With your permission, Mr. Speaker, and that of the House, I wish to make a statement about dividend restraint.
It is already known that further guidelines on the whole field of prices and incomes policy after 1969 will be set out in a new White Paper. In the meantime, however, the Government consider it desirable to give the earliest possible notice of the decisions which have been reached on dividends policy.
The present 3½ per cent. ceiling scheme for dividends will come to an end when the reserve statutory powers in the 1968 Act expire on 31st December. The Government gladly acknowledge that on no single occasion has it been necessary to use these powers ; and they are confident of co-operation in asking companies to continue to observe the requirements of the scheme in so far as they concern recommendations of total dividends which are made public before 31st December. Thereafter, it will remain possible for the Government to require notification of individual dividend increases under Section 12 of Part II of the Prices and Incomes Act, 1966, if the need should arise.
The need for companies to observe moderation when distributing profits will continue. The Government, therefore, reaffirm the general consideration which was set out in the joint statement of intent published in Cmnd. 2639, namely, that they have pledged themselves to use their fiscal powers or other appropriate means to correct any excessive growth in aggregate profits as compared with the growth of total wages and salaries, after allowing for short-term fluctuations.
The Government draw attention also to the ability to refer for examination to the National Board for Prices and Incomes cases in which the growth of profits or dividends appear to be based on price levels made possible by excessive market power.
The specific scheme of dividend restraint introduced in the 1968 Budget was a necessary reinforcement of these more general policies, as a purely short-term measure associated with stringent statutory control of other incomes and prices. But with the end of the special powers over prices and incomes in the 1968 Act, it will be appropriate to revert to the more general policies which can combine restraint in the total of dividend payments with flexibility in individual company situations.
Concentrating specifically on the last few words of the right hon. Gentleman's statement, may we have his assurance that he acknowledges that the whole purpose of devaluation was to make exporting not less profitable but more profitable, and, further, that the concept to which he referred, namely, flexibility in individual company situations, is meant to be an encouragement and not a discouragement to companies not only to make more profits in exporting but also to attract further capital by distinctively attractive dividend policies?
As to the second part of that question, I can certainly say that the statement was intended to be read, and I hope will be read, as an encourage- ment to all companies to become more and more efficient. One of the methods of increased efficiency may be economies of scale and may involve increase of capital. It is because companies are inhibited and almost prevented from making proper arrangements for future increases of capital that the Government thought it necessary to make this announcement now.
Is it fair to sum up what my right hon. Friend says by saying that legal dividend restraint has been removed? If this is so, may we take it as a trailer to the fact that it is now proposed not to go ahead with the bridging powers to the 1966 Act on prices and incomes, now that we are apparently leaving dividends to control by the D.C.E. and pressure on companies' liquidity?
The statement made by my right hon. Friend the Prime Minister, if that is the statement, to which my hon. Friend refers, certainly still stands. This is not to be read as a trailer in any respect other than to what I hope will be increased efficiency in many companies which could have been unduly restricted if we had continued what was known at all times to be purely a short-term scheme.
The Chief Secretary used the phrase which the Prime Minister used last week about price levels made possible by excessive market power. May I ask a question which seems to be extremely important? We have seen recent examples of the use of the labour market power putting up prices, coal, for example. Do the Government intend to proceed just as stringently against all excessive abuse of market power, in capital or labour?
While giving a general welcome to the statement, may I ask the Chief Secretary whether he will take steps in parallel to achieve an equal flexibility in wages by using the combined Prices and Incomes Board and the Monopolies Commission to eliminate nationally-negotiated wage agreements and move towards negotiations at plant and company level?
The hon. Gentleman talks about parallel arrangements. I find it quite sufficient to exercise my responsibilities at the Treasury without exercising responsibilities for all my colleagues at the same time.
Will my right hon. Friend not agree that there is a vast difference between making profits, which can be ploughed back into the industry concerned, and dividend distribution? If there is any tendency towards an acceleration in dividend distribution following any relaxation in Government measures, would he agree that this is bound to lead to accelerated wage demands and that it is in the national interest that restraint of a voluntary nature should be exercised on all sides?
I recognise that it is in the national interest that restraint should be exercised on all sides. Perhaps I could report—I think that it has already been made clear to the House—that the total aggregate amount of dividend paid during 1968 was less than the figure for 1965 and 1966, less than 103½ per cent. of the figure for 1967. In short, we are below target all the way through.
The position remains exactly the same until the end of December. If the hon. Gentleman has any particular problem in mind the Treasury has always been willing to try to assist by discussion. We have found at the end of the day that every single company has been able to subscribe to the scheme.
Is the Chief Secretary aware that for obscurity his statement this afternoon rivals those of the Delphic Oracle, by whom it may well have been drafted? Is he aware that it would be very interesting to hear the answer to the question asked by his hon. Friend the Member for Heywood and Royton (Mr. Barnett), whether this presages a very great departure in Government policy?
I have answered that question twice, but I will answer it a third time. I find it sufficiently onerous to exercise my responsibilities as a Treasury Minister without exercising the responsibilities of the whole of the Government. My right hon. Friend the First Secretary would be only too glad to answer the question if the hon. Gentleman puts it to her.
Surely the Chief Secretary must make his meaning clear? He has not begun to answer the question asked by his hon. Friend the Member for Heywood and Royton (Mr. Barnett). This is meant to be an important question for industrialists, but what he has said is totally obscure. No one knows where he stands. Perhaps he could come to the Box again and tell us whether legal constraint ceases on 30th December?
Secondly, would the right hon. Gentleman bear in mind that many people have received dividends this year which, because of the cost of living, have fallen well below what they were last year? Would he bear in mind the remarks of the Chancellor yesterday that investment is falling well below what is needed—and realise that this is largely due to the stupid policy carried out by obscurantists like himself?
I will certainly bear the second part of the question in mind. What the right hon. Gentleman said about investment falling, and the statement by the Chancellor yesterday, is quite inaccurate.
Dealing with the first part of the right hon. Gentleman's question, when he asked me whether this is the end of legal restraint, that was covered precisely in my statement, when I dealt with the extent to which legal powers ceased and the extent to which they continued. The right hon. Gentleman will find it in my statement when he has an opportunity to read HANSARD.