Condition of Private Industry

Part of the debate – in the House of Commons at 12:00 am on 29 June 1959.

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Photo of Mr Geoffrey Stevens Mr Geoffrey Stevens , Portsmouth Langstone 12:00, 29 June 1959

I said that the right hon. Gentleman had not time for the other half of the truth, but if you, Mr. Speaker, feel that I have in any way transgressed the traditions of the House of Commons I fully withdraw.

The hon. Member for Sheffield, Park (Mr. Mulley) and the right hon. Member for Huyton referred, as, indeed, the Labour Party does in these publications, to the popular misconception that directors are self-appointing and self-perpetuating and that shareholders' control is virtually non-existent. Hon. Members opposite should tell that to Sir Bernard Docker and hear what he has to say. It only indicates how little experience hon. Gentlemen opposite have of the way in which directors are removed from office the moment they show over a period that they are not conducting their business in what the shareholders deem to be the best interests of the company.

It is perfectly true that control of private enterprise companies has changed in recent years. We find institutions, such as insurance companies, pension funds, trade unions, possibly, and unit trusts, acquiring very substantial blocks of equity shares. If those institutions with very large shareholdings feel that the directors are not carrying out their duties properly, out those directors will go. That raises very important issues. It means, among other things, that successful share take-over bids are impossible without the support of those institutions which have so large a shareholding. Therefore, the judgment of the men responsible for the investment policy of these institutions is very important indeed.

I echo the thought of the hon. Member for Gloucester. More thought on this subject of share take-over bids is required. The institutions are apt to be rather like trustees. Indeed, in many cases they are in the position of trustees. They are more interested in an immediate good price for the benefit of their policy holders or their pensioners, or whatever they may be, than in the long-term future of an industrial venture.

Another fact which should not be forgotten is that the money for a successful take-over bid very often comes from other institutions who will buy only if there are good prospects. It may well be that the solution to this problem will be one of evolution, rather than revolution. It may be that a developing class of investment managers with wide business experience and unbiased judgment is required.

I turn to the favourite stalking horse of the party opposite—the capital gains tax. The Opposition accept unreservedly—they have said so repeatedly, and I am sure that I am not guilty of a half truth now, but the whole truth—the minority Report of the Royal Commission on the Taxation of Profits and Income with regard to the capital gains tax. It might be helpful to hon. Members opposite if I recall to their minds paragraph 5 of the dissenting memorandum by Mr. Woodcock, Mr. Bullock and Mr. Kaldor: In our view the taxable capacity of an individual consists in his power to satisfy his own material needs, i.e., to attain a particular living standard. We know of no alternative definition that is capable of satisfying society's prevailing sense of fairness and equity. Thus the ruling test to be applied in deciding whether any particular receipt should or should not be reckoned as taxable income is whether it contributes or not, or how far it contributes, to an individual's 'spending power' during a period. The Chancellor of the Exchequer, at the tail end of a sentence in which he was dealing with the capital gains tax, introduced the one word "pools". I remember that about three years ago we had a debate on the capital gains tax. I ventured to suggest that it was not exactly a General Election winning cry, "Vote Labour and we will tax your pools winnings". Hon. Members opposite were very cross with me and said, "But there is no intention of taxing pools winnings. It is only these wicked share take-over bidders, people who gamble on the Stock Exchange. They are the chaps we are after. Good luck to the people who win big money on the pools. They are all right." If the party opposite accepts unreservedly—[HON. MEMBERS: "We do not."]—what the minority Report said, that spending capacity is to be the sole test, obviously pools winners are in for a very thin time.