§ Before I develop my proposal for dealing with that gap, there is another very important matter to which I must now refer—a matter which is very relevant to any consideration of the question of inflation. The higher cost of imports and other increased costs unavoidable in time of war have exercised a strong tendency from the very outset of the war to raise the prices of essential foodstuffs quite apart from any effect of higher wages. For some time past it has been our policy to check any excessive rise in prices due to such higher costs by means of the centralised purchasing of imported foodstuffs through the Ministry of Food and the control of the margins and selling prices of distributors, but after a time it became apparent that these measures by themselves would not be sufficient to prevent food prices from rising, if the Ministry of Food were to run, as was first intended, on a self-supporting financial basis. It was, therefore, decided to allow the Ministry of Food to incur substantial trading losses which we have carried upon the Exchequer. In this way we have borne upon the Exchequer a considerable and increasing burden, now ranging at about £100,000,000 a year, in order to keep down the cost of living, but for the most part it has been articles of food only that we have attempted to subsidise in this way. Similar causes are, however, increasing the costs of other 1321 goods and services. There is this prospect of a continuing further rise in the cost of living unless the Exchequer is prepared to undertake a much greater burden. If this rise were to occur, it might lead to further rises in wages and other repercussions. In these circumstances I have included in my estimated expenditure a margin to provide for important extensions of the principle of subsidising essential goods and services. In other words, I am prepared to carry a considerably increased burden on the Exchequer in order to prevent or minimise the impact of increased costs, particularly of imports and of transport, on the prices of essential goods and services, apart from any increases in their prices rendered inevitable by further increases in wage rates.
§ As regards the Cost-of-Living Index itself, while, for practical reasons alone, it would be impossible for me to promise that there should be no increase in price in any single item figuring in that index, I propose to continue and extend the policy of stabilisation in an endeavour to prevent any further rise of the Cost-of-Living Index number, apart from minor seasonal changes, above the present range of 125–130 in terms of the pre-war level.
§ Transport costs, which affect prices generally, are an important factor in determining the general price level, and I propose to take upon the Exchequer increases that would otherwise become inevitable and, indeed, are already overdue, in shipping charges, including both freight rates and insurance premiums. I am also examining the question of how far the Exchequer may help in averting further increases in railway rates and fares. This is part, but only a part, of a very large, complicated and important question which is now under close consideration. It would not be right that I should say any more on that matter today, than that I recognise that large increases in fares and charges would give rise to upward movements of prices—a movement which I wish, as far as possible, to avoid. I hope it will be possible to make a further statement shortly.
§ This general policy of restricting increases in prices to a minimum will apply to the prices of coal and gas and also to electricity charges, which, although they do not actually figure in the calculation of the Cost-of-Living Index, ought, ob- 1322 viously, to be treated in the same way as other fuel and light charges. It will also be my aim, in conjunction with my right hon. Friends the President of the Board of Trade and the Minister of Food, to try to prevent substantial increases in the prices of other articles in common use.
§ I put this forward as a most important development of policy, and I hope we may thus create conditions which will enable the wages situation to be held about where it now is. It is clear that persistence of the tendency towards rising wage rates, which necessarily increase costs of production at every stage of the productive process, would compel abandonment of the stabilisation policy. But I trust and believe that this substantial contribution which the Exchequer is making in keeping the cost of living stabilised will ensure greater benefits, particularly to the poorest section of the workers, than could in fact be obtained by any other measure. The important announcement which I have just made shows, I think, that without doubt the Government are determined to create the most favourable conditions for the waging of the battle against inflation as well as to make a substantial contribution to the alleviation of the burdens of great sections of the community.