating to exceptions will be maintained, such as take-over defence, recovery from an adverse trading position and raising new capital for investment. In the economic debate earlier this week in another place, the Government's general economic policy in relation to inflation, as set forth in that White Paper, was endorsed. I think it is right to say that the other place has endorsed the Government's proposals for a further stage of counter-inflation policy on the lines set forth in the White Paper, so it is as part of that that the Government propose the extension for a further 12 months of the statutory controls on dividends. Successive Governments have taken the view that when pay is being restrained income from dividends should also be controlled. Indeed, as I have indicated, very few changes have been made in this regard from the scheme which was introduced in 1973.

The Bill itself requires no detailed explanation, but I think it is right for me perhaps to anticipate points that may be made, and certainly to deal with points that were raised during the proceedings in another place and which indeed have been raised outside. A number of questions were asked by the right honourable gentleman Mr. Maudling in another place; I believe they are questions which it was proper to ask and questions that the Government must face up to.

Mr. Maudling asked, first, why it was necessary, in order to achieve voluntary wage restraint, to have statutory control of dividends. That way of putting it does suggest an attractive symmetry: that you have it either voluntary in both fields or statutory in both fields. Indeed, the policy of the previous Government was to have statutory wages control and statutory dividends control. But, my Lords, it did not work, and that is the essence of the matter. It failed; and the present Government believe, as indeed I think noble Lords opposite now believe, that a statutory wages policy would not work.

On the other hand, the present Government have demonstrated that a voluntary wages policy can and does work. I know there are criticisms of the way it has worked in terms of the out-turn of earnings over the last 12 months and I can, if necessary, deal with that. But I think our experience over some three years has shown that one can combine a voluntary wages policy which works with a statutory dividend control. So that, in a sense, the proof of the pudding is in the eating and that, I think, is the answer to that question.

The same right honourable gentleman then asked another appropriate and pertinent question. He asked the Government what reason they had to believe that they could not get voluntary dividend restraint. Of course, the history of dividend restraint shows many attempts to get voluntary restraint, but the real answer is that many companies have indicated, and have indicated publicly, what they would do if there were no legal controls. It is clear that a large number of them would make very large payments indeed, some of the order of 200 per cent. increases or more, and if that were to happen—and it surely would, because they have said that it would—then people whose only income was earned pay or earned salary would be bound to be angered.

I ask the critics of statutory control: do they really believe that, if this Bill were to fail or were not to be passed and all dividend restraint were to be removed, the result would not simply be that company after company would declare dividends of 15 per cent., 25 per cent., 75 per cent., 200 per cent. or more; that the publicity given to such increases would be enormous, and that many people who are wage earners and salary earners would feel betrayed? That sense of betrayal would give a considerable boost to those who want to destroy the Government's successful drive against inflation by excessive wage increases.


My Lords, will the noble and learned Lord allow me to intervene for just one moment? How can he really suggest that dividend levels of that kind might arise, when he and the whole Government know that the return on capital in this country, the profits in relation to capital employed, are at the very low ebb that they are? It really is serving no purpose for the Government to make exaggerated statements of that kind.


My Lords, may I—


My Lords, if I may answer that, there are two points that I want to make. First, a number of companies have said that that is what they will do, and we can only go on what the companies have said. If we thought that the companies were just shouting something that was not true and not possible, then one might be able to ignore it. But, in fact—and this is the second point—what has happened over the five years of statutory dividend control is that those companies which could have paid over the limit, whether it was 5 per cent. as it was at one time, 12½ per cent. as it was at another or 10 per cent. as it was at another, have accumulated substantial sums of money—in one case, of the order of £600 million. Such companies are certainly able, whatever the return on capital may be, to make a considerable payment and to make that payment, if they were free to do so, on 1st August. So that we have good grounds for our fear. I believe that I have answered the noble Lord's question.


My Lords, we are most grateful as a House to the noble and learned Lord. He is taking a great deal of trouble in dealing with the points raised in another place; very much more trouble than the Chief Secretary to the Treasury was prepared to take. But will he not concede that the longer we go on with either dividend limitation or the control of wage increases, the worse the case becomes? In the case of wages, is it not true that the differentials are increasingly narrowed and the incentives at top levels of management get less and less; while on dividends we get more and more out of touch with reality, and pension funds and other institutional investors seriously suffer as a result? What was right in 1973 surely cannot be accepted as right in 1978–79.


My Lords, may make two points here? First, the Chief Secretary did not reply to the debate last night.


He opened it.


Yes, my Lords, but the question that I am dealing with were asked by Mr. Reginald Maudling in the course of the speech which followed that. The reply was made by the Financial Secretary, Mr. Robert Sheldon, who dealt in considerable detail with these points in column 1921 through to column 1923. So that it is quite unfair to suggest that the questions were not faced up to in another place. On the other matter, it is certainly the case that if one has a statutory policy of this kind, whether it relates to this matter or to something else, it becomes very difficult to break out of that. Governments—not only in this country—of whatever political complexion have found that that is so, and we recognise that.

But noble Lords must recognise, at the end of the day, that the Government have a real choice to make about how to pursue their counter-inflation policy. Of course, there will be casualties of one kind or another on the way, but the Government's economic judgment, which I believe to be right, is that one has to have controls of this kind to accompany and to bolster the voluntary restraint on wages, and this is the only way in which we can continue our success in fighting inflation.

The third question that was asked by the right honourable gentleman—and, again, I think it was a fair question—was this: If pay policy breaks down, what then? Will the Government abandon statutory control of dividends? We do not believe that the voluntary policy on pay will break down. I mentioned a moment ago the success of that policy. May I remind your Lordships, as briefly as I can, that the first phase of the policy, the £6 limit, was almost 100 per cent. successful. Equally, one can say that of the second phase, the 5 per cent. with a cash limit phase. That, also, was very nearly 100 per cent. successful. The most recent phase, the 10 per cent, guideline, cannot be said to be 100 per cent. successful, because when one looks at the out-turn, the annual rise in total earnings, one finds that it is of the order of 13 to 14 per cent. But one has to recognise as well that that includes self-financing productivilty deals. So what one can say is certainly this, that it has been much more successful than any of its critics would have predicted a year ago.

Another criticism which the Government must face in presenting this Bill is that the existence of dividend control inhibits the operation of the capital market and makes investment less attractive. We concede that there is some substance in this point, and indeed the Treasury said so in evidence to the Wilson Committee. But the effect should not be exaggerated. The 10 per cent. statutory limit with the other provisions, including the new one on cover, still allows a good deal of freedom to companies. During the period of controls—that is, since 1973—over £3,000 million of new capital has been raised, mostly by rights issue, and, as your Lordships will know, when it comes to rights issues there is a possibility of relaxation in the dividend control, if the company can demonstrate that that is necessary in order to promote the rights issue successfully. But the essential point is that, in the Government's view, dividend control must be regarded as part of the counter-inflation policy as a whole and, as I indicated a moment ago when the noble Lord, Lord Orr-Ewing, intervened, the disadvantages are worth accepting in the interests of the larger aim of controlling price increases.

The noble Lord, Lord Orr-Ewing, also mentioned the effect on pensioners, and it was certainly said in another place that dividend control hurts people other than the rich. We are not concerned about trying to hurt the rich. We are concerned about trying to protect everyone against the ravages of inflation, which attack everyone. There is certainly something in the point that dividend control affects people who, by no standard, can be said to be rich. Nearly half of all dividends go to pension funds and life assurance companies, and they represent the savings of millions of workers. We acknowledge that fact. In addition, there are millions more who save direct. The Government accept that these people will be, or may be, affected by the continuation of dividend control. But the essential point, again, is that they would be much worse affected by uncontrolled inflation, which is quite arbitrary in its effects and redistributes income away from the poorer sections. Accordingly, we defend dividend control upon that general ground, too.


My Lords, it seems a shame to pester the noble and learned Lord, who is so temperately expounding the case for this Bill. But might I ask him about a matter of increasing perplexity in my mind, as he has developed his argument? How does the noble and learned Lord conceive the modus operandi of the payment of dividends in regard to inflation? Does he believe that the payment of dividends, which are a residue after costs have been met and provision has been made for depreciation, has a direct influence on the increase in the volume of spending, or is he relying, which I should have thought was perhaps the more reasonable position, on the indirect psychological effect of the payment of dividends?


My Lords, I am not advancing an economic case. It would be foolish of me to pretend that I was, and I shall not do so. I am advancing the case that one pay settlement is looked at by others and that if a breach is opened in a guideline or a control then others will seek to go through that breach. That principle applies equally here. I know that in economic terms it is much more difficult to make a case for it, but in psychological terms this is the case. Politics and the control of the economy is a Party political exercise. I am not talking about Party politics, because this policy was introduced by the prevous Government and was continued by us. However, politics is the art of persuading people to accept economic policies and other policies which are seen to be necessary and in the general interest. I make that point unashamedly. Those who propose to attack me on the ground that the economic case is weak because of the relatively small part played in the economics of this country by the two or three per cent. of income that comes from this source, may feel free to do so, but I shall not attempt to reply. I make the point that I make and no other.

The control of inflation requires that incomes be restrained. That is the Government's view, and I think that it is a view which the country widely shares. The great bulk of incomes takes the form of earned income, and the Government look for and expect to get voluntary restraint. That expectation, I believe, is soundly based on the experience of the success of voluntary policies over the last three years which I have outlined. To win the continued assent of wage and salary earners to income restraint, the Government's policy must be, and must appear to be, even-handed. This measure continues in the field of dividends a restraint which parallels the restraint in ordinary earned incomes. I believe that it will be seen by the people, by wage negotiators and even, by those who are most directly affected by it, as a measure which helps the battle against inflation to be continued and to be continued with success. My Lords, I beg to move.

Moved, That the Bill be now read 2a.—(Lord McCluskey.)

11.54 a.m.


My Lords, the noble and learned Lord, Lord McCluskey, as we have become used to, advocates the Government's case in your Lordships' House with great reasonableness and consideration, and with as much persuasion—indeed, more persuasion—than the case which he is advocating deserves. We are grateful to the noble and learned Lord for his manner of approach and for his consideration to us, but the case which he is dealing with this morning is a nonsense.

Before I come to that, may I first take up the challenge when he asked my noble friends and I how we can justify opposing now what we ourselves introduced when in Office in 1973. I think that the answer is many sided, but let me give to the noble and learned Lord just two sides of it. First, conditions are not the same in 1978 as they were in 1973—nor, to pick up a word used by the noble and learned Lord in his closing remarks, is the policy even-handed in 1978, as it was in 1973. In 1973, whatever one may think about the economic rights and wrongs, statutory control was evenhanded on pay increases, on price increases and on dividend increases.

What is the position today? Employers are required to suffer strong but arbitrary sanctions if they fail to keep within the 5 per cent. guideline, even though they may he forced to go beyond it by industrial action—perhaps even by industrial action taken in breach of agreements which the trade unions concerned had entered into with employers. They have no remedy. If employers are forced to go beyond the guidelines for those reasons of force, then the Government still impose arbitrary and penal sanctions upon them.

Employers are also required still to operate under a statutory price control régime. Most shareholders, as I shall come to in more detail later, are not wealthy men. Either they are pensioners or people in insurance schemes or they are small savers. Shareholders are to be required to continue under statutory restraint, but the trade unions are not now required to do anything. They are not required to accept any statutory restraint. They are not even required or prepared to give the most general term voluntary acceptance to the guidelines which the Government have placed before the country. Is that even-handed as between the different sections of our community? Is that what social justice and non-divisiveness in our society is about? That is the chief difference between 1973 and 1978.

The noble and learned Lord tried to answer the question put by Mr. Reginald Maudling, that if voluntary incomes control is sufficient, why not voluntary dividends control, if such control is needed? The noble and learned Lord did not answer that question, with respect. He merely asserted that voluntary control is working. He gave no evidence of proof of any kind that the existence of the statutory control of dividends is one of the conditions of voluntary control working, and why, indeed, dividend control is one of the conditions of it working. And still less did the noble and learned Lord say why voluntary control would not work at least as well as, if not better than, statutory control. The noble and learned Lord did not, with respect, reply to that question in any way at all.

The truth is that this Bill is a nonsense, and it is a damaging nonsense. It has been put forward, again as we heard from the noble and learned Lord, on grounds of social justice. He said in other words what, in effect, the Prime Minister said in another place earlier this week: that it would be wrong, when the working people are being asked to exercise moderation in their pay settlements, for the Government to fail to do all in their power to see that moderation is exercised on dividend payments. But this is nonsense, except in terms of the political mythology of a few dinosaurs in the Labour Party and in the trade union movement—and I do emphasise "a few". It is not true, in the case of the general impression, feeling and sense of what is right and wrong, of the great majority of employees—"of working people", to use the Prime Minister's phrase—in this country.

What is true, I believe, however unpleasant it may be economically, is that if the Government of the day feel that it is necessary in the national interest to impose restraint on pay increases—to put pressure on those who can bargain for pay increases to restrain themselves in using to the full their bargaining power at a given moment to get the biggest increases they might be able to win—then I do understand, and I do think that it is fair to impose an equivalent pressure and restraint on those who can settle prices. That is a proper and a fair trade-off for asking people to accept, on the one hand, restraint in pay increases and, on the other hand, restraint in price increases. One can argue about the economic effects of those two, but, if we are talking about social justice, price restraint is the proper trade-off for pay restraint, and it is nonsense to say, as the noble and learned Lord and the Government say, that there is a trade-off in social justice between pay and dividends.

I know it is some years ago now—too many years ago—but I have had, as I am sure many noble Lords have, experience of working on the factory floor. I never encountered, except among a tiny minority of political activisists, this sort of emotion as regards dividends. It just does not exist among the great majority of our people. The noble and learned Lord says people are bound to be angered. What evidence is there that people are bound to be angered? I do not believe there is any evidence for it at all, not unless a tiny minority of these dinosaurs I spoke of set about a deliberate attempt to whip up emotions on this subject.

I apologise to the noble and learned Lord for interrupting him; I really could not restrain myself, because it is most unlike him to whip up false emotions and damaging emotions of this kind. Really, to give that exaggerated picture of what would happen to the general level of dividends if either compulsory or voluntary dividend restraint were removed today is so ridiculous as to be nonsensical. The noble and learned Lord says that companies have said that they will do this. It would be very interesting if he would place in the Library a list of companies which have said they will raise their dividends to these fantastic levels. I am sure thare will be the odd one which would do so. But while there is the great generality—which the Government quite understandably make a lot of—of acceptance among working people, again to use the Prime Minister's description, of pay restraint, we all know that there are the odd cases where that restraint has not been shown at all. But the Government, quite rightly, do not argue that the odd exceptional case of irresponsibility and lack of restraint on the pay side should therefore cause the whole thing to be put under statutory control. Why should they say that the odd exceptional case on the dividend side should impose this statutory control on the 99 per cent. of honest, responsible, efficient companies?


My Lords, I am obliged to the noble Lord for giving way. I did not suggest and do not suggest that the general level of dividends would rise by the kind of figure I mentioned of 200 per cent. What I did suggest was that there were certainly going to be some such cases, or so the companies themselves have announced. I do believe—and I do not think the noble Lord could contradict me on this—that it is the exceptional case that is going to get the headline publicity, and if it appears to the great mass of people who are prepared to accept some kind of voluntary restraint that in some cases very substantial increases are being paid in this form then I think that will be resented and will cause anger.


But, my Lords, so will the odd case of irresponsi bility on the incomes side get publicity, and what is sauce for the goose is sauce for the gander, in this field of psychology at least. But, anyway, why do we suppose that the great majority of working people in this country are such fools, and so incapable of understanding what are their own true and honourable self-interests in matters of this kind? First of all, as indeed the noble and learned Lord admitted, about half of all shares are now owned not by individuals at all but by pension funds, insurance companies, unit trusts and similar institutions, including trade unions, providing for the mass savings and social benefits of the whole population. Therefore, the main role of dividends in modern society is to provide the pensions and other benefits not for a tiny number, a few rich people, but for the whole mass of the population. So rising dividends equal rising pensions for millions of employees; restrained dividends equal restrained pensions for millions of employees. In what way is it fair or sensible at one and the same time to restrain the pay of million of employees, and then, in the extraordinary name of social justice, on top of that to restrain their pensions as well? What hypocrisy it is to call that social justice! I repeat that I do not believe that the millions of employees, ordinary working peeople in this country, are such fools as to believe or feel that for one moment. I know from my own past experience that they do not.

However, my Lords, the unfairness is even greater than that when one considers the effect as between one class of employee and another. If you are an employee in the public sector nowadays your pension is automatically inflation-proofed, but, if you are an employee with an occupational pension in the private sector, or if you are self-employed and providing your own pension, your pension can only move towards being inflation-proofed if your fund is being fed by rising dividends, or, of course, alternatively if you yourself, out of your restrained weekly income, pay a much increased weekly contribution.

So, from the pension point of view, whether you are already a pensioner or whether you are still of working age and building up a pension for your retirement, dividend restraint separates society into privileged and disadvantaged groups. If you are a public servant, your pension is automatically inflation-proofed; if you are a private sector employee or a self-employed person your pension is held down below what it would otherwise be. Again, I ask how this can possibly be described as promoting social justice between individuals and different groups in our community. Let me remind your Lordships, for perhaps too many times, that this is the basis on which this Bill is presented to us; it is presented on a social justice basis.

Look at that case from a different angle, the angle from which the Government apparently looks at it—the alleged need to prevent the rich shareholder from benefiting when, in the Prime Minister's phrase, "working people are being forced to accept restraint in pay". I have dealt with it from the working people's point of view and shown how they are going to suffer from dividend restraint. Are there in fact, on the other hand, very many rich beneficiaries to whom dividend increases will give much, of a size and on a scale to create some crying scandal of unfairness? Will this be on a scale of unfairness to justify holding back the pensions and insurance benefits of the very employees in whose name it is suggested that these restrictions should be introduced? Of course there are not, my Lords. It is a ludicrous suggestion. No doubt there are still some very wealthy and large shareholders, but the richest ones will have all but 2p out of every extra £1 of dividends taken back by the Chancellor of the Exchequer, and the not so rich ones will lose over 50p out of every extra £1 they get. It is the taxation system, not dividend control, which looks after this aspect of fairness in our community.

What about the general body of individual shareholders? Here I would like to turn to evidence brought forward by the Diamond Commission, the standing Commission set up by the Labour Government under the chairmanship of the noble Lord, Lord Diamond. That Commission has pointed out that there are about 2.1 million individual shareholders in this country at the moment. In 1972–1973, which is the latest figure they can produce at the moment, 50 per cent. of shareholders had a total statutory income from all sources of less than £2,000 a year; that is, with their pensions and interest on savings; while as many as 25 per cent. had a total statutory income under £1,000 a year. In other words, 50 per cent. of the individual shareholders in this country whose dividends have to be restrained in the name of social justice are personal shareholders of very limited means, and a large proportion of them are people like widows and elderly single ladies. Is this social justice? Is this the sort of sacrifice that the working people of this country require from their fellow citizens in return for pay restraint? I do not believe it; at least, not if they are honestly led on these matters.

In conclusion, I should like to say a few words about the economic effects. The noble and learned Lord, Lord McCluskey, at least admitted that they were present. His argument was a de minimis argument—the illegitimate baby was going to be a small one and therefore could be disregarded. It seems to us, on this side of the House, to be rather ludicrous, at a time when there is a large measure of agreement running, right across Party boundaries, shared by managers, employees and trade unions alike, about the urgent need to increase investment in order to improve the competitive efficiency of British industry and to create the only base upon which we can hope to build fuller employment in this country in the future. It cannot be denied that dividend restraint inevitably makes new venture capital more difficult, and not less difficult, to raise. Therefore, it discourages a growth in new investment and that means future unemployment will be, to some extent, higher than it need otherwise have been.

The noble and learned Lord may say that the effect is small. But why do something which has even a small effect in the opposite direction from that which the whole country perceives to be necessary and to its advantage? Of course, another connected disadvantageous effect of dividend restraint is that it tends to a levelling down rather than a levelling up between different companies with different levels of efficiency. The majority of companies may not be much affected by dividend restraint, but one suspects that one effect of dividend restraint may be to drive some companies to pay higher dividends than they might otherwise have paid if there had been no control at all, because if you do not reach the minimum someone will think that there is something wrong and that you are about to go bust. We cannot be sure, but it may actually lead some companies to pay higher dividends than they would otherwise do. What is certain is that a small number of companies—but a small number of really efficient and expanding companies—will pay less than they could and should pay on the basis of their achieved results.

So the most thrusting and efficient companies with the greatest capacity for growth, doing the most to improve productivity, will, to some extent at least, be held back. Therefore, one cannot help asking when, if ever, will the Government learn that you cannot cure inflation and unemployment by holding back the companies in Britain which show the greatest potential for growth, the greatest efficiency, the highest productivity and the greatest readiness to put enterprise into practical effect?

To sum up: statutory dividend restraint exerts a downward pressure on new investment and an upward pressure on the long-term level of unemployment. It unfairly penalises the widow and the small pensioner from professional and self-employed backgrounds. It favours one class of pensioners in the public service against all the other pensioners in the country. It holds back the future pensions of millions of employees at the same time as those same employees are having their increases in pay held back. Is that fair? Does all that encourage greater social justice? Is all that conducive to greater national wealth and prosperity? Of course it is not. It is government by ritual sacrifice to false idols. How much longer are we to be governed by myths of that kind? Is this national leadership? Not so long ago some of the Prime Minister's acolytes were likening his role as leader to that of Moses. Moses indeed!—The Duke of Plazator, perhaps!

12.15 p.m.

Baroness SEEAR

My Lords, the noble and learned Lord, Lord McCluskey, is a very distinguished member of a profession which is highly skilled in putting the best possible face on the worst possible case. We realise from his presentation this morning how well justified is his high standing in that profession. Many of the reasons why we, on these Benches, oppose the Bill have already been put forward by the noble Lord, Lord Carr of Hadley. In the first place we do not believe that the way to compensate for holding down pay is by holding down dividends. We take that view for many of the reasons which the noble Lord, Lord Carr, has put forward, and for some other reasons too. It is far more appropriate to avoid the few cases—and surely they will be a few—in which excessive dividends are paid out by having some continuing control over prices, whatever the disadvantages of that may be. That would be a far more satisfactory way, in terms of inflation control, than attempting to institute this control by the continued limitation on dividends.

However, the Government's case and the case put forward by the noble and learned Lord, Lord McCluskey, this morning has rested primarily on the argument that what the Government wish to do is to be evenhanded. There is no even-handedness in the way in which investors in industry, through the dividends which they receive, are treated as against other sections in the community. The failure of even-handedness goes back a very long way and I suggest that it is one of the reasons why we, in this country, are in our present economic mess.

As the noble Lord, Lord Carr, pointed out, the percentage of people who will gain very greatly—very wealthy people—from increased dividends is, in fact, small and the amount that they receive is greatly cut back by the level of tax that they are paying, plus the investment surcharge, which we alone of all countries impose on the investment income. So those who have a high level of income are really paying back to the Government to the tune of 75 per cent. or more of any dividend they receive.

On the other hand, as the noble Lord, Lord Carr, has pointed out, there are a very considerable number of individuals who, during their working days, accumulated a little capital, were foolish enough to invest it in industry and are now trying to augment their pensions by the dividends that they receive. I suggest that there can be no one in your Lordships' House who does not know someone of that kind. I shall quote only one example, that of a widow of 80 who was left with an income of £1,200 when she was widowed 15 years ago, an income which then enabled her to live a reasonably comfortable life. Dividend control for people of that kind means that what has become penury pushes her into absolute poverty. That kind of case is typical of what is happening to a very large number of older people.

I suggest, as I said a moment ago, that there can be no one in your Lordships' House who does not know people of that kind. Is it really to such people that we would deny the opportunity of a somewhat increased dividend? Surely, as the noble Lord, Lord Carr, has said, it is very improbable that there will be a great outburst of dividend payments throughout the whole of industry given the low levels of profitability that we know are experienced throughout the mass of industry.

Let us look at even-handedness so far as it affects other groups—even-handedness towards the investor in industry as opposed to people who receive income in other ways. In particular, let us look at the case of pensioners. In my view, there are two groups of people in this country who have no business to be critical of an increase in dividends in terms of fairness. The first group is those of us—and I say "us" because I move into this group—who benefit from indexed pensions. For all those people who are drawing and expect to draw indexed pensions to be critical of dividend limitation, on which the pensions of all those not so fortunate depend, is hypocrisy. The second group which is highly privileged in relation to people who are expecting to draw dividends in return for money invested in industry, is the very large number of people in this country who benefit from tax concessions in relation to mortgages. People who have chosen to put their savings into buying a house, as distinct from putting them into industry, receive concessions on tax when they draw out their mortgage and pay no tax on their notional rent; they also have high concessions when it comes to selling a house in terms of capital gains.

Let us compare their position with that of the person who made the decision, which is still a perfectly reasonable decision to make, to live in rented accommodation, if he or she had the opportunity to get it—and there are cases where this is much the wiser and better thing to do, apart from tax concessions—and to invest savings in industry. They save income which has been taxed; they pay tax, plus investment surcharge, on every dividend that they receive: and of course, if they sell their investments, they pay capital gains on them. What even-handedness is there between those two groups?

The approach is based on a totally outdated and highly uneconomic point of view; that is, that somehow or other—and it is a point of view which has been developed over decades by the Party in power today—there is something rather discreditable about putting money into industry and creditable about owning one's own house. I am not against people owning their own houses, but I fail to see why they should be given so greatly preferential treatment as against those who choose to invest in equities. It is high time that we altered our attitude towards the idea that, if people are foolish enough to put their money into equities, that is their own lookout but they should not be given any encouragement, and others are given very preferential treatment. Therefore, the inequality of holding down dividends at present is a very strong argument against the Bill before your Lordships' House today.

But there are also, of course, the economic arguments. It is quite absurd that those companies which are making large profits are encouraged not to distribute them. We are getting a very bad distribution of capital because, of course, it pays companies—and they are encouraged to do this at the present time—to make investments inside their own concern—to plough hack inside their own concern—when, in fact, they may well not be using that money as wisely as it could be used if it was distributed and reinvested elsewhere. We are getting a distortion of capital investment by a continuation of dividend control.

The Government's whole argument rests on the belief that people are incapable of understanding the disadvantages of dividend control at the present time. The noble and learned Lord said that, if a large dividend contribution is seen, people will be angry. Of course, they get angry about all sorts of things. We have to learn to stand up to people being angry.

They get angry because they think that it is very inequitable. I do not believe that people are as ignorant as the Government think. I think that the Government are caught in a set of attitudes that was developed some 50 years ago, and that change in the country has proceeded much faster than people who are boxed-up in Westminster are altogether aware. If they are not aware that people are now better educated and are capable of understanding the folly of continuing dividend control, then I believe that a really intensive educational campaign to explain the economic facts of life—and I have asked for this again and again—should be mounted so that people can understand how industry is best financed and what the function of the dividend is. They are perfectly capable of grasping these facts, and I believe that a great many of them have already done so.

But why do not the Government embark on a much better programme—or encourage other people to do so—of enlightenment so that the real economic facts of the situation can be understood. The noble and learned Lord, Lord McCluskey, himself admits that those facts are on the side of getting rid of dividend limitations; let the people understand and let it be explained to them. They are capable of realising it and I believe that the Government would find that the opposition to it was very small indeed.

12.25 p.m.


My Lords, almost as extraordinary as this Bill is the procedure which the Government have followed in respect of it. They have known all along that the power to control dividends lapses at midnight next Monday. They have known—at least I assume that they have—that the ordinary practice with public companies is to declare dividends through the normal procedures of the Companies Acts many months before those dividends are paid. The Government have repeatedly been begged to make clear what their intentions would be after 31st July. I was one of those who table a Question in this House and was told that the matter was under consideration as recently as 10th July.

Then at the beginning of this week alone they introduced this Bill; they pushed it through another place in one day and here we are in such a hurry in this House that we do not even have a Lords print of the Bill in front of us. The procedure was such that even the noble and learned Lord, Lord McCluskey, at the beginning of the debate was rather foxed by it. This shows an extraordinary lack of forethought by the Government or lack of understanding of the significance of dividend control, particularly to those who have the responsibility of operating public companies. It is not made any better when the noble and learned Lord says in the blandest of ways that, of course, there is no economic case for the measure. Indeed, I understood him to admit that economically this would he counter-productive.

I think that he accepts—he will deny it if he wants to—that this is a measure which, to some degree, will discourage investment; that it is a measure which, therefore, will help to increase unemployment. To come forward with such a measure at a time when the Government are presiding over 1½ million unemployed, the number of whom actually rose at the last count, really argues a very remarkable insensitivity—certainly the noble and learned Lord may interrupt.


My Lords, I was invited to interrupt by the noble Lord and I am grateful that he allows me to. If one looks at this measure in isolation it may, indeed, be seen to have certain effects upon investment and, therefore, upon job opportunities; but one looks at it as part of the platform, or part of the apparatus, of the Government's fight against inflation. If this apparatus were not used, and not used as a whole, inflation itself would lead to such a reduction in jobs and in investment that the result would be very much worse.


My Lords, I shall come in a moment to the noble and learned Lord's belief—if he will allow me to say so, his illusion—that this is an apparatus calculated to restrain inflation. I shall suggest in a moment that it is the opposite. At present I am basing my argument on the initial proposition that in the present position of the country, with unemployment high and showing signs of rising, with the Government in their own White Paper (to which the noble and learned Lord referred) saying that we need more investment, it is astonishing to come forward at this stage with a measure about which we can argue to what extent it will do this, but, it is apparent beyond dispute, will to some extent be damaging to the aim of promoting investment and employment.

It is a very remarkable situation for us to come upon right at the end of the Session. The noble and learned Lord's view about the effect of this economically is sustained by the evidence, to which he referred but did not quote, given by the Treasury to the Wilson Committee last summer. I think that the House may be interested to hear it. Last summer the Treasury said: even with the rights issue relaxation, there can be little doubt that dividend control has tended to distort the equity market, making it less attractive to private investors, and has thus to some extent increased the cost of raising new capital. That is the Treasury, under the directions of Her Majesty's Government, giving evidence with all its authority to the Committee which the Government set up. It and the noble and learned Lord agree that, from the point of view of an economic analysis, this is a damaging measure. That, given the state of the national economy at this moment, is an immensely serious admission to have to make. It must be unsound, if you are trying to operate a still predominantly private enterprise capitalist economy, to undermine the dynamic which makes it work. I thought that the Financial Times yesterday summed it up extremely well when it said: A thorough-going opponent of private capitalism could argue in favour of turning over the equity to the State or to the workers themselves. But to maintain a substantial privately owned sector and prevent its proper functioning is the kind of stupidity into which otherwise sensible people are led by the obsession with pay controls. I come now to the point at which the noble and learned Lord interrupted me. He says that this will help to check inflation. He says that it will help to check inflation because if it is not done the unions, and those they represent, will not exercise restraint in their pay demands. I think that that is, as my noble friend Lord Carr said, an insult to the intelligence and the knowledge of the shrewd and able men who lead our trade union movement today. I cannot believe that they are so rooted in the prejudices of the 1890s and the early 1900s that they are really going to let their decision on pay restraint be affected by the question as to whether or not statutory control of dividends is imposed.

I do not want to weary the House by repeating it but I shall summarise what has been said already: the private shareholder now holds not much more than one-third of the equity in quoted companies. The great mass of these holdings is in the pension funds, in the insurance companies, in the trusts (including investment trusts), in the unions, in the pension funds of the nationalised industries, including those which put a certain amount of funds in works of art. That is where they are held in the interests throughout of those who are earning wages and are being asked to exercise wage restraint.

Why on earth should people be induced to exercise wage restraint because pressure is also being applied in other ways in areas where they also have interests? Let me take an extreme example, because it arises: this is the position where employees hold shares in the companies in which they work. It so happens that a company of which I have the honour to be chairman has 2,555 direct United Kingdom employees, and that of those over 80 per cent. hold shares in our company. What on earth is the inducement to those men to exercise restraint in wage demands if you cut back their dividends? Surely it must be wholly counterproductive.

The irony of this is that this process of worker participation in employee shareholding in companies is something which, quite rightly, the Government are seeking to encourage. I think there are nine clauses in the Finance Bill designed—in my own view not very effectively—to facilitate the development of employee shareholdings. This is the declared policy of the Government. To their credit, it has been urged on the Government strongly by the Party of the noble Baroness, Lady Seear. But how do you reconcile encouraging employees to take shares in these companies while at the same time making it less attractive to them by restricting the dividends?

I think it goes deeper that that. This example of what the Sunday Times the other day called "envious égalitarianism", this old-fashioned attempt to create antagonism, is particularly harmful at a time when it is too transcendentally important to get across the idea that the shareholders who provide the capital, and the workers who provide the skill and effort, are partners in the enterprise and not opponents. It is setting them and their interests against each other. This is not only harmful itself but it is not true in fact, and it is particularly untrue in the kind of example that I gave to the House a moment ago, where the employees are a substantial section of the shareholders themselves.

I say to the noble and learned Lord that of course we all wish to see inflation restrained—indeed, we wish to see far more effective measures taken to do that than the Government show any signs of taking. However, he is not entitled to assume that a measure of this kind is going to increase that restraint in the pressing of wage demands which, I agree with him, is an important element in the restraint of inflation. Any intelligent and sensible trade union leader, or member of a union, must realise that in one way or another, through shares in a company in which he works, through the pension funds, private or public, in which he is involved, if you restrict dividends you are hitting him again and are depriving him of possible gains and benefits. The noble and learned Lord accepts that the Bill fails as an economic measure. It is a harmful one. It is only on the most out-dated assumptions of old fashioned out-dated prejudices still existing that it can have any helpful psychological effect on wage restraint. Even if there were anything in the noble and learned Lord's point, then the answer is the one given by the noble Baroness on the Liberal Benches: for heaven's sake! go out and educate people in the realities of economic life instead of, as the Government are doing by bringing forward this measure, seeking to perpetuate harmful legends which can do nothing but create ill will and disruption.

This is a Bill introduced in strange circumstances at the end of the Session in the light, no doubt, of all sorts of discussions outside. It is one that will do no good, and it is one that will do some harm. It is a mean little Bill which will be covered with contempt, and the Government will not escape a good deal of that contenpt.

12.38 p.m.


My Lords, as a stockbroker I have a personal interest in the decision on this Bill. I am grateful for the opportunity to put the personal observations of one who is not only a junior Member of your Lordships' House but also a junior member of the Stock Exchange. It is not my aim either to recommend this Bill or to oppose it, but rather to emphasise how the cost of a continuation of dividend controls for another year will be borne.

I think it is widely agreed, as has been apparent in this debate, that the reason for this Bill is the psychological one rather than economic arguments. I personallyam unconvinced that the psychological arguments are based on anything else than illogicalities, but nevertheless the fact does exist. If to beat inflation it is considered necessary to have an incomes policy, and if, in order to make an incomes policy work, it is considered necessary to have dividend controls, that is a political decision on which I do not feel that I am qualified to comment. I would put in one thought here which is a personal one, and that is that the stock market, and investors in general, do not like uncertainty. Therefore, they may feel that there is little difference, if there has to be dividend control, between the certainties of a statutory policy on dividend control and the uncertainties and the backroom pressures of a voluntary policy.

We should not exaggerate the role of dividend control in keeping dividends down. There are many other factors, probably the chief of which is the hopelessly inadequate profitability of most of British industry and commerce, which should be of great concern to us all. Nevertheless, a large number of companies would otherwise have increased their dividends considerably. Looking at the Financial Times, one can see well-known companies whose dividend cover is in double figures, when previously anything over two, or possibly three, times cover for a dividend was considered high. Therefore there is a cost in dividend control and it does not necessarily fall where one would think it falls.

In the first place, of course, it falls on investors, and the man in the street naturally thinks of shareholders as rich people. Undoubtedly some of them are, but, as has been stated many times in this debate, many shareholders are not rich and many shares are held on behalf of pensioners and people with very ordinary means. I understand that it has been calculated that 17 out of every 20 families in this country have savings invested in risk capital of industry and commerce, either directly or through such institutions as pension schemes, life assurance policies or friendly societies. As a light alternative to more statistics, perhaps I may share with noble Lords an incident, I am afraid a humdrum one, that brought home to me how widely shares are held.

A few years ago we moved into our house and somebody was putting up cupboards in our kitchen. One evening after work I came home and went outside to the back door to clean my shoes. I heard this man talking to my wife about what I did, and my wife said that I was on the Stock Exchange. "That's just a gambling casino", he said. Perhaps I polished my shoes a little harder, but at that point I did not intervene; naturally I did not agree. There is of course risk in all investment, whether one puts one's capital under the mattress or invests it in industry; and most of the investors I know are more concerned with security—security of capital and the maintenance of income in the face of inflation—than anything else. My wife then asked this man where he put his savings and he replied that he put them in a friendly society. I asked him which friendly society and he gave me the name, and I said, "That is very interesting because that friendly society invests its money through my firm", the firm I was then working with, "and whether or not you like it, your money is being channelled into industry through the stock market". That sort of person, among others, is being affected, as is his income, present and future, by dividend control.

The second sector to bear the cost of dividend control is industry itself, and we have the evidence of the Diamond Commission and the Treasury submission to the Wilson Committee last year that they recognise that dividend controls distort capital markets and make it more difficult for companies to raise new equity capital. This is all the more serious because for some years it has been virtually impossible for companies to raise new capital by means of fixed interest issues; there has hardly been a fixed interest issue worth its name since 1973. With interest rates as they are at present, companies subject to commercial restraints cannot, unlike perhaps the public authorities, afford to borrow long-term capital at present rates.

For a number of factors, of which dividend control is therefore one, industry's supply of lifeblood is being restricted and this bears with particular force on those well-managed and successful companies which have the capability otherwise of expanding and whose success means so much to the future of this country. Some of these companies will of course benefit from the dividend cover concession which was mentioned in the Statement put out by the Treasury earlier this week; but figures have been produced to show that this concession will apply to only about 25 per cent. of companies, and the other 75 per cent. will still be restricted to 10 per cent., apart from the existing concessions on rights issues and so on.

All this leads me to two main conclusions. The first is that we should see that dividend controls are not accepted as a permanent feature of the economy, and in this respect the remark of the Financial Secretary in the debate in the other place, reported in The Times today, is encouraging. The second is that priority should be given to relaxing further the control of dividends for those companies which have consistently shown themselves to be successful. That, unless I am wrong, could be done under the position as it will be under the new measure, if it becomes law. It seems perfectly possible that the Treasury could say they would give sympathetic consideration to companies whose dividend cover would otherwise rise over a figure of, say, five times, to raise their dividends more than the statutory 10 per cent. I hope this will be investigated by the Government following this debate.

12.47 p.m.


My Lords, the noble and learned Lord, Lord McCluskey, in commending the Bill to the House, started by saying that it was incumbent on the Opposition to explain why they now criticised a system which was a continuation of a system which they introduced in 1973. My noble friend Lord Carr of Hadley referred to that, but as I was directly involved in these matters at the time perhaps I may answer the noble and learned Lord even more directly.

The 1973 legislation was emergency legislation of limited duration which was expressed to expire on 31st March 1976, two-and-a-half years ago, and, if Lord McCluskey doubts that it was emergency legislation, I will read him the words of the noble and learned Lord, Lord Justice Roskill, in the GEC case in 1974: One main purpose of the 1973 Act was to confer what were virtually emergency powers to deal with an emergency which, unhappily, still subsists". Those words were uttered in 1974. If Lord McCluskey's argument is that this economic crisis still exists, it is really up to him, not the Opposition, to explain how they succeeded in keeping an economic crisis going for another four years.

The history of this matter is well known. The Bill starts by referring in the first line of the Title to the Counter-Inflation Act 1973, which, as Lord Carr said, instituted strict statutory control on pay, prices and dividends. The first act of the Labour Government when they came to office in 1974 was to abolish not only statutory control over pay but all control over pay. We entered into a period of complete and irresponsible free collective bargaining. That was succeeded by a whole series of quasi-voluntary pay controls, none of which was fully adhered to and the last one, which was supposed to be a 10 per cent. control, has ended up at 14 per cent. If we look at the whole of this period—and we are entitled to do so because this legislation is based specifically on the 1973 Act—what has happened is that between 1973 and 1977 dividends on ordinary shares have increased by £581 million, or 35 per cent. Wages and salaries have increased during the same period by £35,000 million, or 94 per cent. The noble and learned Lord based his case on what he described as even-handedness.

The Chief Secretary to the Treasury in his speech on the Bill yesterday in another place went further than that. He said in his peroration We need an even-handed and fair policy". I quote from column 1816 of the Official Report. Whether the noble and learned Lord regards any of this as "even-handed and fair", I question most seriously.

If the Government wish to implement what they have said both here and in another place, assuming that one accepts that they need statutory control—most of us on this side do not agree with it, but giving them that point as a matter of argument—surely the absolute minimum they ought to do is to provide either in the statute or in the regulations that dividends since 1973 should not be increased by a greater percentage amount than wages and salaries have been increased. That would be "even-handed and fair" treatment.

I want to turn from that to what I might describe as a broad constitutional point. I have raised this point in your Lordships' House before and I propose raising it on this Bill. If one turns to Section 10 of the Counter-Inflation Act, which is what this Bill continues, it reads as follows: The Treasury shall have power to restrict the declaration or payment of ordinary dividends by companies at any time when this Part of this Act is in force. In subsection (2): The powers conferred by subsection (1) above shall be exercisable by order,"— and note these words— or by notice given to the company, or each of the companies, affected by the notice. It is, I suggest, thoroughly objectionable that an Act of this kind does not specify the rights or obligations of the subject but leaves them to the unfettered discretion of the Treasury. That may be defensible in emergency legislation which is introduced for a short period of time and which has written into it its own demise. But it is quite intolerable that this sort of thing should be continued indefinitely, particularly when the power has been renewed again and again and again.

The present Bill says that the powers shall continue until 31st July 1979, "and shall then expire". What faith can we really place upon that? The 1973 Act expired on 31st March 1976 and the Act said—and I quote from Section 4— this Act shall cease to have effect ". The Remuneration, Charges and Grants Act 1975—and I quote from Section 2—provided for the continuation of the control not later than 31st July 1977". The Price Commission Act 1977 continued the control until 31st July 1978 and then said it ceased to be in force". The present Bill says it is to last until the end of July 1979 and shall then expire". What faith can we possibly have when this has happened not once, not twice, but three times and is now proposed for a fourth occasion?

These are points that I hope we shall explore further when we come to the Committee stage of this Bill. May I make another point to the noble and learned Lord? In case he is tempted to reply that the powers of the Treasury are exercisable only by order and that the order has to be laid before the House, there are two points to notice. The first one is that this is subject to a Negative Resolution only. It is well known that this is a means of slipping things through this House and another place when nobody is looking. But, secondly and much more importantly, the powers can be exercised by notice, which is why I referred to those words. So far as I can see, there is nothing either in the 1973 Act or in the present one requiring any such notice to be laid before your Lordships' House or laid anywhere else.

May I turn now to the question of who receives ordinary dividends. They go to two main sources, to private individuals and to the institutions. So far as the private individuals are concerned, the point has already been made that the private investor is not only subject to the scourge of dividend control but is also subject to the whip of the investment income surcharge. A point which has not yet been made to your Lordships, but which is important, is that the investment income surcharge is a much heavier and more savage charge than it was in 1973.

The noble and learned Lord is fond of referring to what was done on these Benches in 1973. May I remind him, therefore, that the rate of the investment income surcharge in 1973 was 10 per cent. The general rate now is 15 per cent. The threshold in 1973 was £2,000. The threshold now for people below the age of 65 is only £1,700, in pounds which have been halved in value by the activities of his own Government. The top rate of income tax and investment income surcharge combined has gone up from 85 per cent. to 98 per cent. There might be an argument for saying the private investor ought to be subjected to dividend control; there might be an argument for saying that the private investor ought be subject to the investment income surcharge. But to subject him to both of these is absolutely intolerable, and anyone who suggests that this is what is meant by "fair" treatment, if I may use the words of the Chief Secretary in another place yesterday, really does not understand what the word "fair" means in ordinary English usage.

What about the institutions? The biggest investors now in the pension funds field are the inflation-proof pensions of the nationalised industries—the Post Office, the Coal Board, the Railways Board, and others. The effect of dividend control in depressing both income and capital values is one of the factors which contributes to the enormous deficiencies that these funds show every year. What happens to these deficiencies? They are either passed on to the public in terms of higher prices, or we have Bills brought along to your Lordships' House asking the Government to produce subsidies for them. If the noble and learned Lord is not aware of that, may I ask him to examine the accounts of the Post Office or to examine the terms of the Transport Bill which comes back to your Lordships' House on Tuesday. Every letter which is posted in this country ought to be franked with the words: "Dividend control means higher postage charges". Every gas bill and every electricity bill ought to have printed on it: "Dividend control means higher charges". Every sack of coal produced in this country ought to have tied around its neck a label which says: "Dividend control means higher prices".

This is the truth of the matter. It is argued on this side of the House, and it is admitted on the Government Benches, that there are no economic arguments at all in favour of these proposals. On the contrary, what they do is to cause distortion, to damage investment, to harm industry, to prejudice the pension funds, to hit savings, and to put up prices. This is a catalogue of what these proposals do. Is this seriously what the Government mean by even-handed and fair policies?

1 p.m.


My Lords, in view of the challenge thrown out by the noble and learned Lord, Lord McCluskey, at the beginning of his speech, I should like to say that he cannot accuse me, at any rate, of double standards in this matter. Whenever the opportunity has arisen I have consistently voted against wage control, against price control and against dividend control, year in, year out, whether a Conservative or a Labour Government have been in power. I suppose that, technically, I ought to declare an interest, but I do not believe that there is any particular significance in this, as I suspect that at least half the population of this country would have to declare an interest, direct or indirect, in this matter.

I hope that the noble and learned Lord, Lord McCluskey, will accept that I make absolutely no personal criticism of him whatsoever, particularly in view of the moderate, and indeed even rather apologetic, manner in which he introduced this measure, when I say that this is a cynical and contemptible Bill, imposed upon this country by an unholy, though perhaps predictable, alliance between two forms of extreme Socialism—extreme by the standards of social democratic Parties on the Continent of Europe, that is. I refer of course to Labour Socialism and to Nationalist Socialism. It only shows how right 61 of us were to vote only a few weeks ago against the iniquity of the continuing over-representation of Scotland at Westminster. Perhaps this business will at last open the eyes of the English —the non-Marxist majority of the English, that is—as to the real reasons why this Tribunite-influenced Government insists upon continued Scottish and Welsh over-representation.

The tragedy of it all is that, as that well-known and much respected economist and author Mr. Sam Brittan pointed out only the other day, there is no demand at all on the shop floor, or from the man-in-the-street, for dividend limitation—. understandably so, as they perceive (without necessarily understanding the precise reasons why) that these controls may very probably damage their own long term economic interests. Indeed, the noble Baroness, Lady Seear, made much the same point. The only people who really want these controls are those who were described by that famous socialist weekly the New Statesman—in a much publicised article by its former editor, Mr. Paul Johnson—as "the laughing stock of Europe", by virtue of their economic illiteracy; in other words, the Left-Wing trade union bosses.

Their "economic illiteracy", which the New Statesman ascribes to them, is illustrated by their assumption that dividend limitation will cause "the rich to squeal"—to use, I think, Mr. Healey's elegant phraseology—which is, presumably, what they are seeking. Of course this is simply not so, as a simple example will illustrate. Leaving aside the factor of a 98 per cent. marginal tax rate, the fact is that an individual with a few hundred pounds or a few thousands pounds to invest will have no difficulty whatsoever in doubling his income over night without risk to his capital, either in monetary terms or in real terms.

Let us suppose that his investments were all in unit trusts, which for an individual would be quite a sensible arrangement. By switching, for example, from M & G Magnum Fund to M & G High Income Fund he can overnight raise the return on his capital by no less than 127 per cent., and without any risk to the capital value of his investments either, because since December 1972 the capital value of the higher yielding fund has risen by 44.8 per cent., whereas the capital value of the lower yielding fund has fallen by 12.1 per cent. Nor is this an isolated example. If he were to switch from Schroder Capital Fund to Schroder Income Fund, he could raise the return on his capital by no less than 187.5 per cent., again with no risk to his capital, because the value of the Income Fund has risen by 29.4 per cent. since December 1972, whereas the value of the Capital Fund has fallen by 17.3 per cent.

Insurance companies and pension funds have millions of pounds—not hundreds or thousands of pounds—to invest, and they, or rather their beneficiaries, are the ones to suffer, as there are simply not enough secure high-yielding shares to go round, as the noble and learned Lord, Lord McCluskey, himself conceded. It is all very well for those with inflation-linked pensions to be supercilious, because their pensions will be met by the taxpayer of the day in 20 to 25 years' time dipping into his or her pocket, but most of us do not, and are not likely to, have inflation-proof pensions.

The Government have totally disregarded the fact that dividends have lagged far, far behind wages, especially since 1972. The noble Lord, Lord Carr of Hadley, referred to the noble Lord, Lord Diamond; and I am sure that no one would deny that Lord Diamond is a staunch member of the Labour Party. Yet the Diamond Commission pointed out that dividends had fallen in real terms by no less than 20 per cent. between 1963 and 1973. How much farther they must have fallen since that time!

The Government have also totally disregarded the risk element inherent in equity investment, which makes the case for dividend restriction even less valid. My own bottom drawer is full of worthless share and loan stock certificates, and if there are many more company failures like those of Court Line, Fairey, or Town and Commercial Properties, I shall have enough worthless share and loan stock certificates to wallpaper the proverbial "loo".

I do not think that we should constantly be looking over our shoulders, or that we should worry overmuch about our image. We should do what we believe to be right—and we shall be respected for so doing—rather than what may appear, superficially, to be expedient. Convention demands that we should not throw out the Bill this afternoon, however much one should like to do so. However, we must amend it next Monday so as to reduce both the scope and the duration of the harm that it does.

1.8 p.m.


My Lords, the origin of the Bill that your Lordships are discussing today is in the Counter-Inflation Act 1973, as has been pointed out by numerous noble Lords. I have been very much impressed by the arguments of high principle that have been enunciated by many noble Lords opposite. The noble Lord, Lord Cockfield, for example, did not mince his words: any kind of dividend control, under any circumstances whatever, was completely wrong. He was kind enough to elaborate the evils that would flow, under all circumstances, from an adoption of a policy of dividend restraint: there would be lack of investment, lack of enthusiasm, and lack of initiative; it would inhibit company structures and all the rest of it. If that be so, if it is a bad thing in perpetuity, if it is a bad thing in principle, then it was of course had in 1973.

Noble Lords have been a little less than frank about the events that led up to the Counter-Inflation Act 1973. It has been described as an emergency situation. That, indeed, we know was true. But why? In the years 1971 and 1972, as is now ancient history, there was one big, glorious, free-for-all for everything. More-over, as the noble Lord, Lord Carr, knows quite well, there was a complete lifting of restrictions on the activities of the central banks in this country, in consequence of which there was a bonanza and in two years no less than £5,000 million was injected into the property, construction and fringe bank activities. This is precisely what happened. Indeed, the former Prime Minister, Mr. Edward Heath, complained bitterly in August 1972 that, despite the magnificent opportunities that had been offered to industry in this country under his Government, investment still lagged behind, that companies and individuals were still not investing—and this after a protracted period of free-for-all accompanied by an increase in the total money supply which, if my memory serves me correctly, was no less than 28 per cent. This is what happened.

My Lords, I am not saying that, today, we are living in the same kind of emergency as we were in during 1973. Heaven forbid that we should go through that lot again! Indeed, many noble Lords opposite, and many of the present Members of the Opposition Front Bench, have very grave reservations indeed about the policies of free-for-all that were followed in those days. Addressing myself for the moment to the problem of the shareholder himself, whether he participates, either directly or indirectly, or potentially in life assurance funds, and so on, I would suggest that one of the best things that we can do for those individuals (and I must say that I relish the concern that has been lavished today upon the small shareholder; I was waiting for the widows and orphans to appear, but they did not, although they will no doubt appear later, at some convenient stage) whether they be small shareholders or persons who have a direct or indirect interest in pension funds and insurance funds, is to bring inflation under control. This is the most important thing of all. What benefit does it do to a small shareholder if his cash dividend is increased marginally and then, owing to the continuance of inflation at increased rates, all that immediate cash benefit is lost? Of what benefit is it to him?

I heard the noble Baroness, Lady Seear, refer to economic realities, and it has indeed been said by many noble Lords that the Government have conceded that there is not an economic case. If that be so, then I must venture to disagree with Her Majesty's Government; because any economist knows perfectly well—I am not looking particularly at the noble Lord, Lord Robbins, but I think he would confirm this—that psychology is in fact an economic factor that has to be taken into account, and that economic judgments and indeed business judgments are made on sentiment, on fears and on optimism; and that, indeed, to some extent inflation has been increased by people making what they describe as anticipatory price increases because they think that inflation is going to continue. So do not let us imagine for one moment that individuals, whether they be members of the Stock Exchange, whether they be those people whom the noble Lord, Lord Boyd-Carpenter, described as "shrewd trade union leaders" or whether they he people on the shop floor, with whom Mr. Sam Brittan suddenly seems to be on terms of intimacy, are free from the psychological influences of fears and hopes. These are common to all people, whatever position they occupy in society. To take that out of economics is to make the whole science of economics so mechanistic, so tied up with statistics, as in fact to render it completely meaningless.

My Lords, one thing I think we have limit. But within the normal ranks of to remember is that for most of the working people in this country their income is their capital. Never let that be lost sight of: their income is their capital. The number of people who have both capital and income is limited in comparison with those whose income is their capital, not to mention the submerged 25 per cent. of the population whose incomes are much lower than they should be anyway. Here I turn to the observation made by the noble Lord, Lord Boyd-Carpenter, concerning the shrewd trade unionist. It is funny how trade unionists suddenly get faced with their statesmanship under such circumstances. I tell the noble Lord that one thing the shrewd trade unionist knows is that if a shareholder has his dividend limited, it does not at all mean that he has lost that value. It means, of course, that the total net asset values of the company in which he has his money is larger than it would have been if the amount had been permanently alienated from the company by way of dividend.

I must also, if I may, give a word of good cheer to those noble Lords opposite who seem suddenly this morning to be stricken with misery, doom and destruction in regard to the whole of the shareholding community, and of British companies in particular. In the European Economic Community's Sixth Annual Report on Competition relating to the year 1976, I was very proud to note (I unashamedly admit it) that of the 50 most prosperous companies in the whole of Europe, no fewer than 25 were British—and they were fairly high up in the league, too. So there is hope in this matter as long as we all try to keep inflation under control.

The limitation of dividends, to which, as the noble Lord pointed out, there are going to be some exceptions in relation to performance, is psychologically necessary at this time, and I make no apology for that whatsoever—and I include psychology within the realm of economics. We are going to ask the trade union movement in this country and we are going to ask the workers generally in this country to accept some pay restraint. I do not think anybody in the House would disagree with that, apart, perhaps, from the noble Lord, Lord Monson, who is an inveterate free trader and free enterpriser throughout, and to whom the sky is the Limit. But within the normal ranks of political prudence, as exemplified by the two Front Benches, not least the Opposition Front Bench in another place, there has been a repeated urging that there should be restraint—unless, of course, one can get some electoral advantage out of it, and then you advocate that the police be paid in full forthwith regardless of what the particular economic position is at the time.

On the whole, therefore, I ask your Lordships to adopt a more moderate attitude to this whole matter, in common with what Lord Boyd-Carpenter described as "the shrewd trade unionist", and to realise that dividend restraint is not the end of the world but that the capital remains intact anyway. Remember always, too, that in that protracted period from 1945 right the way through to 1973, during a very large amount of which period—at least 13 years, if my memory serves me aright—we were governed by the Party opposite, when the utmost freedom prevailed, industrial investment in this country nevertheless ran at some 30 per cent. below that obtaining in the Federal Republic of Germany and some 30 per cent. below that operating in France.

I do not think the arguments of principle carry any weight. What carries weight, if I may suggest so, is our reasonableness in the whole matter. We are going to have a policy of pay restraint which is going to be very difficult to maintain, which is going to involve the exercise of the utmost goodwill between the trade union movement and the Government of the day—whichever it may be; although I suspect it will be the Government of my own Party. It is clear that restraint all around is the order of the day and it is not good, I suggest, that these efforts in moderation, which one devoutly hopes will be made by everybody in this country, should be given an exception in the form of shareholders whose money in any case will not be lost and whose dividends will be deferred.

1.21 p.m.


My Lords, I am mildly moved to intervene because until my noble friend Lord Bruce spoke it seemed to me that the Government had no defenders and that the Opposition and all parts of the House seemed to have all the arguments except the ones that matter. I would not want to say that there is any direct inflationary effect on abandoning dividend control. I do not think that anybody would say that the inflationary effect would be more than negligible. I would not want to argue that compulsory dividend limitation is a good way of redistributing income or even that it is a major plank in any move towards social justice. If we wanted to do something about social justice, we would have a capital gains tax or a capital levy and we would not muck about with the distribution of dividends or their payment.

It is the case, as has been said from all sides today, that much of the argument is about economic distortion and whether, if you have consistent dividend limitation, it is sustainable. It is true that dividend limitation may discourage investment, although I would not have thought that it was that kind of money constraint which is a major problem as far as employment in this country is concerned. The problem about employment is the marginal efficiency of capital. It is not that businesses cannot get the money to invest. The problem is that they do not believe they can invest, produce and sell at a profit. The main reason why they fear that is that they fear what may happen to wages. It is the marginal efficiency of capital which is the cause of unemployment, or fears about it. I do not think that dividend limitation has much to say about that one way or the other.

However, there is something in the argument made about the widow's mite. I do not think, however, that the widow's mite argument is so relevant when the widow puts her money in the Prudential. The large institutions know very well how to offset the consequences of dividend limitation—whether they shift into property or into foreign equity or, as my noble friend Lord Bruce said, hang around and wait for capital appreciation. Let us not exaggerate that. The main point, the real argument, is that put forward already by my noble and learned friend Lord McCluskey and later by my noble friend Lord Bruce. It is a political argument.

It depends on two assumptions, and only those who deny both assumptions are entitled to come to this House and decry this Bill. First, it depends on the assumption that you can do something about inflation by restraining pay, by directly restraining pay, by operating on psychology, by operating on anticipation and by operating on the collective bargaining system. If there is anybody in this House—and apparently there are still a few—who believes that inflation has nothing to do with the rate of pay, then your Lordships can cheerfully vote this Bill. But it seems to me that, as we approach nearer and nearer the date of the General Election, the Opposition are doubtful about this proposition. They are doubtful about how far they would want to say that there is nothing to do in incomes policy. I would ask, if by some miracle, or catastrophe, according to how you see it, they find themselves responsible for the government of this country and this Bill is on the Statute Book, are they seriously telling us today that their intention, their immediate announced intention to take this Bill off the Statute Book and to have freedom of dividends, including some of the bonanza dividends that we should then see, would have no consequences on pay demands?


My Lords, would the noble Lord be prepared to accept a view that, having regard to the pledges given to the International Monetary Fund and to our creditors, the main argument for restraint of pay is that it prevents unemployment?


My Lords, there are many arguments for restraint of pay. I do not see, even if the main argument for restraint (which may be the argument of the International Monetary Fund) is that it prevents unemployment, what that has to do with passing immediately this Bill about dividend limitation.

I want to pass on to the second assumption which you have to deny if you are going to deny this Bill. You have to deny what the moderate leaders of the trade union movement tell the Government. That is an easy thing to do when you are not the Government. When the Opposition are in Government we find that they listen carefully to people like Mr. Lionel Murray, and what he says and what the moderate leaders of the TUC General Council say (and the Government and this House have to take note of this) is that if there is not some measure of limitation of dividends they are going to find it extremely difficult to keep the policy of restraint going and give this policy a fair wind in the next 12 months. People who say that they know the way that the organised working class feel about this, do not know what the organised working class feel about this as well as do the trade union activists. I am not just talking about Mr. Lionel Murray, but about trade union activists who in trade union conferences since Easter have been seeking to fight for the continuation of a policy of restraint. They have said over and over again that there must be a quid pro quo, that there must be something on the other side. That something on the other side is the continuation of dividend limitation.

This is what the moderate trade union leaders tell the Government. There are other trade union leaders, other activists in every trade union; there are people who want to throw this policy over. Maybe they are not always Left-Wing activists; maybe they are supporters of the IMF; but they want to throw this policy over. What the moderate trade union leaders say to the Government (and would be saying to any future Government) is: "Do not give these people a handle, a weapon." This is a real, felt, policy advice. It is the one overwhelming argument in favour of this Bill, and I commend it to the House.


My Lords, before the noble Lord sits down may I ask one question. I listened to his speech with interest and learned from it, but there is one point which I did not understand. It was where he said that the insurance companies could get round dividend restraint by certain alternatives. Is the noble Lord quite sure that these alternatives are means of increasing income or, in fact, are they not just low yielding investments as a whole? Certainly foreign shares are so.


My Lords, much investment is low yield. We have had experience in the past of the consequences of long periods of dividend limitation. One consequence of this is that it assists capital accumulation and capital values; and the major investment companies know this very well.

1.30 p.m.


My Lords, I rise with some hesitation to declare my wholehearted support for what I believe to be this necessary Bill. Seventy years ago this year I began to study economics at the University of Cambridge under three great men: Arthur Cecil Pigou, Maynard Keynes and Walter Layton—the last of whom became a Member of your Lordships' House. I agree profoundly with my noble friend who says that psychology is an immensely important factor in the economic working of our society. This Bill is of course concerned with the psychology of the policy of wage restraint.

I want, with due economy of words, to make two points. I want first to pay a wholehearted tribute to the courage, wisdom, patriotism and statemanship of the trade union leaders of this nation over the whole of this century. When I first came into close contact with trade unionists it was in the year before the First World War started. I had the privilege to be the vice-principal of Ruskin College, Oxford. The students came straight from the factory, the mill and the mine. I was profoundly impressed with the ability, with the spirit and with the civic patriotism of the men whom the trade unions chose to send to Ruskin College with scholarships from union funds.

After the Second World War, I had to work in very close co-operation with trade union leaders. I held the office of Minister of Fuel and Power. I took part in the tripartite consultations between the Government, industry and finance, and the trade unions which the Labour Government introduced—an extremely important reform in the conduct of our national affairs. Then, as through the past five crucial years, I felt a deep admiration for the spirit, the knowledge and the wisdom of the trade union leaders with whom I had to deal. I valued very highly the immense contribution which they made to the post-war reconstruction, the most difficult economic operation which any Government in this country has ever had to carry through. I felt a profound admiration for the contribution to that post-war reconstruction which was then carried through with such enormous success that the whole world was filled with praise for what we did.

I say this with great respect: it is all very well for noble Lords opposite to quote the tiny minority of workers who hold shares in the companies in which they work. It is all very well for noble Lords to quote the Sunday Times about envious egalitarianism; but if noble Lords will face it frankly, we are very far from being an égalitarian society today. When the trade union leaders say, as my noble friend has just reported that they say and have been saying for a long time, that there must be a quid pro quo and that there must be restraint on dividends, if the wage restraint is to be continued, then I believe that to be a factor of profound importance, and it is in the interests of every section of society that this Bill should be passed into law.

I raise one other point which some noble Lords will think not relevant to this Bill. I want to urge upon your Lordships' attention and upon the Government that, while wage restraint is essential and, as I think, dividend restraint is essential, nevertheless the principal cause of inflation has been and is the military expenditure of the world. I know that some economists have said that it is not inflationary because taxation absorbs the purchasing power which comes from military expenditure. When I was young, there was a trans-Atlantic saying that if you took all the economists in the world and laid them out in a row end to end they would not reach a single conclusion. Since Adam Smith, economists have always said that military expenditure is unproductive. There is the factor that even if purchasing power is mopped up by taxation, military expenditure does not produce goods which the people can buy. You do not buy a minesweeper; you do not buy a mini-nuclear bomb. There is the vast sum of 400,000 million dollars a year, or more than 1,000 million dollars a day, pouring out on to world markets, and no goods to absorb them.

I hope and believe that the Special Session of the General Assembly of the United Nations, which debated the problem of armaments a month ago and to which our Prime Minister made a most remarkable contribution (which I heard), will have started a process by which disarmament is going to be brought about and by which military expansion will very rapidly be reduced. I know that the inflation in the United States was started by deficit financing for the Vietnam war. But the Vietnam war ended five years ago and the dollar crisis is not over. It will not be over until the 80 billion dollars spent by the United States on armaments is drastically reduced. I end what I have said by repeating that I believe this Bill to be required. I give it my wholehearted support and I hope that your Lordships will give it a Second Reading without a vote.

1.39 p.m.


My Lords, I rise to reply to the debate and, in doing so, I express my thanks to my noble friends Lord Bruce of Donington, Lord McCarthy and Lord Noel-Baker for their support. I believe the reasons they gave are reasons which I sought to outline in moving the Bill in the first place. May I pick up one point from what was said by the noble Lord, Lord McCarthy, that is, the point about the views of responsible trade union leaders. As he said, the trade union leaders have come in for a good deal of praise from noble Lords opposite today. What they have said, and said publicly, is that they want dividend controls to be continued, and what they have made plain publicly is that without dividend restraint, pay restraint is out of the question. That is a factor of very great importance indeed.

The noble Lord, Lord Boyd-Carpenter, wondered why the Bill was introduced so late. It is perfectly true that the Bill is late and we should like to have seen it earlier; but the whole House surely realises that this is an aspect of the point I have already made. Dividend control is part of a comprehensive policy and that had to be considered along with all the other factors involved, including pay policy, leading up to last week's White Paper which of course followed discussion and widespread consultation with the TUC, the CBI and others, and could not be brought to a conclusion until last week. That is why the Bill comes along at this time.

One would have thought from the contributions of noble Lords opposite that we were trying to stop dividends rising. We are not doing that in fact; we have specifically introduced a new provision to allow rises to take place. What we are trying to stop is dividends rising by more than 10 per cent. per annum. Having regard to the fact that the rate of inflation is now below 8 per cent. and unlikely to rise above 10 per cent. the point made by the noble Lord, Lord Carr, that there is indexation of public service pensions seems to be an entirely irrelevant matter, when one can see that dividends can rise by 10 per cent., despite the rate of inflation being below 8 per cent.

It was also suggested that people are being penalised. I think the noble Lord and the noble Baroness referred to penalties upon the widow and upon the pensioner: certainly the noble Lord, Lord Carr, did. In my submission, it is not a penalty to keep dividends at this kind of rate and not allow them to rise by more than 10 per cent. when wages are for the forthcoming period to be kept at 5 per cent., we hope, over the previous year and when the rate of inflation is below 10 per cent.

I referred to the new provision, but it would appear from the remarks of the noble Lord, Lord Carr, that he had not fully understood it. The new provision means that a company which does not wish to increase its dividend cover beyond the highest level achieved since the current controls began will be able to seek Treasury consent to maintain that cover in respect of a completed financial year ending after 31st July 1978. For those companies who are at their highest cover point the provision means they will be able to increase their dividends in line with profits, and the new provision will be of most interest to companies which have shown a consistently strong profit growth over the periods of controls and who expect to do so in the future. The companies to which the noble Lord, Lord Carr, referred as "efficient and thrusting companies" will certainly not he held back, because those which will benefit from the new provision are those which have consistently had a favourable profit record, with the effect that their cover has risen steadily and is now at its highest point. These companies from now on will be able to increase their dividends in line with profits. Companies whose cover position has not shown a steady increase but which have had a very high cover figure at some point in the past will have to wait until that is exceeded before being able to benefit.


My Lords, I am much obliged to the noble and learned Lord for giving way: I think it is important. He said that companies which could show that their position in respect of dividend cover was as he stated could seek Treasury consent to increase their dividend. Does that mean it is still discretionary in the Treasury, or that if the conditions are satisfied the Treasury are bound to give consent?


My Lords, may I return to that when I come to deal with the point made by the noble Lord, Lord Cockfield, about the general constitutional point and the indication as to how the Treasury treat these matters, because it arises in that context too.

Just to conclude the general matter, with reference to what was said by the noble Lord, Lord Robertson of Oakridge, I think he welcomes the new cover provision to which I have referred, but he would also like the relaxation to apply to companies whose cover would otherwise he taken above, say, a factor of five. The intention of the Government is not to open a large new gateway so as to make mockery of the controls. One therefore has to bear that in mind.

In relation to what has been said by the companies about their intentions if there were no dividend control—and the noble Lord, Lord Carr, called in question my assertion that there would be a free-for-all in some cases—a large number of companies, and certainly more than 50, have given notice over the last month or two of their intentions if statutory controls were to come to an end. I am not suggesting that these statements are necessarily commercially or economically wrong, but large pay-outs would certainly follow and certainly would be damaging to pay policy if there were no such control. May I repeat the point so forcefully made by the noble Lord, Lord Bruce of Donington, because it is so important: the pay-outs in such cases, or some of them, would represent a distribution of profits earned and money set aside in earlier years—perhaps since 1973. There are examples of many big companies who have large sums which fall into that category, and when wage-earners see that there can be no payment now of pay forgone in earlier years, but that there can be in the case of dividends, they will take an extremely different view from that advanced by the Benches opposite about this relaxation of dividend control.

I should like to say, through your Lordships, to the noble Baroness that her whole argument about social justice is misdirected, because it proceeds upon a kind of assumption that dividends are being more severely restrained than earnings. That is not so, because the Government have announced their intention during the same period of seeking to restrict earnings' increase to 5 per cent. I simply do not think that the noble Baroness's main argument stands up.

The noble Lord, Lord Cockfield, referred in his speech—and the noble Lord, Lord Boyd-Carpenter, has just made an associated point—to the use of discretionary powers by the Treasury. Under Section 10 of the 1973 Act, the discretion is indeed very wide; but conceding that the powers given to the Treasury to control dividends are very general, and although the Treasury could in fact operate a discretionary system, as the laws allow, they do not in fact operate such a system. All the provisions applied are laid down in publicly available documents in as precise terms as possible. There is no question of the Treasury picking and choosing among companies in accordance with the Treasury's own judgment of what is desirable. From the very beginning, going back to the White Paper which was published by the previous Government, the Treasury have sought not to lay down precise rules in precise legal language in the way that, for example, taxation rules might have to be laid down. If I may quote from the White Paper, Cmnd. 5444, of 1973, it states: It is not possible to specify in advance precise rules applicable to all cases. The following paragraphs are not exhaustive but they indicate the broad areas where Treasury discretion is likely to be exercised. Following upon that, public announcements have been made and publicly available documents have been published in order to indicate how that discretion is to be exercised: so it is not an arbitrary thing.


My Lords, I am sorry to intervene, but the noble and learned Lord is replying to an entirely different point from the one which I made.


My Lords, that is why I hesitated to give way, because I had not finished the argument. The noble Lord, Lord Cockfield, made a separate point with regard to the date of 31st March 1976. He seemed to be suggesting that the 1973 Act, had there been no change of Government, would just have been allowed to fade away, whatever the circumstances in 1976. That of course is a nonsense. The most significant thing about the date of 31st March 1976 appearing in the Act of 1973 is that it was a date conveniently beyond the date of the next General Election. One would certainly see that had any Government, whatever its complexion, found a continuation of the same world crisis as this Government did when it came into office—and the crisis has since continued on a world scale—measures of this kind would have to be continued. That, I believe, is the answer to the point the noble Lord sought to make. If he wants to raise the point in Committee, he must feel free to do so and I shall endeavour to address myself more closely to it then.


My Lords, if I may interrupt the noble and learned Lord, the point that I was trying to make when I interrupted him earlier was not at all the point with which he is now dealing. I had never argued that the Treasury were using arbitrary powers as between one company and another. What I was objecting to was the general rules being left to the unfettered discretion of the Treasury, and this he cannot deny. The Act contains no indication whatsoever as to the parameters within which the Treasury should operate. Indeed, it goes further. If the noble and learned Lord cares to read it, he will see in subsection (3) of Section 10 the words: Without prejudice to the generality of subsection (1)". It is the handing over of what, in effect, is the law-making function on the issue of principle to the discretion of the Treasury that I was objecting to.


My Lords, of course the noble Lord was not a Member of this House when the 1973 Act was being discussed as a Bill here. But I understand that that point was not taken, or not taken with any force, here. We are not talking about the present Bill. We are talking about the 1973 Act and the noble Lord is criticising that. All that the present Bill does is to continue for 12 months an Act which has been in force since 1973, without occasioning very much serious complaint of this kind.


My Lords, I do not want to trespass unduly on the noble and learned Lord's courtesy, but but surely he must admit, whatever Government were in power, that what might have been unpleasant but tolerable for an emergency lasting three years, would require different conditions if the emergency lasted much longer. What is tolerable for three years is not tolerable for five or six.


My Lords, of course I concede that that is a theoretical possibility, but again the point is this. Is anyone suggesting that the Treasury, having been armed with these wide powers for reasons which have been explained, has abused them? Because if the Treasury has abused them, then something ought to be done. But if no one is suggesting that the powers have been, or are likely to be, abused, this is all academic nonsense in relation to the main thrust of the present Bill. I see no benefit to companies, to shareholders, to widows, to pensioners or to anyone from rapid inflation. This Bill is part of the Government's battle against rapid inflation, and for that reason I again commend it to your Lordships.

On Question, Bill read 2a, and committed to a Committee of the Whole House.