Lords Sitting of 31 July 1978

Preamble
The House met at half-past two of the dock: The LORDS CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.

RHODESIA: ABDUCTION OF CHILDREN
Baroness ELLES: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the abduction of hundreds, if not thousands, of children from their homes in Rhodesia; and if so, what action they propose to take in this regard.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, we are aware that substantial numbers of children are being abducted or otherwise made refugees from Rhodesia. We are using our influence through the Botswana Government, the United Nations High Commissioner for Refugees and the International Red Cross to try to ensure that those who wish to return home can do so and that those who do not are properly looked after.
Baroness ELLES: My Lords, while thanking the Minister for that reply, may I ask whether it is not an example of the apparently cynical indifference of the Foreign Secretary to the situation in Rhodesia that this issue is never brought up with the guerrilla leaders themselves who are, obviously, perpetrating these deeds daily?
Lord GORONWY-ROBERTS: My Lords, that is a most unwarrantable suggestion about the feelings or views of the Foreign Secretary about these tragic incidents. I am rather surprised that the noble Baroness should have made it. I know the Foreign Secretary, as well as most people do, as one who is deeply
1122
concerned about human tragedies of this sort and is working hard to alleviate the situation through the agencies that I mentioned in the reply which I have prepared for the noble Baroness. There is undoubtedly intimidation and therefore forced influx into Botswana and other countries; there is undoubtedly quite substantial voluntary movement which is politically encouraged, in sonic cases politically intimidated. It is an extreme difficulty and, I am afraid, widespread happening. We and other like-minded countries are doing our utmost through the agencies, by representation and also by very substantial assistance, to ensure that at least these children do not suffer unduly if they are kept where they are.
Baroness ELLES: My Lords, I should like, again, to thank the noble Lord for that reply. I accept that the Foreign Secretary is making efforts through the agencies. Obviously, the Minister said so; and I do not doubt it. But what I doubt is the assertion that these abductions are not being perpetrated by guerrilla forces; and it would have seemed to me that this was an opportunity for the Foreign Secretary, when talking with Mr. Nkomo, to take this as one of the matters which should be stopped forthwith. I am thinking not only of the children but of the thousands of distraught parents who are waiting for results in Rhodesia. I should be grateful if the Minister were to convey this message.
Lord GORONWY-ROBERTS: My Lords, that is very much more like what I had hoped the noble Baroness would say on the first occasion. Now that she has made gracious and generous amends, I will certainly convey what she has said to my right honourable friend. I can assure the House that he, probably more than any other, being a parent himself with small children, feels deeply about this particular aspect of the Rhodesian tragedy.
The Lord Bishop of SOUTHWARK: My Lords, will the Minister agree, since I happen to have been the pastor to the Foreign Secretary and responsible for his spiritual welfare for a good many years, that the remark made opposite is regrettable and untrue and one that ought never to have been made? Secondly,

1123
would not the Minister agree that, had Mr. Ian Smith co-operated with the Conservative Government and with the Labour Government, these tragedies in Rhodesia might not have occurred? And would the Minister agree also that, having said that, it does not mean to say that those who criticise Mr. Smith approve for one moment of the atrocities which are now being carried out by people on both sides in Rhodesia?
Lord GORONWY-ROBERTS: My Lords, I find the remarks of the right reverend Prelate both spiritually and politically admirable. I join with him freely and comprehensively in agreeing that nobody in Salisbury, including Mr. Smith, would wish any of these little children or their parents to suffer from the present circumstances.
Lord ALPORT: My Lords, may I ask the noble Lord whether the Government recognise that, in spite of the very great difficulties which the situation on the border presents to Botswana, the Botswana Government have done their best to carry out their obligations on an international basis?
Lord GORONWY-ROBERTS: My Lords, I am grateful to my noble friend for what he has said. I should like to join in paying very high tribute to the sense of humane responsibility which has animated the Botswana Government from the start in the situation, and continues to do so.
Lord PAGET of NORTHAMPTON: My Lords, is not what the noble Lord has said even more remarkable owing to the uniqueness of the attitude of the Botswana Government as compared to the shocking behaviour of Rhodesia's other African neighbours? In view of the sad things that we have heard, has the noble Lord something to tell us more optimistically about the notable victory which the forces of law and order in Rhodesia appear to have won in Mozambique?
Lord GORONWY-ROBERTS: My Lords, I am not going to be drawn into an instant appraisal of the actual situation in the guerrilla war, even by my noble friend. As to what he has said about the Government and people of Botswana, I
1124
fully agree and am delighted to see that his somewhat impetuous generalisations about Africans as a whole are now somewhat more tempered.
Lord HARMAR-NICHOLLS: My Lords, while everybody is aware of and will congratulate the noble Lord for his defence of the Foreign Secretary, is it not the fact that the indecisiveness of the Government in this field is one of the causes which encourages this sort of thing to happen? Is he prepared to face up to the paradox that, on the one hand, we will not accept the de facto situation of the Government in Rhodesia and, on the other hand, we will not accept the responsibilities that should go with our belief that we are the people who are administratively responsible? If we could give greater support to the de facto Government it may be that they could prevent the excesses which we are discussing on this Question.
Lord GORONWY-ROBERTS: My Lords, as the noble Lord knows, there are two views at least on what he has said. I will not engage in debate with him on these questions today. I gather that the other place will have that opportunity next Wednesday. The noble Lord refers to the indecisiveness of the Government. That might be applied to any Government in the last 13 years in dealing with the Rhodesian situation from Britain. I would not share his view about any Government in Britain in the last 13 years on that point. Perhaps the misguided decisiveness of the Smith Government since 1965 has more to do with it than anything that any British Government are guilty of.

CHEMICAL CONTAINER MARKING
2.43 p.m.
Lord SANDYS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what proposals they have for ensuring that all bulk chemicals in drums, packages or containers are clearly marked for identification of contents during transit or storage.
Baroness STEDMAN: My Lords, regulations to give the present voluntary scheme of tanker marking statutory force are being prepared by the Health and Safety Executive. The regulations will probably be laid before Parliament before the end of the year. The labelling of drums and packages will be covered by the comprehensive regulations now being prepared by the Health and Safety Executive to control the transport by road of all dangerous goods. A consultative document is expected to be published in October. There are no proposals for further legislation covering the labelling of dangerous goods in storage
Lord SANDYS: My Lords, will the Government agree that it is very dangerous that we should have delay for possibly as long a period as between four and five months? In view of the circumstances following the tragic accident near Tarragona in Spain, will the Government give a greater sense of urgency to this particular legal problem?
Baroness STEDMAN: My Lords, I do not accept that the Government have not treated this matter with a sense of urgency. It is a complicated problem. Not only is the Department of Transport involved but also the Health and Safety Executive. They have to look at these matters and we are consultating with various sides of industry. Certain voluntary codes are being used by a great number of people who are involved in the carriage of dangerous goods, whether by road, ship or train. Until we can have full consultations and the legislative time in which to deal with them, to lay the orders and so on, having achieved agreement, we cannot do more. We are not delaying on it; we are consulting the whole time and it is an extremely complicated subject.
Lord BRUCE of DONINGTON: My Lords, will my noble friend agree that there is absolutely nothing to stop these public spirited firms from labelling their own containers without waiting for legislation?
Baroness STEDMAN: My Lords, my noble friend is quite right and a great many firms do that already. They are using schemes based on the European regulations for the carriage of dangerous goods by road, rail and sea. They are
1126
using the "Hazchem" markings with the special numbers and diagrams so that our Fire Service and emergency services can take appropriate action if vehicles are involved in accidents. There is nothing to prevent people from using the codes voluntarily until we have decided exactly what form the statutory regulation should take.
Viscount ST. DAVIDS: My Lords, can the noble Baroness tell me whether the regulations which are being produced will specify that certain dangerous cargoes should travel, at least for the major part of their transit, by rail or, if not, that they should travel by certain limited routes which are believed to be specially safe and which can he specified for such cargoes?
Baroness STEDMAN: My Lords, there are at present European standards governing the carriage of dangerous goods by road, rail and sea. As I have said, there are various other voluntary arrangements in this country. So far as the carriage of dangerous goods by rail is concerned, it is the policy of the Government to get what heavy loads they can off the roads and on to the railways. That remains the Government's policy.

ROYAL NAVAL DOCKYARDS: PAY LEVELS
2.46 p.m.
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will state what are the average weekly earnings in Her Majesty's Royal Naval Dockyards of mechanics, skilled labourers and labourers respectively; and what percentage of the industrial employees are able to participate in incentive payments and fixed schemes of prices respectively.
Lord WINTERBOTTOM: My Lords, the average weekly earnings for all adult employees in Her Majesty's Dockyards who are employed for 40 hours or more in a week are: Skilled craftsmen, £82·89; semi-skilled workers, £73·72; unskilled

1127
workers, £58·76. The majority of employees in Her Majesty's Dockyards have the opportunity to participate in payment by results schemes. About one half of dockyard production work, in fact, is actually performed in this way.
Baroness VICKERS: My Lords, I thank the noble Lord for that reply. I put down a Question on 7th March 1956, when the earnings were £10 11s. 6d. a week. Now I gather that will be £59·5p. I have not had time to make any calculations and, if the noble Lord will be kind enough to tell me, I should like to know why the Polaris fitters only get £1·9p an hour, whereas fitters in neighbouring nationalised shipyards get £1·50p an hour. Why is there this difference?
Lord WINTERBOTTOM: My Lords, this is a question that I cannot possibly answer. My simple arithmetic says that skilled craftsmen are getting something over £2 an hour for a 40 hour week. I do not know whether that helps the noble Baroness.

DIVIDENDS BILL
2.48 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord McCluskey.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Continuation in, force of 1973 s. 10, 1973 c. 9]:
Lord MONSON Lord MONSON moved Amendment No. 1:
Line 10, leave out ("July") and insert ("March").
The noble Lord said: Every knowledgeable person, even those who are in favour of this particular Bill with a greater or lesser degree of enthusiasm, can see that continued dividend restriction has unfavourable side effects upon the economy
1128
in general and upon the beneficiaries of occupational pension schemes in particular. As Mr. Terence Higgins, an Opposition spokesman on economic matters in the other place, said last Thursday, the longer it goes on the worse the distortions become. Indeed, Mr. Sheldon, speaking from the Treasury Bench in another place, said:
"… dividend restraint cannot be continued indefinitely because of some of its distorting effects".—[Official Report (Commons), 27/7/78; col. 1931.]
The Treasury's evidence to the Wilson Committee also made this clear.
It was doubtless for these reasons that the Conservatives, together with the Liberals, led by Mr. David Steel, moved Amendments in another place last Thursday to provide that the Act should expire on 31st December. Thanks to a combination of the Post Office and British Rail, I have had no time whatsoever to read that debate but, anticipating the Government's objections, I would concede that the 31st December is perhaps a little soon. There is the possibility, indeed the probability, of a General Election in the autumn and any new Government will have much to cope with abroad: quite as much as, and perhaps more than, at home. The date of 31st January would be rather too soon after the Christmas Recess to give adequate time for discussion of any new Bill, if it was proposed to introduce one. The end of February would be ideal but, in an effort to be constructive and helpful, I decided on the date 31st March.
Whether by accident or design—and I must say I rather suspect the latter—both Houses have had far too little time to discuss the implications of this important measure which adversely affects 13 million people: 2 million directly and 11 million indirectly. A terminal date of 31st March would give plenty of time to discuss whether dividend limitation ought to be renewed for a few months or for longer and, if it is to be renewed, on what basis. It would also enable a very necessary educative process to take place—not only among the general public, if indeed they do need educating, but also among Parliamentarians themselves. For instance, I was astonished to see that an honourable Member in another place who is a university lecturer, actually believed that a one-for-one scrip issue immediately

1129
led to a doubling of the capital value of the shares held by an individual.
If I may refer to the noble Lord, Lord Bruce of Donington, he expressed the view the other day that it would not harm an individual if his dividends were limited because the money would be ploughed back: the consequent retentions used would increase the capital value of his shares, which he could then take out by way of a capital gain, which would be lightly taxed, rather than in the form of dividends which are more heavily taxed. I think what the noble Lord overlooked is that share values are decided by the expectation of future dividend increases, certainly as far as institutions are concerned, and it is those institutions which call the tune nowadays as far as share values are concerned.
The most important reason for limiting the operation of this Act to eight months instead of twelve is a psychological one. If you want to destroy the free enterprise system—and I know there are a few people who do, but I believe they are not in the majority on the Government side—the best way to do that is to make people believe that dividend limitation is continuing indefinitely July after July, whatever promises are made. As long ago as 27th July 1977, the Minister said there will be no further dividend restraint at the end of the year beginning 1st August 1977; in other words, not after 1st August 1978. As recently as the 22nd June 1978, the Lord President said:
"With regard to dividend control, we do not believe it will be necessary to have fresh legislation on this matter".
That was only five weeks ago. This sort of thing induces a mood of great cynicism and a feeling, when it comes to the crunch, that Governments are against capitalism and the free enterprise system whatever they may have said earlier.
Acceptance of this Amendment would show that the Government are not afraid of a thorough and detailed examination of this matter—and, let us face it, July is never a good time for a Bill of this nature, even had we been given two or three days to scrutinise it, instead of one. It would also demonstrate that the Government do understand economic realities and would accordingly boost business confidence. I beg to move.
2.54 p.m.
Lord CARR of HADLEY: Perhaps, I might take this earliest opportunity to explain to your Lordships that the absence of Amendments on the Marshalled List does not indicate that the Opposition are any more satisfied with the Bill than we indicated last Friday. It is a recognition on our part of the impossible position in which your Lordships' House has been placed by having a Bill of this kind introduced at the time it has been introduced; and I must once more register our protest about that.
It is impossible to deal with it properly for at least two reasons: first, coming at this very late time in the Parliamentary Session and, secondly, coming on a day when the legislation it is supposed to replace runs out at midnight. If we were to go through the normal processes of amendment, of sending Amendments back to another place and then studying their replies, and so forth, there would be a hiatus in the law and there would be uncertainty. I think that would be against the national interest, however much we dislike this Bill.
But I really must take this opportunity of saying that I think the handling of a Bill in this way by the Government reduces Parliament to a farce and we wish to enter the strongest protest about this, because it really is a farce when Parliament is treated in this way. We might as well have a dictatorship on this sort of thing, because if there is no opportunity—the noble Baroness laughs, but what happened in the other place? They were driven to taking the Bill all in the same day—a Bill published only two or three days beforehand and with no proper papers about what these wonderful new loopholes were going to be. I gather that guidance was given to the Press, but I do not believe that there were any proper papers available for Members of Parliament describing the purposes behind the Government's actions in this respect. It is not for me to talk about the rights of another place although, having been a Member of that place for 26 years, I cannot help feeling rather strongly about it. I can only talk about this House. I believe this House has been disgracefully treated by this Bill having been brought in in this way, with our having no proper opportunity to discuss

1131
it or to amend it. That is the only reason why there are no Amendments down from this side of the House.
It is also the reason why I fear I must say to my noble friends behind me that whatever sympathy we may have with the Amendments put down by the noble Lord, Lord Monson, I cannot advise my noble friends to vote for them, even though we may agree with them. That is simply because of the position I have explained: that the present legislation runs out at midnight tonight and Parliament in any case is supposed to rise for the Recess in the next couple of days. Both those reasons together I believe put your Lordships' House in the most impossible and intolerable position.
As to the Amendment moved by the noble Lord, let me say that in objecting to this Bill—I wish it did not last for eight days, let alone eight months; and certainly eight months would be less damaging to the country than twelve months—to that extent we have sympathy with him. Perhaps we might also reflect somewhat wryly that had the year run from March to March before, at least the Government could not have treated your Lordships in this way, by bringing in a Bill two days before the end of the Session.
The Marquess of LINLITHGOW: My Lords, may I intervene for a few seconds. I apologise for not being here on Friday but circumstances debarred me from exercising my sense of priorities. I should like to support my noble friend, and in doing so I shall be brief. I might say that, while the effect of the Bill itself does not really concern me, provided it has a shortish run, I think it is always an unhappy situation if financial legislation mitigates against those who want incomes and in favour of those who do not. I think that is one of the weaknesses of the Bill. However, circumstances being what they are, quite obviously this Amendment is not going to be pressed.
There is one other matter on which I should like to hear the Government's comment, because the defence of the Bill has been that it is a necessary psychological factor in the fight against inflation; and also there is a suggestion that dividend limitation will obviously help to discourage excessive wage claims. This is where I
1132
am confused: I cannot believe that that is correct. I cannot believe it is right because, so far as I can make out, it is axiomatic that there is no way in which excessive wage claims can affect inflation provided, and only provided, that the Government maintain the financial disciplines imposed upon them by their agreement with the IMF. If they do that, excessive wage claims will be balanced inevitably by an increase in unemployment. That seems to me axiomatic, and therefore the defence of this Bill seems to fall to the ground, unless the Government are saying that in the event of excessive wage claims they will meet the threat of increased unemployment by further inflation of the currency. That is the point that I wished to make and, as I said, I am very grateful for being allowed to make it.
Lord McCLUSKEY: May I say first that I do not dispute, and did not dispute on Second Reading either, that this Bill, in so far as it continues dividend limitation, has certain side effects which the Government acknowledge, and which the Government would rather not have. But looking at the matter in the round, this Bill is seen as a part, and an important part, of the whole counter-inflation policy. It is for that reason that we ask your Lordships to accept this Bill, despite the fact that it has certain side effects. The Government's judgment is that their pay policy is necessary in order to contain inflation, and also in order to avoid a great growth in both inflation and unemployment.
With regard to the general remarks which were made by the noble Lord, Lord Carr of Hadley, the Bill is indeed late and, again, I cannot seek to get away from that. I sought to explain the reasons on Second Reading, when the House was perhaps rather less full than it is today, and perhaps I might be allowed to quote from what I said. The extract is quite short:
"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 ".—[Official Report, 28/7/78: col. 1114.]
That is the explanation, and I simply repeat it.

1133
As to the handling of the Bill in this House, there was agreement through the usual channels that it would be taken in this way, with the Second Reading last week and the other stages today. I think that the noble Lord, Lord Carr of Hadley, went rather far when he talked about dictatorship. After all, the scope of this Bill is extremely tight. It is simply to extend dividend control, which was introduced in the first place by the previous Government in 1973, for a further 12 months and that is all. In relation to the point made by the noble Lord, Lord Carr of Hadley, about the new arrangements for dividend cover, these are in fact a relaxation of dividend control, not some further restriction.
If I may just say this quite generally about the Amendment itself, the question of the duration of the Bill was extensively debated in another place. I have already indicated that the Bill is an intrinsic part of the counter-inflation policy. One of the main features of the counter-inflation policy is the pay round, and the pay policy set out in the White Paper begins on 1st August 1978 and is to end on 31st July next year. It may be suggested that the concept of an annual pay round is not very meaningful. The Government's successful pay policy has involved different pay limits for each of the past three years, and the period from 1st August to 31st July of the following year is appropriate, mainly because there is a real break in the summer during which very few big pay settlements are negotiated.
I would remind the Committee that one of the features of the pay policy which has been accepted, even last year when others were not, is the 12-month rule, and if we are to win—as I think we have won—the acceptance of the majority of people in this country to the concept of income restraint on the basis of a 12-month rule, we cannot go to them and say: "So far as dividends arc concerned, we are going to make it nine months," or "six months," or "some shorter period". So I believe that the selection of the 12-month period is absolutely crucial to this Bill, and for that principal reason I oppose this Amendment.
I should simply add that it' circumstances were to change dramatically, such as the fact that there was a General
1134
Election, and in that Election the Conservative Party were to be returned to power, the sovereignty of Parliament being what it is, it would be open to a new Government to introduce a measure to repeal this Act. So that it can be changed; indeed, it can be done by a repealing order. Therefore it is not necessary, for any purpose of that kind, to have an Amendment such as this accepted. For all these reasons, I urge the Committee not to accept this Amendment.
I should point out, as the noble Lord, Lord Carr of Hadley, made clear to us, that this Bill must come into force today. I accept that that is unfortunate, but it has to come into effect today. We should be in great difficulties indeed if we had to send this Bill back to the other place, with an Amendment of this kind which is entirely unnecessary, because that would necessarily delay the Royal Assent. I ask your Lordships not to accept this Amendment.
3.5 p.m.
Lord BRUCE of DONINGTON: My Lords, I should like to congratulate the noble Lord, Lord Carr of Hadley, on having advised his colleagues to take a moderate course in connection with the Amendment which has been moved by the noble Lord, Lord Monson. It is quite clear that there have been second thoughts over the weekend, particularly in the light of authoritative observations that have been made in the weekend Press. He made the usual Party points in connection with the presentation of the Bill, but I do not think one can complain at all about that.
But doubtless he has read the Sunday Times of yesterday, which passed some observations on this matter, and which may be of interest to the noble Lord, Lord Monson, although I should hardly describe him as a punter. The Sunday Times said this in the most moderate terms:
"Whatever the punters thought of dividend restraint, it became clear during the week that the big institutional battalions were happy with the prospect of dividends rising by an average of 15 per cent. in the coming year. The Government's Bill to cut pay settlements got safely through the Commons; the 'corset' is keeping bank lending in check; the outlook for the rate of inflation has improved; and the pound has been strengthening not only against the United

1135
States dollar but also compared with some of the 'hard' currencies. Given this background, and the growth in institutional liquidity that is flowing from the relatively smaller amounts of money presently going into gilts, the outlook for ordinary shares is, for the moment, promising".
With those happy considerations in mind, on which I am sure all your Lordships are agreed, I invite the Committee to reject the Amendment.
Lord CARR of HADLEY: The noble Lord tempts me more than I can resist. I must assure him, and indeed the whole Committee, that we on these Benches have had no second thoughts over the weekend. We make up our own minds. Even if we read the papers, we do not have our views dictated to us by them. The extract from the newspaper which the noble Lord read out was of course inaccurate, because no Bill went through another place last week to deal with pay.
But that brings me to one of the points which the noble and learned Lord brought out again, as he did on Friday. One of his excuses for coming so late to your Lordships' House is that, as he said the other day, this is, after all, a very little illegitimate child and therefore we need not bother too much about it; anyhow, it was originally conceived and born under a Conservative Government. We had to correct the noble and learned Lord about that the other day, because when the last Conservative Government brought in this measure of dividend control it was even-handed, as it was part and parcel of a Bill which also dealt with prices and pay.
Whatever may be the rights and wrongs of that—and I am not seeking to have an argument about it today—it is in no way valid to say that, just because a Conservative Government felt it right and expedient in 1973 to introduce some statutory control of dividends at the same time as they were introducing statutory control of pay and prices, that justifies having statutory dividend control, when statutory control of pay is entirely removed and when there is not even voluntary agreement about pay with the trade union movement. So that, whatever else are the arguments, the fact that a Conservative Government first put this on to the Statute Book does not apply, because Section 10 of the Conservative Government's 1973 Act is taken entirely
1136
out of context, and is merely using that as a legislative device to get this further statutory control, in totally different conditions, on the Statute Book.
Before I sit down I must say once more to the noble and learned Lord, and to the Government as a whole, that it really is no excuse to come along to us and say that all these extra-Parliamentary talks and talks outside Parliament with the trade unions and the employers and all the rest of it took so long that Parliament could not be given any time to deal with the matter at all. I am not using too strong a phrase when I say that in Parliamentary terms this is dictatorship. If a measure requires an Act of Parliament then it is the duty of the Government to see that there is time to pass an Act of Parliament and not to put us in this position. If they could not complete the talks until when they did, then I am afraid it was the responsibility of the Government, however much Members of both Houses of Parliament might have objected to it, to sit longer in order to be able to deal with it.
Lord MONSON: I am most grateful to the noble Lord, Lord Carr of Hadley, for his support, albeit extremely qualified support. I am glad he agrees with me that the Bill would be less harmful if its duration were eight months rather than 12 months. The noble and learned Lord, Lord McCluskey, will not be surprised to hear that I am afraid I cannot accept his argument. I wish to stress that my Amendment is in no sense a wrecking Amendment. If the Act continues until March there will be plenty of time for full, detailed and profound discussion on the merits and demerits of renewal, and if it is decided at that point that it is worth renewing, either until the new pay round or for a shorter or longer time, it can be done. If, on the other hand, the Act runs for a full 12 months—after which, incidentally, dividend limitation would have been in force for almost six full years, with all the unfairness and distortion that that entails—if it runs until the end of July next year, we may well have the whole process over again with the Government, if a Labour Government is in power, telling us that dividend control must be imposed for a further 12 months, thus making it almost seven years and there

1137
will be no time for adequate discussion of the matter in either House. Therefore, I regret that I must insist upon this Amendment.
On Question, Amendment negatived.
On Question, Whether Clause 1 shall stand part of the Bill?
3.13 p.m.
Lord CARR of HADLEY: The fact that we have not moved Amendments for reasons that I have already explained does not mean that we do not wish to have some more information at least before we allow this Bill to go on to the Statute Book. There are straight away one or two questions that I should like to put to the noble and learned Lord. First, as your Lordships will be aware, this Bill operates by continuing in force Section 10 of the Counter-Inflation Act 1973. That, of course, was the section in that Act which dealt with dividends whereas all the others dealt with pay and prices, rent and things like that.
The guts of Section 10 is to give the Treasury power to restrict the declaration or payment of ordinary dividends by companies at any time when this part of this Act is in force, and to do so by means of order or by means of notice given to the company, or each of the companies, affected by the notice. I think that before this Bill goes through your Lordships' House the Government owe us some account of exactly how they propose to make use of these powers.
If I recollect the 1973 Act properly, the order here referred to is a Negative Resolution procedure order; that is to say, it can come into operation without an Affirmative Resolution of either or both Houses of Parliament but it is one which Parliament can pray against. But of course Parliament can only pray against an order subject to this procedure when Parliament is in Session and here we are, on July 31st, and about to go into Recess in two or three days' time. What are the Government's intentions? Presumably the Government must intend to lay some order in the near future. I see the noble and learned Lord is shaking his head so perhaps he will enlarge upon that shaking of his head in a few moments, and then I and others can, if necessary, question a little further what he means.
1138
Clearly, it would be disturbing if the Government were going to proceed by order and, having rushed this Bill through in this way without a proper chance of debate or amendment, immediately both Houses of Parliament have gone away for the Recess the Government were to lay orders which became effective immediately and could not be prayed against until, at the earliest, late in October. If the Government are not going to proceed by order then presumably they are going to proceed by notice. I must admit that, unlike the noble and learned Lord, I am not a lawyer and I find some of these different governmental procedures a little confusing. If they are not going to lay orders, perhaps he can explain exactly how the Government propose to proceed in making this Bill effective—this Bill which must be passed today. We should like some information about that.
I think also your Lordships would like to have some explanation of what the Government themselves are calling "the new loophole" which will make dividend control more generous and less restrictive from tomorrow onwards than it has been in the last 12 months and the periods before that. One of our troubles—unless I did not look diligently enough—is that there seems to be no Parliamentary Paper of any kind describing this loophole although I gather some guidance was given to the Press. If I am wrong about that then of course I apologise and, as it were, withdraw in advance the imputations I am about to make. But if I am not wrong about that, I think that once again it underlines what I said a little while ago about this procedure amounting to dictatorship. The Members of both Houses are not given the information, let alone the time, to debate it. This is contempt of Parliament. We are not given the time, and since we have not got the time we are not even getting the information which we might have wanted in order to debate the matter if we had had the time.
Once again, on behalf of the whole Opposition, I must register the most strong and bitter protest about this way of treating Parliament. If I am wrong and in fact there is some Paper to which I could have referred—I did make some inquiries, but if I did not make them properly—I apologise without any qualification at all. However, if I am right in saying that there is no proper, authentic

1139
official document to which I and other Members of your Lordships' House could have referred, I think we are owed an apology and also a very full explanation by the noble and learned Lord about the exact nature of this so-called "loophole".
If I have read about it correctly in the Press, I do not think it is anything like as generous as Ministers are making out. If I understand correctly—and I may not—what this new loophole amounts to is to say to a company, "So long as your dividend cover is not greater than it was in any of the years 1972 to date, then you can increase your dividend beyond 10 per cent. in line with increasing profits". That I understand to be a loophole, but what I am saying is that you can extend it beyond the guideline of 10 per cent. on the basis of not exceeding the meanest distribution year in your record. After all, when the cover is at its maximum the distribution is at its meanest and therefore, if I understand aright, all the Government are saying is that you can exceed the meanest level of distribution in relation to your profits. If that is right then it is not much of a loophole and I suspect that it is being presented in a misleading (although I am sure unintentionally misleading) way to the public at large and to the company and financial world in general. So please could we have some more information about the loophole and the rationale behind it?
The last point about which I want to put a question at the moment, although I may have some more later on, relates to the expiry date. At the end of Clause 1(1) of the Bill we read:
"…and shall then expire"—
that is, at the end of July of next year. That is fine, but will it expire? It was going to expire today and Ministers are on uncorrected record that it was not going to be reintroduced. That is what was said last year. A statement by a Minister to the effect that Section 10 would not be renewed and that it would expire today, has stood uncorrected for all this time. Then, two days before today, a Bill was introduced, without any time being allowed for amendment, which extends Section 10 for one more year.
I think that on this occasion the Government spokesman owes not just to your Lordships' House but to Parliament
1140
as a whole and the country a more firm and reliable statement about what are the intentions of the Government for 31st July 1979, because I think that there would be no little fuss if the same thing were to happen next year—although I realise that by next year, under Providence, we may have a different Government.
3.22 p.m.
Lord ROBERTHALL: I had wanted to make a few remarks at some stage in these proceedings but I was not sure on what peg to hang them. However, what I have to say follows on from what the noble Lord, Lord Carr of Hadley, has just been saying. I think that everybody who has studied the subject believes that the present dividend limitation is a very unfortunate way of going on—that it very much distorts the system and that if one has to have dividend limitation it would be much better to have it by control of profits as a whole, which has been recommended by a number of people including, I believe, the Treasury. Certainly the Diamond Commission would have preferred it.
My own view is that the noble Lord, Lord Carr of Hadley, is absolutely right at this stage. I would certainly vote for the Bill; I happen to think that we have no option but to do that. The justification for it is that if the Government think that it will help them with their incomes policy, then it probably will. If not, they would have made something of it. As I am a strong supporter of an incomes policy—as is, I think, the noble Lord, Lord Carr of Hadley—I think that we must take it.
If I may return to the point that I want to make, all that this Bill does, as the noble Lord, Lord Carr of Hadley, has pointed out, is to empower the Treasury to make regulations. I shall be very surprised if the noble and learned Lord, Lord McCluskey, is going to tell us what will be in the regulations. I suppose that we shall have to wait until they come out. However, like the noble Lord, Lord Carr of Hadley, I have seen the suggestion as to the easement that will be made. Broadly speaking, the place where the shoe pinches is on those companies that began the period with a very big level of cover. If you can put up 2 per cent. by 10 per cent., it is not much; every year that goes on you

1141
fall more and more behind, whereas if the smaller companies—the less respectable ones—started with a low cover and a fairly high dividend, they will, although they have not exactly caught up with inflation, be doing rather better this year: 10 per cent. of a figure that was good to start with is better. As I understand it, the easement which the Treasury say they have in mind will not put that situation right.
This has got to end some time, and my own very strong feeling is that if it has to end it would be useful to use this intervening period to ease it a little. If the Treasury would look at the hard cases—those companies which started with a high dividend cover, that still have it and that are getting more and more behind—and would apply some easement there, it would remove the worst grievances and facilitate the introduction of a more sensible state of affairs.
Lord McCLUSKEY: Perhaps I may be allowed to intervene at this stage. I believe that there is a misunderstanding and that it would be better if I cleared it up before the debate continues. As the noble Lord, Lord Carr of Hadley, has explained, this Bill seeks to continue for a further 12 months the provisions of Section 10 of the Counter-Inflation Act 1973. I am not seeking to make a Party point to the effect that they did it and therefore we can do it. However, if I may give the history, the position is that the White Paper, which was published in October 1973 under that section, indicated that the provisions of the existing order—which was Statutory Instrument No. 659 of 1973—would continue to apply. At that time, the order restricted dividends to 5 per cent., not 10 per cent. as the position is now. Accordingly, what the Government propose to do is simply to continue in force the existing order. No new order will be brought before Parliament. Therefore the order is kept in force by the provisions of this Bill when it becomes an Act, and, accordingly, there will be no new order which anyone may annul. There may be an annulment procedure in respect of the existing order, but the Government do not intend to use that procedure.
In relation to dividend cover, the position is that it was outlined first of all in
1142
paragraph 30 of the White Paper Winning the Battle Against Inflation, which we published the week before last.
"… from 1st 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. This will enable companies to increase their dividends in line with profits or in line with the statutory limit, whichever is the higher, but they will not be permitted to distribute funds accumulated in the past".
So the backlog of funds cannot be distributed. It was thought that that required further explanation and elucidation. Accordingly, the Treasury published a rather fuller Press notice on 24th July 1978. That was fairly fully reported in the financial Press. There was a particularly interesting column in the Financial Times of 25th July 1978, which, in the light of that Press notice, explained the position and included the following sentence:
"There were certainly some qualifications, but in theory this approach should work reasonably enough".
Since that time, the Treasury has not received any challenges to its Press notice. Nobody has sought any explanation other than that which was contained in the Press notice. If it is desired, I could explain the matter more fully by reference in particular to the terms of the Press notice.
The third point which was made by the noble Lord, Lord Carr of Hadley, related to the Government's intentions. The Government's intentions at 31st July 1978 are that the Bill should continue in force for 12 months. The House will surely understand that it is quite impossible for me or, indeed, for a Treasury Minister to say what may happen at the end of that period of time. Everything will depend upon how the economic situation is seen and what measures are seen by the Government in power at that time as being essential to keep the economy under control, to avoid excessive inflation and to avoid excessive unemployment.
In relation to the point made by the noble Lord, Lord Roberthall, and his invitation to look at hard cases, of course the Government have done that. The relaxations which have taken place and which have been brought into effect without order but informally, as it were, as I explained at Second Reading, have been fully published and are, I think, fully understood in the City and in the

1143
commercial world. The Treasury has not found any difficulty about explaining its position to anybody who has come forward and has sought an explanation. And, as I asserted at Second Reading—and I have not yet been contradicted—the system works well and is well understood.
The Government have, of course, in the light of experience since 1973, discovered a number of cases or general cases where relaxation was obviously necessary; for example, the companies which had 90 per cent. of their assets and their earnings overseas. There was a relaxation there. And the relaxation in respect of dividend cover is another of the same kind. So we do look, in the light of experience, at these cases and we make relaxations accordingly. I do believe that the Government's position is tenable, and I do believe it is well understood in the City.
3.31 p.m.
Lord COCKFIELD: The explanation given by the noble and learned Lord makes the matter a great deal worse and not better. We start by his saying that no new order will be required. I wish to ask him two points on this. First of all, does the mere continuation of Section 10 of the 1973 Act automatically carry with it the continued life of orders which were made under the existing Act? That is the first point. The second one is this. How does he propose, therefore, if he does not lay a new order, to deal with the relaxations to which he and his right honourable friend in another place have referred? In the normal way one would expect these relaxations to be incorporated in a new order. Therefore, if no new order is now to be made, are we left in the position where we first of all have an Act of Parliament which gives open-ended discretion to the Treasury to do anything that they like, we then have an order which defines certain things under the section in specific terms, and we then on top of that have a Treasury practice which without any new order allows derogation from the order which has already been made? If that is the position, it seems to me to be an absurd instance of complete affront to the whole of the Legislature, not only to this House but to another place as well.
1144
The noble Lord referred also to what was said in the White Paper. What was said in the White Paper about this relaxation was in such vague and unsatisfactory terms that the White Paper itself said that a further statement would be required. But instead of that statement being made to your Lordships' House or to the other place, in which case some debate or questioning could have taken place on it, the statement was apparently made by the Treasury to the Press. When I went to the Printed Paper Office and asked for a copy of it I was told that no copy was available, and therefore I had to rely upon a newspaper report of a statement made under the terms of a White Paper which itself in turn was endeavouring to explain what was contained in this Bill. I am sure that the noble and learned Lord is well aware of what is regarded as secondhand evidence, but this at best is fourth-hand evidence.
But I want to go further than this. Had the rules been incorporated in the Bill, as they ought to have been, the subject would know where he stands. It is surely one of the principles of the British Constitution—and I realise that the British Constitution is unwritten—that the subject should know where he stands and one of the ways by which the subject knows where he stands is that his rights and duties should be written down in an Act of Parliament. Members of your Lordships' House and, indeed, Members of another place who may be so disposed, can question the Government about the proposals when they see them. What opportunity had we of questioning the Government about these proposals? All we have in this miserable little document is a statement that Section 10 shall be continued until the end of July and shall then expire.
We thought we were going to have a regulation that we could at least have debated, if we were quick enough to spot that it had been put down. We could then at least have tabled a Motion for it to be negatived and we could have had a discussion on it. But the noble and learned Lord now tells us that there is going to be no such order, so we are not even going to have that opportunity of discussing it. So the way that this dividend limitation is being continued is a way which provides neither Parliament nor people with the opportunity of con

1145
sidering the matter and debating it. I suggest to your Lordships that this is not the way that Government ought to be carried on.
Lord McCLUSKEY: May I say, after that extraordinary speech sneering at the way the Government have behaved, that the order I am talking about has been in force since 1973. When before today, or rather when before last Friday, have we heard from the noble Lord, Lord Cockfield, or anybody else that this order ought to be renewed in the kind of way he is talking about? I would like an answer to that question; I do not believe there is one.
In relation to the question that I was asked first of all by the noble Lord, Lord Cockfield—Does the Bill automatically continue the 1973 order—the answer is, Yes. In relation to the question, How do we deal with the giving of consents? We deal with it in the manner provided by the 1973 Act itself, which went through this House without objection in relation to the provisions of Section 10(3)(d), which reads as follows:
"Without prejudice to the generality of subsection (1) above, an order or notice tinder this section may"—
I go to paragraph (d)—
"make provision for the giving of consents, whether by the Treasury or by one of the Agencies, to the doing of anything otherwise prohibited by the order or notice".
It was a Conservative Government, rightly one may think in the light of circumstances, which put that provision in which left a necessary discretion to the Treasury; and I think all the City recognises that discretion has to be left to the Treasury because one cannot legislate in a Statute for 2,000 quoted companies; one has to look at each individual case. As I said at Second Reading in my final observations, does anyone suggest that the powers which the Treasury has and has had since 1973 have been, or are likely to be, abused? Because, if not, all this complaint is simply academic whining about a system which has worked perfectly well. If it is absurd, it has been absurd since 1973.
If the noble Lord, Lord Cockfield, wanted to know the terms of the Treasury announcement and could not get it from the Printed Paper Office he could have
1146
asked the Government; he certainly did not ask me. He says the subject ought to know where he stands. The subject in this instance is the company whose power to pay dividends or to declare dividends is subject to the control under Section 10 of the 1973 Act and the order which has been made since. The subjects know perfectly well where they stand; they stand where they have stood, with the modifications, since 1973. They know perfectly well what the position is. The Treasury has not kept its position secret; it has published the guidelines which govern the exercise of its discretion. The discretion is not related to the guidelines themselves but to the interpretation and understanding of information put before them by individual companies who seek to say that they come under one particular escape clause or another. The position has worked perfectly well, and I think these complaints are quite misplaced.
Lord CARR of HADLEY: I must take up what the noble and learned Lord has said. I am bound to say to him that it is most unlike him to talk in that spirit, and I do not want us to end up our Session on an ill-tempered note. The noble and learned Lord says that, if the statement was not available, my noble friend could have asked the Government. I suppose that could apply to me just as much as to him. But really, unless Parliament is being treated with contempt, we ought as Members of this House, or of either House of Parliament, to have available in the Printed Paper Office, or the Vote Office in another place, the papers that we need and the information we need for this debate. Until Thursday night I was not even sure that we were to have this debate at all or that the Bill would get here. On Friday I tried to obtain the information, and evidently my noble friend also tried and failed.
As a matter of practice how does one, from one's home over the weekend, ask for official papers or ask the Government to obtain this information? It really is unreasonable. The Government, as regards this little matter, are behaving like "dictators'. I keep repeating that word and I am sorry to do so, but it is true. The noble and learned Lord will not win the support and the persuasion of this House if most uncharacteristically he chooses to rebuke my noble friend in the

1147
tone he did when my noble friend has a perfect justification for making the complaint he has—a complaint which I wish personally to endorse.
Lord McCLUSKEY: Six hundred copies of the Press notice went to the Press Council and 400 copies went to the Stock Exchange. I was answering the point and I apologise to the Committee if my tone was unduly censorious and severe. I shall try to resume my normal calm and equable temperament. I simply felt that there was widespread publication given to this notice, and in particular to those who were affected in the City. I feel that that is as far as I can go.
Lord CARR of HADLEY: Some of us in this country have feared that for some of the last four years this Government have been run by the TUC. Thank goodness that we are not yet run by the Stock Exchange. To send papers to the Stock Exchange and to say that that is an adequate alternative to sending them to Members of both Houses of Parliament is about the last, worst and most unacceptable excuse that I have ever heard from any Minister in any Government.
3.43 p.m.
Lord SHINWELL: My noble and learned friend the Solicitor-General does not require any assistance from me; he is quite capable of handling the situation so far as it has emerged. However, I am bound to say that I am astonished—I could use other words because there are plenty of other words that I could use but "astonished" will do—at the exhibition, the "demo" or demonstration, by the Front Bench opposite. They would like to have a fight, but they do not have their cudgels with them. They must have left them in the cupboard when they left their flats or their residences. There is a great deal of sparring but not a single one of them has a straight left—not even the noble and learned Lord opposite.
This tiny Bill tells us all that we require to know, and that the Treasury can restrict. That has been going on since 1973. I suggest to the noble Lord, Lord Carr of Hadley, that if he wants a fight he should not start off in the way he did in relation to the first Amendment and say, "Oh no, we shall not support it". Let there be a fight. We have plenty of time.
1148
They have been arguing that there is not enough time, but we can go on discussing this matter until a quarter to twelve tonight, when the time expires. But until then it can go on, because it is still the 31st July.
All sorts of arguments could be adduced, but not a single argument has been adduced. It could be adduced, for example, that the Government should not come along at the last minute and present this aspect of counter-inflation when they might have come along a fortnight ago and provided ample time for serious debate, if that is what the other side want. What are they after? Are they going to divide? If they are going to do so, then they should tell us, so that we know where we stand. They are asking for information, and I am asking for information as a Member of your Lordships' House. If they are going to divide they should say so and should not leave the noble Lord, Lord Monson, in the lurch as they have already done. They should treat him reasonably. That is what we expect.
I have never seen anything like this! What a poor lot we are this afternoon! The other side are not usually like this. There are many able and highly educated people on the other side and we expect them to be intelligent; it would be strange if they were not. But what is the noble Lord, Lord Carr of Hadley, up to? Did he get out of the wrong side of the bed this morning? Is that the trouble? He has entered into a debate with my noble and learned friend who can knock the "stuffing" out of him—excuse the simple language. I cannot think of another word at present but if the debate proceeded I could find many other words. No, they must make up their minds what they want. Do they want a fight today? Are we going to have Divisions? Are they going to denounce the Government? If so they should use the proper language and should not indulge in half-baked adjectives which remind me of the Victorian era. They are no longer of any use.
I am bound to say to my noble and learned friend the Solicitor-General that he even lost his temper a moment ago. I am not surprised at that. He was snappy and I have never heard him as snappy as he was a few moments ago. During the whole of the debates on the

1149
Scotland Bill he was so kind, generous and magnanimous. In fact, his magnanimity was almost embarrassing. Today I was not surprised that he was so snappy. I could almost see him using a straight left against the shadow boxers on the other side of the House. I say to noble Lords opposite, let us be finished with it; tell us what you want and be done with it.
Lord WIGG: Some assistance is required and I am always anxious to help. We need to get the matter sorted out. This has partly arisen, if I may say with great respect, because of the ignorance of the noble Lord, Lord Cockfield, about the way this House is organised. The Government are not responsible for the Printed Paper Office and I should not like it to be thought that anything that I say now is in any way criticial of the Printed Paper Office. I receive tremendous service from the Printed Paper Office—the same as that which I received from the Vote Office in another place. However, they are not the instruments of the Government; they are the instruments of the House.
Of course, this House is appallingly organized—but that is no criticism of the staff because they all do their best—because it is based upon an anachronism. This House is administered as a Royal Palace. The chief officials are servants of the Crown. In another place it was a constant source of worry to some of us who wanted to do our duties as Members of Parliament to have very inadequate resources with no secretarial assistance. We had to do it all ourselves and we received no help. I shall not be unfair but the traditions of the Conservative Party were such that nobody could do anything about it, and it is true here.
The noble Lord, Lord Cockfield, impresses me as a beautiful, polished intellectual, but he is a little remote from the realities of life—and that he should complain to the Government. The noble Lord, Lord Carr of Hadley, for whom I have the greatest respect really ought to know better. His feelings of loyalty towards his young playmate are such that he goes dashing to his defence but he knows just as well as I do—whatever the defence may be—that if a document is not available in the Printed Paper Office the responsibility in the first instance is
1150
that of the officials of the House, but it is ultimately that of the system of which they are a part.
I can understand my noble and learned friend Lord McCluskey. After all, he has had a very trying time. Last week we were paying tribute to the great service that he has given to the House on a very difficult Bill over a very long period. To make that criticism now, on a matter for which in no sense whatever can he be held responsible is a little below the belt. I never complain about that because I often hit below the belt myself. I am always sorry for it—and I do it again. But I am not a lawyer or an intellectual, so if I hit below the belt it is what you would expect from me, but I do not expect it from the noble Lord, Lord Carr. He is an example to me, and as it is the end of the Session let us call it a day and finish with this nonsense.
3.50 p.m.
Lord COCKFIELD: As the noble Lord, Lord Wigg, has specifically referred to me and as the noble Lord, Lord Shinwell, has also referred to what I was saying, may I answer them very directly and try to explain that there is a point of principle involved. Your Lordships have given this Bill a Second Reading without a Division. Therefore, we are no longer fighting the principle of the Bill. That is why my noble friend Lord Carr of Hadley advised us not to support the noble Lord, Lord Monson, in his Amendment. We accept that that is the position.
We are faced, therefore, with this circumstance, and I am trying to explain this also to the noble and learned Lord, Lord McCluskey. The Government say that they will make a concession. We greatly appreciate their act in making the concession—I do not want the noble and learned Lord to think otherwise—but when we come to examine that concession, the problem which I face is that the noble and learned Lord has quoted on numerous occasions the precedent of the 1973 Act. I hope he will forgive me for saying that I was probably much more directly concerned with that Act and its administration than he has been; the details of it are very much in my knowledge. But he has quoted the precedent of the 1973 Act.
If he examines the various codes which were issued under the terms of that Act,

1151
he will and that normally what people were allowed to do was to choose the year or the period which suited them best. It appears—and I do not want to put it any higher than this because I do not have the documents, and I explained the circumstances of that—that under their concession the Government propose that people should be allowed to choose the worst year. I suggest that there is a difference between the best year and the worst year. Had this concession been brought along to your Lordships' House for debate, this point would have been probed and some of us would perhaps have been disposed to table Amendments to have altered the balance of that concession, so that the subject—if I may be forgiven the legal technical term—could have chosen the best year and not the worst.
The essence of my complaint is that, because of the way in which this matter has been handled, your Lordships are deprived of the right both to examine this proposal and to put forward what they would believe to be reasonable Amendments which they would hope commend themselves to your Lordships.
Lord LEATHERLAND: A great deal of fuss seems to have been made about the Press statement that was issued explaining the Dividends Bill. We have been given to understand that it is a most mysterious document and that, despite all his efforts, the noble Lord, Lord Carr of Hadley, was unable to obtain a copy of it. Your Lordships may have noticed that I was absent from this Chamber for exactly three minutes; I went out without a copy of the Press statement and I came back with one. As there seems to be some doubt about its contents, perhaps I might be allowed to read it to your Lordships It is relatively brief. It says:
"The White Paper Winning the Battle against Inflation … announced the Government's intention to extend the current controls on ordinary dividends for another 12 months after 31 July 1978. The necessary powers are being sought by a Dividends Bill now before Parliament which, if enacted, will enable the existing Dividends Order … to continue to have effect after that date. The permitted rate of increase on ordinary dividends will remain at 10 per cent. and the other aspects of the existing controls, such as those relating to the raising of new capital, are unchanged.
"In addition, a company which does not wish to increase its dividend cover beyond the highest
1152
level achieved since the current controls began will be able to seek a Treasury consent to maintain that cover in respect of a completed financial year ending after 31 July 1978.
"The Treasury will regard cover as the number of times that the net dividend is covered by the earnings of the year available for distribution as ordinary dividend as expressed in the company's published Accounts but further information may be necessary (e.g. on extraordinary items and deferred taxation) and may affect the decision. Previous undistributed profits and transfers from reserves will not be taken into account. Where there have been changes in accounting policies, the cover for each of the relevant years will be computed on a consistent basis.
"Since this new rule on cover is intended to apply to a company's completed financial year, companies will not be able to take full advantage of it until the declaration of their final dividend. As hitherto however, under the provisions of SI 659/1973 as amended, companies will remain entitled to declare interim dividends of their choice in respect of a current financial year provided that these do not exceed the total amount of dividend declared for the preceding financial year by more than 10 per cent".
That Press statement bears the heading "H.M. Treasury".
Lord DAVIES of LEEK: Where did my noble friend pick it up?
Lord LEATHERLAND: For 50 years I was in newspapers. Whenever there was any mystery in the House, the editor would say, "Just ask Charles; he'll get it". I went along to the House of Commons Library. So could the noble Lord, Lord Carr of Hadley—of course he could. He knows more about the House of Commons than I. In my most polite terms I said: "I am a Peer. Can you please give me a copy of the Press statement issued on the Dividends Bill?" The fair maiden went immediately to the file, extracted this, placed it in my hands, and I said: "Can I keep it?" She said "Yes". The noble Lord could have done precisely the same.
Lord McCLUSKEY: I think that we are getting very far away from the subject matter, but while the noble Lord, Lord Leatherland, was going himself to the Commons Library, I asked my noble friend Lord Wallace of Coslany if he would get me a copy. He obtained one from the House of Lords Library because they sent someone along to the Commons. Copies of the notice were put in the House of Commons Library on 24th July 1978. As I said, some copies were given to the Stock Exchange. If the city had been

1153
upset by or, indeed, dumbfounded by what the notice contained. I believe that they would have brought that to the attention of noble Lords opposite or of someone in the Committee, and we should have heard detailed criticisms. I do hope that we can get on to consider Clause 1 stand part.
Lord CARR of HADLEY: The source of where one can obtain this particular document is interesting, and, of course, I suppose that I ought to have thought on Friday afternoon to go along to my old haunts. But should that be necessary? If one goes to this House—and I did, as I believe did my noble friend Lord Cockfield—and is told that the document is not available, I do not think it is unreasonable for us to assume that it is not available in the Library of another place. I think that the Government should have made sure that this document was available. On a Friday afternoon to expect us to do so was, to put it mildly, unreasonable.
I should like to refer to something which the noble Lord, Lord Wigg, said. I certainly want to make it clear that I did not intend to breathe a word of criticism of the Public Paper Office or the Officials of this House. I do not think I did. My criticism was entirely of the Government, because I believe that they should have seen that this paper—the only paper to my knowledge that would have enlightened us on this—was easily available to us on our own premises in your Lordships' House.
Lord WIGG: I want to be equally fair. The point I was making was that the Government are not responsible for the administration of the Printed Paper Office. In my respectful submission, from the day I became a Member of the House of Commons, I thought that Members of the House and Members of your Lordships' House should have the same services as those which are available from any good library to members of the public who pay rates. We do not get it here. Perhaps in the next Session the noble Lord, Lord Carr of Hadley, will join me in putting down an Unstarred Question in order to bring pressure to bear on the Government to improve facilities. In the meantime, we get the best that can possibly be provided with the resources which are available.
4 p.m.
Lord CARR of HADLEY: I hope that when those of us on this side are sitting on the other side of the House in a few months' time that we shall still look at this matter with the same viewpoint as we do now. Before we pass on, may I have a brief word with the noble Lord, Lord Shinwell, at whose feet I have many times been glad to sit in both Houses and from whom I may have learned a little but obviously not enough over the years.
I do not think that I got out of bed on the wrong side this morning. Perhaps the trouble is that I had hoped to awaken this morning and find the weather of a kind which would have allowed me to spend a pleasant two hours in the sunshine at the Oval before coming along to your Lordships' House for this matter. The disappointment of finding that relaxation taken away from me may have had some psychological effect. After all, this Bill is, so we are told, all about psychological effect. If I was put off by the weather, or whatever it may be, I am glad at least that I am in the same boat, if not in the same bed, as the noble and learned Lord who is responsible for this Bill for the Government, because the noble Lord, Lord Shinwell, also remarked that he was more snappy than he had ever known him before and perhaps I am too, whatever may be the reason.
Let me pass on from being snappy just simply to repeat the substance of our dilemma and perhaps answer the major question the noble Lord, Lord Shinwell, put to us: what are we up to? Do we want a fight, or do we not? The answer is Yes, we would like a fight, but the Government have put us in the position, in Parliamentary terms, of holding only a nuclear deterrent, because if we have a fight, and if we amend this Bill as we should like to amend it, we leave this country with no law as from midnight tonight.
The noble and learned Lord, in replying to Lord Monson's Amendment, having said something about resisting the Amendment on merit, then used some revealing words which, in effect, said that regardless of the merits he must ask the Committee to reject this Amendment. In effect he was saying that even if he agreed with the Amendment he would still have to advise

1155
the Committee to reject it, because there is no time for your Lordships to make any Amendments because the law expires at midnight tonight.
So I say to the noble Lord, Lord Shinwell, that perhaps what has got us out of bed the wrong side is that we are being brought to go through the Committee stage of this Bill in your Lordships' House unable to fight a proper Parliamentary battle and seek to amend this Bill because if we do the Government have so handled affairs that the existing law will expire as from midnight tonight and no law can take its place at one minute past midnight. That is the difficulty we are in. If we are a bit ratty, or snappy, it is for that reason and that reason alone, and it is a pretty good reason why Parliamentarians should be snappy: I cannot believe that the noble Lord, Lord Shinwell, either in his earliest days in Parliament or now, if he were on the Opposition Benches, would he anything but extremely snappy indeed about it.
Clause 1 agreed to.
4.4 p.m.
Lord MONSON Lord MONSON moved Amendment No. 2:
After Clause I, insert the following new clause:
Act not to apply to certain companies
(". The provisions of this Act shall not apply to companies where during the last complete financial year (as compared with the financial year ended 5 years earlier), the percentage increase in total wages and salaries paid is more than treble the percentage increase in net ordinary dividends distributed.")
The noble Lord said: May I first say to my noble friend—if I may call him my noble friend—Lord Shinwell how grateful I am for his exhortation to the Conservative Benches, and go on to express the hope that he himself will listen attentively to my arguments and that, if I manage to persuade him (as I am sure I shall), he too will support me in the Division Lobby. If either of these two proposed new clauses should be accepted by the Committee then I shall of course table a consequential manuscript Amendment to alter the Long Title of the Bill.
I hope that the purpose of Amendment No. 2 is clear to the Committee. It is to provide that this Act shall not apply to companies where the percentage increase
1156
in dividends over the past five financial years is less than one-third of the percentage increase in the wages and salaries bill paid by the same companies over the same period. As Mr. Peter Hordern pointed out in the Commons' debate last Thursday, the retail price index has more than doubled since 1972 and wages have done rather better; that is to say, wages have beaten the cost of living by a short head, and of course we are pleased about that.
Dividends, however, have risen by a mere 40 per cent. in monetary terms. In other words, they have fallen heavily in real terms. Wages have risen 2¾ times faster than dividends over the period. I do not believe that anybody except the most inveterate, bile-filled Marxist can think that this is fair or even-handed—to use a phrase much favoured by the Government when discussing this matter. Certainly, I submit that the man in the street would not think so. This Amendment would simply allow those companies where dividends have lagged behind wages and salaries to an even greater extent than most to have some opportunity of catching up to some degree. I beg to move.
Lord JACQUES: The noble Lord, Lord Monson, has talked about wages lagging behind.
Lord MONSON: Dividends.
Lord JACQUES: I beg your pardon, dividends lagging behind. Let us look at what is contemplated for the next twelve months. The Government are trying to get accepted wage and salary increases of 5 per cent. plus 2 per cent. for flexibility in ironing out anomalies. That is the objective. What is the position in relation to dividends? It is estimated by City stockbrokers that if this Bill is passed the increase in dividends in the next year will be 15 per cent.; not 5 per cent. plus 2 per cent. as is suggested for wages. If this Bill does not go through Parliament, it is estimated that the increase would be 25 per cent. as against a proposed wage increase of somewhere between 5 per cent. and 7 per cent. I suggest that, if these figures are right, it is wages that are lagging behind dividends and not dividends lagging behind wages.

1157
In moving his first Amendment the noble Lord complained that this control of incomes was giving rise to anomalies. It is certainly true that an incomes policy often gives rise to anomalies, and that every effort should be made to see that it is flexible. The one thing you should not do is write out the rules in a Statute as was suggested when we were on Clause 1. To write them out in a Statute so that this House can amend them is the last thing you can do. They will be out of date within a few months. You have to give the Department and the Minister concerned some discretion if you are going to have flexibility.
Let us look at this Amendment before us now. Supposing you had a firm which was a very competent firm; it was investing in its business, and, as a result of the investment, it was in a position that it could do with much less labour. But, instead of sacking people, it increased its output of exports, if you like, and made reductions in its staff only by wastage. It restricted reductions to wastage. So it was not merely a competent firm but one which was acting responsibly. Nevertheless, its total wages and salaries had fallen because it had invested in the business and needed less labour. If that were so, in spite of the firm being competent and responsible, it would not get the alleviation which is given by this Amendment, but some other firm which was not so responsible and so competent would get the alleviation. I suggest to the noble Lord that his Amendment would create far more anomalies than are already created by all the other rules connected with dividend control.
4.10 p.m.
Lord McCLUSKEY: I wish at the outset to take up the point which my noble friend Lord Jacques was answering. The position about putting the matter into Statute is exactly as he stated it to be, and that has been recognised since this form of dividend control came in. I do not have to go further than the White Paper of October 1973 to find in paragraph 12—which dealt with the provisions which the Treasury could make for relaxation in what were described by the noble Lord, Lord Roberthall, as "hard cases"—these words:
"It is not possible to specify in advance precise rules applicable to all cases",
1158
and it goes on
"The following paragraphs are not exhaustive but they indicate the broad areas where Treasury discretion is likely to be exercised".
One goes on to find the paragraphs dealing with take-over defence, increases in share capital, recovery from adverse trading position and cases of that kind. As I say, that has been the position for some years and it would not be appropriate to seek to put into this Bill, which is concerned only with the extension of the period for 12 months, a statutory scheme which, as Lord Jacques made clear—I am sure rightly—would simply not be valid after a few months.
I accept the general thrust of a point made by the noble Lord, Lord Monson, namely that there has been a divergence over the past five years—indeed, over any such period one could take—between income from dividends and income from pay, but this is part of a very much longer trend, as the Diamond Commission Report showed, and as was shown by a Written Answer given in another place on 27th January 1977, which took the position back to 1963. There is no particular reason why one should take five years.
If one had an exception of this kind, that could result in an unknown number of companies escaping dividend control and the effect would be that dividend controls would not be seen to be working; it would look like a leaking sieve. I accept there may be anomalies, but there are anomalies in pay policy, too. I am very conscious of that because I feel I am one myself. There are many anomalies which have come to public attention in relation to different groups of employees, and the Government are saying that we accept there are anomalies in pay policy but, for the public good and for the control of inflation, those anomalies just have to be lived with. If there are anomalies here, too, then I am afraid we have to give the same answer.
Lord CARR of HADLEY: I thought the noble and learned Lord, Lord McCluskey, accepted the argument adduced by his noble friend Lord Jacques, but I thought Lord Jacques' argument was bad because he was looking at this one year ahead in isolation. There may

1159
be some truth in it when Lord McCluskey asks, "Why take any particular five years?", but, when one is looking at the operation of a system of control, it is at least fair to look back to the point at which that system of control was commenced. Therefore, it is worth putting on record again that, if one takes wages and salaries in 1972, just before the beginning of these systems of control, and expresses them both as an index of 100, wages have risen—this is up to the end of last year—from 100 to 223, well over double, whereas dividends have risen from 100 to only 140. Thus, if one takes the whole period of control, the effect of the régime of control has been to allow a far bigger increase in wages than in dividends. I am not saying that control was the only cause for that, but, if we are talking about fairness and the need to impose a statutory control on dividend increases for the psychological reason of fairness, then it is fair to take into account the figures I have just given.
As the Committee will appreciate from our debate on Friday, it is not really on grounds of historical fairness that we on this side oppose the Bill; it is really on two grounds, as the Committee knows, and especially that of economic efficiency. We believe marginally that this control is holding back investment and is therefore holding back the efficiency of British industry, leading to somewhat higher unemployment next year and the year after than would otherwise be the case. It seems to us odd that the Government, for reasons of fairness, should be imposing a measure which they themselves admit must have adverse effects in economic terms, particularly when the chief recipients of dividends are the very workers in whose names we are told there must be dividend control.
As I said the other day, rising dividends equal rising pensions for the whole workforce; restrained dividends equal restrained pensions for the whole workforce It seems a very funny idea of social justice that, at a time when the Government are imposing restraints on people's incomes, they should also—in the name of fairness, not of economic necessity—put a restraint on their actual and prospective pensions as well; hit them once and have another hit at them in the name of fairness. That is a most odd idea.
4.18 p.m.
Lord SHINWELL: The Committee is in a serious mood and we must consider what to do about the Amendment. There is a case against the Government, in that we must examine the situation in a rational fashion, although they have introduced the Bill almost at the last minute. That has not provided sufficient time to go into the details of the matter and to discuss all the aspects and repercussions. It seems a simple Bill, but its consequences are wide-ranging and far-reaching. I recognise the need for counter-inflationary measures and I am sure that it is recognised by everyone in the Committee, because unless we can suppress the trend in the direction of inflation—which did not begin a few months or even a few years ago; it started many years ago, when I first arrived in another place—serious consequences are bound to arise. But how are we to deal with it?
What concerns me is something which has some bearing on the Amendment. I find that the Government introduced the Bill marginally, I would not say exclusively, because of its merit; to convince the general public that if we are to call upon the workers of the country to restrain themselves and not make excessive demands for higher rates of pay, obviously it would be improper, and an anomaly that would be difficult to explain, to allow dividends to increase. It would only seem that we were pandering to the wealthy and clamping down on the impoverished, and that the country would fail to understand and, if it did understand it, would reject it with the contempt it would deserve.
Let me explain what concerns me. The other day another place spent a considerable amount of time deciding about their salaries, future pensions and so on. Like other noble Lords, I read the Hansard reports of what is said in another place and the subjects on which they deliberate there. Hardly a word was said about the inflationary effect and the consequences of raising the salaries of Members of Parliament or, in the future, providing them with increased pensions. They accepted it. Indeed, if there was any comment at all, it was in the nature of a moan—almost a groan—to the effect that what is now being done should have been done long ago. There

1161
was an accusation against Members of Parliament that they are to blame because they should have protested a long time ago, and then conditions would have been very much better for them. But there was not a word about the inflationary effect.
There are too many anomalies about this matter. We tried to promote—and to some extent we promoted—a statutory incomes policy. I would say only this about the principle and the basic psychology and philosophy underlying a statutory incomes policy: In a civilised form of society there must be direction, and there must be acceptance of control—I hesitate to use that word, because it is not a likable one. We cannot afford to have a free-for-all in a civilised form of society. Therefore, if restraint is imposed upon one section of the community, it is hardly acceptable to allow another section to get away with increases, whether in the form of increased dividends or in the form of the higher salaries that are being paid to, for example, the chairmen of the nationalised industries.
Since I mention that particular matter I cannot help but comment upon a television programme I saw the other evening when the chairman of the Post Office appeared. He told us about the millions of pounds of profit that the Post Office had made in the current year. He bragged and boasted about it. During all the talking in which he indulged so glibly, with no sign of modesty, or even understanding of what had happened, it never seemed to occur to him that the profit derived from the simple fact that the Post Office arbitrarily imposed higher rates upon the consumers for postal and telecommunications services, and the rest. No doubt the ordinary workers in the postal service—such as the postmen themselves, and the sorting staff—deserve the remuneration that they receive; probably they ought to receive more.
However, when we are talking about inflation, and when we are deciding, as we are today, whether we should condemn the Government for this further imposition of restraint, why do we not recognise that some people are getting away with more than they deserve? How are we to deal with it? There are bound to be anomalies; it cannot be helped. What
1162
are we to do about this? I venture a few words of advice to the noble Lord, Lord Monson, regarding the Amendment. I should not at all like to see a Division on the Amendment. I do not think that it would appear to the public that we had done the right thing if we were to condemn the Government for restraining companies from paying higher dividends when another place has decided that it is ready to accept what is proposed. If we did that there would be an outcry of "The Lords again! There they are—the wealthy classes". Of course, we are not all wealthy, but that would be the assumption.
We do not want that kind of thing. For one reason alone, if for no other, I would say that we should have the argument and the debate, and we should ask for information and indulge in the dialectic that is essential, or which noble Lords think is essential. Then we should accept what is proposed, and so not place the House of Lords in a situation—which is not of its own volition, but which is imposed upon it on almost the last day of the Session—of taking action from which it would appear that if we were asking more for ourselves than we were prepared to grant to others; more for ourselves in the way of dividends, and less for the workers of the country. Let that not be said of us.
I hope that there might be further debate on the subject. Members are entitled to speak as they think tit; this is still a free country. But having done that, let us accept this for what it is, let us accept the consequences, and let us hope that they will be to the advantage of the nation in dealing with this evil of inflation, for, after all, that is our essential purpose.
Lord McCLUSKEY: Before the noble Lord, Lord Monson, replies, I wish to point out that the Amendment is directed at what the noble Lord sees as an injustice which has built up over a period of sonic years, since these controls were introduced. While not attempting to say anything further about that, I should like to say that the year we are talking about in the Bill is the year commencing tomorrow; and the fact is that inflation has now fallen below 8 per cent. and the Government's belief is that it need not go into double figures. Therefore, given that the dividend limitation is to a figure of 10 per cent.

1163
and given that in this year there is more scope for dividend increase in real terms, because of the new provision on cover, and because the turnout may be a general increase of about 15 per cent., this is not a year in which that injustice—if it is an injustice—is likely to continue. This is the one year, above all others, when one would not see that injustice continuing. I hope that noble Lords will take that into account.
That is the only point I want to make, apart from reminding your Lordships that the Government believe—and there is no secret about this because the financial Press has made similar estimates —that if there were no control dividends could rise to over 20 per cent. Some predictions have given a figure of 25 per cent. Certainly there would be one or two individual cases where the dividends would be of the order of 200 or 300 per cent. above 1977 figures. Given that the winning of consent of the people to wage restraint is partly a psychological matter, I ask your Lordships to consider what the effect would be if increases of 200 and 300 per cent. were to be allowed because a company was somehow able to use this kind of loophole. Therefore, I urge the Committee not to accept the Amendment.
4.28 p.m.
Lord MONSON: Once again, I am grateful to the noble Lord, Lord Shinwell, for his support. He made many of the points that I intended to make, particularly in regard to the differential treatment by the Government of top salaries on the one hand, and dividends on the other. With regard to the noble Lord, Lord Jacques, I hope that I am not doing him an injustice when I say that I fear that he has failed to realise that, except for a short period of exceptionally fast inflation during, I think, 1977, wages have kept pace with, or even beaten, inflation over the past five or six years. It is absolutely right and proper that they should have done so, and one makes no objection at all to that. They will continue to do so, even in the unlikely event of wages rising by as little as 7 per cent. over the next year as he predicted. On the other hand, dividends will have fallen heavily in real terms over six or seven years if the control continues until July 1979 or possibly later, even if there should be a 15 per cent. or so rise in average dividend payments this year.
1164
I take the point that the noble Lord, Lord Jacques, made about the company which had economised in the use of labour. My Amendment has a slightly rough and ready effect, but it entails rather less rough justice than would result from leaving the Bill unamended. The noble and learned Lord, Lord McCluskey, talked about a divergence between dividends and wages and salaries. "Divergence" is a very mild word to use to describe a really heavy fall in real terms. He also asked why I chose an arbitrary period of five years. There is nothing arbitrary about it: it is simply the time during which dividend control has been applicable.
The noble Lord, Lord Shinwell, rightly drew attention to the question of top salaries. There is a double standard here. For instance, the Government have rightly agreed that the disgracefully low salary of the chairman of Cable and Wireless, which has been frozen since 1972, should be more than doubled. Quite rightly, this is being put up to somewhere near where it should be, but dividends are not being treated in nearly such a fair manner. I think it is vital to bring home to the general public how very far dividends have lagged behind the cost of living over these years, and how this will affect their pensions and their with-profits insurance policies. However, I fear that the effect of my Amendment might be rather more wide-reaching than I had supposed. I have not had time to examine this, but I suspect it could possibly cover a very large number of companies, possibly the majority. I might then be accused of introducing a wrecking Amendment, which is not my purpose. Therefore, I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
4.31 p.m.
Lord MONSON Lord MONSON moved Amendment No. 3:
After Clause 1, insert the following new clause:
Exception for companies holding insurance and pension funds
(" The provisions of this Act shall not apply to companies where more than 50 per cent. of the shares are held by insurance companies and pension funds.").
The noble Lord said: This is an adaptation of an Amendment tabled in another place by three honourable

1165
Members from the Conservative Benches. They sought to provide that the Bill should not apply to companies where more than 30 per cent. of the shares—they did not use the term "ordinary shares", but I imagine that is what they meant—were held by insurance companies or pension funds. I think 30 per cent. is rather a low figure, because it would include almost without fail the majority of companies listed on the Stock Exchange, and such an Amendment would be construed as a wrecking Amendment, although I do not think it was intended in that way when that Amendment was tabled in another place. I therefore decided to substitute the figure of 50 per cent. Of course, this does not mean that the other 50 per cent. of shares would be held by individuals receiving personal dividend income, because a great many of the other shares would normally be held by charities, by the Church Commissioners, by associated companies, by trade unions (so far as their direct investments are concerned), by friendly societies and so on. Also, of course, they would be held by unit and investment trusts, and many investment trust shares are also held by insurance companies and pension funds. So this would in fact mean that, so far as the companies covered by this Amendment are concerned, individual investors would be likely to hold less than 30 per cent.
Honourable Members in another place told the House how very badly pension funds and the like would be affected by the Bill, and I wonder whether noble Lords realise the extent of subsidy paid by the taxpayer to one pension fund alone, the British Rail Pension Fund. The taxpayer has apparently been advancing about £100 million a year to the British Rail Pension Fund over the past two or three years. in part to make up the deficit due to dividend control. The public expenditure forecast is that the taxpayer is expected to provide that one fund with a further £81 million each year between now and 1981; so it is in fact the taxpayer, to a large extent, who is suffering from dividend limitation, as well as the beneficiaries of those funds where the taxpayer does not make a contribution. I think this is an important point, and I beg to move.
Lord PLANT: I hope the Committee will not agree to this Amendment. I
1166
think it is ill-thought out, and will cause endless difficulties. Of course, it would affect the discretion which the Treasury exercises at the moment in relation to dividends; but what date would be applied to companies in relation to the stocks that they hold in the various companies? Would it be tomorrow's date, as my noble and learned friend Lord McCluskey has indicated, or should a date be written into the Bill? The noble Lord, Lord Carr, has said that there should be fairness by the Government in this operation. Would there be any fairness if we agreed to this Amendment? For example, we like to think of equality, but suppose that widows, for instance—and a great deal was said about widows last Friday—held a fair amount of stock in companies in which insurance companies and pension funds had not got 50 per cent of the stock. Those widows would feel somewhat hard done to if, because the insurance companies had not got a majority holding, they were not able to have their dividends free of restraint, as the insurance companies and pension funds would have theirs free.
It opens up a considerable vista. Think of the advertising in the Press by the insurance companies—"Insure with us. We have 51 per cent. of the stock of ICI. Therefore, no dividend control". I could amuse your Lordships with a lot of quotations that occur to me in relation to advertising in this field. The top hat pension schemes draw their advantageous position from insurance companies. Would this encourage insurance companies to endeavour to purchase more stock in a company in which they have a large holding? Is there any law which prevents insurance companies and pension funds from taking over companies 100 per cent., for instance? I think this is very dangerous. Of course, we are approaching the TUC Annual Congress, to be held in Brighton early in September. If we were foolish enough to agree to this Amendment, it would go a long way towards destroying the goodwill that I hope will be built up between the trade union movement and the Government in relation to moderation in the future.
The Marquess of LINLITHGOW: May I please ask a question of the noble and learned Lord? It is quite a short one, and I probably ought to know the answer,

1167
but I would be very grateful if he would help. As the undistributed dividends have piled up over the years and added themselves to the reserves of companies, I take it that, provided there is no question of a rise in the dividends beyond the measurement allowed, there is no objection in principle to the actual capitalisation of reserves in terms of capital bonuses.
Lord McCLUSKEY: If I may answer that in a roundabout way, the only thing that the Bill seeks to do is to enable the Treasury, on behalf of the Government, to prevent dividends exceeding last year's dividends by more than 10 per cent. That is the only answer that I can give. If it is not a satisfactory one, I will try to amplify it later.
In relation to this Amendment, the Government would ask the Committee not to accept it. The Government accept that dividend income is of interest to large sections of the population, of course including pensioners. Indeed, pensioners are especially included because of the shares held by insurance companies and pension funds. I should say, just in case anyone be misled, that the side-note to this Amendment has in fact got it the wrong way round, as I think the noble Lord, Lord Monson, would acknowledge. It should not be:
"Exception for companies holding insurance and pension funds".
That puts it back to front. To turn to the Amendment itself, many of the persons who own shares directly—and about one—third, or perhaps a little more, of shares are held by individuals directly and not through institutions—are also pensioners, and if the purpose of the Amendment is to help pensioners it does not succeed in its purpose in so far as it helps only those pensioners who are saving through schemes which are referred to in the clause. That is the point which I think was made by my noble friend Lord Plant. I do not need to develop it, because I simply acknowledge what he has said and I accept that as being absolutely correct.
In relation to the effect of the Amendment, it would appear that about half of all shares are now owned by the institutions and, accordingly, the proposed Amendment would open a considerable
1168
gateway through these controls and it would be difficult (if we were to accept this Amendment and the new clause) to argue that dividend controls were in force at all. Perhaps I can pick up and develop the point made by my noble friend Lord Plant. It would be difficult—indeed, probably impossible—to operate a control based on proportion of ownership of shares. The control applies primarily to quoted companies where, almost by definition, there has to be a sizeable market on the Stock Exchange. The effect of the Amendment would be to alter the eligibility of companies perhaps from day to day depending on a particular distribution of ownership which the market happened to throw up. There could be many undesirable features and repercussions given the dominating position which the financial institutions have in the Stock Market—and I have in mind particularly that one might find manipulation of shareholdings in order to avoid the limitation by taking advantage of the new clause and so to avoid, perfectly legitimately, but to avoid dividend controls and thus make a nonsense of the continuation of the system. For these reasons, I would ask the Committee not to accept this new clause.
Lord MONSON: The other Thursday night in another place Mr. Peter Hordern, speaking from the Conservative Benches, wondered how the Government were going to persuade workers to ask for not more than a 5 per cent. wage increase with the inducement of a reduced pension when they retire; because a reduced pension is what a lot of the workers are going to have as a result of this Bill. I have to take the point of the noble and learned Lord that even the 50 per cent. figure, which I altered from the original 30 per cent., is still a little low in so far as it brings into the net rather a lot of companies, possibly the majority, again. Had we been given the normal time in this House between the Committee and Report stages one could have digested what was said today and tabled suitable Amendments on Report to raise the figure to 60 or 65 or whatever may be reasonable. We have not been given that time and all that I can do is to beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2 [Short title and extent]:
4.43 p.m.
Lord MONSON Lord MONSON moved Amendment No. 4:
Line 16, after ("Dividends") insert ("(Continuing Restriction)").
The noble Lord said: In the Commons last Thursday again Mr. Peter Hordern, speaking from the Conservative Benches, said that this Bill ought to be entitled the "Dissemination of Envy Bill". I think that the honourable Member had a good point. I do not propose to go quite as far as he did: Indeed, the honourable Member himself put down, together with two others, a milder Amendment, which was defeated after some debate. I have not had the time, as I have said, to read the debate, but on the principle that one ought not to repeat a Commons Amendment which has already been rejected by that House, I have altered my Amendment so that the title would read now: "Dividends (Continuing Restriction) Bill" which I think in any case is more descriptive of what the Bill really means. This is an anti-cosmetic Amendment. It strips the smooth, bland, innocuous-seeming pancake veneer from this Bill and leaves it in all its stark, mean-minded ugliness. I beg to move.
Lord LEATHERLAND: Before my noble and learned friend replies, if we are to make an alteration in the Title of the Bill, should it not be slightly different from that proposed by the noble Lord, Lord Monson? I understand that this Bill contains some easement in the situation when compared with the system that has been prevailing for dividends over the past year. If that be so—and I am sure that it is—it would be better to have toe words, "Dividends (Easement) Bill" instead of, "Dividends (Continuing Restriction) Bill".
Lord McCLUSKEY: In relation to what has just been said by my noble Lord the Bill does not contain any easement. The easement is contained in the announcement by the Treasury which it is authorised to make under Section 10 of the 1973 Act, which section is continued in force by the Bill. I cannot say that the Government have any deep objection in principle to calling the Bill by the Title that it would have if this Amendment were accepted. None the less, I must urge the Committee not to accept it. In the first place, it is
1170
not necessary. Anyone who looks at the Bill will see the words in Clause 1(1), the plain words in brackets. The subsection reads:
"Section 10 of the Counter-Inflation Act 1977 (which enables the Treasury to restrict the declaration or payment of ordinary dividends …) shall continue in force …".
There is no doubt about the purpose of the Bill. That is plain. Given that this Amendment would make no difference to the content of the Bill, and given that anyone who cares to look at the Bill will see what its purpose is—and I believe that its purpose is well understood by all affected by it—it would be unfortunate however if this House were, for a cosmetic or counter-cosmetic or anti-cosmetic reason, to send the Bill back to another place with all the consequences that we have already discussed. I hope that in these circumstances the noble Lord, having made his point, will not press the Amendment.
Lord CARR of HADLEY: I cannot resist pointing out once again that what the noble and learned Lord, in effect, is almost saying is that if some Member of this House came forward with an Amendment which the Government wished to welcome strongly as reinforcing the vital psychological effect of this Bill, the Government would still have to tell us that we could not pass it because they have not allowed any Parliamentary time in which we could do so.
Lord MONSON: The noble and learned Lord has conceded that the Amendment could not in any way wreck the Bill or restrict its scope in any way. Reverting to the cosmetic analogy, its only effect would be that the Government would lose a small amount of face. It is a pity that it cannot be accepted in this House, and that we have not a few hours more in which to send it back to the Commons with this changed Title; but I would not wish to be accused of causing unnecessary difficulties and therefore I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.48 p.m.
Lord MONSON Lord MONSON moved Amendment No. 5:
Line 17, leave out ("extends") and insert ("does not extend").
The noble Lord said: The purpose of this Amendment is to exclude Northern Ireland from the provisions of the Bill. The Committee will be aware that unemployment in Northern Ireland is very much higher than in the rest of the United Kingdom. It is not only an unhappy and undesirable state of affairs, but it contributes in large measure to the level of violence in that troubled Province. Young people in Northern Ireland, like young people anywhere else, if they are bored and have nothing to occupy themselves with tend to turn to crime. In Ulster, there is no shortage of evilly-disposed older men ready to put weapons in their hands.
This Amendment would focus attention of investors, not only in Britain but internationally, upon the undoubted economic attractions of the Province. It should lead to greater investment and thus to diminution of unemployment and, hence, ultimately a diminution of violence. It would, incidentally, help the British taxpayer in so far as new industries and the expansion of existing industries would tend to be met more by the investor as an individual and less by the taxpayer collectively by way of subsidies. I cannot believe, finally, that any responsible trade unions in Northern Ireland would object to this: I suspect that they would welcome it. I beg to move.
4.50 p.m.
Lord COCKFIELD: May I say that I feel that the noble Lord, Lord Monson, has a legitimate point here. Before I come in detail to Northern Ireland, may I ask the noble and learned Lord—and nobody is in a better position to answer—whether, if there was a Scottish Assembly before 31st July 1978, this would be a devolved subject or a reserved one? This is directly relevant to Northern Ireland, because presumably the reason why the reference to Northern Ireland is inserted in this Bill is that, but for the fact that the Westminster Government has now assumed direct responsibility for Northern Ireland, it would have been a matter within the competence of the Northern Ireland Legislature.
If one looks at what happened in another place, according to The Times newspaper, two of the representatives of Northern Ireland voted in favour of this Bill, two
1172
abstained and the remainder voted against it. As always happens on these occasions, one is not told how many the remainder were. Presumably they represented a solid majority. If the duly elected representatives of the people of Northern Ireland thought that this was not the type of Bill that ought to apply to Northern Ireland, or indeed to any other part of the United Kingdom, we ought to pay some attention to their views. There is always a risk—admittedly, in the Government's view, a small one—that they might be right and that the exclusion of Northern Ireland would at least provide an opportunity of testing whether the views which have been expressed about the economic effects of this Bill are justified.
In the past few days the Thomson Organisation has emigrated to Canada. One of the reasons—admittedly only one in a long catalogue—given for them removing their seat of control from the United Kingdom to Canada was dividend limitation. It may very well be that if dividend limitation did not apply to Northern Ireland it would give Northern Ireland a slight edge. I am talking not only in terms of indigenous companies in Northern Ireland but, much more importantly, companies which might be attracted to Northern Ireland. It is essential to make the point that there are a large number of multinational companies operating in Northern Ireland, and Northern Ireland has a great deal for which to be thankful that these companies not only operate in Northern Ireland but invest there. Anything which was done to improve the attractions of Northern Ireland might well be something of real value in the light of the problems that that particular part of the United Kingdom faces.
4.53 p.m.
Lord McCLUSKEY: I think, without fear of contradiction—that does not mean to say that I am right, but I believe I am right—that this would not be a devolved matter in Scotland if the Scotland Act were to come into force. The effect of this particular Amendment would be to exclude Northern Ireland from the scope of the measure. The Government believe that this would make a nonsense of the counter-inflation policy which applies to the United Kingdom as a whole. The Dividend Bill is only part of a total policy.

1173
It is just as important that inflation should be brought down in Northern Ireland as elsewhere in the United Kingdom, if, indeed, it is possible to argue that there are important regional differences in prices.
I would remind the Committee that the Counter-Inflation Act 1973, which contains Section 10, which is prolonged by this Bill, applies to Northern Ireland. The provision in the Bill in Clause 2(2) is declaratory or explanatory for information. It is not, strictly speaking, essential as it stands. On the substance of the matter, the noble Lord, Lord Monson, in supporting his Amendment, argued that Northern Ireland has a greater need of capital investment than other parts of the United Kingdom. The Government do not dispute that; indeed, it is true. The Government believe that the best way to deal with it is through special regional measures: for example, grants for investment, which Northern Ireland enjoys. The effect of these is to lower the cost of capital, and shareholders ultimately benefit since profitability is higher than it otherwise might be. We believe that that is the way to do it and not this way, which would make a big hole in the counter-inflation policy of the Government. For these reasons, I ask the Committee not to support this Amendment.
Lord MONSON: As a general principle, I believe that all parts of the United Kingdom ought to be treated in the same way. However, such is the degree of unemployment and general economic distress in Northern Ireland that I think an exception is justified. The noble and learned Lord has not convinced me that there will be any opposition from the trade union movement in Northern Ireland; rather the reverse, I suspect. I think that freely chosen investment by individuals is always preferable to economic subsidy by Governments, particularly as the subsidy comes out of the taxpayers' pockets and taxpayers are complaining about the amount that has to be spent on Northern Ireland in any case. I am afraid that I must insist upon this Amendment.
On Question, Amendment negatived.
On Question. Whether Clause 2 shall stand part of the Bill?
4.56 p.m.
Lord SOMERS: Before we leave this point, I wonder whether the noble and learned Lord will answer something which has been at the back of my mind during the whole of this afternoon's discussion. What is the purpose of this Bill? It is surely to take a step in reducing inflation. Any step against inflation is to be welcomed; but does this Bill really do that? What are the causes of inflation? First of all, prices rise for various reasons: because the cost of raw materials goes up, and there are other factors. As a result, the workers feel that they must have extra wages and. a result of their extra wages, prices go up again, and so on, ad infinitum, as we have all seen. But dividends do not have that effect. They do not raise prices; they do not cause inflation. All that this Bill will do is to make a great many people who at present are not at all well-off rather poorer than they were before. I cannot see that that is any cure for inflation.
Lord BOOTHBY: If I may say one sentence: I am opposed to this Bill, although of course I shall not vote against Her Majesty's Government; I seldom do. The things that the country requires more than anything else are incentives leading to enterprise, particularly in smaller industries; and, above all, investment. I do not see that this Bill is going to promote any of those three vital things, although it may not do any great harm.
Lord McCLUSKEY: I have a sense of déjà vu about this. While I was plodding through my Second Reading speech, the noble Lord, Lord Robbins, asked me almost the same question about the purpose of this Bill and the relation of it to inflation. I did not then seek, and I do not now seek, to make the point that the control of dividends itself as an economic instrument is going to reduce or control inflation. What I said then, and what I repeat now—and the point was made for me much more forcibly than I could make it by my noble friend Lord Bruce of Donington—is this: the Government's approach to an incomes policy is a total one. The incomes with which we are concerned are, for the most part—and very much the most part—earned incomes. The Government believe in control of the kind that we have had for some years past of earned incomes, where

1175
the Government have given an indication as to the limits. By and large, these have been accepted on a voluntary basis by persons in employment, by trade union leaders and by those in trade unions. They have to persuade these people to accept a continued restraint during the forthcoming year. In fact the Government's ambition and intention is that the figure should be kept down to 5 per cent. That object is one which it would be extremely difficult to achieve if those who are earning incomes saw what appeared to be a free-for-all in relation to unearned incomes. So the impact of the Bill is simply that: it is psychological and political (though not Party political) in character. That is the basic justification for this Bill; not the economic one. I have not sought to conceal that and I hope the House will not believe I have.
The Marquess of LINLITHGOW: Before the noble and learned Lord sits down, I should like to say that one sees the point of it, but I do not think that in fact in the present financial climate—that is, with the present financial disciplines which are quite rightly being exercised by the Government under their agreement with the IMF—excess wages can lead to more inflation. They can only lead to further unemployment. Is there to be no answer from the noble and learned Lord? As I had made the point before I was rather assuming that, having made it before and very shortly, the noble and learned Lord's assent to that theory was being reserved by him by silence. I shall have to take it that in fact that is so unless there is some sort of argument against it. Even if the noble and learned Lord thinks I am talking rubbish, I should prefer him to say so rather than say nothing.
Lord McCLUSKEY: I am not an economist and I am not going to say that what the noble Marquess has said is rubbish. I do not regard the debate we are having in Committee on the Question Whether Clause 2 shallst and part of the Bill? as being the occasion for a general economic debate when we would discuss the effect on employment of restricting or increasing the money supply. We do not have a free market, as it were, in employment because the Government take measures against unemployment, even if
1176
other pressures seem to cause it. I do not regard myself as qualified to expound a general thesis on this matter or to answer the noble Lord, at this stage, in the context of this Bill. I apologise if that seems an inadequate answer, but at least it is a truthful one.
The Marquess of LINLITHGOW: It is, if I may say so, a very good escape: the noble and learned Lord avoided the bad puddle at the edge of the
pond!
Clause 2 agreed to.
In the Title:
[Amendment No. 6 not moved.]
House resumed: Bill reported without Amendment; Report received.
Then, Standing Order No. 43 having been suspended (pursuant to Resolution):
5.6 p.m.
Lord McCLUSKEY: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord McCluskey.)
Lord CULLEN of ASHBOURNE: My Lords, when the Chief Secretary to the Treasury introduced this Bill in another place he attempted to justify its provisions on economic grounds. Some six hours later, the Financial Secretary to the Treasury wound up with a political rather than an economic speech, and the final outcome was a vote won by the Government with the support of the Scottish Nationalists.
When we held our Second Reading debate last Friday, the noble and learned Lord, Lord McCluskey, having studied the debate in another place shrewdly announced he was not going to put forward an economic argument. In reply to the noble Lord, Lord Robbins, he said at column 1078:
"I am not advancing an economic case. It would be foolish of me to pretend that I was, and I shall not do so".
The noble and learned Lord has just confirmed that a moment ago. How right he was! Even so experienced an advocate as he would have been hard put to it to advance economic arguments in support of the Bill that would have convinced the noble Lord, Lord Robbins.

1177
What he explained to the House was that the Bill was being presented for psychological reasons and that the chances of obtaining agreement for a further period of pay restraint depended on dividend restraint. That is not an argument: it is a statement of the opinion of the Government as to how they believe the trade union leaders would react if the Government stood by the statement made a year ago by the Minister of State for Prices and Consumer Protection, which I quote:
"From the end of the year beginning 1st August 1977 there will he no further dividend control".
I repeat, my Lords, that that is not an argument. It comes into the same category as a paragraph in the speech of the Financial Secretary to the Treasury who said this:
"If there is agreement that pay and price restraint needs to continue, an essential consequence of that is that dividend restraint should continue too. That is not because of the economic advantages of dividend limitation. It is rather that the economic advantages of the pay and prices policy depend upon dividend restraint".
That again is a flat statement, with no reasoned argument to support it.
My noble friend, Lord Carr, agreed on Second Reading that it was fair to impose on those who settle prices pressure and restraint equivalent to that imposed in respect of pay increases: he agreed that was a proper and logical trade-off. But we entirely disagree with the Government that there is any logical trade-off between pay and dividends; and, to give the noble and learned Lord his due, he did not argue that there was. So now that the economic case has been abandoned by the Government, I have put aside the statistics I had assembled and I shall try to deal with the psychological argument before us.
Before doing so, I must also add my strong protest over the manner in which the Government have introduced this Bill. As my noble friend Lord Carr said, to leave uncorrected until the eleventh hour a categorical statement by a Minister that dividend controls would end today and then to force this Bill through Parliament so that there is no time to amend it without a vacuum being created between today and the time of Royal Assent is really a shabby way to treat Parliament.
1178
I suppose the Government changed their minds or lost their nerve at the last moment, but they do not tell us why. This psychological argument they have dreamed up is utterly unconvincing to me. Was the dreaded psychological impact of a discontinuance of dividend control on pay settlements not perceived 12 months ago when the Minister made the statement that today was to see the end of dividend control, or did it not exist then? If that is the case, what has occurred since then to make it relevant today? This does not seem to me to be up to the high standard of advocacy to which we have become accustomed from the noble and learned Lord.
It is quite clear that the Government realised that they could not win the economic argument and have therefore retreated behind a flimsy and crumbling palisade of outmoded prejudices. Are we not perpetually regaled with the plaudits of the Labour Party about the responsible attitudes adopted nowadays by trade union leaders? Do the Government really think that such people are unable to recognise the immense changes that have taken place in this country since the turn of the century, and that in the period since 1973 dividends have been restrained to a far greater extent than wages?
Trade union leaders are very well aware of the importance of investment in industry, and if their members do not realise that this country will not prosper until a thorough-going partnership is forged between investors and employees, it is high time that the advice of the noble Baroness, Lady Seear, was taken, that a really extensive educational campaign should be mounted to explain the economic facts of life. This, I should have thought, would appeal to the noble and learned Lord, who said unashamedly last Friday that politics is the art of persuading people to accept economic policies, and other policies, which are seen to be in the national interest.
It would be in the national interest if more and more people understood the economic facts of life. At any rate, I believed that trade union leaders, or at least many of them, understood such facts of economic life until I listened to the Government's wind-up speech last Friday. Until then, I had believed, like my noble friend Lord Boyd-Carpenter, that no

1179
public statements had been made by trade union leaders that continued dividend restraint was necessary if an agreement to restrain pay was to be achieved. Then we heard from the noble and learned Lord that such public statements have been made.
All I can say is that, if that is so—and I cast no doubts upon the noble and learned Lord's words, though it is news to me—those statements have met with even greater restraint by the national newspapers in reporting them. I wonder when they were made and by which trade union leaders, and when they were reported. I should be grateful if the House could be given that information. I can only believe that those statements must have been made very recently, as it is my understanding that it has for months been generally expected in political, financial and Press circles that control of dividends would end today, as no warning to the contrary had been given. Naturally, previous experience of the extension of these powers, from 31st March 1976 to 31st July 1977 and, again, to today, caused some scepticism, but as time went by and the date got nearer and nearer even the sceptics thought that they had misjudged the Government.
In many economic debates during the last four years, the point has been made time and again from these Benches, from the Liberal Benches and from the Cross-Benches, that it is vitally important that Governments should be as consistent as possible in maintaining policies, so that those who are engaged in industry and commerce are enabled to plan ahead with confidence. It is well understood that some changes are inevitable when circumstances alter materially, but it is common sense that changes should not be peremptorily made unless that is quite unavoidable, owing to some national disaster or some such event. It would be hard to think of a more classic example of inconsistency than this last minute repudiation by the Government, and, I suspect, against their will, owing to what we now learn have been the demands of certain trade union leaders.
Looking back over the last four years, I marvel at the way in which the Government have congratulated themselves on their fight against inflation. The first action that the Government took, in 1974, was to abolish wage controls, resulting
1180
in 30 per cent, increases in vital areas of the economy. Did it surprise them that this, in itself, caused inflation in this country on an unprecedented scale? The economy was in desperate danger of collapse, when further profligate spending was made impossible by the discipline of the IMF; a discipline which coincided with advice that the Government had repeatedly received from both financial and non-Socialist political circles. How quickly the scene changed and the pound recovered, and how quickly the Government came to realise that the advice they had been given was sound!
Every Member of your Lordships' House, and every sensible person in the country, heartily supports the fight against inflation. If the only way in which the Government can continue the fight, without losing the co-operation of the trade unions who have such a powerful influence upon their actions, is by the extension of dividend controls, then so be it. But let us realise that there is a price to pay. The further extension of the 1973 powers, which, as my noble friend Lord Cockfield reminded us on Friday, were to deal with an emergency, will to some degree distort the capital market and they will act unfairly against some companies, while slightly helping some others. To some extent, they will operate against the declared aim of all political Parties, the CBI and the TUC to encourage investment in industry. They will tend to increase the level of unemployment. All in all, they will give some satisfaction to the sceptics and, apparently, to some trade union leaders, but that is the most that can be said of them. This is not a logical Bill, nor an economic Bill. It is, to use the Minister's own words, a psychological Bill, and it deserves to be damned without faint praise.
5.16 p.m.
Lord MONSON: My Lords, a few days ago—I am afraid that I did not have time to look up the exact date, because my train was half an hour late this morning—the noble Lord the Leader of the House moved that Standing Order No. 43 be suspended until the Recess, so as to allow more than one stage of a Bill to go through on the same day. Being of a suspicious nature, I was contemplating opposing the Motion but was dissuaded from doing so by a senior Opposition Whip, on two

1181
grounds. The first was that such opposition would be frowned upon. The second was that such opposition would, in any case, be totally unnecessary as no Government, be it Labour or Conservative, would ever dare use such a suspension of a Standing Order in order to force through a controversial Bill. It was designed solely to allow non-controversial Bills to go through before the end of the Session. We now know better—do we not?—and next time I shall stick to my guns.
5.17 p.m.
Lord TERRINGTON: My Lords, I fully realise that this decision to continue the restriction on dividends is a political one and that nothing I may say now can have the slightest bearing on the outcome. I also realise that practically everything there is to say has already been said in both Houses and outside. None the less, having made numerous appeals for the ending of these controls in the course of a number of recent debates in your Lordships' House, I feel that I cannot let this final stage go by without making a brief general comment.
All my appeals have, first and foremost, been on the grounds of fairness and that includes fairness to the mass of small private individuals who wish to stake part of their savings in support of British industry for a fair reward. Here, once again, I must declare my interest as a member of the Wider Share Ownership Council which believes, as I do, in the social as well as economic advantages of attracting the small saver directly into industrial investment, as distinct from indirect investment through pension schemes and insurance policies. What bothers me is how such people can be persuaded to back British industry, which badly needs them, if the rewards are not allowed to match the attendant risks, and this particularly at a time when alternative investments, such as Government debt, offer special tax advantages. In fact, they have been positively dissuaded for quite a considerable time, and the evidence of this is the net selling of industrial investments in the private sector to the tune of well over £1,000 million a year.
Who are these private individuals that I am talking about? According to the Diamond Commission's research in 1973,
1182
approximately 50 per cent. had a total statutory income of less than £2,000 a year and three-fifths of them were of pensionable age. This is a point which the noble Lord, Lord Carr of Hadley, made on Second Reading, but it is important enough for me to repeat it in order to give emphasis to what I am saying about fairness to small private individuals. These are the people I have been concerned with in all my appeals; people who built up modest assets out of savings during their working lives—not people who have inherited their capital. So no wonder the exodus of private individuals from investment in industry continues at a high rate.
This leads me on to my other general point, which concerns the logic of restricting dividends for yet another period, however temporary. All my City experience confirms what other noble Lords have said about distorting the allocation of funds raised from savings through the marketplace and I particularly have in mind the small to medium sized companies which can play such an important part in the reduction of unemployment. My noble friend Lord Boothby touched on that point a few minutes ago. I made that point recently during my noble friend Lord Baker's debate on enterprise and industrial growth and I drew attention to the fact that in the past it was frequently the individual investor who was prepared to provide the main financial backing for small but enterprising companies with growth prospects. I am afraid the situation now is that these companies feel they can no longer look to individuals for financial support and they are therefore less inclined to seek a public quotation which would make their capital requirements both easier and cheaper to attain.
I have said it before and I say it again, I am really amazed at the way in which we have allowed the drift of the individual away from supporting industry in his own country and I can therefore only view this decision today with the greatest disappointment. I am afraid I have no way of assessing whether or not the trade union movement as a whole has really made a demand for further dividend control as a quid pro quo for wage restraint, but I am quite certain that today's decision is basically unfair and most discouraging to a whole lot of existing and potential small savers; and I really felt that I must

1183
say so. For these reasons, I can only conclude by saying that I regret this Bill and I am sorry to see it pass into law, even if it is only for a period of another 12 months.
Lord LEATHERLAND: My Lords, before the noble Lord sits down, I should like to ask him a question. He said that it was very difficult for medium-sized businesses to get capital through prospectuses and public issues. Can he therefore say why it was that the three prospectuses which were announced during the last few weeks were over-subscribed 50, 60, 70, 80 times?
Lord TERRINGTON: My Lords, without looking closer, I cannot reply to the noble Lord. I should like to see exactly who the contributors were towards the subscription lists. The point I was making is that, generally speaking, from quite a number of years of City experience I am aware that in the past medium-sized companies would depend on private individual support in the belief that in due course they could come for a quotation to get easier and cheaper money. I am talking about companies which have not yet reached the quotation stage.
Lord LEATHERLAND: Jones the jewellers was one, my Lords. That was over-subscribed 50 times.
Viscount HANWORTH: My Lords, I have little doubt that from a psychological point of view, and bearing in mind the vital question of keeping wages under control, this Bill is necessary. What disturbs me so much is that it should be necessary from a psychological point of view and I think that undoubtedly more education of the public on a number of these matters is desirable. What I really want to say from these Benches is that in my view both Parties should search their consciences. The amount of obscurantism, misleading statements and absence of the truth which has been given out by both Parties on occasions is such that it is hardly surprising that some of the public hold the views they do. At this stage I will not quote examples of this, but if your Lordships think about it you will find that there are plenty of them.
Lord McCLUSKEY: My Lords, I certainly accept what the noble Viscount
1184
has just said about this being a necessary Bill, and already on more than one occasion I have sought to explain why that is so. I have said repeatedly that I did not seek to make an economic case for this Bill. I do not want it to be thought, however, that it has no place in the Government's economic policy. Indeed, as I sought to explain (and perhaps the point was put more forcefully by my noble friend Lord Bruce of Donington at Second Reading when he picked me up on this very matter), the Government's policy is to have control of incomes in the way indicated in the White Paper. This Bill will not in itself make an economic difference there, but it is necessary as a psychological factor in achieving that overall aim. There is a substantial economic argument for this Bill on that basis.
The noble Lord, Lord Cullen of Ash-bourne, said that the Government's assertion that it was psychologically necessary was just a statement of opinion by the Government. It is of course a judgment by the Government but this Government should know. Let me remind the House that this Government have conducted a successful incomes policy on the basis of agreement and consent for the last three years. It was 100 per cent. successful in the first phase, it was 100 per cent. successful in the second phase, and in the third phase ending today it has been far more successful than any of the critics of the Government would have given it credit for this time last year. Indeed, the out-turn on wages is something of the order of 13 and less than 14 per cent. Of course the Government's target was less than that but none the less the policy must be accounted a success and certainly the critics of the Government this time last year must acknowledge that the Government were substantially right. So it is on the basis of their success over the past three years that the Government are entitled to say, "This is our judgment and we ask the country and Parliament to accept it ".
So we do not abandon the economic case. I merely put this Bill in the context of an overall policy. I have said before, and I accept, that trade union leaders do understand the role of dividends in relation to pensions, to insurance and matters of that kind. The matters that were brought out, for example, in the Diamond Report

1185
and elsewhere are well known to the trade union leadership, but there is a difference between the intelligent economic appreciation which one gets now in discussion with all the forces at work in society, including the trade unions and the CBI and others and, ultimately, people on the shop floor who might easily be misled, and it is the judgment of trade union leaders, communicated to the Government, that dividend control is necessary if they are to he able to persuade people to exercise restraint.
May I remind your Lordships that we are not just talking about responsible trade union leaders. There are people in this country who, for reasons that I need not attempt to specify, are out at all costs to destroy any kind of restraint on incomes and if we did not have this kind of restraint then on the first occasion and the second occasion and the third occasion when a company declared a dividend which was 200 per cent. greater than the dividend declared last year and paid out, that would put a formidable weapon in the hands of those who would seek to destroy any kind of pay restraint. That is the ultimate justification for this Bill.
It was suggested by the noble Lord, Lord Cullen of Ashbourne, that no notice had been given of the Government's change of mind. It is not the Government's change of mind but any departure from the statement made by the Minister that he referred to. On the 8th February, in answer to Mr. Cant, a Treasury Minister said that it was—and I quote:
"too early to decide whether legislation might be needed when the current controls ended on 31st July".
If you like, you can call that a "holding reply" but it did at least indicate from 8th February of this year that the Government were preserving their position. They had to do so and they did so and took the decision which is now incorporated in this Bill, following upon the discussions to which I have referred.
I turn finally to the general point that has been made, that there is an element of unfairness and lack of even handedness in relation to people who, either directly or through institutions, receive the kind of income to which this Bill would apply. I do not dispute that, if one takes the
1186
period of a year since this kind of control came into force, there has been a considerable gap opened up, of the kind that was specified when we discussed an earlier Amendment, between earnings on the one hand and income from dividends on the other. However, in the context of this Bill, the Bill applies to the next 12 months, and all the indications are that the kind of dividend which will be allowed in terms of this Bill and the extra relaxation which has been discussed are such that those who have income, directly or indirectly, from this source will do at least as well as those who earn income from wages and salaries. If the Government's prediction as to the rate of inflation is correct, it is also reasonably plain that income from these sources should exceed the rate of inflation. Therefore, whatever the general complaint may be over a period of years, in the context of this Bill, and looking at the next 12 months, I do not think that that complaint is valid. Therefore, I beg to move that the Bill be read a third time.
Lord CULLEN of ASHBOURNE: My Lords, before the noble and learned Lord sits down, I wonder whether he could reply to a question which I asked him. Could he let us know when these public statements were made by trade union leaders, who they were and when they were reported? The noble and learned Lord said at Second Reading that these public statements had been made, and I have not found them.
Lord McCLUSKEY: My Lords, on that occasion I was speaking on the basis of my briefing. I do not have to hand any record of any public statement that has been reported. I must make it quite clear that on the basis of consultations with trade union leaders and others, it was made absolutely plain to the Government that dividend control would be necessary. Of course, this is a slightly different point, but these are matters which are confidential and I cannot identify particular trade union leaders and particular occasions. However, I am afraid that I do not have to hand any reported public statement.
Lord CARR of HADLEY: My Lords, I am sorry to detain the noble and learned Lord, but necessary for what? In return, the TUC gave no undertaking of any kind,

1187
however voluntary, however qualified. So what was it necessary to obtain?
Lord McCLUSKEY: My Lords, trade union leaders have not indicated that they will seek to get increases in pay which go through the roof. They have consulted with the Government, and their interest—and, indeed, the interest of the trade union movement as a whole—is that there should be restraint. They have not committed themselves to the particular figure or to the particular policy which the Government have announced in the White Paper, but moderate trade union leaders are committed to exercising a restraint.
On Question, Bill read 3a, and passed.

ROYAL ASSENT
5.45 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Finance Act,

Independent Broadcasting Authority Act,

Employment Protection (Consolidation) Act,

Statute Law (Repeals) Act,

Employment (Continental Shelf) Act,

Civil Liability (Contribution) Act,

Homes Insulation Act,

Community Service by Offenders (Scotland) Act,

Inner Urban Areas Act,

Scotland Act,

Wales Act,

Chronically Sick and Disabled Persons (Northern Ireland) Act,

Dividends Act,

London Transport Act,

Greater London Council (General Powers) (No. 2) Act,

Vale of Glamorgan (Barry Harbour) Act.