HC Deb 31 January 1940 vol 356 cc1154-9
Mr. Attlee

(by Private Notice) asked the Chancellor of the Exchequer whether he can make any statement regarding the cost of living?

The Chancellor of the Exchequer (Sir John Simon)

The announcement I have to make to the House refers to decisions which the Government have taken with a view to controlling as far as possible the retail prices of the principal essential foodstuffs.

At the outbreak of war there was an immediate and inevitable rise in the cost of buying food abroad and of bringing it to this country. This increase in wholesale prices resulted from a number of causes, for instance, the devaluation of the pound, higher freights, and war risks insurance. It was in a sense the natural result of transition from peacetime to war-time conditions, and it would be a mistake to imagine that it necessarily foreshadowed a series of similar or even more marked increases in prices. This initial rise was gradually reflected in an increase in retail prices in this country, and the cost-of-living index (in which food prices are the predominant factor), after standing at 155 at the beginning of September, rose by 18 points, or more than 10 per cent., to 173 at the end of November.

Hon. Members who have followed the monthly figures will be aware that the cost-of-food index remained quite steady between 1st December and 1st January. I will explain the reason. The position at the beginning of December was that further increases in food prices would have been found to be necessary if the working of the Food Control were not to involve a loss to the Exchequer. The Government then decided, after a careful examination of the economic situation and of the principles which ought to guide their policy in that sphere, that the Exchequer should bear, for the time being, the loss involved in an endeavour to avoid these further increases. It was due to this action that the cost-of-food index was unchanged between December and January. This policy of controlling retail food prices by the use of public funds is being continued, and I anticipate that as a consequence any increase there may be during the present month in the cost of food controlled by the Government will be of quite small dimensions.

The cost to the Exchequer of following this policy is, however, very substantial. It is at present running at the rate of £1,000,000 a week or, say, £50,000,000 a year, the cost arising principally from the holding of the prices of such articles as bread, flour, meat, and milk. In existing circumstances, when every demand upon the Exchequer must be subjected to the closest scrutiny, it would be unwise to assume that in all conditions we could continue to shoulder an increasing burden as the result of a policy of avoiding increases in the cost of living. On the other hand, we are very conscious of the grave disadvantages which would be entailed in any excessively marked or swift advances in prices of primary necessities, and we are anxious to do all that is practicable to avoid this in the light of the economic position as it develops.

Our policy, therefore, is to continue, for a time at least, to make public money available, within such limits as prove possible, to hold retail prices of staple foods, or, at any rate, to impose delay and check the abruptness of any rise. The House will observe that this policy benefits not merely wage-earners but also all those with small fixed incomes and allowances.

Hon. Members will, I am sure, recognise the complexity as well as the significance of the problem with which the Government are endeavouring in this way to deal. It would not be right for the Exchequer, amidst its unprecedented burdens in the prosecution of the war, to undertake an unlimited commitment the end of which cannot be foreseen; still less would it be right for us to promise things which in the end we might find ourselves unable to fulfil. Upon other occasions both my right hon. Friend the Prime Minister and I have referred to the very serious economic dangers which would result in the event of rises in wages and salaries becoming tied automatically and mathematically to rises in the cost of living. This, of course, does not mean that the cost of living can be excluded from the various factors which have to be considered in determining rates of wages. But we all desire to avoid inflation, which brings satisfaction to no one, and the decision I have announced is the contribution which the Government propose to make, at the cost of additional burdens on the Exchequer, towards the attainment of our purpose. I have no doubt that all sections of the community will do their best, by the exercise of the appropriate restraints, to assist in furthering this common interest.

Mr. Attlee

The Chancellor of the Exchequer has made a very important statement, the subject matter of which will have to be debated in this House later, but I would like to ask him two questions, and in putting them I would like to say that we are all aware of the need for avoiding inflation and that we have from these benches urged that prices should be kept as far as possible stable. As to the two questions, first of all, does the £5o,000,000 which he gives as the annual cost include the subsidies on milk, meat, flour and wheat; and, secondly, is it proposed to extend this policy to the other staple commodities outside the range of foodstuffs?

Sir J. Simon

No, Sir. The figure of £1,000,000 a week, which should be understood as a round figure, is a figure which represents the application of this definite policy, and it is not designed to include things already decided upon or voted by the House. As regards the second question of the Leader of the Opposition, it is certainly the case that there are other matters to be considered besides the important foodstuffs. As, of course, hon. Members know, the present cost-of-living index is made up of a great number of things. About 6o per cent. of it is food, and there is another important part of it which is rent, though rent is already controlled. Then there are also some others items, of which the most important, and the most difficult to deal with perhaps, is the price of clothing, because clothing is so very variable. As regards that, I can inform the House that we have been for some time very carefully examining, through a special committee, the problem of how clothing might perhaps be dealt with. I am not in a position to make an announcement, but I agree that it is very important. It has not been overlooked, but is being very closely examined by the Government and on behalf of the Government by those best qualified to do it.

Mr. T. Williams

The right hon. Gentleman mentioned that one of the commodities the price of which has increased is milk, and later he said that what the House had already done would not affect the present policy. Might I ask him, therefore, whether the £3,000,000 subsidy for milk recently granted and the £5,000,000 previously passed by this House are included; and, secondly, can he state which commodities where long-dated contracts have been entered into show any material increase in price?

Sir J. Simon

I should be very sorry, in answering these important questions, to convey the smallest wrong impression, and I do not know whether the hon. Member would think it unreasonable if I asked for an opportunity for finding out tine details. I could not give details straight off, though naturally I have been looking into the question pretty closely.

Mr. Holdsworth

With regard to clothing, how far are the Government prepared to stop their own Department, the Ministry of Supply, requisitioning wool at a certain price and re-issuing it at from 3o to 4o per cent. above that price? That enters into the cost of living. Will the right hon. Gentleman inquire from his fellow Cabinet Ministers as to how far the Government themselves, by that kind of action, are putting up the cost of living?

Sir J. Simon

I do not think matters are quite in that form, but there again, if my hon. Friend will allow me, I will look into the matter closely and let him have an answer. There can be no question as to our intentions. Raw wool is an enormously important material, for fighting purposes, for export—tremendously important for export—and for home consumption, and the policy which we are following with all our might is to get, if we can, all our wool distributed for the purpose of serving those three purposes in their proper proportion.

Mr. Craven-Ellis

Have the committee that has been considering this question formed any opinion as to what is to be the limit of this form of State contribution? We are out to avoid inflation, and the intention now is to reverse the machinery, and in that way, instead of having a higher cost of living, we shall have to have higher taxation, and the effect of that, if it is carried too far, will be that the higher taxation will be a bigger burden than the higher cost of living.

Mr. Speaker

The hon. Member is going rather beyond the question.

Mr. Woodburn

In considering the question of the two ends of the string that may cause a breakdown in this arrangement, will the right hon. Gentleman have inquiry made into the tremendous cost of distribution in this country, with a view to seeing what economies can be effected there which will lessen the burden at both ends of that string?

Sir J. Simon

That very important question will no doubt come into whatever Debate we have hereafter, but I would remind the hon. Member that one of the reasons why the Government are acquiring the original overseas supply is in order that they may be able to control it in the course of its passage to the consumer.

Mr. J. Morgan

Are there any offsets to this cost to the Treasury, such as profits on sugar, or is the Treasury also considering the abandonment of food taxes?

Mr. Stephen

In considering this question, have the Government considered the appropriation by the Government of the social credit which is at present being taken by the banks?

Sir J. Simon

I always find social credit an extremely difficult term.