BRITISH INFLATION AND DIVIDEND REGULATION

Grey River Argus, 26 February 1949, Page 7

BRITISH INFLATION AND DIVIDEND REGULATION

LONDON, February 24;

Sir Stafford Cripps, Chancellor of the Exechquer, told the House of Commons that the Federation of British Industries, the Association of British Chambers of Commerce and the National Union of Manufacturers has assured him by letter of industry’s co-operation for one more year in avoiding any general increase in the level of dividends. A letter from these bodies had stated that, while giving an assurance on dividend limitation, industry felt strongly that the most powerful singne factor in reducing inflationary pressure must be a reduction in public expenditure. The three bodies based their recommendations for reduced dividends in 1948 on an assumption that Government expenditure would be reduced as an essential part of a disinflationary policy. This had not been achieved' and it was vital for a reduction of costs, an increase of competitive power, and healthy national economy, that it be achieved.

The letter said that voluntary limitation of dividends was accepted on an implicit understanding that wages would generally be stabilised, but, although large and general increases had been restrained, higher wage rates had been granted or awarded during the period, March to December, 1948, to the extent of £1,660.000 a week, affecting nearly 7,000,000 work people, and extensive new claims were being advanced.

“The effective observance of a policy of restraint by the trade unions must be one of the most important .justifications for requesting a similar policy regarding dividends”, it was stated.

The letter also urged the alleviation of corporate taxation. It pointed out that the aggregate amount of distributed corporate profits after tax was less than four per cent, of the national income. Therefore any cnceivable changes in its level could have only a very slight direct effect on inflation.

Sir Stafford Cripps, in his reply, said the points raised would be given careful consideration.