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Food Subsidies

Volume 463: debated on Wednesday 6 April 1949

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I now turn to deal with the very important matter of food subsidies. Let me first state the bald facts of the situation. During the war, these subsidies were introduced to stabilise the cost of living, and so prevent inflationary wage movements. The amounts paid out by the Government by way of subsidies were in the first year, 1940–41, £63 million. In 1945–46 they had risen to £265 million.

Since that time the same policy has been pursued, but the costs, especially of imported foods, have soared upwards. Our own farmers' costs have also increased owing, amongst other things, to better wages for the farm workers and larger profits for the farmers—and the greater part of our subsidies continues to be paid on home products. Thus, the amount required annually to stabilise prices has grown and grown beyond anything that was ever contemplated when that policy was initiated.

In last year's Budget debate I stated that it was our object to prevent subsidies rising, in total, above £400 million. But we had, just at that time, launched a campaign to stabilise wages, prices and profits. It would not have been a very helpful gesture had we just then increased the prices of subsidised foodstuffs, and so it was decided to let the prices remain stable and to let the subsidies rise. As a result, the rate of subsidy has now risen to about £485 million, and it is estimated that, if the present prices are maintained and there is a very moderate increase in supplies, as we hope there may be this year, the total subsidies payable would amount to no less than £568 million, all of which must be found by taxation, on the top of the other prospective increases that I have already mentioned.

Now that just cannot go on. We must call a halt, or else we shall find ourselves in the ridiculous position of having to refuse to import much needed food, because we cannot afford to pay the subsidy out of our Budget. Besides which, prices have got out of all relationship with realities, and the longer that state of affairs persists the more impossible if becomes to bring about an adjustment. We propose, therefore, to put an effective and firm limit on subsidies so that if there is a further rise in cost it will have to be added on to the price.

We must also make immediate provision to prevent the prospective rise in subsidies this year, which would inevitably take place if we were merely to leave prices where they are. As I have pointed out, that prospective increase is of over £80 million. The changes which I propose to make to deal with this situation have already been allowed for in the Estimates actually submitted to Parliament, so that they will not require any further adjustment. This is the adjustment of which I spoke earlier.

The major part of this adjustment must, of course, be by retail price increase; but about one-third of it can be accomplished by the remission, in the case of tea and sugar of part of the duties now charged on these commodities. That, in reality, is merely a bookkeeping change. The Tea Duty will be reduced by 6d. a lb. all round, and the Sugar Duties by l¼d., with appropriate reductions on molasses and glucose, which are in the same class. Prices, both to the public and to manufacturers, will remain unaltered, and special arrangements will be made to ensure that exporters do not suffer from the reduced rate of Customs drawback. The result will be to reduce the subsidy required to maintain the existing prices by £11 million in respect of tea and £22 million in respect of sugar.

The rest of the adjustment must be by increased prices. It is, of course, immensely difficult to decide what changes in price are least objectionable. Individual views will differ, but, after full consideration, and, of course, after consultation with my right hon. Friend the Minister of Food, I have come to the conclusion that regard should be had to the relationship of the present subsidised price to the pre-war price, with a preference for raising those prices that are low compared to pre-war prices in the light of the general price increase that has taken place; to the actual cost compared with the present price; and to the countries of origin of the particular foods

I propose, therefore, that, as from an early date to be arranged by my right hon. Friend the Minister of Food, the following increases in prices charged retail should be made: cheese, 4d. a lb.; meat, 4d. a lb.; margarine, ld. a lb., and butter, 2d. a lb. Of these, cheese is actually at less than its pre-war price at present, and butter is the same price as pre-war. These changes in price, together with the change in import duties for tea and sugar, will mean that the subsidies should not exceed £465 million in the current year, and whatever happens to prices, we must not allow them to rise above that level.

These changes will cause a rise in the Cost of Living figure on the All-Items Index of rather less than two points. I am sure the Committee will realise and appreciate that this question of limiting the amount of expenditure on subsidies is a problem of its own, and however much the prospective surplus might be or might not be we should still have to limit the amount to be spent on subsidies.