Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 19th April 1956.

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Photo of Mr John McKay Mr John McKay , Wallsend 12:00 am, 19th April 1956

No, I am not challenging the result of the rise in dividends. I am challenging the comparison made with the wages earned by the workers. The number of workers has increased from 17 million to 23 million. If each had the same wages individually as he received in 1938, when there were 17 million employed compared with 23 million today, naturally there would be a great increase in the total wages Bill, even though each man was getting exactly the same. It is not a true comparison.

I am not disputing the percentage rise in dividends, comparing one period with another. I am trying to emphasise what everyone knows: that, in practice, dividends form only a part of the profit which has been made year by year. The true comparison between profits and wages is made by taking the total net profit made which means undistributed profits and dividends combined. When we do that we find that the increase in the net profit has been far more than the increase in wages. That is my main objective tonight. It may be difficult to follow, but it is a matter of great importance.

When a trade union deputation meets employers the arguments have to be based on facts; the deputation will not accept artificial figures. The trade union leaders will not accept artificial comparisons such as are made in these financial returns when dealing with profits. It is not practical. These returns do not compare profits with wages; they compare a part of profits with wages. It does not matter whether part of the profits is saved or not; it is still a profit.

I am, therefore, trying to indicate that profits in reality rose from a figure of 100 to a figure of 303, including the preference shares which are a standing return in a fluctuating market; and that the ordinary fluctuating profits rose by 243 per cent. from a figure of 100 to a figure of 343.

Let us consider the figure for wages, after deducting Income Tax and insurance contributions. The figures given are for profits free of tax, so let us compare wages free of tax to get a true comparison. Hon. Members often tell each other to compare like with like. That is what I am doing when I compare wages and profits free of tax. I am not including any irrelevant factors or excluding anything relevant.

When considering the standard wage instead of the overtime wage—that is, putting the 49 hours into a 44-hour standard week one finds from the index that total profits have risen from 100 to 343 per cent. while, since 1938, according to the London and Cambridge return, the cost of living has risen from 100 to 246 per cent. In comparison with the cost of living, profits, excluding preference shares, have risen 39 per cent. above the cost of living. When wages are converted to a standard rate the increase is only 8½ per cent. as against 39 per cent. after weighting the effect of different Income Tax payments and National Insurance.

It may be thought that this is just a lot of twaddle and that I do not know what I am talking about. This is a difficult subject and it is not easy always to relate figures in comparison, but when we have to do something abnormal to overcome a great economic crisis we must look at the whole picture, whatever the future may hold.

Who is it who controls prices? There is an inclination frequently to say that prices are the result of wage demands, but there are bound to be some years when wage demands are met and will affect profits in that year to such an extent that there will be a big difference in the returns.