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Food Subsidies

Volume 893: debated on Monday 16 June 1975

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asked the Secretary of State for Prices and Consumer Protection if she is satisfied with the effect of food subsidies on the cost of living.


asked the Secretary of State for Prices and Consumer Protection by what percentage the payment of food subsidies has reduced the average cost of those items to which they apply.


asked the Secretary of State for Prices and Consumer Protection what effect food subsidies have had on the cost of living; and if she will make a statement.

The present saving in the General Index of Retail Prices as a result of food subsidits is estimated to be 1·4 points, while the reduction in the average cost of subsidised foods is estimated to be about 20 per cent. These savings are particularly helpful to low-income families which have to spend a high proportion of their money on food and other necessities.

The right hon. Lady was asking for specific suggestions. As food subsidies are making only a marginal impact on food prices, yet adding substantially to inflationary pressures because they are increasing Government spending, would it not be more sensible to reallocate these blanket, indiscriminate and wasteful subsidies to those families and pensioners who are being hit worst by the ravages of inflation?

The hon. Gentleman must have misheard what I said in my answer. I made it clear that food subsidies are making a 20 per cent. difference to the prices of subsidised foods. In terms of benefit, they are four times as valuable to a family with an income of £20 or under per week as to a family with an income of £80 or over per week.

The Opposition are in little position to criticise when, in government, for years they pursued a policy of subsidising the nationalised industries, where the benefit was 2 to 1 in favour of the high-income groups.

As my hon. Friend's answer clearly demonstrated that, in terms of subsidies on basic foods, the less well off are receiving substantial help, will he give an undertaking, in view of the efforts which will be made to re-vamp the social contract in the weeks ahead, that subsidisation of basic foods will continue in order to assist the less well off in our community?

It is our intention that the subsidies on food shall continue. We have announced the programme for the following year. There will be no cut in them until the next financial year. There is no question of the subsidies being terminated. It is a matter of their being phased out systematically.

I accept the point that the less well off are being benefited to some extent as a result of the food subsidy policy, but will not the right hon. Gentleman take on board the reasonable point, put by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost), that if the Government wish to continue to direct most help towards these people it could be more effectively and perhaps more generously done direct through the social services benefit system?

I appreciate the hon. Gentleman's attempt to be constructive. In the Chancellor of the Exchequer's announcement of public expenditure cuts, the increases that were scheduled for the social services were not in any way cut. For example, there will be a further uprating of pensions and associated benefits in November, the non-contributory invalidity scheme, and the help for the one-parent family.

If the food subsidy system is so egalitarian in its nature, why are food subsidies being phased out progressively?

It was never envisaged that food subsidies would be continued permanently. As my hon. Friend will remember, at the time when he supported the original programme in the House it was made clear that food subsidies were an interim measure. My right hon. Friend made it clear that in the long term she was envisaging more on social security benefits—for example, if a new system such as that for one-parent families could be devised—and that we would move away from food subsidies. It was always envisaged that the food subsidies would be short-term, and the Act was brought in for two years.

What effect have food subsidies on the retail price index? Would it not be better, for example, to look at the rating system, and methods of reforming it?

The amount being paid in food subsidies is £550 million, in real terms. I ask the hon. Gentleman to read my answer, in which I stated their impact on the retail price index.

If the hon. Gentleman is right—and I accept it—that the value of food subsidies to a man on £20 a week is four times that to a man in a higher income group, does this not show, in itself, that there is a great deal of waste in the system and that it distorts the value of food in relation to other commodities in our community? Would it not be much better to give the lower income groups the help they undoubtedly need much more directly?

The hon. and learned Gentleman is aware that we have looked at a whole series of alternatives. Food subsidies were introduced because they could apply immediately. In addition, experience of schemes introduced by the Opposition—I accept their motives, but their methods were wrong—such as the family income supplement, and so on, all had a low uptake and did not get to the people who most needed the help.

Does not my hon. Friend agree that subsidies on essential foods, such as milk, bread, butter and cheese, have kept food prices in this country much lower than those in neighbouring European countries? Would it not be possible at the point of sale to show the amount of the subsidy to the consumer so that she could appreciate the benefit of the Government's action in subsidies?

The difficulty about that suggestion is that in a period of high inflation various changes would make it difficult and possibly confusing to give such information. My hon. Friend should also bear in mind the risk that if too much information is given at the point of sale, at the end of the day the consumer ends up getting no information.

Does the hon. Gentleman acknowledge that as the average family has to spend over £12 a week more than it did last year, and as poorer families need £10 a week more, and as the pension for a married couple will have to go up by £5 in December to restore its purchasing power to the level of last July, in this context the 85p a week that food subsidies are saving families is insignificant and irrelevant? Could not the Government have helped people far more by restraining inflation instead of trying to conceal it?

The hon. Lady states the obvious when she says that it would be better to restrain inflation. Both parties have been trying to find effective methods of doing just that, and we have invited the co-operation of both sides of industry in achieving an agreed policy. The hon. Lady constantly repeats the record and I congratulate her on having had it played on the radio for the first time today, but no doubt the listeners will become as familiar with it as we are. So far, the Opposition have not come up with a single alternative.


asked the Secretary of State for Prices and Consumer Protection if she will make a statement on the implementation of the Government's proposals to scale down food subsidies.


asked the Secretary of State for Prices and Consumer Protection if she will make a further statement on her proposed phasing out of food subsidies.

We have not decided the adjustments to be made in particular subsidies in 1976–77. The position will be considered nearer the time in the light of developing economic conditions and the expected price movements for the various subsidised foods.

I accept the need, expressed on all sides of the House, to help those on low incomes, but does the hon. Gentleman not agree that confidence in the pound sterling will not return until we, as a nation, stop subsidising consumption? Will that process not be painful for all sections of the community?

I do not agree with that conclusion. It is not necessarily valid. There are far more important factors which relate to confidence. I do not think it did confidence any good to have such an irresponsible speech as that which we had from the Leader of the Opposition at the weekend.

Since it was the Government's argument in favour of food subsidies that they protected those on low incomes, is that not a reason to retain them? Will it not be much more difficult—

It is nothing to do with the Common Market. Does my hon. Friend not agree that it will be much more difficult to get an acceptable voluntary incomes policy if food subsidies are phased out, because of the consequential rise in the price index? Does my hon. Friend not agree that the trade unions will not accept that there should be an increase in food prices at a time of income restraint?

I accept the problem put by my hon. Friend. The change that has been envisaged for next year—and I stress that it is next year; there are many months before the change comes into operation—will still add only half per cent. to the cost of living at a time when the Chancellor envisages a substantial change in the rate at which the cost of living is increasing.


asked the Secretary of State for Prices and Consumer Protection what has been the value of food subsidies to the average family in Great Britain for each week; and the value for each person, during the last 12 months.

The latest estimate of the value of food subsidies to a typical family of two adults and two children is about 75p per week. During the last 12 months the estimated average value per person has varied between 15p and 23p per week.

Does my right hon. Friend agree that the subsidies have been of great help to millions of people and that this help has been insufficiently appreciated in the country? Does she also agree that the absence of that help would be noticed by those to whom a half of 1 per cent. increase in the price of food is a great deal?

I thank my hon. Friend for what he said. The Conservative administration did not see fit to increase family allowances at all, but food subsidies have been of direct help to people with several children to raise.

Is it not the case that out of the total amount of subsidies for the current year, namely, £550 million, £280 million is going to families with more than £50 a week and only £270 million to families with less than £50 a week?

The hon. Gentleman is falling into the common statistical error of comparing households which are mostly one- and two-person households—that is, pensioner households—with households which are normally four- and five-person households in the upper income brackets. If he were to look at the benefit per capita, he would find, as we have said, that the proportionate benefit to low income households is between three and four times what it is to high income households.