Bonus Issues (Hansard, 13 March 1951)
HC Deb 13 March 1951 vol 485 cc1288-9
46. Sir John Mellor

asked the Chancellor of the Exchequer what instructions he has given to the Capital Issues Committee about proposals to capitalise reserves; why he refuses to disclose reasons for decisions, either in general or in particular cases; and if he will now permit reserves to be converted into permanent capital without restriction.

Mr. Gaitskell

The instructions are those set out in a letter dated 13th December, 1949, to the Chairman of the Capital Issues Committee from my predecessor, who quoted it in reply to a question by Mr. Collins on 15th December, 1949. [OFFICIAL REPORT, 15th December, 1949; Vol. 470, c.295.] Permission to make bonus issues is withheld in cases which do not fall within the scope of these instructions; I am not prepared to permit such issues without restriction.

Sir J. Mellor

Is not the Chancellor actuated by political prejudice? As no real money is involved ought not companies to be encouraged to plough back profits when they have them?

Mr. Gaitskell

There is no political motive here, but there is an inflationary danger.

Sir H. Williams

How does a bonus cause inflation, since it only involves a book entry?

Mr. Gaitskell

Because of benefits through increased dividends and possible capital appreciation to shareholders.

Mr. Oliver Lyttelton

Will the right hon. Gentleman look into these instructions, because many anomalous positions are arising and I suggest that the time has come when the instructions require drastic alteration?

Mr. Gaitskell

We keep a matter of this kind under continuous review.

Sir J. Mellor

Does the right hon. Gentleman not think it desirable that companies should be able to bring their issued capital into closer relation to their assets?

Mr. Gaitskell

That is an argument on that side, but there are also some powerful arguments the other way.

GLOBAL ISLES COURT OF RECORD