LIMITATION ON DIVIDENDS?
By Paul Derrick
JUST over 10 years ago Sir Stafford Cripps published his White Paper on "Personal Incomes, Costs and Prices". The Labour Government, which had been congratulating itself on maintaining full employment in the post war world. realised with a shock that it was faced with the equally serious problem of inflation.
Prices were rising and there were many more vacancies than there were people to fill them; abut Sir Stafford Cripps' White Paper pointed out that if costs and prices continued to rise faster than output and if prices rose faster in Britain than in other countries we should find great difficulty in maintaining our export markets and paying for essential imports of food and raw materials.
The White Paper asked the Trade Unions to exercise restraint in wage claims and urged companies to limit their dividends to what had been paid in 1947. The F.B.I. promptly agreed to recommend affiliated companies to limit their dividends and 90 per cent. of them did so.
But the T.U.C. was very reluctant to accept the White Paper and only agreed to "give it a trial " three months later after a special conference. Some wage increases continued to be pressed and granted; and the whole policy of restraint began to break down in the summer of 1950 after the increase in living costs following devaluation.
IN 1955 the country again began to run into balance of payments difficulties, perhaps partly as a result of the spring budget of that year as the Economic Survey said world conditions were highly favourable. In the autumn of 1956 the Suez adventure added to the country's balance of payments difficulties and the Rent Act foreshadowed an increase in living costs and increased trade union determination. to press wage claims, although the T.U.C. had itself often recognised the danger of increasing wages leading to higher prices and loss of export markets. In September, 1957. the Bank Rate wets raised to seven per cent. in an effort to make it impossible for industry to grant wage increases on the scale of previous years. In August. 1957, the Government appointed the Council on Prices, Productivity and Incomes to produce an independent report on the whole problem of inflation. The next month the T.U.C. passed a resolution repudiating restraint in wage claims "so long as prices and profits remain uncontrolled" and several leading members of the 1 .U.C. General Council refused to join its Economic Cornmince in giving evidence to the new Council.
The Council consisted of three members: Lord Cohen, a judge; Sir Harold Howitt, an accountant; and Sir Dennis Robertson, an economist.
As had been expected the Cohen Council has repeated the warnings of the White Papers of 1948 and 1956 about the dangers of increases in wages not accompanied by increases in productivity. Perhaps it has made a concession to the Unions in that it does not argue, as the "Economist" has been doing, that all wage claims ought to be rejected out of hand even if it means widespread strikes. It has contented itself with urging that if wage increases are granted this year they should be substantially below the average of the last few years and not enough to offset increases in the cost of living. The Cohen Council does not like the idea of any authoritative body making recommendations about what wage increases are appropriate in any year. It is not a very constructive report; and makes few recommendations beyond saying, as the Government has done, that it would be a good thing if companies were to keep their prices as low as possible and cut their profit margins in the hope of a larger turnover. • It would have pleased many people if the Conned had recommended tax cuts; and pleased the T.U.C. if it had recommended cuts in purchase tax and increases in profits tax. But the Conservative Government has made cuts in purchase tax and increased the profits tax in the autumn of 1955 and the spring of 1956 without any noticeable effect upon trade union opinion.