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Cost-Of-Living Subsidies

Volume 436: debated on Tuesday 15 April 1947

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The Ministry of Food estimate shows a large increase of 5c) million over last year's expenditure. This is due to the increase in the cost-of-living subsidies, on which, perhaps, I might conveniently interpolate some observations at this stage.

No, only cost-of-living subsidies. I am anxious to speak frankly to the Committee about these subsidies. I have estimated their total cost this year at £425 million, of which £392 million are for subsidies to food prices, as against £348 million last year, and £33 million are for subsidies to utility clothing and footwear prices as against £19 million last year. This is a most formidable total, which has grown very rapidly in the last few years. Last year in my Budget Speech I said that we could not go on holding the cost of living steady regardless of the cost. I added:

"We shall have to reconsider this matter next year. We might even have to do so earlier, if prices of our necessary imports, or home supplies, rose steeply."—[OFFICIAL REPORT, 9th April, 1946; Vol. 421, c. 1811.]
We have now reached a point where, in any case, it would be necessary to consider very carefully whether we could face any further increases in the total cost of these subsidies. Otherwise, this element, alone in all the total of our public expenditure, might seem to be passing out of our own control, and we might seem to be dragged along by rises in prices all over the world, independently of our own decisions, and hitched to a most out of date and generally discredited index of the cost of living. This would be a very unfortunate and ignominious situation.

The wisdom of any policy, including this one, is relative both to its practical effect on the one hand, and to the practical possibilities of continuing it unchanged. I have no doubt at all that, up to this point, the policy of stabilising the old cost-of-living index, as we have hitherto known it, has been wise, and has been abundantly justified. It has helped to stop inflationary pressure from becoming an inflationary break-through. It has carried us through the first chapter of this very difficult transition from war to peace with an added sense of social security to the general body of consumers. It has helped the housewife, and it has helped the farmer. It has prevented many automatic wage and price increases from taking place, in cases where wages under collective agreements are linked with the cost of living. Up to now it has, in my submission, paid good dividends.