LIMITATION OF DIVIDENDS

Press, Volume LXXXVII, Issue 26491, 4 August 1951, Page 7

LIMITATION OF DIVIDENDS

Chancellor Replies To Questions

(Special Correspondent N.Z.P.A.) (Rec. 7.30 p.m.) LONDON, August 3. The Chancellor of the Exchequer (Mr Hugh Gaitskell) told the House of Commons that the “relatively modest’’ decline in share values after his recent announcement on the limitation of dividends was only onethird of the rise in values that had occurred previously. The Chancellor made this statement in reply to questions from Mr R. A. Butler (Conservative) who had referred to a fall of many millions of pounds in Stock Exchange values, and had asked Mr Gaitskell how he proposed to restore confidence. Mr Gaitskell said he understood that the industrial ordinary share index had declined since the day of his announcement by six points, or about 4J per cent “I cannot agree from the point of internal financial stability that this decline, following as it did upon a rise of 17 points or more than 12 per cent, in the last three months and a half, is undesirable,’* said the Chancellor.

“Both the rise in share values and the sharp increases in dividends which gave rise to it had inflationary consequences. The proposal to limit dividends durine the rearmament period is intended to check these consequences, which would clearly have become more serious had they continued, and will thus help to maintain confidence in our ability to win the battle against inflation.” Effect on Small Investors Mr Butler said the holdings of many people of modest means—pensioners, widows, and others—had been very much reduced by the manner and method of the Chancellor’s announcement. “What psychological value does the Chancellor think he has so far gained from the nature of his operation?’* asked Mr Butler. Mr Gaitskell replied that he could not agree that persons who invested money over a long term need necessarily suffer any damage from the Government’s decision. It was, after all, only a proposal that dividends should be maintained and not increased over the period of rearmament.

“Those who are prepared to hold their shares for that time clearly need suffer no disadvantage so far as the value of the shares is concerned,” he continued. “I think the decline in stock market values, which is of a relatively modest character, had already had valuable disinflationary consequences on the economy” Earlier in the debate, the week-end speech by Dr. Hugh Dalton, in which he referred to the “fun” of throwing the Stock Exchange into disorder, was mentioned by Mr John Arbuthnot (Conservative) who asked Mr Attlee if such a statement represented Government policy. ‘•When a former Chancellor snakes such a statement can any other interpretation be put on it except that the Government regards it as jgood

fun deliberately to throw the Stock Exchange into disorder,” said Mr Arbuthnot. “Such Government cynicism betrays a careless disregard for the thousands of small investors who have been so badlv affected.” Mr Butler asked whether Mr Attlee would publicly dissociate himself from Dr. Dalton’s remarks. Mr Attlee said Dr. Dalton’s remark had not been a statement of policy. It was a remark, he gathered, made in the way of humorous observation. “I cannot believe people have so little sense of humour as to take a remark, obviously thrown off by way of a joke, as a serious matter,” said Mr Attlee. "Judging by what I know of members of the Stock Exchange, they have a more vivid sense of humour.” Mr Butler said that whatever vein of humour the remark represented—and the Opposition found the theory difficult to accept—it had caused a great upset in important financial circles.