Budget Resolutions and Economic Situation

Part of Orders of the Day — Ways and Means – in the House of Commons at 12:00 am on 25 March 1968.

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Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester 12:00, 25 March 1968

I heard very clearly what my hon. Friend put to me. I have read the tables, not only those that he quoted, but all the tables in Economic Trends. They support part of my statement. However, I am bringing the matter up to date. Those tables refer to 1965 and 1966. What the House would want to know was whether the general common sense approach of everyone that this Budget was fair was justified by a close examination of the figures. I have attempted to do that. I have had such assistance as has been available, and I have examined the figures carefully. That is the conclusion I have reached. I have not the slightest hesitation in putting all the information at my disposal before my hon. Friend and discussing his view and the conclusions to be drawn.

I turn now to the question of dividend restraint, and I want to report the present position to the House. First, I would like to give the figures, so that the discussion may proceed on a secure basis of fact. The increase in wages last year amounted to 6 per cent. Dividends suffered a fall of 1 per cent. It is against this background that we are proposing a policy for dividend restraint to match our wages policy. These are certainly not on all fours with one another, but there is no doubt that those who are affected by wage restraint policies would feel a sense of grave injustice if there were no comparable dividend restraint policy.

Quite apart from the broad justification in equity, it is also the case that great economic benefit will flow from a reduction in consumption, whether that consumption derives from salaries, from wages, or from dividend income. Dividend restraint must also mean that in certain cases larger profits will be retained than would otherwise be the case and larger reserves will, therefore, be available for ploughing back, for investment, and for encouraging future growth.

For all these reasons, we have decided to restrict the increase in dividends of quoted companies to 3½ per cent, as compared with last year. Indeed, we are requesting companies not to increase their dividend at all, unless they feel compelled to do so.