Letter: Tory years of low investment

The case for not confronting Britain's current level of dividend payments ("Don't take it out on the dividend", Business, 12 January) echoes the approach of John Major, who, in a reply to a question I put to him about dividends on 23 May 1995, claimed: "We have at the moment perhaps the best environment for investment in this country that we have had for many years. Three years of steady growth with low inflation has given companies the stability to take investment decisions in a secure environment. We can now see that investment is increasing..."

The figures show the reverse. Between the second quarter of 1979 and the second quarter of 1996, total government investment fell by 1 per cent of gross domestic product. During the same period, investment by the company sector, private and public, fell by 2.2 per cent. As a percentage of GDP, UK investment has fallen to a level not seen since the 1950s.

In stark contrast, since 1979, dividends of private companies and financial institutions quadrupled from 1.3 per cent of GDP to 5.3 per cent. The equation is simple: the increased company income we have witnessed since 1979 has gone into consumption rather than investment.

Gordon Brown will face difficult choices when he inherits the mess left by the Conservative government. The option of controlling dividends in order to release billions of pounds for investment is the bullet the Labour government should bite.

Ken Livingstone MP

House of Commons

London SW1