§ 11.5 a.m.
§ Mr. Wingfield Digby (Dorset, West)
I beg to move:That this House believes an adequate measurement of changes in the cost of living to be most important and urges the Government to collect the necessary information to provide a more up to date index of retail prices.I think that I should crave some indulgence from the House, because for two years I have been under the vow of silence of the Whips' Office and am, therefore, no longer accustomed to addressing the House. This Motion is one which the Government need have no difficulty in accepting, as it is drafted in general terms. There can be few Members on either side who are interested in this question who will not broadly agree with what it says. I should like to record my satisfaction that after this Motion was placed on the Order Paper the Minister 682 made a very considerable concession, which I hope he will be gracious enough to complete by the end of this debate. The Minister informed us that he was again setting up the Gould Committee —the Cost-of-Living Advisory Committee.
The first question I wish to ask the Government is when this Committee ceased sitting, because we were led to believe that it was to continue reviewing this question for the purpose of replacing the interim index with a more permanent index. I did not realise that it had ceased to keep the situation "under constant review" and was no longer functioning. Nevertheless, I am very glad to know that it is again sitting, and one of my objects is to ensure that it gets on with the very necessary business of setting up a more permanent type of index which reflects more accurately the present pattern of spending in post-war times.
We live in an age of statistics. There is a tendency to over-estimate statistics of any kind, whether they are indices or averages. Members will recall the words of the famous historian, Carlyle, that you can prove anything by figures. Even in the realm of cricket, we find there is a tendency to judge batsmen merely by their averages. Anyone who thought on these lines must have had a very rude shock from what happened at Brisbane the other day. Even averages can work out occasionally in a very queer way.
There is no doubt that Members on both sides are concerned about the cost of living. The Chancellor of the Exchequer would have us think, from his recent speech, that he was not nearly so worried as the rest of us—I was far from convinced by his argument. There has been the broadcast of the Lord President of the Council in which he referred to the cost of living, and the statement by the Secretary of State for the Colonies, at Margate:The Labour Party is aware that the increased cost of living is causing perturbation and anxiety.In any event there can be no doubt about the importance of this subject when we realise that this retail price index is the measure of the salaries and wages of nearly 1,250,000 people in this country. It is not enough to say that the present index is a fairly good index. We want 683 to have the most just index possible, in order that people may feel that they are being justly treated.
In his speech on 2nd November, in the debate on the Address, the Chancellor of the Exchequer dealt at some length with the cost-of-living index, which is the index of retail prices set up to gauge the changes in the cost of living. He put up a spirited defence of the index. I think he went too far in inferring that a lot of people were suffering from imagination in this matter and were forgetting when prices went down. It is only right to say that the average housewife has the cost of living in her head, and that it is no use trying to persuade her that her own weekly budget is less than it is. The Chancellor went on to point out that during the past year the index had gone up by only two points since devaluation. Against that, an official publication, the blue sheet called "Bulletin for Industry," goes so far as to say that devaluation had been the prime factor in the rise in the cost of imports. It has also been the prime factor in the rise in the cost of living during the last year.
The Chancellor said that the cost of living had gone up by only two points, but that it might rise more in the immediate future. Hon. Members should remember that in just over three years the cost of living has gone up by no less than 15 per cent. At that rate in 10 years it will be half as much again as it is. That is not a fact about which anybody can feel complacent. There is an impression that the Government are concerned to keep the index down artificially, whereas their real task should be to keep down the cost of living.
One of the problems about this interim index is that there is no basis of comparison any further back than 1947. I must remind hon. Members, however, that there are unofficial indexes which have not the full weight of Government authority behind them and which enable us to take the process further back. When we look at them, we realise how much prices have gone up since the days before the war. The London and Cambridge Economic Service have used 1938 as a starting point. We find from their index that the cost of living has almost doubled since then, the comparison being 100 against 183. Among the items are: 684Eatables, 306; clothing and household durables, 206.John Lewis and Partners have a cost-of-living index of their own. Here again, we see results which are more or less in line with the index of retail prices, but I must say that in both these unofficial cases I observe that the rises are higher than in the official index. Figures have been worked out—they were referred to by the Chancellor of the Exchequer in his speech—by the Oxford Institute of Statistics. According to those figures, which take 1938 as 100, upper middle-class expenses have gone up 113 per cent—a very steep rise.
An index of wholesale prices is contained in Table 53 of the Monthly Digest of Statistics. Here is the shape of things to come, and it is a most alarming picture. The latest figure shows that, since 17th June, 1947, wholesale prices have risen by no less than 47 per cent., and are almost half as much again as they were a little more than three years ago. I know that some of those figures may not come to be reflected in the retail index, but a great many of them will. We have to expect over the next months a further sharp rise in the retail price index. For example, the price of wool is seven times what it was in 1935, the price of cotton is five times, and the price of non-ferrous metals is four times what it was in that year. I am not surprised that the hon. Member for East Ham, North (Mr. Daines) told the House during the debate on the Address that, whatever the Prime Minister might say,among the ordinary people … I found that I was quite incapable of convincing them that the cost-of-living index is a true reflection of present day prices. I think we have to face that fact."—[OFFICIAL REPORT, 31st October, 1950; Vol. 480, c. 44.]I do not think anyone will deny that there is a great deal of scepticism, and a considerable amount of alarm, about this matter. The retail price index does not go up as much as most people imagine their costs do, and it is essential, for that reason, that the Ministry of Labour should do everything they can to restore confidence in the index. I do not think that they can do so without abolishing the interim index and replacing it by something more permanent. I know that there are many misconceptions of the index and of what it tries to do, and I should like to give briefly one or two facts about it.
685 As hon. Members will be aware, the index deals only with an average working-class household. It does not attempt to deal with the household of the more skilled and highly-paid workers or of the professional classes. There is no allowance for direct taxation or for National Insurance contributions. Next year the National Insurance Act is due to be reviewed, and it may be well to remember that the contribution is already quite a large and compulsory item against the family budget.
§ Mr. Mulley (Sheffield, Park)
Would not the hon. Gentleman consider also the saving in doctors', dentists' and other professional fees since 1938?
§ Mr. Digby
Yes, but at the moment I am trying to enumerate some of the things which are left out of the index.
There may be items on the other side of the balance sheet. We have a system of rationing, which obviously distorts the index. Another factor is that when people get married and set up homes they have extra expenses. There is no allowance whatever in the index for the expenses of setting up house, but only for expenses which are incurred once people have set up house. There is a failure to represent the cost of non-utility lines, so that the effect of Purchase Tax is not nearly so much reflected in the index as it is in the consumption index in the digest of statistics. Lastly, the most serious defect of all is that it is based on pre-war expenditure. It is based on budgets collected in 1937 and 1938, which do not bear very much relation to present-day conditions. I regard that as a most unsatisfactory state of affairs.
The history of the index is interesting. There were some very voluminous Reports in 1908 and 1909 which outlined budgets throughout this country and also France and Germany and gave the detailed budgets from very many towns and country districts. It will be seen from these how similar the pattern and standard of spending was in Scotland and in England. From the point of view of an Englishman who has listened to many Scottish debates, I am not sure that the Scots have as much ground for complaint about their difficulties as is sometimes imagined. The old index was of a 686 different kind from the present one; the range of items which were priced was very much smaller. In 1947 the Gould Report recommended an interim index based on a very much larger number of items, and it said that this should be a temporary measure pending further study and examination. That is three years ago we have now the interim index which is the subject of my Motion.
Bismarck once observed that politics, was no exact science. If he had seen a cost-of-living index he would probably have been even more sceptical. Despite the fact that the new index covers a very large number of items there is still room for a considerable amount of error, and hon. Members should bear that in mind. It is based on the inquiry which took place in 1937–38. It was an admirable inquiry. It was based on 9,000 family budgets which were submitted, and it has been followed in the setting up of the new index, with the exception that drink and tobacco have been given a different weight. Perhaps the Parliamentary Secretary will be able to tell us more about this. I gather that it was thought that the budgets which were submitted tended to under-estimate the amount spent on drink and tobacco and, therefore, these items were given greater weight in the final calculation.
The Minister of Labour said, on 23rd November:The House must face the fact that the pattern of living of our people is changed. Things which were regarded in the old days as luxuries in the working man's family are today absolutely essential."—[OFFICIAL REPORT, 23rd November, 1950; Vol. 481, c. 482.]If that is so there can be no excuse whatever for hon. Members opposite to support an index which is based on a pre-war standard before rationing or anything like that occurred. It must be wrong. I press the Parliamentary Secretary to tell us that his first instruction to the new Committee will be that they should immediately set about collecting a new series of budgets to show the new pattern of spending so that we can proceed with a new index. That will take a little time and that is all the more reason for setting about the collection of the budgets at once.
The Minister may reply to me in the words used the other day by the Minister of Labour about this subject, that the conditions of wages, prices, and so on, 687 are really very unsettled. We have had over five years of Socialist government now. How much longer have we to wait until conditions are really settled? I do not think that any more time can be wasted; the budgets should be collected immediately. I would go further and suggest that the collection of these budgets should not be a haphazard affair, just occurring whenever there happens to be a Motion in the House; there should be a permanent committee in session considering budgets collected regularly every three or five years. In this I am not trying to pre-judge the rather important issue—I have not much time today—as to the alternatives and as to the form which the permanent index should take, whether it should be on a fixed or a currently adjusted basis.
§ Mr. Harrison (Nottingham, East)
In his opening remarks the hon. Member for Dorset, West (Mr. Digby), spoke about the dependability of the index. I wish to put a point to him, so that we may avoid doing him an injustice. When he is arguing that the index is not dependable does he accuse the Government of deliberately altering the barometer to disguise the state of the weather?
§ Mr. Digby
My subsequent remarks will make it clear that I think there is a suspicion that in certain cases the Government may have been tinkering a little with the barometer. I do not say that they have done it in a large way; it is perhaps not exactly tinkering with the barometer but rather moving the barometer from one place to another.
The next question which bears on the subject is that of subsidies. Obviously, subsidies slightly distort the picture. They are very much bound up with the question of rationing. Here I come to the very point about which the hon. Member for Nottingham, East (Mr. Harrison), was talking. "The Times" the other day, in a very admirable leader on the question of the cost-of-living index, made this accusation:Purchases have been made or not made with an eye to moderating the rise in the prices of rationed food.If that is the case, the public are having to forgo food which they would otherwise have merely to keep the index at a lower level. I certainly hope that that charge is not a correct one, but—
§ Mr. Mulley
Would the hon. Gentleman agree that some people have been enabled to buy because of prices which have been moderated by controls?
§ Mr. Digby
I am trying to develop my argument on this rather difficult subject in my own way. I am trying to do it fairly. I am not trying to go out of my way to make party points.
Do the Government expect food rationing to be permanent or do they not? As long as rationing continues it is bound to have a considerable effect, and I do not think there is much doubt that the effect which it has is to keep the cost of living index down. The appendix to the Gould Report estimated that if the spending of 1937–38 had been carried into the index the weighting of food will be 40.1 per cent. of the total. Due no doubt to the operation of rationing, the actual weighting of food is only 34.8, a very much smaller figure. Since the price of food has gone up much more than the prices of most items in the index—in September it had gone up to 122—it follows that were it not for rationing the index would have been running at a very much higher level than the 15 per cent. increase in the last three years.
§ Mr. Digby
I cannot give way too often. I am merely trying to make the point that the effect of rationing on the index is to keep it down. If the hon. Member will take the trouble to look at the figures which are available he will see that that is so. There are certain items which are omitted from the index. I shall not say much more about National Insurance contributions except that I hope the Committee will be asked to look into the advisability of including these in the new index, and also considering, at the same time, other fixed weekly payments.
With regard to the choice of items, there is a large range included in this index. Utility items will be seen to be used almost exclusively with regard to food and clothing, so that Purchase Tax is not much affected. Hon. Members will remember that Purchase Tax last year rose by no less than £300 million, so somebody must have spent it, but Purchase Tax does not find full reflection in 689 this index of retail prices simply by reading its terms of reference.
Items are deliberately selected which the average working class family with several children is likely to buy, although many may be forced, through scarcity, to chose other items of a non-utility type which are more expensive. I was rather surprised to find that no provision was made for fish and chips. The extraordinary expedient has been used of increasing the weight allotted to potatoes and increasing the weight allotted to fish, which seems to me rather like increasing the weights for bricks and mortar if one cannot find out the rent.
A number of methods are used for collecting current prices. Personal visits are used for foods and durable household goods. This seems to be an admirable system and I cannot see how that can be improved upon. Second, in some cases written information is taken from non-Governmental bodies, as in the case of transport, and particularly clothing, where the Ministry is in touch with 1,000 retailers. But, through correspondence, they have to deal with the rather difficult question of adjustment for quality, where it gets better or worse, making the necessary adjustments in the price allowed for. Third, and this seems to be open to more objection, information is collected by getting into touch with Government Departments, as in the case of fuel and light, items which are wholly controlled by the nationalised industry and which have risen considerably more than the index as a whole. This information is all obtained from the regional officers of the Ministry of Fuel and Power allowing them a considerable margin for choice as to which items they select for pricing.
I now come to some more doubtful cases. Immediately after devaluation the President of the Board of Trade came to the House and cut the margins on clothing. The result was that although future stocks will cost more, and the index in that respect will go up more in the future, for the time being the index for clothing fell by no fewer than three points. So it would appear that the cost of living was getting cheaper when, in fact, the change would become much more rapid when it did occur.
Then we have the rather ridiculous and much quoted case of beer. Speaking 690 statistically, it is sound but, when it is examined practically, it is not. By an agreement with the brewers, in the last Budget the specific gravity of beer was increased. The effect of this on the index was that since quality had increased and we got more strength in the beer for our money, the index dropped 3.2 points. I want to ask the Parliamentary Secretary a question. That evening, when he went into the local, knowing the beer was stronger, did he ask for four-fifths of a point? If so, what did the barmaid say to him? That is the kind of thing which gives the index a bad name, because it is obvious that we order our beer by the pint or half pint and cannot break it into fractions merely because the Chancellor has agreed to alter the specific gravity.
§ Mr. Emrys Hughes (South Ayrshire)
In the earlier part of his speech the hon. Member said that the Scots had no grievance. Could he tell us how the cost of whisky affects the cost of living in Scotland?
§ Mr. Digby
I do not think that is a very heavily weighted item, because we have to bear the whole of the United Kingdom in mind.
Another case has come to my attention where, again, the Government seem to be artificially keeping down the index when, in fact, the man in the street is being saved nothing. I have a letter addressed by the Minister of Food on 24th October, 1950, to the Central Milk Distribution Committee about the cost of delivery in rural areas. In this the Committee were refused permission to put up the price of milk in those areas, which would have been reflected in the index and so would appear to put up the cost of living. Instead, they were told that they could make an additional distribution charge which would have to be paid just the same by the country folk who consumed the milk, but would not put up their cost of living index.
In the newspapers yesterday we saw an announcement that the price of children's utility cotton dresses was to go up by 1s. 6d. to 3s. Od. in the pound. I hope this will be fairly reflected in the index, and that there will not be a sudden discovery that the quality has gone up at the same time so that everyone is just as well off as they were. Again, wool blankets 691 are bound to go up seriously in time. I hope that will be put fairly and squarely in the index, because people need blankets and are getting tired of quibbles on the subject.
We see the lack of more up to date budgets in the important question of weighting. We are not sure how drink and tobacco are weighted. As far as we can see it is done by some kind of guesswork by the Ministry, no doubt founded on a scientific basis. However, it would increase confidence if we knew exactly how it was done. Here, again there is room for undue pressure by the Ministries. For example, budget items chosen by the Ministry of Food are likely to reflect the movement of prices in a sector as a whole. This gives them practically carte blanche to decide which items they want priced. Again, the Ministry of Fuel choose the items for the fuel and light index.
In other respects the actual weighting of the items seems to be fairly satisfactory, although I have grave doubts about the weight given to one or two of the items. So it will be seen that there are a number of limitations in this index, some of a small character and some more serious, such as the fact that it is based on pre-war and that there is suspicion that the Government go out of their way to keep down the items included in the index as opposed to other items.
I emphasise that the index does not include the middle classes. It is based on typical working class budgets, from which the items it contains are selected. No proper allowance is made in any way for the cost of living of the middle classes, which, as is well known, and as I showed earlier in figures, has gone up very considerably. It should be made as widely known as possible that the index pretends to deal only with the expenditure of typical working class households, and should not be used by anyone in trying to show that the middle classes are as well off as they were.
§ Mr. Digby
There are a great many people who are affected by the index in one way or another whose salaries are not directly governed by it.
692 This leads me to ask whether there is not room for more than one index. I should like to know what the Parliamentary Secretary has to say about this. The late Lord Keynes, in his "Treatise on Money," published some years ago, dealt at some length with this question. He pointed out the defect of having only one index reflecting only working class expenditure and not other expenditure. I hope that the Parliamentary Secretary will say whether he thinks there is a case for one or more other indexes to give a better view of how the costs of living of the community are going up.
Another point which arises from a study of the index is how unsatisfactory it is to have no basis of comparison with prewar. I ask the Parliamentary Secretary to do one of two things: either to bring forward to 1950 the old index—which, I know, is not very satisfactory, and does not fully reflect rises in the cost of living —or to take back the new one to before 1947. I see no reason why those calculations cannot be made. At present, immediately one begins to make any comparison with pre-war, one is forced back on to the unofficial indexes such as the London and Cambridge Economic Service. Government figures should be available right back to 1937.
I see that there is an Amendment on the Order Paper.—
§ Mr. Digby
In that event, I need not deal with it at any length. I am sorry that that Amendment struck more of a party note than I have struck, although that may not have been intended. Had the Amendment succeeded, it would have appeared to have the effect of putting off the budgets without which we cannot get the new index. I am sure that that was not the intention of the hon. Members in whose names the Amendment appeared.
A cynic was once described by Wilde in one of his plays asa man who knows the price of everything and the value of nothing.Certainly the Minister, through his various inquiries in connection with the index, knows the price of a good many things, but he must not allow himself to lose his sense of values or he will find that public confidence in the index is irretrievably undermined. Already the official rise in 693 the index of no less than 15 per cent. is serious when we see that the wholesale index has gone up by 47 per cent. We see the shape of things o come, and worse may be in store.
No time should be lost. The interim index is not worth proceeding with, and the Minister should start on a more permanent type of index and give instructions accordingly to the technical committee. Finally, we should remove suspicion that the Government are trying artificially to keep down the index. The job of the Government is to keep down the cost of living, not merely to keep down the index. Until the cost of living is kept down, hon. Members on all sides will continue to be seriously perturbed at the situation.
§ 11.46 a.m.
§ Mr. Boyd-Carpenter (Kingston-upon-Thames)
I beg to second the Motion.
I believe that I shall be expressing the views of hon. Members in all quarters of the House in saying that we are grateful to my hon. Friend the Member for Dorset, West (Mr. Digby) in using his good fortune in the ballot to raise this immensely important subject this morning. We would wish also to congratulate him on escaping, however momentarily, from the silence zone which has enveloped him during the last few years. There would no doubt be repercussions of an unfortunate character if I were to seek to congratulate him on a maiden speech, but perhaps I might adopt the language of Whitehall and say how much I personally enjoyed his quasi-virginal oration.
In approaching this problem, it is important to appreciate, not only that it is important that the cost-of-living index should be accurate, but that, to adopt the words of the late Lord Hewart, it should manifestly be seen to be accurate, and that all concerned should have the utmost confidence in its accuracy and efficiency. Undoubtedly the unfortunate occasion last summer, when the index actually registered a fall of one point—due, I believe, to a seasonal variation in the price of certain vegetables—at a time when to the ordinary person the cost of living seemed to be rising, had a very unfortunate effect upon public confidence in the accuracy of the index. That is of itself a lamentable thing in any circum- 694 stances. That lack of confidence would be particularly lamentable at this time when, as I think most hon. Members are only too well aware, we are in the earlier stages of a fairly sharp upward movement in the general level of prices. It is particularly important in stormy weather that one's barometer should be functioning with a reasonable degree of accuracy.
I would not limit the faults of the index, as, I think, one hon. Member during an intervention in my hon. Friend's speech seemed to indicate, merely to the fact that the remuneration of about a million and a quarter of our fellow-citizens is directly geared to it. That is a very important factor nevertheless, but its importance does not stop there. I am sure that the Parliamentary Secretary would agree that not only in negotiations on the subject of wages, but equally in the consideration of wage claims by the various arbitrating bodies which now do so much work in that field, the rise in the cost of living is often a very material factor considered by those bodies.
They rightly and properly put considerable weight on the cost of living figure in coming to their decisions, and particularly, perhaps, in coming to their decisions on claims such as those, of which there have been a good many recently, affecting the lower-paid workers, particularly when those claims are based, as they so often are, on the extreme difficulty of those lower-paid workers continuing to carry on on the present levels of prices. Therefore, unless we are to vitiate the decisions of these arbitrating bodies, in whose decisions it is so important that public confidence should be maintained, it is essential that the figure they themselves act on should be a figure that is entirely beyond suspicion.
There are other issues of equal importance. For example, claims for Service pensions, whether valid or not I am not prepared for the moment to argue, are very often based on the rise or fall in the cost of living. It is difficult to think of any particular item in our whole system of negotiation and argument on the subject of personal remuneration into which the cost of living figure does not inevitably enter. It is obvious that, even if we had not had the great changes of the last 10 years, a figure based on budgets of 1937 and 1938 would be already out-of-date. As my hon. Friend 695 said, the course of events for 100 years or more has been that the luxuries of the few of one generation become the necessities of the many in the next. That is a long developing process and the mere passage of time, therefore, to some extent makes out-of-date budgets of some years ago. The changes which have taken place in the last 10 or 12 years have greatly increased that tendency.
I would also say a word further to what my hon. Friend said on the effect of rationing. The 1937 and 1938 budgets were based on a state of affairs in which there was no rationing and in which, therefore, consumers spent what money they had to the best of their judgment in obtaining value. In point of fact, I do not think it is disputed that the foods of better value for money were almost entirely the rationed foods and it was for that very reason that they were rationed. They were the basic foods, needed by the great majority of our fellow countrymen in substantial degree, and that is why they were rationed.
In present conditions there are remarkably few who could attempt to subsist on the bare ration. They have to add substitutes or alternatives, fish instead of meat, tinned, prepared or cooked meats instead of raw meat, and various substitute articles which they can buy. Because they are limited in the amount of basic commodities they are able to buy, they need something in addition to sustain them. That fact must have a tremendous effect upon the pattern of consumption of the families concerned, and for that reason alone I should think it would be right to assume that the budgets of 1937 and 1938 are completely out-of-date.
I will carry that argument a little further, because I think I am fairly close to the point that has so far prevented the Government from taking a new survey of budgets. I believe the attitude of the Government is that the situation is still so unstable that it is not worth while having a survey which inevitably would be out-of-date in a very short time. I appreciate that argument, but I do not think it is a valid argument for continuing to retain a system which, we are all agreed, is out-of-date.
I make this suggestion. So long as the situation remains unstable, so long, for 696 example, as there are considerable changes in the amount of food made available on the ration and so long as factors of that sort continue, I suggest that we should have a review of the pattern of consumption by some outside statutory body, perhaps on the analogy—although it is not an annual review—of the review by the Assistance Board of the appropriate levels of assistance. While we are in a state in which we are all agreed the pattern of consumption is apt to vary and to vary considerably over a period of a few months, we should entrust to some impartial outside body the duty of making a review of the pattern of consumption and rendering a report, both to His Majesty's Government and to this House, of the result of their investigations. That process should be continued until we are, as we all hope may be the case in a few years, in a more stable situation.
§ Mr. Mulley
I was always under the impression, as an economist, that the index was used primarily to register changes-over a period of time. If we were to have an annual review, how could the index serve that purpose?
§ Mr. Boyd-Carpenter
The point I have in mind—and I am sure that as an economist the hon. Member will appreciate this—is that the weighting will have to be adjusted in accordance with what commodities are available, because to go on with a weighting which proceeds on a wholly fallacious assumption as to this must inevitably provide a fallacious result. I can quite see the point raised by the hon. Member from the point of view of statistics, but I see no reason why the suggestion made by my hon. Friend of continuing to record the figures on the old basis should not be continued for the purposes of comparison. All I am urging is that the cost-of-living figure used in wage negotiations, and used also for the adjustment of wages where there is such a clause, should be subject to adjustment in weighting in accordance with the actual facts of each year. I think the hon. Member will see that—
§ Mr. Mulley rose
§ Mr. Boyd-Carpenter
I will give way again in a moment. I think the hon. Member will see a distinction between the two purposes and both can be met in that way.
§ Mr. Mulley
I am sorry to disagree with the hon. Member. I see exactly what he is wanting to do. But the figure itself means nothing whatever. We have to realise that any cost-of-living figure is significant only in relation to the base year with which it is a comparison, and if we change the base year, as we know by comparing the old index with the present interim index, we get nowhere.
§ Mr. Boyd-Carpenter
If the hon. Member's argument were followed to its logical conclusion, his contention would be that the 1937 and 1938 budgets should he continued, although the basis is quite out of accord with the facts. Unless he is prepared to do what I am glad to see the Ministry of Labour are not prepared to do—to proceed indefinitely on the 1937 and 1938 budgets—I do not think his argument affects the issue. If it did, why not go back to the 1914 budget, which would produce the continuity and the figures, increasingly irrelevant but continuous, for which he apparently craves.
There is another element which I think is bound to weigh in these matters, and I shall be grateful to the Parliamentary Secretary if he can say something about the element of rent. I do not know how that is properly to be considered because we are here concerned, thanks to recent legislation, with the fact that people earning the same wages are living in what is substantially the same degree of accommodation but in fact paying widely different sums in the way of rent in accordance with whether they are council tenants or tenants of new or older houses subject to rent control.
The Parliamentary Secretary knows the enormous discrepancy which depends on sheer chance whether the individual concerned has the good fortune to live in an old rented house or a new council or privately-erected house. I do not know, if the cost of living index is to be a reality, how we are to take into account those separate sets of circumstances which, in many cases, dominate the whole budgets of a very large number of our fellow countrymen. Yet, on the other hand, we cannot deal with the issue simply by avoiding it, and I should be glad to know whether the Parliamentary Secretary and His Majesty's Government have taken any steps to deal with that very real difficulty.
698 Then there is the question of the scope of the inquiry. The budgets of 1937 and 1938 were described as those of working-class families. The phrase itself is completely obsolete in these days, for no section of society has a monopoly of work. Equally the income figure of £250 per annum is obviously obsolete in view of the fall in the value of money. I do not know whether the Parliamentary Secretary can tell us what figure will be selected as representing the maximum income of the families among whom investigations are to be made for the next index. Obviously its validity will be greatly affected by the figure which is selected, and I hope that the Parliamentary Secretary will be able to tell us what it will be.
I should like to repeat what my hon. Friend said as to the undesirability, particularly in present circumstances, of confining these investigations to one section of society only. The Chancellor of the Exchequer told us the other day that the cost of living of different sections of society had moved to a different extent. That would of itself seem to me to reveal the desirability of making and setting up not merely one index but possibly two, or possibly some combination of the two.
When my hon. Friend was speaking, an hon. Member interjected to the effect that the people of the higher income groups who would be affected by a middle-class index do not have their remuneration affected by the cost of living figure. In a narrow sense that is true; I do not think there are any cases in which there is a cost-of-living clause in salary agreements; but in a broader sense that is not so because the demands, for example, of the middle grades of the Civil Service for an advance in their remuneration are made, and properly so, largely on the basis that their cost of living has increased; and it is impossible for those who have the immensely difficult duty in present circumstances of deciding upon these claims to do that job properly unless they are provided with figures which show beyond dispute how strong a case can be made on those grounds.
So far as that section of society is concerned, there is no official index whatever, and we are driven back to private surveys made by most eminent people but which in the nature of things can be only partial in their scope, and cannot carry the authority of an official figure. 699 I hope that when the Parliamentary Secretary replies he will have some constructive proposal to put forward for dealing with this very real difficulty, because whatever those hon. Members who placed on the Order Paper the Motion which has been ruled out of order may think about rises in wages, it is undoubtedly the fact that there are a very large number of people in this country in the lower and middle salary ranges who are very much worse off than they were before the war.
In many cases they are a most admirable section of society, doing highly responsible work on behalf of the public, and they are adversely affected by present conditions. They have the greatest difficulty in putting forward their claims because no official statistics of their cost of living are available. I hope that the Parliamentary Secretary will not seek to deal with this issue simply by saying that as only one section of society was covered by the index in 1937–38 that is a reason why in 1950 only a similar section should be covered.
I have tried to put before the House what seem to me to be the needs of the situation if we are to have the facts on which wise decisions as to the remuneration of most sections of our society are to be made. At a time when competing claims are being made for increased remuneration right through our society, the merits of those claims as against the general desirability of preventing increases in personal incomes cannot be wisely decided unless there is available a precise set of facts on which to base the decisions. If we have not that precise set of facts we shall, with the best will in the world, commit injustices, and I am perfectly certain that the Parliamentary Secretary is the last man in the world to wish deliberately to do that.
I beg the Parliamentary Secretary to consider very carefully what my hon. Friend has said, and to consider whether it is not possible along the lines he has suggested, or along other lines, because I do not think either of us would tie ourselves precisely and solely to the proposals we make, to obtain for the House and for the Government the precise and detailed facts as to what the real cost of living of different sections of our society is. It is only on the basis of those facts that 700 we in this House can see to it that justice is done.
§ 12.6 p.m.
§ Mr. Albu (Edmonton)
I should like to join the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) in congratulating the hon. Member for Dorset, West (Mr. Digby), who initiated the debate, on having left the sanctuary of the Whips' Office for the statistical jungle with which we are now concerned. Or rather, I congratulate him on having avoided that jungle and widened the scope of the debate somewhat beyond what I think were the strict confines of his Motion.
The difficulties of the subject and the prejudices which are sometimes involved in its discussion were underlined to some extent by the hon. Member for Kingston-upon-Thames. I agree with him that there is a case for different indexes for different classes of the community, but the people who, I think, are most vocal about the inadequacy of the index, particularly those who write in the Press, and hon. Gentlemen opposite, are those for whom the index does not represent the full rise in their cost of living—the minority of the population whose incomes are very much higher than those for whom the index was intended.
The sort of misunderstanding to which their prejudices give rise can be seen, for example, in one or two recent reports in the Press. I noticed that in the "Evening Standard" two or three days ago a lady who is a member of the Ministers' Advisory Committee, and who was for some years a Conservative Member of Parliament, complained bitterly that for her at all events, the 15 per cent. rise shown in the cost of living since the end of the war was an inadequate estimate. She said that she had, for example, to spend a great deal more on heating her house than was represented by the cost of coal in the index. I have no doubt that her house is much larger than the houses of the people to whom the index was intended to apply. It is, of course, perfectly true that for such people the index is inadequate, and that their cost of living has risen further.
Again, in "The Times" recently, there was a discussion on the question of Purchase Tax and utility goods. The representative of a trade association suggested 701 that we ought to abolish Purchase Tax and utility standards and apply a 10 per cent. sales tax to all goods. That, again, is completely to misunderstand the difference in consumer expenditure and living costs of different sections of the community. What that proposal would do would be to raise the cost of all the basic commodities used by the working class and the masses of the population for whom the index is intended while keeping down the cost of living for those people who are able to buy the semi-luxury goods on which Purchase Tax is payable.
It is most important that we should understand exactly what this index is. At the same time we should recognise that it has been by Government intention that the cost of living of the masses of the population, particularly of the working class, has been prevented from rising as much as that of the middle, professional and upper classes. That is the Government's intention. It is a part of the policy of redistributing the national income, but it may result in dissatisfaction on the part of the professional and upper classes if the cost of living index does not represent entirely the increase in their living costs. The index is nothing more than a measure of the changes of the cost of a parcel of goods in the weekly shopping basket of a housewife who is representative of a family with a certain income—not merely a working class family—in 1937–38; with the addition of the standing charges, rent, and so on, and expenditure on blankets, furniture and other household durable goods, spread over the whole of the year, but taken as a weekly average. That is what the index is.
The question with which we are concerned, and what raises doubts in the minds of hon. Members about the accuracy of the index, is what is the average family on whom the index is based. The original index drawn up on a survey made in 1904–5, which remained in operation right up to 1947, was never changed when hon. Members opposite had the chance to change it. It continued to be used as a measure of working class expenditure at a time when the expenditure of employed working class families was changing—for the better, I agree. This index was kept in being for all that time. It was based on an average of the budgets 702 of under 2,000 working class families collected by the Board of Trade.
The present retail price index is much better. It was based on between 12,000 and 14,000 households, both manual and non-manual, industrial and agricultural workers with incomes of less than £250 a year. During the period between the two-surveys, there were considerable changes in the standard of living of employed workers. The percentage spent on food dropped from 60 per cent. to 35 per cent. The percentage spent on rent and rates dropped from 16 per cent. to 9 per cent., and so on. Most significant of all, the totals spent on goods other than the actual basic necessities of food, rent, clothing and fuel—the amount spent on goods such as drink and tobacco, household goods and services—rose from 4 per cent. to 40 per cent. This was a measure of the change in the standard of living of the employed worker.
We must use a little reason in our criticisms of the present index. I support the arguments for a new survey, but we must not exaggerate the extent to which the present index is, in fact, a false index for large sections of the people—for perhaps 80 per cent. or 90 per cent. of the people. There is a kind of check as to its accuracy. If we compare the actual weighting in the index with the figures of consumers' expenditure given in the White Paper on National Income and Expenditure, it will be seen that the budget on which the index is based has, for food, a weighting of 35 per cent. For the whole population in 1938 the actual expenditure was 30 per cent., and in 1949, according to the White Paper, it was 28 per cent. Those with rather more money would spend a less percentage of their income on food. Nevertheless, I do not think that the figures show anything very radically wrong.
For rent, the budget figure was 9 per cent.; in 1938 the actual expenditure was 11.4 per cent. and in 1949 it was 7.4 per cent. Clothing was about the same. For drink and tobacco, the budget was 21.7 per cent.; in 1938 the amount spent was 10.8 per cent. and in 1949 it was 17.9 per cent. These figures are some rough measure of the accuracy of the index. If we remember that the index as a composition of all these figures, the extent to which it is wrong, at any rate for the 703 people for whom it was intended, can be greatly exaggerated.
As the hon. Member for Kingston-upon-Thames said, the index may not be suitable for wide ranges of income. In fact, the inquiry made in 1937–38 covered a very wide range of family incomes. The average weekly wage earned in industry at that time varied from 35s. 7d. to 67s. 6d., and agricultural wages were considerably lower than the first of those two figures. The average expenditure in the households investigated was 86s. 3d. for industrial workers, and there were one and three quarters wage earners per household. For agricultural workers, however, the figure was 57s. 11d., and the average number of workers per household was 1.6.
It is clear that the index cannot really cover accurately such a wide range of family expenditure, because what would have been correct for a family expenditure of 86s. 3d. obviously was not correct for a weekly family expenditure of 57s. 11d.
Since the war the whole of our policy has been aimed at keeping down the cost of the basic necessities, which are the largest expenses in the families with the lowest incomes. It is in that sense that those earning more money and those in the middle and salaried classes have found that their cost of living has appeared to go up. Part of that is due to Government policy, because the imposition of Purchase Tax is a means of ensuring the cost of living of those earning most goes up most, and the cost of living of those on the lower levels is kept down.
But we are not only concerned with the cost of living. We are concerned much more with the standard of living of all classes in the community. There is a case for an inquiry as to how our present policy on taxes and subsidies is affecting the standard of living of different classes. The party opposite think that we should abolish all, or some, of the food subsidies and that we should in some way re-allocate what we save by increasing some of the social services. They do not know, and nobody really knows, what the effect of these changes would be. They can only make a guess. There are unofficial estimates, but nobody really knows.
There is a good case for widening the inquiry so that we can find out what has been the actual effect on different classes 704 in the community of the policy of taxation, food subsidies and social services. That would form a much better basis for any legislative changes than a mere guess made by the Opposition.
§ Mr. Speaker
We are not dealing with legislative changes. We are dealing with the index, and nothing else.
§ Mr. Albu
I will not pursue the point further. I am sorry if I went outside the rules of order.
The Ministry of Labour, the Minister and the Parliamentary Secretary have only a limited interest in these figures. I agree that they cannot be considered as entirely unbiased in these matters. They have an interest in maintaining the stability of wages, and so on, and not getting themselves into trouble. There is a case for another body doing this work. The Ministry of Labour should be only one of the clients for the figures which should be produced at a new inquiry. The body which I should like to do the work is the most experienced and most scientific body for the purpose, and that is the Social Survey of the Office of Information. They have great experience of this class of work. In fact, they do work of this sort already for other Departments and for other reasons. They are especially good, because they are extremely scientific in their sampling methods.
The sampling methods used in previous inquiries were not very scientific. There is a lot to be said for having a much more scientific inquiry. I hope that the Parliamentary Secretary will not take it amiss that I should make this suggestion. I do not make it out of any ill will towards his Department. For the much wider purpose for which this inquiry is required, it would be better to have the work done by the Social Survey, and it might be done from time to time so that the figures can be kept up to date.
I believe, also, that a good case can be advanced for making a survey and producing an index for different classes. I have mentioned the difference which existed in the past between agricultural and industrial workers, and I do not know how great that would be today; but there is another section to which the hon. Member referred—the middle class and the professional classes. But, in addition, there is the whole class of pensioners and 705 those on the lowest incomes. It would be very interesting to see exactly how their cost of living is being affected by recent changes. After all, the class of family incomes on which the original index was based was above the level of income of those living on the lowest scale of wages or on pensions. I believe that the results of such a broad inquiry as that which I am advocating would be of great value in determining Government policy in the social field, the field of social services and also in the field of general economic planning. It would be particularly valuable to the Government and industry in providing a measure of the elasticity of demand as wages and salaries rise with increasing productivity.
Personally, I believe that the use of an index of this sort for wage fixing must be very limited. It can only be used to any great extent as a measure of the changes in the real value of a minimum standard of life, of the real basic commodities, and it should not and cannot be used for the great varieties of standards of life of people over a wide range of wages and salaries and family incomes.
It should not be used, therefore, and no attempt should be made to use it, as a final measure of all the changes in the cost of living and standards of life for the whole population. It can be a method of protecting the standard of life of those on the lowest level and of ensuring the maintenance of an adequate and sufficient standard of life for those who have to live on the lowest level. I do not think any trade union would claim that, by itself, it is an adequate measure of the rate of wages or the changes which should take place in wages with changing productivity and with changes in the national income.
I hope that, in his reply, my hon. Friend will indicate his willingness to consider an expansion of the suggestions which have been made for a new survey and will agree that there are probable advantages in having the survey made by another body—a permanent body, already in being—rather than setting up a special body of people to do the job or having the job added to the many other duties of his overworked Ministry. Such a body as I suggest would be one with great experience in this field. There would be an advantage, too, in not restricting the 706 index and the survey to my hon. Friend's own purpose but, instead, seeing whether it can be extended so as to make it of use for other purposes of Government policy.
§ 12.23 p.m.
§ Mr. Summers (Aylesbury)
I agree with the hon. Member for Edmonton (Mr. Albu) in that part of his speech in which he said that he hoped that the survey, if and when it is made, will be made outside the Ministry of Labour. He also spoke of the need for an expansion of the survey and, desirable as that undoubtedly is, I hope that, as a result of the requests for a number of additional surveys, we shall not see a delay in the revision of the current index which so drastically needs bringing up to date at the present time.
Hon. Members have already pointed out that there is widespread distrust of the results of the present working of the interim index, and I do not think there is any need for me to emphasise that at length, but I must say that in my view the attempt which the Chancellor made on 2nd November to cast doubts on this distrust by the public did not help matters at all. After dealing at some length with the operation of the calculations, the Chancellor said that people should not be so worried as they appear to be because, he said, between 1947 and 1950, while earnings had risen by 20 per cent., retail prices had risen by only 14 per cent.
I do not dispute the figures he quoted, but in taking such a long period as three years he completely obscured what has been happening during the course of those three years. For instance, we find that between April, 1948, and April, 1949, while earnings rose by 5 per cent., retail prices rose by only 1 per cent; but in the following year earnings rose by 4 per cent., while retail prices rose by 5 per cent. It is not surprising, therefore, that the comment of a leading article in "The Times" on the figures for the last two years in that three-year range was:a striking reversal of the trend.The hon. Member for Edmonton said that my hon. Friend the Member for Dorset, West (Mr. Digby) had contrived to escape entering the statistical jungle, which it was rather tempting to do. Although I shall take note of his warning, I propose to depart for a moment or two from the open road to make an excursion into the jungle, and I hope I shall not 707 be unreasonably scratched by lack of an adequate map. With the object of showing where there are apparent grounds for lack of confidence in the working of the index, I should like to draw attention to one or two aspects in order to indicate that there is a prima facie case—no more than that—for some review of its workings.
First, I turn to the weighting given to drink and tobacco. As my hon. Friend says, additional weight was deliberately given to them in 1947 by the Committee set up to deal with the matter. At the time it was probably to the advantage of those most affected by the index that that should be done, but since then two factors have now to be taken into account which has made it work the other way. The first is the increase in the price of drink and tobacco which has risen so much that many people are not able to maintain the consumption in those two commodities which the index assumed they would maintain. Secondly, the influence of the rise in the price of other commodities since then has been very much more than has been the case in regard to drink and tobacco.
I was interested in the figures quoted by the hon. Member for Edmonton in respect of drink and tobacco, for in no case did the figures that he gave reach even 20 per cent. as the share of drink and tobacco in the budget concerned. That was the case not only in the figures which he quoted but also in 1938 and today. Yet we find that the weighting given to that section of the index is 22 per cent. The figures which the hon. Member quoted reinforce the case which I want to make on two other grounds for the revision of the weight given in the index to drink and tobacco.
It is said that before the war 10s. a week was spent on those items in the average household budget. In those days the average wage was approximately £3 a week. Thus, 14 per cent. was said to be spent on drink and tobacco. Today the weighting given to drink and tobacco is 22 per cent. so that there again is a prima facie case for a revision of the index and for suggesting that unreasonable weighting is given to those items. Let me put it in another way. Today, the average wage is £7 5s. 6d. a week, so that the weighting given to drink 708 and tobacco would still be excessive if it could be demonstrated that the typical household bought seven packets of cigarettes a week and drank seven pints of beer a week. When account is taken of the number of women in a household and the proportion of non-smokers and non-drinkers, it suggests that unreasonable weight is given to those items.
I want to approach the point from another angle. In 1949 the price of beer was reduced by 1d. a pint. The Chancellor, quite rightly, told us that the effect of this change would be to reduce the cost of living by seven-tenths of a point. Now, if examination is made of those wage arrangements directly affected by changes in the cost of living, it wilt be found—I could give further details, but I do not want to detain the House—that approximately 7d. is deemed to be the value of a one-point change in the interim index of the cost of living—7d. per point. If, therefore, we take that 7d., and relate it to the change in the price of beer in 1949, we find that the effect of that change was assumed to be 5d.—seven tenths of the figure for a single-point change in the cost of living index.
In the drink and tobacco section, beer is only half the total section. It would seem, therefore, that the total due to beer alone is not 5d. but 10d., from which I am drawn to the inevitable conclusion that it is assumed that the average, working household drinks 10 pints a week—10 times 1d. per pint as shown by the figures I have just quoted. I suggest that that is considerably more on the average than occurs at the present time.
I do not want to exaggerate the rather humorous aspect of the 1950 treatment of beer to which my hon. Friend who moved the Motion has already alluded, namely, that because people got better value for money the cost of living was deemed to have gone down. I do not want to stress that of itself. The point I want to make is this. If it is regarded as proper to take account of the quality of beer and to depress the cost of living on that account, surely it is equally proper to take account of the quality of coal and let that have some influence on the cost of living.
In that field it is not difficult to demonstrate that a deterioration of at least 10 per cent. in the quality of coal has, in 709 fact, occurred during the period while this index has been operative. If we take the amount of coal that people are allowed at a reasonable price for the purpose, it will be found that on the 10 per cent. basis 7d. a week is spent on having to use more coal because, for a given quantity, there is, in fact, that much more dirt now than there used to be. So I think it is not an exaggeration to say that in the case of beer and in the case of coal there is a prima facie case for suggesting that at least two points in the index have disappeared, without justification from the point of view of the public.
Reference has already been made by my hon. Friend to the vital importance of obtaining an accurate index which will inspire confidence because of the wide application of the results, not only to the 1,250,000 people directly affected, but to others as well. I want to point to a less important but additional justification for going to great trouble to get at the truth. It is said in the Report of the Committee that they have not found it possible to assess such items as holiday expenses, and they must be deemed to be changing at the same rate as the index. I question very much whether between August, 1948, and August, 1950, it is a true measure of the change in the cost of holidays for the type of people we are talking about to say it has only gone up 5 per cent. That is an argument which is derived from the method of calculation which, I suggest, does not accurately reflect the truth.
I hope, therefore, that what has already been said will make clear to the Government how it comes that, despite what the Chancellor has said, the public are justified in having serious misgivings about the figures which are produced, and the vital need for bringing more up to date the calculations based on the modern deployment of household budgets. There has been great social changes, and there are other factors which affect the deployment of family budgets which are not adequately reflected in the figures. It is notable, for instance, that those items which have gone up most in price in the last three years, clothing, household goods and food, are those which, by the increase in the supplies, would be expected to produce a greater weight. In fact, on account of the rigidity of the system, it 710 has not turned out in that way when the calculations are made.
I should like, in conclusion, to join with others who have congratulated my hon. Friend the Member for Dorset, West, on moving this Motion. I am sure that all of us, not only in this House but elsewhere, are greatly indebted to him for his initiative in raising this subject, which, I hope, will lead to the compilation of a more satisfactory Index of Retail Prices.
§ 12.36 p.m.
§ Mr. Daines (East Ham, North)
I should like to say to the hon. Member for Dorset, West (Mr. Digby), who opened the debate that I, too, went through a period of some 12 months as a political Trappist under vow of silence in ministerial life as junior Whip, and I can understand the sense of release and of joy he must have felt at being able to speak again. He certainly did celebrate thoroughly this morning. I watched the clock go round and I thought he did it fairly well. He was followed by the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who was more brief. I have no complaint; but I noticed that the look of benign optimism on the face of the hon. Member for Wimbledon (Mr. Black), who hopes to move a Motion of his own later, began to change, and that he began to show signs of approaching depression; and the look on the face of the hon. Member for Billericay (Mr. Braine), who also wants to move a Motion, was one of intense anguish. I observe that he has gone out now to fortify himself so that he can stand the stress and strain of waiting.
It seems to me that the Motion is really unnecessary, although it gives us an admirable opportunity for debating the subject. It seems unnecessary because of the statement made by the Minister of Labour on 5th December. He has indicated clearly that the Cost-of-Living Advisory Committee is to be called together again. I think that the more we examine this problem the more we can see that there is no one pattern that can be fixed as far as the cost of living is concerned; and that applies to the whole range of groups in society. I think it is clear that the pattern of living alters with income, and varies between income groups; and that it alters within those groups. For example, 711 some of the steel workers, I am assured, are drawing very high wages, anything from £15 to £20 a week. But there are sections of industry in which the wages are not half that figure. It is quite obvious that the pattern of living they will look upon as normal within those wage limits will be substantially different.
There was a point made by my hon. Friend the Member for Edmonton (Mr. Albu) which, I thought, had considerable force. It was as to whether we cannot get a new type of pattern, or find out how old-age pensioners and retired people live, and to try to get some form of index that would really help us to frame social policy. It seems to me that the more we go into this subject the more we see that no one index can possibly govern the whole situation. I accept without reservation—or, at any rate, with very little reservation—the argument of the hon. Member for Kingston-upon-Thames, that while it is a fact that this index governs only 1,250,000 trade unionists, it does, in fact, affect the whole range of other groups as well.
In trade union pleadings or employers' pleadings on arbitration, references are invariably made to it. I have been busily studying the official papers, and may I say, in passing—and I am not a Scotsman—that I had to pay 8d. for two documents for the purpose of putting myself in a position to make a contribution to this debate. I resent that very much; I think it quite wrong. Hon. Members can imagine my feelings when, having lent the two documents to my hon. Friend the Member for Sheffield, Park (Mr. Mulley) last night because the office was shut, I had to pay another 8d. for two more this morning. But, in all seriousness, I think we are entitled to official papers without charge.
I think that the committee set up to consider the Interim Index of Retail Prices was quite sound in its approach and that it would have been quite wrong for its members to have accepted the White Paper on National Income and Expenditure as the basis for arriving at a new index. But I agree very much with hon. Members opposite when they point out that the basis of 1937–38 is a wrong basis. However, I do not agree with the hon. Member for Dorset, West nor, I think, with his hon. Friend who called 712 for a permanent index. It seemed to me quite fantastic. Here we are, with the war clouds as large as ever they can be, and it is quite obvious, when we look at the position, that we have not yet begun to feel the real impact of the re-armament which now seems inevitable.
§ Mr. Boyd-Carpenter
So far as I am concerned, I think the hon. Gentleman must have misunderstood me. I went out of my way to suggest, for the very reason he has given, that there should be, for the time being, an annual review.
§ Mr. Daines
I thank the hon. Gentleman very much; I stand corrected. But his hon. Friend the Member for Dorset, West, certainly made a great point of it.
It is not only a matter of expenditure in terms of money, but whether the goods will actually be there. It could be the height of economic stupidity as well as political incompetence to try to fix as a permanency what constitutes the items that make up the index in anything like the near future. Quite understandably, hon. Members referred to beer. I have no comment to make about that other than to mention it once again as an example of statistical nonsense. Dudley Sears, who is an expert in this field, calls attention to the fact that at present we are working on the basis of a normal family—a man, wife and two and a half children—and that the rations for such a family are 2 lbs. of butter, 5 lbs. of sugar and one dozen eggs a week. I like my right hon. Friend the Minister of Food very much as a man, but I very much doubt whether we shall see those rations in anything like the near future.
There is another aspect, which, I think, also affects the pattern of living, and which has hardly been referred to by hon. Members opposite. I find, from consulting the "Labour Gazette", that the average earnings for all workers in October, 1938, were £2 13s. 3d. per week and that the average earnings for all workers in April, 1950, were £6 4s. 1d. per week. It is no good hon. Members opposite trying to argue that there has not been a substantial improvement in the standard of living of the lower paid groups, because it is perfectly obvious when wages are tested against the cost of living—as I intend to show in a moment—that there has been a very substantial improvement. That, of necessity, 713 must affect the pattern of their living, and what would be the normal goods they have the right to expect.
The argument is often heard from hon. Members opposite that the figures of wages are not real, that what the workers get in one way is taken from them in another in the form of taxation. I have not much comment to make on that because the comment comes very well from the "Weekly News Letter" issued, I believe, by the Central Office of the Tory Party. They say, taking a man, wife, and one child with an average wage of £6 14s. Od. a week:The tax he pays is only enough to meet nearly half of his share of the entire national expenditure of every kind. The other half comes from his more fortunate fellows and from those he thinks of as the rich.Accepting that to be a fact—I do not know whether it is or not, but as it comes from the Conservative Central Office and I suppose it is—the lower paid worker is, in fact, being helped by more taxation and does not suffer from it. Therefore, I do not think that that argument need be unduly pursued.
I also find, on turning to the figures of Professor Bowley, who is also an expert in this field—and I quote from the document issued by the London and Cambridge Economic Service—that taking September, 1938, as the starting point of disarmament, and with the datum line of 1924 as representing 100, real wages as expressed in terms of cost of living were 122; in September, 1939, 120; in September, 1945, 146, and in April, 158. This form of statistics was afterwards dropped, but, nevertheless, the broad facts remain the same.
Mark Abrams, who has also done a lot of authentic work in this field, shows, in making a comparison between the prewar position and today, in terms of expenditure on food, rent, fuel, light, and household goods, that before the war 60 per cent. of the personal incomes of working people was spent on those items, but that since the war the expenditure has dropped to 39 per cent. Hon. Members opposite have pointed to their own peculiar working of the food subsidies. It is quite obvious that if there were a change in Governments, one of the first victims of the change would be the food subsidies. I do not think any hon. Member opposite can seriously challenge 714 that. Indeed, on 8th April, 1948, the hon. Member for Monmouth (Mr. P. Thorneycroft) said:I would scale down, or make a start in scaling down, food subsidies."—[OFFICIAL REPORT, 8th April, 1948; Vol. 449, c. 449.]The right hon. Member for Warwick and Leamington (Mr. Eden) also said:I suggest that the time has now come for a thorough review of the whole food subsidy situation… There is a very strong argument for a progressive reduction."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1365–6.]If food subsidies are wiped out, it is quite obvious that far greater weight must be given to food, because the price of food will go up substantially. That is one of the difficulties. When we argue these actual problems in the House, right hon. and hon. Members opposite would like us to forget the propaganda line they take outside. I would like some hon. Gentleman, at some point in the debate, to say how, by slashing food subsidies, "the Conservatives would fight the rising cost of living."
§ Viscount Hinchingbrooke (Dorset, South) rose—
§ Mr. Deputy-Speaker (Major Milner)
I doubt very much whether that question comes within the purview of this Motion. I hope that the hon. Member will not pursue the point.
§ Mr. Daines
I am very sorry, Mr. Deputy-Speaker. I was not watching you, but I felt a slight thought ray penetrate; that is the worst of being telepathic. It must be a hangover from last week's debate on witchcraft.
Turning to the pattern of post-war expenditure in regard to the index, there are certain statistics, which I apologise to hon. Members for inflicting upon them, but which, I think, should go on record. We find that in 1938 the expenditure on entertainment was £64 million; in 1949 that figure went up to £174 million. On travel, £163 million; in 1949, £341 million. Books, magazines and newspapers, £64 million; today, £136 million. Tobacco—the hon. Member for Aylesbury (Mr. Summers), who has just sat down, spent a lot of time on that, and I am sure he will be interested in this figure—has gone up from £177 million to £764 million. Clothing and footwear have gone from £446 million to £948 million.
715 I know that on the subject of tobacco we can argue that this rise is due to taxation, but it is clear in terms of statistics and in terms of attendance at football grounds—perhaps not so much at the cinemas—and in other forms of entertainment and from the number of ordinary working people who have holidays, and whom we all want to have holidays, that there is a substantial gain in the pattern of living of a very substantial section of the population.
Any realistic index must take these facts into consideration. The hon. Member for Dorset, West, spoke about the necessity for bringing in the insurance contribution. What he does not call attention to is the other item in the budget of the person who pays the contribution. In the case of a man, wife and two children it would not be putting it too high, I think, to say that their benefits from the social services are worth something like 32s. a week. This, again, is another item which is bound to affect the pattern of living of the ordinary people.
I would like to say a few words about the effect of full employment upon the pattern of living. The fact that we have full employment is accepted today by the bulk of the population; but mass unemployment as well as full employment also effects the pattern of living—it must do. When we had, as we had before the war, two million people unemployed, there was also a constant fear of unemployment among the employed. That meant that some of the working class income had to be set aside to meet the contingency of unemployment. It also meant that very often, because of the operation of the family means test, other members of the family had to subsidise the person who was unemployed.
§ Mr. Osborne (Louth)
Is the hon. Gentleman suggesting that the working classes are not saving today as much as they were proportionately before the war? If he is, how does he account for the extraordinary figures in the savings movement and in the savings banks?
§ Mr. Daines
The hon. Gentleman, ever since he came into the House in 1945, has been filled with gloom about the economic future of the country. He should examine the figures and find a new 716 set of figures which will cheer him up; I can assure him that one can generally find the figures that one wants. I do not agree with his argument.
The point that I am making is that when full employment becomes a normal part of our existence that in turn must affect the pattern of living. I have no false optimism about this major issue. It may be that eventually a Tory Government will follow this Government, and I have always been certain that we stand a very good chance of going back to mass unemployment if that should be so. It may be unreal, for that reason, to say that we are able to have an index on a permanent basis that does not take not only the economic factor of unemployment into consideration but also the political life of the time into consideration.
§ 12.56 p.m.
§ Mr. Osborne (Louth)
I should like to say to the hon. Member for East Ham, North (Mr. Daines) how much I sympathise with him that he has had to pay 8d. for two official papers. I got mine for nothing from the Ministry of Labour by asking Questions on this subject two or three days ago.
§ Mr. Daines
I willingly withdraw what I said about the hon. Gentleman being pessimistic, because I now understand why he has lost his pessimism.
§ Mr. Osborne
The hon. Gentleman must not get the notes for his speech for his meeting tonight, mixed up with the notes of the speech he delivered today. I have asked many Questions about the cost-of-living index since 1945, and I am rather shocked at the large number I have asked during those five years. Many of those Questions were prompted by the experience I have had, and by the experience of my friends in dealing with the wages problem at factory level. Anyone with that experience knows that the cost of living figure always comes up when wages are being discussed. Therefore, from practical experience, I know that it is of vital importance that this figure should be reliable and that people should have confidence in it. If the figure is not reliable, it can be one of the greatest causes of industrial unrest.
I think that the Motion today is of very great importance, and one that ought not to be treated with the levity with which 717 at times it has been treated. [HON. MEMBERS: "No."] It is of very great importance to both sides of industry and to those who have to deal with the wages problem in industry. The hon. Member for East Ham, North, said that there were certain facts that he would like to put on record. There are some facts which I should like to put on record from this side. I think that, in addition to this being of great importance, the Government are guilty in regard to the way they have handled this problem. For the past five years they have treated it as though it were a piece of hot coke which they were afraid to touch. [Interruption.] If the Minister wants them, I can give him all the Questions I have asked; I have them here—lots of them. I can understand the Government being frightened of this matter because it is the controlling factor in wage negotiations.
I should like to give some facts. In October, 1946, on a number of occasions I asked the Minister whether he would appoint a Committee to investigate the cost of living in order to bring up to date the old index that held good before the war. In answer to one of my Questions on 21st November, the Minister said that the Cost-of-Living Advisory Council would be reconstituted. That, again, arose out of my persistent questioning.
I asked the Minister at the end of January, 1947, how many times this Committee had met. Although it had been appointed, after much delay, he gave the answer that it had met only once. I say that the Government have handled the matter in a lackadaisical manner, that they have dillied and dallied and have been frightened of it. They have not dealt with the situation as they should have done. Finally, we got this interim index, in regard to which the Ministry stated in their Explanatory Note:If any attempt were made to hold a new Budget Inquiry, much of the information that could be collected would, in the present abnormal circumstances, he out of date before it could be used.That was the excuse offered in 1947.
The index which we now have is a kind of hotch-potch between up-to-date information and the 1914–18 index, and one of the reasons given why we cannot have a more realistic index is that it would be out of date before it could be of any use. If that were true then, it 718 is doubly true now. If conditions were unstable at that time, how much more unstable are they today, both in regard to prices and the pattern in which wages are now being spent. I am confirmed in this by another document which the Ministry issued on the interim index in January of this year. This document stated:The Cost-of-Living Advisory Committee, appointed by the Minister of Labour, recommended in March, 1947, that, as a temporary measure, pending the results of further study and examination, an interim index should be instituted at an early date.Why have the Government dillied and dallied three years, and what is the cause of the delay? Why have the Government not taken action sooner, and why do they now think it is convenient and proper to do what they said they could not do three years ago? Do the Government think that the position has improved in the meantime, and, if so, on what grounds? This is what the Minister himself said later on in the document:These recommendations were made on the understanding that an index so constructed would serve until such time as full consideration could be given to the details of a permanent index relating to a period when the expenditure of working-class households could be recorded in a market considerably more free than it was when the Committee made its Report.It all goes to show that the Ministry regarded the index we are now discussing as a temporary expedient, which would be replaced by something more permanent when conditions were more stable. I challenge the Minister and his supporters that they are frightened of the matter, and that they have let sleeping dogs lie as far as they could.
§ Mr. Osborne
I have done my best to wake them up. I started nagging the Minister again on 2nd May of this year. I asked the Minister of Labour:What steps he is taking to establish a new cost-of-living index in the place of the old index, which was abandoned in 1947.The Minister made this remarkable reply:The matter is kept under constant review.It means that nothing had been done for a two and a half years. He continued:As soon as conditions are appropriate, steps will be taken to institute a new family budget inquiry.719 Again, I ask, what are the conditions he thinks should obtain for a new inquiry to be made? I probed the Minister further, and he gave me this remarkable excuse for doing nothing:We cannot spare the manpower required for that yet."—[OFFICIAL REPORT, 2nd May, 1950; Vol. 474, c. 1559.]What a paltry and poor excuse for having waited two and a half years.
§ Mr. Osborne
There is Government expenditure which can be justified and that which cannot be justified, such as the groundnut scheme which cost us £45 million.
I did not let the matter rest there. I put a Question to the Chancellor of the Exchequer on 26th October, and this comes to the heart of the problem as far as the industrial workers whose conditions are fixed by this index, are concerned. I asked him upon what basis he calculated, between the months of May and August, this year, the cost of living had gone down, and therefore the value of the £ had gone up from 16s. to 16s. 2d. The Chancellor gave this surprising reply:By reference to the movement in the Interim Index of Retail Prices between May and August this year. This movement reflected the cheaper summer tariff for coal "—How many industrial workers can afford to buy cheap coal in the summer? This is nonsense of the worst order; it is nonsense even for a Socialist Minister. He continued—together with certain price reductions, of which the most important averaged about 60 per cent. for cabbages, about 40 per cent. for onions, cooking apples, and cauliflowers, and nearly 10 per cent. for tomatoes."—[OFFICIAL REPORT, 26th October, 1950; Vol. 478, c. 398.]What a futile excuse for reducing wages. Because of that statement, no less than 350,000 wage packets were reduced. I know that in my city there was a good deal of resentment, not only that the wage packets had been reduced, but about the excuse given for reducing wages. If we are to get the industrial co-operation and harmony that we require, it is necessary to give better explanations to the workers of why their wages are being cut.
§ Mr. Osborne
I am suggesting that it should be based on the prices of commodities that workers can buy. I challenge the hon. Member to say how many of the poor workers he is supposed to be pleading for in his constituency, are able to buy cheap summer coal.
§ Mr. Osborne
I challenge the hon. Member to say how many people in his constituency could afford to buy coal during the summer at cheap prices. Their wages were reduced on that fiction, and against that I am protesting.
§ Mr. Osborne
I do not believe in cheap anything. I realise that if the fruits of a man's labour are sold too cheaply, he cannot be paid a fair wage; but, having been paid a fair wage, we are entitled to a fair day's work.
My last question was on 5th December. I asked the Minister of Labourin view of the fact that conditions were not regarded as sufficiently stable whilst the wage and dividend freeze was in operation to carry out a family budget inquiry as the basis of a new cost-of-living index, what conditions he has laid down as requisite before such an inquiry can he made and a new and more reliable cost-of-living index be established.Between March, 1947, and the end of this year we have gone through the Cripps stage of stability by wage and dividend "freezes" Surely the new inquiry could have been made during that period.
§ Mr. Jenkins (Birmingham, Stechford)
I think that the hon. Member completely misunderstands an important point here. What one means by stable conditions in the carrying out of a survey of family budgets is conditions in which people's demands express themselves completely freely, and are not distorted by rationing. It does not matter whether prices are stable, because that is beside the point.
§ Mr. Osborne
The index must be affected to some extent by prices, because 721 if one set of prices goes up very much, purchases will go from that group to another group. The pattern of spending is inter-related to prices, and we cannot divorce the two. During a period of two and a half years we had a maximum of stability and goodwill, but the Government funked doing this job. Now they are going to do it when conditions are just about as difficult as they could be. Only last week the Minister said to me, in the course of a reply:The household expenditure for some time after the end of the war would he abnormal, and therefore misleading if used as a basis for weighting an index.This was only last week. He went on to say:I have now"—"now," notice—decided to call the Advisory Committee together again "—after they had been doing nothing for two and a half years—and to ask them to consider whether, in their opinion, this is now the case."—[OFFICIAL REPORT, 5th December, 1950; Vol. 482, c. 171]During the next 12 months, prices are going to rocket in this country beyond the imagining of most people. There could not be a worse time than the next 12 months in which to carry out a budgetary inquiry into the relationship between spending and wages. In an industry with which I am associated, we are having great trouble with our supplies and prices. I want to give the House a set of simple facts. The cotton that we are using to make utility cloth cost us before the war about 19d. per 1b. Before devaluation we were paying an average of 50d. per 1b. Before what I call "the Korean crisis" we were paying 85d. per 1b. Today we are having to pay 110d. per 1b. Nobody can hold those prices back. Take wool. Before the war we were paying 3s. a 1b. Before devaluation—let us not forget that the Chancellor of the Exchequer said that nothing would go up after devaluation except bread—we were paying 10s. Before Korea we were paying 16s. Today we are paying 23s., and that is for our basic raw material.
§ Mr. Osborne
They went up on the Monday morning after devaluation, because the Ministry of Supply put up the cost of basic materials by £50 per ton. We had to pay pence per 1b. more for our own raw materials within two or three days. The fact is that prices will go up terrifically during the next year. Consequently, there will be a demand for higher and higher wages. The demand is inevitable. To hold an inquiry under such conditions is almost fatuous. I want to know why the Government have refused to deal with the matter earlier.
§ The Parliamentary Secretary to the Ministry of Labour (Mr. Frederick Lee)
Is the hon. Gentleman now saying that his hon. Friend the Member for Dorset, West (Mr. Digby) should withdraw the Motion because it is entirely inappropriate?
§ Mr. Osborne
No, I am not. I am trying to show by facts and references, and from replies received from the Ministry of Labour, how the Government have shirked their duty during the last two and a half years. Now, at a point almost of panic, they are going to do a job which ought to have been done a long time ago. I finish by saying that I hope that the job will be done as well as possible in these difficult circumstances, that employers and workers will be given every detail of how the index is compiled so that they will have every chance of criticising it, and that they will be given the answers to questions which they require. Upon a good index, depends very much future peace in industry.
§ 1.15 p.m.
§ Mr. Jenkins (Birmingham, Stechford)
I am bound to say that I think that the case which the hon. Member for Louth (Mr. Osborne) put up was quite insubstantial. If he had read the leading article in "The Times," which appeared, I think, on 20th November, and to which the hon. Member for Dorset, West (Mr. Digby) referred in his speech, he would have seen there a complete reply to the arguments which he has been putting forward. The difficulty about instituting a new inquiry immediately after 1947, when we had just put into operation a new index which was a great improvement on the old one, was that a great number of goods were still rationed and in short supply. In those circumstances people's budgets were distorted and had 723 not settled down to their true post-war pattern.
§ Mr. Osborne
Is it not a fact that a great many goods are rationed and in short supply today, and that what was true after 1947 is still true?
§ Mr. Jenkins
It is true that many goods are in short supply, but the number is very much less than it was in 1947. If one is to apply the hon. Member's argument, it would justify us in voting against the Motion moved by his hon. Friend, and for suspending any inquiry for a very long time indeed until one was absolutely satisfied that all the shortages had disappeared. I do not think one can apply that argument. One has to strike a reasonable balance and, as soon as the shortages are no longer great and the economic pattern is not distorted out of all recognition, institute an inquiry with a view to getting a more perfect cost-of-living index.
Most speakers today have agreed that it is most desirable to institute inquiries with a view to replacing the Interim Index of Retail Prices by a more complete and adequate guide to the changes in the cost of living. I have not agreed with all the points that have been made from the other side of the House and certainly not with some of the emphasis put on them. Perhaps I can bring out both my agreement and disagreement with some of the speeches if I just run over what appear to me to be the main disadvantages of the present index.
Obviously, the first disadvantage is that the index is now 12 or 13 years out-of-date. It is based upon a collection of family budgets made in 1937 and 1938. Why is that a disadvantage? Because the pattern of expenditure has changed during those 13 years, In what way has the pattern changed? I would say that it has changed in two ways. First, it has changed owing to shortages which have arisen because of the war and to the rationing which has continued since the war. That factor applied very much more two or three years ago than it does today, when we are moving back fairly near to the 1938 level. While that may mean that we were a good way from the 1938 position in 1947 and are now much nearer and that the index has not been a completely adequate guide over the three 724 years when we have been moving into a different position, it does not necessarily mean that from this point of view it is not an adequate index today.
The other reason why patterns of consumption have changed over the period is that working-class demand has greatly expanded. As others have already said, things which were previously regarded as luxuries for the great mass of the population have come more and more to be regarded as necessaries or even necessities. That is a movement which has been going on not merely in the last 13 years but for many decades and centuries. If hon. Members opposite think that the improvement in the standard of living in the period between the wars was as great as or greater than it has been in the last ten years, it is in some ways curious that in those days they allowed an index based on budgets collected as long ago as 1904 to go completely unchallenged and to allow to remain in existence an index the basis of which by 1947 was 43 years out of date.
§ Mr. David Renton (Huntingdon)
Surely the hon. Gentleman's argument can only be based on the assumption that the standard of living and the pattern of living necessarily change with each other? Surely he will agree that the standard of living can improve without the pattern of expenditure changing very greatly.
§ Mr. Jenkins
I should say that it would certainly be extremely difficult for the standard of living of working people to improve very greatly while they continued to spend 60 per cent. of their total incomes on food, which was the position in 1904, and I really do not think that that point amounts to very much. We are therefore in the position that hon. Gentlemen opposite used and entirely accepted an index which, in the end, was more than four decades out of date. We are doing very much better than that. All sides of the House are already complaining about an index based on budgets which are only 13 years out of date. On the whole that is a great improvement.
The second of the three main objections to the present interim index which I would put forward is one which was 725 mentioned in passing by the hon. Member for Dorset, West. It arises from the method of collecting the information. Great numbers of budgets are collected from families throughout the country. By definition, people who keep budgets and write down carefully and meticulously in a little book what they spend are not really a fair cross-section of the community. They are a very careful section of the community. I suggest that to a very large extent that results in certain things in their pattern of expenditure, such as rent, rates and probably clothing and household furnishings and things of that sort, and perhaps food, being exaggerated, whereas luxury expenditure, that or on tobacco, alcohol and all sorts of other luxuries, is not adequately portrayed.
When we are drawing up a basis for a new index, it is important that we should try to get round that difficulty. In this connection, I very strongly support the suggestion which was made by my hon. Friend the Member for Edmonton (Mr. Albu) that the Social Survey should be used to do this job of inquiry into patterns of family expenditure. I agree with him that it is very expert in that job, and I believe that, by carrying out the new methods of inquiry into subjects of this sort which have been developed in recent years, it could get round the difficulty of a distorted sample because of budgets coming forward only from an un-typical section of the community.
The third disadvantage which the index seems to have is that it is an omnibus affair. There is only one index and yet there are in the country a great number of different people with different tastes and habits. Here one has to try to strike a happy mean. The only way completely to get over that difficulty would be to have 50 million indexes, an index for each individual. Immediately we put together the patterns of expenditure of two individuals, the index or the average which we get from the two distorts the pattern of expenditure of both the people concerned. That applies over the whole field.
The point was put forward by the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who spoke of the great difference which there is in this respect between someone who happens to live in a pre-war council house and someone 726 living in a post-war council house, or someone living in a rent-controlled flat and someone living in a flat which is not rent controlled. However, it is not possible to go round constructing different indexes for all these categories of people according to exactly where they live, or what they do, or their particular type of expenditure. All we can do is to try to construct something approaching a happy mean.
While there would probably be a good case for having different indexes for different parts of the country—one for London, one for the big towns and one for the more scattered areas—it is also clearly desirable that we should have some official index to reflect the different movements of the cost of living in different social and income groups. The hon. Member for East Ham, North (Mr. Daines) quoted some figures which Mr. Dudley Seers published in the Oxford Bulletin of Statistics showing that the rise in the middle-class cost of living since 1938 has been a good deal sharper than the rise in the working-class cost of living, and that the rise of what he defined as the "upper middle-class" cost of living had been sharper still. That is no doubt the case. It probably agrees with all our observations. I do not object at all to the fact that that is so. It is very desirable that we should have our other measures for equalising things out fortified by movements in this direction, but it is certainly important that we should know what has been taking place here.
Therefore, when it comes to dealing with the new index, it is important that we should consider the possibility of constructing, not a vast number of different indexes, but a fair number of different indexes so that we can at least see the differences between different income groups and possibly the differences between people living in certain broad geographical areas.
Having dealt with these three disadvantages of the present interim index, I would say that in this debate we ought not to exaggerate those disadvantages. Clearly the present index on which we are working is very far from being a perfect instrument of infinite sensitivity, but neither is it so wildly wrong that it gets a trend in the cost of living completely wrong. It is possible that when we get a month-to-month change it may not be 727 terribly reliable, but if we take the evidence of the index on a year-to-year basis I am sure that it portrays reasonably accurately what has been happening.
I know that the Opposition do not like to admit this at the present time. They want desperately to show that the cost of living is going up much faster than it has ever done. The Chancellor of the Exchequer said some time ago that the fact that the index showed that on the whole there had been a rise of only two points during the first 10 months of this year, whereas during 1949 there was a rise of four points and during 1948 five points, was rather unpleasant and unwelcome to the Opposition, who tried to get round it by saying that the index gave a distorted picture. I do not think it does.
It is probably the case that the rise in the items which enter into the Interim Index of Retail Prices has probably been slower in recent months than in the last two years, and I think that the reason why, despite that, public concern about the cost of living and public interest in this problem has undoubtedly been growing is to be found in what has been happening to total wages during this period. One finds that the rate of increase in wages has slowed down very much in recent years. In 1948, total wages were 12½ per cent, above 1947. In 1949, they were over 5 per cent. up on 1948, but this year they were a good deal less than 5 per cent. up on 1949. This really shows that it is not merely apologists for the Government who say that the important thing is not so much the cost of living but the standard of living; it is also said by the people generally, as shown by the barometer of their interest in this question.
§ Mr. Jenkins
Certainly. Nobody will dispute that an increase in the cost of living affects adversely anybody living on a fixed income. What I was trying to explain was the apparent paradox between the fact that the cost of living is rising rather more slowly this year than in the 728 previous years, and that people are much more concerned about the cost of living now than they were in previous years. The explanation is the relationship between the movement in prices and the movement in wages generally.
§ Mr. Geoffrey Lloyd (Birmingham, King's Norton):
Does that, in the view of the hon. Gentleman, mitigate to a large extent the gravity of the continually increasing cost of living? Has he considered, for example, the effect that would have upon savings?
§ Mr. Jenkins
If the cost of living is going up in any case, it is much better that it should be neutralised as far as possible by movements in wages. But I agree that if we could plan things exactly as we wanted, the desirable solution would be one in which prices were kept steady and wages perhaps rose a little over a period of years, so that there was a rise in real wages without any rise in prices. Certainly, however, if one is in the situation in which we are at present, one has only to look at the facts of the world position, and to listen to the speech of the hon. Member for Louth (Mr. Osborne)—when he talked of the cost of living changes and prices of raw material —to realise that, whatever Government is in power, there is no hope of holding the cost of living steady in the months to Come.
Therefore, it is not enough to look just at the cost of living and at the value of money as though that were in itself the complete answer to whether or not a Government is doing well. The complete answer is whether or not the economic welfare of the people is improving. After all, the cost of living is extremely cheap in Central Africa and extremely high in New York, but anybody who attempted to argue from this that the economic welfare of the Africans was higher than that of the Americans, would be putting forward a very doubtful proposition.
Let us by all means welcome the fact that the Ministry of Labour are to undertake inquiries to try to get a more up-to-date and, I hope, in other ways better measurement of changes in the value of money. I hope they will solicit the services of the Social Survey in that task. Let us welcome that, because we want to know as much as we can about the movement of prices and the way in which they 729 affect people; but let us not be foolish enough to think that the only things which affect the standard of living and the well being of our people are changes in the value of money and in the cost of living, because any change in real income is at least as important if not more so.
§ 1.35 p.m.
§ Mr. Redmayne (Rushcliffe)
The hon. Member for Stechford (Mr. Jenkins) has been at pains to prove that the need for a new index is due to the increase in the standard of living. I suggest that there is an even greater reason, the increase in the diversity of wage rates as opposed to the standard of living, and I shall try to prove to what extent that has affected the need for a new index. It is obvious that an index has two objects which are separate issues. Its primary and narrow object is to give a measure of value for wages in specific industries. Its second object is, if possible, to give a general measure of value over a much wider field. To my mind it is doubtful whether the same index can achieve the same objects. Indeed, I would go so far as to wonder whether the accepted form of statistical average can achieve the answer at all.
I know that the hon. Member for Stechford has to catch a train and is paying me the courtesy of listening to my speech. I would like to excuse him from that. The hon. Member can read my comments in the OFFICIAL REPORT. I have some fellow-feeling, because I have to catch a train myself.
I have expressed some doubt as to whether an index can do what we want it to do under present conditions. I am not at all sure that, as an alternative, it would not be far better to take 20 carefully chosen sample families, each from a different wage level, trade, and type of house. Week by week and month by month, from watching their actual expenditure, we could then see, systematically and accurately, the progress of Mrs. Pensioner Brown, Mr. Stoker Smith and Mr. Cashier Jones. We could use their actual problems as our guide for the changing period which, I am sure, will follow during the next five or 10 years. It would give a much greater possibility of accurate deduction of their problems than we can get from a statistical average index. I do not know whether an economist or a statistician would swallow that theory for one 730 moment, but it seems to me to be a reasonable one in the conditions of today.
It is clear that the present index, and its relation to the survey of family budgets, relates to insured manual workers generally and to clerical workers under £250 a year. When that survey was taken, nearly all manual workers under £250 a year were included and, therefore, it made a class in itself. Taking the same people today, manual workers generally are a far wider class of wage earners whereas the salary earners corresponding with those people probably earn no more than £400 per annum because salary rates have not increased at the same pace.
The average earnings in industry in 1937 and 1938 have been put at various figures and it is difficult to find a concrete figure. Probably it is round about 65s. but, like all averages, there is a diversity between the lower part of the average and the upper part. Today, the average wage rate is £7 5s.; again, there is a difference, between the lower part of the average and the upper part, but that diversity is much wider than it was. It might be fair to say that it goes from £4 a week at the lower limit up to £20 a week at the higher limit, and yet it produces an average of £7 a week. I realise that even £4 excludes a lot of people, but not, I think, a lot of wage earners.
My next point is that the possible methods of disposing of a range of wages as wide as between £4 and £20 per week, coupled with endless variations for size of family, type of house, tastes, vices and virtues, set a task which is far beyond the scope of the existing index in its present form, and is the real reason why the index has grown out of date. The question, therefore, is how to confine the scope of the index so as to restore its usefulness as a measure of value.
It was estimated in 1937 that 74 per cent. of all the families in the country had as the head of the family a man earning £4 a week or less. That 74 per cent. was divided approximately equally between men earning 50s. to 80s., and men earning below 50s. It is significant that in 1950 there is that same percentage of about 70 per cent. of all families who are earning, now, £8 a week or less—that is, the corresponding block. It is also significant, and, of course, is a good thing. 731 that of that 70 per cent., only one-eighth are below the half way mark of £4 a week. It also shows, however, that the great bulk of families are below the £8 a week mark, which is very near to the average of all wages, and are mostly somewhere above the £4 a week mark.
I suggest, therefore, that any new index or any adjustment of the old index should be based, not on classes of workers, manual or otherwise, but on a fresh review based on that standard of £8 a week or less, which embraces the majority of wage earning families. It might be thought useful also to fix a lower limit of £4 a week.
To strengthen my point I refer to the argument of the Chancellor of the Exchequer and others, and also of hon. Members in the debate today, who wish to defend or to attack the Government on the accusation that money values are falling. We are told that prices are rising steadily, but that wages are rising steadily also, so that no one is really any worse off. That is an attractive argument, but the average wage is produced from a wide diversity of wages rates, some very high and some low, whereas the average price is, in the main, the price typified by the cost of living index, which is taken from the middle or bottom of the price range.
Therefore, the argument is not really fair to a great mass of people—70 per cent. of all families—who earn £8 a week or less. They lose both on the swings and on the roundabouts. The cost of living has the greatest significance for them, and this most important index of all should be adjusted to become a more accurate guide for that large majority of families to whom I have referred.
My next point concerns the question of a second index. I regard the first index as one of prime importance, which should have priority and should be changed into a new form as early as possible. There is, however, a strong call for a second index, based on the assumed habits of the remainder of the earning families who, for the sake of argument, are called the middle class. Today, the important point—and hon. Members opposite can congratulate themselves about it whenever they choose—is that "middle class" represents any family, however employed, of which the head of the family earns from £8 to £20 per week. 732 A great number in that class are people for whom the old index was designed, but who, through changes in circumstances, have grown out of the scope of that index.
This middle class index must take a very different form, because the pattern of expenditure is very different. In my first group—those earning below £8 a week—basic expenditure takes 55 per cent. of income; direct taxation, only 5 per cent.; savings, only 1 per cent.; and the rest, which might be called spending money, or the extra ancillary expenditure which is spent on better standards of living, 39 per cent. But for the second class the pattern is very different. Basic expenditure is only 36 per cent.; spending money, which includes, of course, a much greater proportion of indirect taxation, is 37 per cent.; savings are 3 per cent., and direct taxation, a very large part of the budget every week, is 23 per cent. Therefore, a middle class index, or, as I prefer to call it, a taxpaying class index, must include two factors which are largely excluded from the index today. One of these is taxation, and the other is the full incidence of price rises, including Purchase Tax, on consumer goods, in which, of course, that taxpaying middle class has a large share.
I suggest to the Parliamentary Secretary, that there is a call for a second index of this type and, which is important, that there is a definite need for both those indexes to be related one to the other or to a common base, so that it can be fully realised throughout the country that those who are deemed fortunate to have been called the middle class, and whom I call the taxpaying class, bear a burden of tax and costs fully in proportion to their good fortune.
I do not in any way produce this as a political point, but I suggest that there would be great social benefit in helping, by the use of these two indexes, to show that the country is not divided, as some more prejudiced members of the community and some Members of the House might have us think, into two classes, one of which is workers, and the other, spivs, or whatever other name it is sought to apply. It is, however, divided as to 96 per cent. of all families. On one side is 70 per cent.—that is, workers who do not pay a great deal of tax; and 733 on the other side, 26 per cent.—or workers who pay a great deal in tax—making 96 per cent. of all families. If that honest truth could be brought home to all people by the use of these two indexes, we might make a step forward in social progress.
§ 1.48 p.m.
§ Mr. Darling (Sheffield, Hillsborough)
This is the first time that I have ventured to address the House, and although it would be presumptuous of me to ask for the indulgence of hon. Members for so haggard a maiden, I hope that they will bear with me if I am not as coherent as I should like to be.
I am glad that the Minister of Labour has decided to call his Advisory Committee together to give him advice on whether a new cost-of-living index could properly now be brought into being. It would no doubt be improper for me to comment upon the speeches that have been made in the debate, but I am glad that my right hon. Friend is taking action in this way and calling the statisticians together, because it would be better to have the job done by them than by politicians. Although, as I say, it is improper for me to comment on the speeches of hon. Members, some of the statistical heresies to which I have listened today have sent shivers up and down my spine.
I do not know what the Advisory Committee will say to my right hon. Friend, but the chances are that they will advise him that the present is not an opportune time to introduce a new cost-of-living index. There are many reasons for this. This index, as many hon. Members have said, must be based on an accepted pattern of living habits, and if those habits were in the process of changing considerably within a short period the basis of the index would quickly go out of date. That could be covered, as has been suggested, by altering the basis of the index from time to time as living habits change. But, when we are in the process of big changes in living habits, it seems undesirable to start on the compilation of a new index. A new index, if introduced now, or if the basis of it is worked out at the moment, would be affected by the shortages of some articles which go into the cost of living.
I am sure that no one would suggest that the present supplies of meat which 734 go into the budgets of average families could be considered normal or at least satisfactory, and that kind of shortage should work itself out before we talk of compiling a new index. In addition, an index introduced now would be affected, I hope, by the abnormally high level of taxation. No one can say what would happen if the present high level of tax on cigarettes and tobacco was reduced. It is quite probable that the buying habits of the people in regard to tobacco and cigarettes at lower prices would be quite considerable.
At present we are having many changes in what might be called the social habits of the people and they have to work themselves out before we come to more stable conditions. For instance, a large number of people will be buying television sets within the next year or two as new television transmitters come into operation up and down the country. I believe that when people buy television sets their social habits change considerably. They probably spend less on beer and entertainment and spend more time at home. If we start collecting material for a new index now, in a few year's time it is quite likely that that material would be useless because the social habits of the people, or of a proportion of the people, will have changed very quickly. I agree that a new cost-of-living index is desirable, but I do not think that work should begin on it during this period when so many changes are taking place.
The time to decide when it would be proper to undertake the preparatory work for a cost-of-living index is, of course, quite important. Suppose the Advisory Committee suggested to the Minister of Labour that the collection of family budgets, and so on, should begin as quickly as possible for the compilation of a new index. It would take some weeks or months to gather the investigators, together, to decide on the questions to go into the family budget questionnaires and to get the questionnaires printed. The inquiries would begin, perhaps, in the middle of next year when we should be just beginning to feel the full effects of our re-armament programme.
One of the effects of the re-armament programme might be to alter the social pattern, the buying habits, of the people quite considerably. It is quite likely that 735 they would spend less than they have been spending on durable goods, furniture and household fittings, and so on, because there would be fewer of those things in the shops, perhaps, and to spend more of their income on immediately consumable things like beer and tobacco and such things as football pools and entertainment. It is quite possible that most wages will go up during the next year and if there are fewer durable things on which to spend higher wages that will alter the pattern of people's behaviour. That, I hope, will be temporary, but no one at this stage can say how long it will last.
In the meantime, because I think it would be wrong, at this stage, to set on foot inquiries for the purpose of compiling a new cost-of-living index, it would be desirable to go ahead with the social surveys which have been suggested from both sides of the House. In addition to the reasons which have been given, I have a reason for wanting these surveys which I do not think has been fully mentioned. I have the idea—I may be completely wrong and I want the information and data about it—that the differences in incomes and the differences in the patterns of expenditure today are widening, not only between middle class and working class, but within classes and particularly within the working class. We are now getting the situation, because so many of the lower paid workers have not had what I believe is their due, where steel workers, for instance, are coming out with wages of £15 a week and more, while some groups of railwaymen, at the end of their weeks' work, still come out with less than £6.
The social effect of having one group of workers getting about three times more in earnings than another group of workers is that the pattern of social behaviour between groups is very much different and the differences are becoming wider. It will be extremely difficult to put the two groups together in a family budget survey, take an average and say that that average is the basis of a new cost-of-living index, because within that average there will be some items of expenditure which belong to the top group, the fellows who are well off, which do not appear at all in the budgets of the family below the line.
736 If those items happen to come down in price there will be a suggestion that the cost of living has come down, whereas, in point of fact, a reduction in price of those articles, which did not go into the family budget of the lower paid people, will not affect the standard of living of the people getting the lowest wages. That being so I want more information about this spread of wages and the wide differences in earnings and the wide differences in patterns of expenditure of various groups which make up what we call the working class.
I also want to see—and I am sure that this is the wish of the whole House—a very good scientific and rather widespread survey of the incomes and living habits of the middle class, and of old age pensioners. I may be wrong about it, but I have a feeling that the present Interim Index of Retail Prices has less relation to the standards of behaviour of pensioners than to any other group in the community. I would like to see just how old age pensioners are living, where they are feeling the pinch and how their standards compare with the standards of those living on wages and salaries. That is an inquiry which is long overdue.
That leads me to suggest that rather than ask the Minister's Advisory Committee to advise on a new cost-of-living index, it would be better to ask the Advisory Committee to set about preparing the basis for a complete survey into the incomes and living habits of the whole community. Do not leave anyone out; let us bring the whole community in. I see no reason at all why residents of mansions and expensive apartments in Park Lane should not be visited by the Minister's investigators just as the investigators, visit old age pensioners, workers, bank clerks, and so on. I would like a complete survey of the whole community so that out of the information that comes through that survey we could decide when it is an opportune time, an appropriate time, to start the compilation of a new cost-of-living index.
I want to see a new cost-of-living index for the reasons given by hon. Members on both sides of the House—there is no point in repeating them—but I am convinced that the present time is inopportune for that. But the present is opportune for the wider survey that I 737 have suggested, a survey which will show us just how the people of the country are living and what effect post-war changes have had on the living habits of the whole community.
§ 2.0 p.m.
§ Mr. Vosper (Runcorn)
It falls to my lot to congratulate the hon. Member for Hillsborough (Mr. Darling) on his excellent maiden speech. When I arrived here this morning, I had no idea that I should have this unexpected pleasure, which again proves that this place is full of surprises. All hon. Members will agree that his was a well-considered contribution to this debate, full of material not hitherto provided, an achievement which is difficult towards the end of a debate. We shall look forward to hearing him on future occasions.
It seems to be fashionable today for hon. Members who have taken a vow of silence to enter this debate. I do so not merely to support my hon. Friend the Member for Dorset, West (Mr. Digby) but because before I took a vow of partial silence, I had been making some study of this index. It might be well at this stage to look at the Motion on the Order Paper and see what is the object behind it. I think it falls into three parts: first, to ask whether an index of prices in some form or other is necessary; secondly, whether the index we have is accurate; and thirdly, what action should be taken and what form of alternative index should be provided.
Much has been said on the first point, and I think that we are all agreed that an index is necessary. I think that some of the confusion which arises, however, not so much in this House as in the country, is due to the fact that people mistake the present index for a cost-of-living index. The present index is the Interim Index of Retail Prices, and it measures changes in retail prices on a weighted basis. A cost-of-living index is designed to show a percentage increase or decrease required to maintain a given standard of living. Those two indices are substantially different. It is due to that more than anything else that much confusion has been caused.
It is a fact, which has been made abundantly clear, that large numbers of people in this country attach a great deal of importance to this index. It is not merely a question of the 1,500,000 people who have their wages tied to this index. I 738 believe that some 30 years ago a considerably larger number of wage earners had their wage rates based on the cost-of-living index. There is also a large army of other people who have wage agreements decided by the National Arbitration Tribunal—to which my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) referred—or have their pensions or other fixed incomes decided by some public authority; these people know that the present index, even if not directly attached to the wage or pension decision, must at least have a bearing on the subject.
I also think that the Government pay rather more attention to the present index than is justified. There is the tendency, if I may suggest it without being too controversial, for the Government rather to look on the present index as a sort of little tin god—that provided it shows no appreciable change, then the cost of living is being stabilised and we are controlling inflation. There is also the tendency—I put it no higher than that—to manipulate the index so that if there is an increase in certain elements, it may be due to natural causes, some other aspect of it is varied so as to control the overall figures.
§ Mr. Vosper
Most certainly. I can think of many ways. My hon. Friend the Member for Dorset, West, gave three or four examples. I suggest that there is a tendency to use price controls and possibly utility standards to that effect.
§ Mr. Mulley
Is not the hon. Member confusing what is a real economy with the cost of living, because obviously if the index is of any value at all, it measures the saving to people of utility prices, food subsidies and the rest? That is what it is for.
§ Mr. Vosper
I quite appreciate that point. I am merely suggesting that if the overall index rises, there is that tendency to look around and see what can be reduced, possibly at the wrong time, artificially—
§ Mr. N. H. Lever (Manchester, Cheetham)
What is the wrong time? Surely the time to vary the price of a commodity within the control of the Government is precisely when the price 739 of some article not within the control of the Government goes up? Why does the hon. Member say "at the wrong time," except from the point of view of the Tory Party howls about the rise in the cost of living?
§ Mr. Vosper
I am sorry that the hon. Member tries to make a controversial point out of this matter. I think it is a fact.
We are all agreed that some index is necessary today, because there are not only those people whose wages are dependent upon it, but there are those people on fixed incomes whose conditions I believe all Members wish to see improved, and who must attach importance to it. Therefore, we must have an accurate index.
The criticisms of the present index are two-fold. The first criticism is that it is not sufficiently comprehensive. I do not wish to pursue that point. The second is that it is not weighted accurately. We have been told by many hon. Members today that there is a change in our pattern of living. We are all glad to see that. It has been due to the increase in our real national income, to the redistribution which has taken place in the last 11 years —I need not elaborate that point, I think we are all agreed on it and welcome it: to the policy within the last 11 years of subsidies on foodstuffs and other items on the one hand, and of subjecting certain items to Purchase Tax on the other hand; and also to the conditions of shortages I suggest that all these have affected the pattern of living, and, therefore, the basis of this index.
It is possible to go further than that, and to produce some proof that the present index is weighted inaccurately. The hon. Member for Edmonton (Mr. Albu) referred to the fact that this survey included some 14,000 family budgets in 1937 and 1938. In fact, I think that the number was 9,000; 14,000 were written to but only 9,000 sent in their returns. In that survey the average household was one of three and three-quarter persons. In each household the average was one and three-quarter wage earners. It was estimated from these budgets that in the industrial areas the average expenditure on consumption was 85s. per week and in the rural areas 57s. 4d. Putting those 740 figures together on the basis of 15 to 1, which was the accepted ratio, we find that the average consumption expenditure was 83s. Of that 13s. was on consumption which was not included in the index. In fact, some 70s. was the average expenditure in 1937–38 on the items in this index.
It would be true to say that today that same household of three and three-quarter persons, including one and three-quarter wage earners, would spend 150s. on the same items. I cannot prove that point, but I think that from what has been said earlier there is substantial evidence in support of that figure. Therefore, it is possible to find from the index what the index would allow that family to spend today on those items, and also to find what they actually spend on such items. I will mention only six items. According to the index, that family of three and three-quarter persons would today spend 3s. per week on butter. We have the authority of the Minister of Food for saying that the expenditure on butter today would be 2s. 0½d. for three and three-quarter persons, which is nearly a 50 per cent. difference. In the case of meat, the index tells us that the figure is 9s., whereas the Minister of Food says that it is 5s. 10d. In the case of tea the amount is 2s. 4½d. in the index and 1s. 6¾d. in reality.
One finds that that family of three and three-quarter persons would today spend 13s. 3d. on rent, according to the index. I do not know whether or not that is a fair average. In the case of fuel—coal, electricity and gas—the index is probably further out than it is in the case of any other item, because it would permit that average household to spend only 6s. 1d. per week on coal and coke, and only 3s. on gas and electricity. Then the index allows the family to spend £5 15s. 3d. on children's clothing and £3 11s. 3d. only on drapery and soft furnishings. I would not attempt to say what the actual average is, but I am sure that it is more than that.
The general conclusion I should like to draw is that the weighting of the index is wrong, that it tends to over-weight those items which are subsidised, such as food and controlled houses, but it underweights those items which bear Purchase Tax, and also even those in the utility standards of clothing, household materials and council houses. I suggest that there is a case for finding a more accurate standard.
741 The hon. Member for Stechford (Mr. Jenkins) defended the Government for not doing anything about this matter earlier, and I appreciate his reasons. However, I should like to draw attention to two paragraphs in the Report of the Cost of Living Advisory Committee. At the end of paragraph 11 they say:Accordingly, we propose with your permission to continue our consideration of this matter and recommend that such budget and other inquiries and tests he put in hand as will enable us to express our considered view on the subject in due course.The third of their conclusions was:We also recommend that the technical committee, when it has prepared this scheme, should then address itself to the problems involved in instituting a regular series of budget collections.That was in 1947. I have been through every issue of the Ministry of Labour Gazette since that date to find out how they have continued to implement that recommendation. I can find no trace of any action having been taken. Whether or not there was a case for no new index since 1947, surely there is some blame attached to the Government for not allowing those inquiries to be pursued.
I wish to make a few suggestions to the Committee which is now being reconstituted. Most of these points have been made already, but if they are put in one consolidated list they may be more effective. I hope that it will be possible to have a more comprehensive survey. There was a tendency in the last one to have the budgets of good housekeeping families and not those of the bad housekeeping families. I hope that it will be possible to include families with budgets up to £600 per annum. I do not think that that is unreasonable compared with the £250 limit in 1937. I hope that consideration will be given—no more than that—to the question of making the index more comprehensive, so that it includes insurance contributions and other items now excluded. I know that there is an argument against doing that, but the survey would be more real if that could be done.
I support hon. Members who have asked for a second index to be compiled, possibly at a later date, for the middle-class group. This time the index should be currently weighted as opposed to being weighted on a fixed basis. That would seem to be perfectly possible. and it was suggested in 1947.
§ Mr. Vosper
In paragraph 11 of the Gould Report that is suggested, and it is also suggested in many documents published by the International Labour Office. I hope that when the figures are compiled and future statistics obtained, it will be possible to extend the area from which the figures were obtained on the last occasion. I also hope that some consideration will be given in an effort to tie up the new index, if it is compiled, with the indexes of other countries. Many countries have schemes which may be superior to ours, but there is no comparison between them at the moment. The International Labour Office have deplored the fact that it is impossible to draw a comparison between various countries. That would appear to be desirable.
Lastly, it is possible that there should be some link made with the present index. That point was made by my hon. Friend the Member for Dorset, West. I fully appreciate that it will take a long time to compile this index, but I think most hon. Members agree that it would be a job worth doing. In the interim, I suggest that we should try not to attach too much importance to what I consider to be the present faulty Interim Index of Retail Prices.
§ 2.15 p.m.
§ Mr. Mulley (Sheffield, Park)
I hope the hon. Member for Runcorn (Mr. Vosper) will forgive me if, before attempting to deal with some of the points he made, I say how delighted I was to hear the maiden speech of my hon. Friend the Member for Hillsborough (Mr. Darling). I am very pleased to be the first speaker from this side of the House after my hon. Friend. He represents a constituency adjacent to mine in Sheffield. It was a privilege to hear his excellent delivery, coupled with the considerable information which he gave, based on a long study of this subject. Many hon. Members will have heard my hon. Friend on the radio and I think that I express the view of the whole House when I express the hope that we shall not have to wait for too long before he makes another contribution to our debates.
743 I wish to discuss some of the points made by the hon. Member for Runcorn. In general, he had some good ideas, but I thought that his statistical background was not as sound as his intentions. The point he made about food was of extreme interest. Other hon. Members opposite have said that the difficulty with the present index is that it does not give sufficient weighting to food. In fact, they have said that the weighting is too low and that food changes have not been reflected to the degree to which they should have been shown. He said that, because of the desire of the Government to manipulate the index, food items were weighted too much so that the subsidy items would conceal what otherwise would have been a rise in the index. If he reads the speeches of some of his hon. Friends, he will see that that cannot be the case. It is a criticism, with which I think we can agree, that perhaps food is weighted too low in the index. As a result of that, because food prices have risen more than any others, perhaps the index has not shown as big a rise as would have taken place.
§ Mr. Mulley
The hon. Gentleman's point is that some of the non-subsidised foods are insufficiently weighted.
The hon. Gentleman also mentioned the possibility of having an index which could be tied up with the indexes of other countries. In its way, that introduces the whole of the difficulty in this business. If we try to compare the cost of living of the French worker, with his wine and coffee, with the cost of living of the British worker, with his beer and tea, we find it most difficult. Those are only four commodities on which there is an enormous difference in taste. It is also difficult to draw up a cost-of-living index which will give satisfaction to all the workers in our own country.
It will be agreed that the basis of the criticism of the present interim index is that the pattern of expenditure in 1937–38 was different from that of today. We on this side of the House wish that it were even more different. We take credit rather than blame for this fact. I would much sooner see an inadequate cost-of-living index than have the standard of 744 living of our people on the same pattern as it was in 1937–38. I will return to that point a little later.
I should like to be a little pedantic before being controversial, with no apologies for the controversy. I wish to make some comments on the use of statistics. Whether we like it or not, the subject which we are discussing today is simply the use of certain statistics, and they can only be approximate. There is very great danger in using statistics unless the full data upon which they are based is known.
Perhaps I may quote two short examples. In discussing the effect of alcohol on health, an Indian Army colonel said that teetotallers were five times as prone to illness as those who took a little alcohol, and he supported that by saying that when his battalion was on the Indian frontier he had a 10 per cent. sickness rate among those who liked their glass of beer and a 50 per cent. sickness rate among the teetotallers. They were quite impressive statistics until one person present, who was a statistician or who knew something about statistics, asked how many in the battalion were teetotallers. The statistics were less convincing when he found that there were only two teetotallers in the battalion.
We must be very careful, too, about the use of averages. I wonder what kind of picture statisticians would provide of the average Member of Parliament, if they were given the necessary data about Members of Parliament? I think the lady Members might be a little upset, and I am sure some male Members would be upset, if they were told that they were 97 per cent. male and 3 per cent. female. Other hon. Members would take satisfaction from the fact that the average figures of consumption of alcoholic liquors by Members of Parliament were, say, half-a-pint of beer and one-twentieth of a bottle of whisky a day, while others, as my hon. Friends who have been the life-long advocates of temperance, would wish firmly to dissociate themselves from that impression. Another example would be if it were suggested that hon. Members smoked one-sixth of a cigar a day. Some unscrupulous platform orators could take that statistic, if it were true, to say that we spent the whole of our time looking for the butts of cigars.
745 Statistics can be twisted and, in discussing them, hon. Members should realise that we cannot get a set of statistics which will give a complete picture. For example, there is the subject which we were discussing yesterday and last week. On the same basis of averages, we could suppose that a Member of Parliament spent 75 per cent. of his Sunday in quiet meditation, which would give the utmost satisfaction to the most Sabbatarian of his constituents, and 25 per cent. of his Sunday on the sinful and furious riding of roundabouts.
Thus, statistics can give a ludicrous picture, and even if we could find a better way of dividing up these figures, they would still not give an index of an average Member of Parliament. Similarly, I do not think we can ever obtain an index of the cost of living which will fit the pattern of living for any particular individual. There will obviously be criticism on that ground. We should examine, therefore, what the Interim Index of Retail Prices is meant to show. It is based on household budgets of 1937–38, and it simply measures the changes in prices in proportion to the consumption of those commodities at that time.
I agree with hon. Members that there is a considerable difference between the pattern of expenditure today and that of 1937. I would stress the point, in particular, that there is an enormous difference in the pattern of expenditure today between families of exactly the same income. For example, it would be quite wrong to exclude from any measure of the cost of living, cigarettes, alcoholic drinks and similar items, but obviously the changes in the cost of living for a family in which one or two of them smoke and one or two of them like a drink, are quite different from the changes in families where that is not the case. Among other things, there has been an enormous increase in the cost of smoking cigarettes and tobacco, as I know to my cost, in the years since the war—an increase quite out of proportion to the general level of increased prices.
There is also a difference between people who are buying furniture and carpets—who have just married—and those whose homes were complete before the war. Other hon. Members have already suggested difficulties about rent- 746 controlled houses and people who have to pay the inflated prices of scarcity. There is no method of collecting information which would avoid these difficulties. One cannot have a smoker's cost-of-living index and a non-smoker's cost-of-living index unless at the same time there is a non-cinema-goer's index, a non-drinker's index, a non-meat-eater's index and so on. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who is fond of logic, will agree that if we were to pursue that to its logical end we should have to have nearly 50 million different indices.
There is one point I should like to make to the hon. Member for Kingston-upon-Thames. It arises from that part of his speech in which he permitted me to intervene—that part in which he suggested that there should be an annual review of the weights. I do not think that is a practical proposition because if we did so we should not have the advantage of a comparison one with the other. That is not to say that we should not have a new survey this year or next year upon which to base a future cost-of-living index, but obviously the change would be made over a period of time during which the other index would also run. There is no exact comparison, of course, but there is something like a comparison, whereas if we changed the basis of the index and weighting every year there would be no means of comparison at all unless every year we set off a new series of numbers. After five or ten years there would be at least five or ten indices.
I have looked through the writing of various people who have made suggestions for providing a better index than that provided by my right hon. Friend and, after reading three or four pages and seeing the diagrams of how they differ, I am convinced that the results of having five or ten indices are to be avoided at all costs. If we want to bring the cost-of-living index into even greater disrepute, the best way is to have about ten indices, because there could be no relation between them, since as we change the things included in the list of commodities, there can be no comparison. If we had about ten of these indices, the whole foundation for any cost-of-living index would disappear and people would quote that index which suited their particular case.
747 I want to emphasise the arguments which have been advanced by hon. Members opposite about the difference between the pattern of living today and that of 1937. While it is true to say that the middle-class budgets were not included in that survey, it is also fair to say that unemployed budgets were not included either, and I have one or two quotations here which I think are relevant to our discussion.
They cover precisely this period of 1937 to 1938 and they come from the "Daily Sketch," the Kemsley newspaper, now known as the "Daily Graphic." I do not think I can be accused of being unfair if I quote from this source. In a leading article on 17th January, 1938, the paper said:The winter budgets of the poor present more serious problems than usual on account of the increased costs of living. Dearer coal is perhaps one of the most difficult to contend with. Especially hard hit are the older folk …Beverley Nichols, writing in the same paper in 1938, said in a rhetorical question to his readers:Have you ever been really hungry? So hungry you could sit still in a cold, grey room and keep on drinking water because water, at least, helps to stop the pain?On 18th January, 1938, the "Daily Sketch" under the headline "Black Days in Poverty Land," said:Tuesdays and Wednesdays are the black days in the distressed areas in London. The average midday meal consists of a pennyworth of bones boiled with a few vegetables.Those are the facts from the period on which the present cost-of-living index was based. Here is another example from the same paper. It is said that one of the people who received parcels and help from the "Daily Sketch" soup kitchens was an old lady pensioner aged 90 with a 10s. pension who was paying 6s. in rent. Hon. Members opposite will, perhaps, remember that then they were on this side side of the House, and had just refused a request from the Labour Opposition of the day for an increase in old age pensions.
I think it is undoubtedly true that, because of full employment and social security, family allowances, and the extension of the utility range, there has been opened to the ordinary working-class family a much bigger range of expenditure than was possible for them in the 748 period 1937 to 1938. Is the weighting of the index really so bad that it misleads the people? Dudley Seers has been quoted in this debate, and has made a study of the subject. Writing in the Bulletin of the Institute of Statistics at Oxford in January, 1949, he made a number of criticisms based on a comparison between the budgets of the Interim Index, and their weighting, and the budgets of 65 families in 1947 to 1948. They were collected by the Oxford Institute of Statistics. He said that fuel and light, clothing, household durable goods were weighted too highly; that is to say, any alteration in these items would lead to a disproportionately large increase in the cost-of-living index.
Of course, some of the criticisms we have heard recently about the index are precisely the other way, namely, that it takes insufficient account of the changes in the price of clothing, changes in the price of coal, changes in the cost of household durable goods. These are fields, of course, in which the argument about Purchase Tax is put. I agree that articles that are considered within these ranges do not take much account of Purchase Tax, but at the same time I would say from my experience that very few working-class families buy outside the utility range if they have any opportunity at all of obtaining utility articles.
As a counter to the too high weight of these items, he says, miscellaneous goods and services are weighted too little. I do not think there is such an enormous distortion as we have been led to believe in the present Interim Index, desirable though it may be to change it, and I was a little surprised when some hon. Members actually suggested that when the prices of important things like fresh vegetables went down the cost-of-living index actually moved. I think that one hon. Member said that when there was a drop in the price of fresh vegetables, to his surprise the index dropped a couple of points. I think that part of the trouble is that we always concentrate on the things that go up and not on the things that go down. There have not been so many of these recently, but a very important item in many housewives' budgets is milk, and this winter the price of milk has not been put up to the winter price, as it was in previous winters, and that obviously, 749 in terms of the retail cost-of-living index, will have a considerable weighting effect.
Also we tend to forget that because of food subsidies, food prices have been very largely stabilised. That obviously is a much more important item in any basis of comparison of one period with another in the cost-of-living index than clothing and furniture and carpets, and items of that sort, because we must buy food every week whereas we do not buy clothing every week, and we do not buy carpets and furniture every year. I know that some people who still have not replaced the linen, for instance, which they bought before the war, and which has worn out, and who, indeed, never had any decent clothes and furniture before the war, find this a particular grievance and difficulty at this time. These are, of course, always items which hon. Gentlemen opposite include in the interesting leaflets they send out to the people to point out the inadequacy of this cost-of-living index.
I would stress, as one hon. Member has already stressed, the important differences in weights that are to be found within broad commodity groups, and I have some independent evidence, which I hope hon. Members will accept, and which tends to show that the bias in the index since its inception in 1947 has been rather too high; it has shown a disproportionately high increase in the cost of living. I shall quote now from the Bulletin of the Institute of Statistics at Oxford, the June, 1950 number, page 189, an article by D. G. Holland, who has been associated with the various inquiries this Institute has made into this problem. He says:In conclusion, it can be said that although the 'working class' cost of living may have risen faster than the 'personal' cost of living over the period 1948–49, and for instance there is some evidence to show that 'working class' clothing prices have risen faster than 'personal' clothing prices.I should explain that by "personal" he is referring to a comparison with the National Income and Expenditure White Paper figures on personal consumption and expenditure.Yet the Interim Index almost certainly overstates the magnitude of the increase of the 'working class' cost of living, largely because of a systematic bias within the food component of the Index.In other words, the food index has shown a greater rise than the actual rise.This appears as a strange contrast to the downward bias which was deliberately imparted 750 to the old Cost-of-Living Index, but its importance in present day circumstances should not be underestimated.Hon. Members will remember the deliberate distortion caused, for example, by subsidising candles.Thus, for example, 'real wage' calculations are increasingly based on the Interim Index of Retail Prices, and a crude comparison between this index and the Index of Weekly Wage Rates indicates that 'real wages' were constant over the period 1948–49. In fact, because of the upward bias in the Interim Index of Retail Prices it is almost certain that wage rates rose faster than 'working class' cost of living over this period and that, therefore, 'real wages' were slightly rising.That is, I think, an interesting different opinion on the so called distortion of the present interim cost-of-living index.
I should probably be out of order if I enlarged on the question of what is the basis of the cost of living, and how it should be reduced, and how hon. and right hon. Gentleman opposite, if they were elected to be the Government, would reduce it; but I would emphasise that we must be very careful not to throw the baby away with the bath water. We have had a great discussion today about the statistics upon which the cost-of-living index is based, but we shall not, whatever we do about the cost-of-living index, deceive the people of this country about the rise in the cost of living, or the improved standards of living of today as compared with those in 1937 to 1938, on which the present index figures are based. I can say quite confidently on behalf of my constituents—faulty though the index may be—that they prefer the 1937 index and the 1950 standard of living compared with the prospect of returning to the 1937 standard of living which hon. Members opposite may offer them in order to rectify the index.
In conclusion, I would point out to my hon. Friend the Parliamentary Secretary, who is to reply, that it is very important, if he is going to start a survey of budgets for the compilation of new figures, that this should not be done by post, but, if possible, should be done by experienced social investigators. In the same connection, it is extremely important not to try to get too many different sets of figures, too many indices or levels. If we have one reasonably satisfactory cost-of-living index—I do not think the present one is bad; we must realise that it is only a rough-and-ready guide—we shall be satisfied. We must pay attention 751 to what has caused the rise in the cost of living and not attempt to pull wool over the eyes of the public by throwing the blame back on to the Interim Index of Retail Prices.
§ 2.42 p.m.
§ Mr. Mellish (Bermondsey)
Having listened to most of the debate, I am now in the position of speaking when most of the "meat" has been absorbed. A number of persons whom I intended to quote have already been quoted by previous speakers. However, I wish to make one or two comments about what has already been said. The hon. Member for Runcorn (Mr. Vosper) talked about manipulation by the Government or by Government Departments with regard to the present index system. I think that was an extremely dangerous thing to say. The idea that somebody was purposely committing this fraud would do more than anything else to undermine a great deal of confidence among our people.
In wage negotiations, the trade union movement has come up against the present cost-of-living index again and again. As has rightly been said, when the arbitration boards came to certain decisions, they did so on the basis of the present index figures. To say that there has been manipulation by the Government means that the arbitration boards have, in fact, been dealing with figures which are a colossal fraud. That is a shocking thing to say and, as anybody knows who has any responsibility in the matter, it is not true.
I accept the argument that the present retail index figure is completely out of date, and that it must be altered. We welcome the calling together of the Advisory Committee, and I hope that when my hon. Friend comes to reply he will tell us the terms of reference to be given to this committee. I also hope he will enlighten the House on how the Ministry propose to tackle this matter. Will they give any sort of guide as to what they actually want, and the form in which they want it?
I agree with what was said earlier by an hon. Member on this side, that we ought to have a complete survey, and that it ought to be undertaken now, because we must be concerned not only with the cost of living, but also with our new standard of living. The old retail price index figure which we have today was based on budgets for 1937 and 1938 of 752 £250 a year or under. But those families with an income of £250 a year or under, upon whom the present figures are based, are entirely different from the families in a similar position today. They never desired the things which our people have today. Mr. Dudley Sears, who has been frequently mentioned in the debate, said that the figures between 1938 and 1947 for all items were increased by 62 per cent. and, for food, 38 per cent. Since then, all items have gone up by 14 per cent. and food by 23 per cent. He said that, compared with 1938, prices of all items are now 85 per cent. higher, and food, in particular, 70 per cent. higher.
There is one thing that ought to be said in relation to that figure—which, I agree, is exceptionally high—and that is that we must put it in relation to the difficulties which the whole world has had to encounter in regard to rising prices. Without making party politics out of it, we know that our figures are as low as those in any country in the world. Norway and Sweden may compare with us, but, in the main, the figure for our increased cost of living is the lowest in the world. That is something we ought to be pleased about, instead of apologising for it all the time and going on the defensive regarding the cost of living. We ought to remind our people that we are living in a world where prices generally have gone up, and that the increase is not confined to this country alone.
This country is fortunate in having a Government who have helped it by subsidies, and so on. As a trade unionist, I am concerned with the proportionate effect which this increase in prices generally, and in food in particular, has had on wages and salaries. The Oxford University Institute of Statistics says that the average earnings in October, 1938, were 53s. 3d. per week. Today, they are £6 1s. 9d. The figure of wage increases today as opposed to that of 1938 is 192 per cent. From the figures I have already given, it will be seen that wages have gone up considerably more than prices. This has been one of the difficulties that has confronted the trade union movement for the last two or three years.
We must face the fact that, in the main, wages have only gone up among that section of the community which has been able to earn higher wages. For in- 753 stance, dock workers and piece workers are alleged to earn £14, £16 and £20 a week. That may be so in some cases, but they represent only a small fraction of the whole industry. Those people have been able to counteract the increases that have occurred since 1938. Nevertheless, we must recognise that in making a new index we must take into account the new demands of our people. Merely to say, as was said in 1938, that there shall be a minimum is not enough. We know that we have now removed the grinding poverty of the past.
We must make sure that we fix a minimum, below which the Government and, indeed, any Government, must make certain that nobody ever falls. The figure fixed in 1938 did not take into account the unemployment at that time; it did not consider the people who were well below it when it was fixed. It is no good talking about Christianity unless we are prepared to apply it and fight for it. To an enormous number of people the cost-of-living index is utter nonsense and has been so for years. If the Government gives advice to the Advisory Committee they should say, "We want you to arrange now for a new cost-of-living standard." They should, at the same time, take powers to ensure that they will not allow any section of the community to fall below it. We may eventually have to take into account a control of wages policy from the Government angle and say that certain wages shall be paid to ensure that minimum.
§ Mr. Beverley Baxter (Southgate)
Is not what the hon. Gentleman was saying what Lord Beaverbrook outlines in his manifesto which was greatly scoffed at by the T.U.C. and trade unions, that there should be a minimum wage of £6? Why was the trade union movement against that?
§ Mr. Mellish
The difference between what Lord Beaverbrook says and what I have to say is that I am sincere. They know his past record. For Lord Beaver-brook to describe himself as the champion of the working class is farcical. We have to make sure that we have a certain minimum. The Government have to take the responsibility for that. We differ from the Conservatives because we believe in governmental control and they do not.
754 Let us ask the ordinary people how they would deal with the cost-of-living index. Do not let us ask the experts of Oxford University. The ordinary people have some simple solutions which might be well considered. Will anyone tell me if he can understand why, in the case of an article value £1, which carries Purchase Tax of 6s. 8d., and the manufacturer puts the price of that article up—which he may be justified in doing, because of increased wages—the Purchase Tax should go up as well? It is no good the Treasury saying that this is all very difficult and extremely hard to apply. The Treasury have to make certain that they can find a way in which that can be dealt with. Another thing which the ordinary person wants to know, especially in a constituency like mine, is why, on Fridays and Saturdays, the price of vegetables and many other things in the shops is so very much more than it is from Monday to Thursday. Why is it that private enterprise exploits people in that way?
§ Mr. Reader Harris (Heston and Isleworth)
That is a very simple question to answer. When these goods reach the shops on Saturday they are usually fresh, and on the other days, when the old stock is being sold off, it is reasonable to reduce the price.
§ Mr. Mellish
I do not think that that is the answer. The hon. Gentleman cannot do much shopping himself. Potatoes, cabbages and other things in the shops on Thursday automatically go up in price on Friday and Saturday, because that is when the average person goes shopping and, therefore, can be better exploited
§ Mr. Harris
That is what the British Electricity Authority have done. When people need electricity in the winter they charge more for it, and in the summer, when they do not need it so much, they charge less.
§ Mr. Mellish
I do not think that that is a fair answer at all. The whole principle of a reduction in summer and an increase in winter is surely to get people to buy. The extra charge on commodities at week-ends which have been in the shops all the week is done deliberately. I challenge the hon. Gentleman to ask the housewives in his constituency if they are prepared to accept the reasons which he has given for the increase about which we are talking.
755 This whole problem is one that we have to deal with courageously, bearing in mind that we have to construct a minimum below which no one can fall. If we do that, we shall have done a good job for the country as a whole. We must never get away from the food subsidies which we have laid down since we have been in office, because they have been a great saving for our people. Those who cannot protect themselves need the most protection. I think the time has come when we ought to say again and again to the middle class that what they have done is to help the working class. There should not be a class warfare which we have been accused of carrying on by representing one class against another. [HON. MEMBERS: "Oh!"] It is so. The hon. Member for Southgate (Mr. Baxter) knows that it is so. He has not been here, so he has not heard what has been said.
§ Mr. Baxter
I have been here during the last 10 minutes, and I am glad that I did not come in before.
§ Mr. Mellish
If the hon. Member had come in earlier he would have heard some extraordinary statements from some of his hon. Friends.
I have tried to show, in talking of the cost of living, that we have to be concerned with the person at the bottom. Earlier in the debate it was said that we had to apply cost of living in all sections of the community—the lower class, the middle class, and the higher class. How many cost-of-living indexes are we to have? Who is to defend the middle-class worker and who is to defend the lower paid worker? We have done more to cut out class hatred and class distinction than any other party. We have to arrive at a figure below which no one can go.
§ Mr. Reader Harris
I think that the hon. Gentleman ought to withdraw the very unjustified slur that he made when he said that it was farcical that Lord Beaver-brook should be regarded as the champion of the working class. He knows very well that there has been no stauncher champion of the working class.
§ Mr. Mellish
I am not prepared to withdraw it. Having read the "Daily Express" for a number of years I should say that Lord Beaverbrook has no claim to regard himself as such a champion. I 756 think that the reason why the hon. Gentleman objects to what I said is because he must be employed by Lord Beaver-brook.
§ 2.58 p.m.
§ Mr. N. H. Lever (Manchester, Cheetham)
I am sorry that my interjection in the speech of the hon. Member for Runcorn (Mr. Vosper) was thought by him to be too controversial to warrant a reply. In fact, I was seeking to help him to clear up his point. If he had availed himself of the opportunity, he would not have received the castigation he has had from the hon. Member for Bermondsey (Mr. Mellish), for I feel sure that his remarks were open to that misinterpretation.
He was charging the Government with deliberate distortion of the issue, although I do not think that he meant to do that. I think that his complaint against the Government was something other than that. He was bringing, as I understand it, complaint against the Government that when the price of some article over which the Government had no control went up, and would therefore tend to send up the cost-of-living index, the Government duly intervened with regard to other articles in the index to keep the price down and thus balance and offset the increase in price on the article over which the Government had no control.
I suggest to the House that that complaint can only be made by those seeking to make political capital out of the rise in the cost of living. The Government intervened because they are concerned with the welfare of the people. When faced with an inescapable rise in the price of articles of working-class consumption, all their ingenuity and concern should be to reduce the price of other articles which people have to buy. It is very sad, if it takes away a talking point from Members opposite, and their calamity howls should be to that extent diminished. I do not think it is so much criticism, as in the nature of a backhanded compliment.
I am bound to say that, since 1945, we have witnessed a very astonishing change in the party opposite. I hope Members will not resent this compliment coming from an insignificant back-bench Member like myself, although they have already learned of it from far weightier figures in the House. The party opposite before the war held that everything was for the 757 best in the best of all possible worlds. In 1945, when they came in inspissated gloom to the House as an Opposition for the first time for many years, their idea of the policy of an Opposition was to ask a number of questions about the amount of petrol the Lord President of the Council was using, and why the post in East Renfrewshire was coming in late.
I am glad that the Tory Party have gained experience in opposition which has broadened their outlook. They have become a party of perfectionists—a party which hold that there is nothing good in the worst of all possible worlds. The very adequate price index we use is by no means perfect, but it is a handy and ready measure. It is quite good enough for the Tory Party to use in attacks made on the Government. But they now want, not one index, but a number of indices with which to register extremely accurately the temperature of the country on its cost of living.
I cannot help feeling that the trouble about indices, as far as the Tory Party is concerned, is that when they use them they think that, Socialism being in the nature of a disease from which the country has been suffering very seriously for the past five years, they should show a terrible illness. The fact of the matter is that when they look at the thermometer they find that the patient is doing extremely well. So what do they do? They want to smash the thermometer. It is very interesting to observe that, one after another, Members opposite have deplored the minute unbalance of the index, whereas the same party wants to use the index as a stick with which to beat the Government, if I may be forgiven for mixing my metaphors. The right hon. Gentleman the Member for Woodford (Mr. Churchill), when describing the Government and their supporters and the whole apparatus of Socialism, talks of the "money cheat"; but he often uses the index in order to measure the amount of "money cheat" in which we are supposed to have indulged.
I observe that the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) made a very interesting intervention in a newspaper in my constituency, the "Manchester Evening News." He contributed a learned discourse on the difficulties of the cost of living, and he suggested certain 758 remedies. I observe that, in castigating the Government for the increase in the cost of living which had already taken place, he relied absolutely on the cost-of-living index. The fact of the matter is that the index is right when it can be used to suggest something that is unfavourable to the Government.
I am surprised that the hon. Member for Kingston-upon-Thames considers that the index is so unreliable, and then uses it in an attempt to criticise the Government. I am surprised, also, that the Leader of the Opposition has used it in alleging the extent of the "money cheat" which is supposed to have gone on. If I remember correctly, the Tory Party have always objected to "snooping" as a result of statistic gathering by the Labour Government, and on this ground they voted against a Bill we were anxious to pass in the last Parliament. But they now want a middle-class index. Why not an upper-class index as well? It would be nice, for example, for Members to be able, free of charge, to glance at a White Paper from the Vote Office showing the number of cases of rickets and malnutrition among surtax payers.
§ Mr. Lever
It is a part of this egalitarianism of the Tory Party which makes them resent the class privileges of the bureaucrats of the Coal Board and their salaries. I have been so pleased with the broadened outlook of the party opposite since they have been in opposition that I am tempted to think hopefully of what it will mean to them if they are still in opposition 20 years' hence. I certainly hope that the people of the country will not fail to notice the beneficial results upon the Tory Party of the last two elections and will take every step to repeat the treatment. The danger I fear is that they will go so far to the left that in about 20 years' time we will no longer be able to welcome them into the Labour Party.
There is no honest desire for a number of indices. I do not see why we should have an index for different classes. We might equally demand a regional index as well, because habits of living and spending are not the same in Lancashire as they are in Mayfair, even among the same class of society. The House should address itself to the practical problem of 759 working out an index based upon working-class standards and working-class costs of living, but to seek for perfection in that respect is to seek for the impossible. There has always been a desire to produce the Economic Man, who spends every farthing of his weekly budget with prudence and shrewdness, but that beloved idea of Victorian economists has had to be abandoned. The attempt is being made to discover the same kind of gentleman in a rather more human form. He is assumed to have one vice and we are prepared to work out his weekly beer consumption to a recurring decimal.
There is a great danger of the Government attaching too much importance to statistics. I do not belittle statistics, which are useful as a guide, but it is no use telling Mary Evans, a spinster living on her own, that the cost of drink, of going to the cinema or using tobacco has gone down, if she does not drink, go to the cinema or smoke, but is more concerned with the practical necessities. In the same way, it is no use telling somebody that the average level of wages has gone up if the person concerned does not get an increase in wages or in pension. It must always be remembered that statistics do not suffer and averages do not console. The whole idea of the Government should be to get a slightly more modern version of the cost-of-living index, and I welcome the intention to do so; but we shall not find that it is a solution of our cost-of-living problems. The present index is substantially accurate, but it can be improved upon, and such improvement would be welcomed on all sides of the House.
§ 3.8 p.m.
§ Mr. Beverley Baxter (Southgate)
The hon. Member for Cheetham (Mr. N. H. Lever) has just given us a vivid picture of 1945 when the Tory Party reeled back from the battle of the polls and gazed in dismay at the party in power. According to the hon. Gentleman, we at once began to ask such questions as: "How many motor cars has the Lord President?" and "How much petrol does he use?" It may be that we asked such questions, but may I suggest as a reason that public morality was more evident then than now? Also the hon. Gentleman must remember that we were seeing the 760 creation of a new ruling class—what we might call "the commissars." If indeed we have ceased to ask those questions it is perhaps because our conscience has been dulled by what we gazed upon.
In the very few remarks I want to make, I will first of all reply to the hon. Member for Bermondsey (Mr. Mellish). As far as we are concerned, he is rather a popular member of the Socialist Party. Many times I have liked his speeches and admired his spirit, as, for example the other day, when he peremptorily told the Postmaster-General that he was wrong. We all like that sort of thing.
§ Mr. Baxter
Those of us who have the unpleasant duty of gazing day by day upon the Socialist Party study them and sort them out, and the hon. Member for Bermondsey is one of our favourites. Therefore I cannot understand his bitterness today. I made a very mild interjection about Lord Beaverbrook's manifesto and the hon. Member replied—I think it was quite unworthy of him —that the only possible explanation is that I am employed by Lord Beaverbrook. That is worse than the Chancellor of the Exchequer's castigating the Leader of the Opposition. It is a most unworthy thing to say that the only possible excuse is that my opinions are for sale and that I am here as a deputy either to praise some man or to put forward his policies. That is a particularly wrong thing for a young Member to say.
§ Mr. Mellish
With great respect, if I have offended the hon. Member for Southgate (Mr. Baxter) I am quite willing to withdraw. However, I certainly do not want to become at any time a favourite of the Tory Party. The day I do that, I shall resign forthwith from the House of Commons.
§ Mr. Baxter
It seems to me that there is then nothing left for the hon. Gentleman to do except to apply for the Chiltern Hundreds. If he is an honest man and this is a pledge, then perhaps this is the last time we shall hear him speak in the House.
§ Mr. Emrys Hughes (South Ayrshire)
Cannot the hon. Member for Southgate endear himself to this side of the House by making a slashing attack on Lord Beaverbrook?
§ Mr. Baxter
If it is thought that Lord Beaverbrook and I have had a peaceful association for 25 years it is not true; it has been a very stormy one. Since my moral position has been challenged, may I say that I have drawn no salary from Lord Beaverbrook since 1933, when I was the editor of the "Daily Express" and we reached two million a day. That seemed enough, and I resigned. I have had no salary from him since that day. It is true that from time to time his newspapers have published things which I have written, but that is purely accidental and has no relation to salary.
Before we dismiss this controversial matter, may I tell the House that Lord Beaverbrook is intensely unpopular in the Conservative Party. He made war upon them, and when I was the editor, too. We made war upon them with "Empire Crusade" candidates. I assure hon. Members that a man who is so heartily disapproved of by both sides must have some substance to him or he would not antagonise all sides. Even the Liberals do not like him.
But may I say in all seriousness that no man has so championed the need for higher wages for the workers over and over again. He did more to raise the standard of wages in Fleet Street than any other man. He has been a good employer. He has also fought for the Empire. Hon. Members should not under-rate him, for if they do "Crossbencher" will never speak well of them again. Perhaps that is unfair. He will always speak well of them because Lord Beaverbrook likes to publish things against himself. That is quite unlike Lord—I forget his name fortunately—who owns another group of newspapers.
An interesting philosophical and political point was raised just now from the curious miasma of the hon. Member's mind. The hon. Member for Bermondsey has today not been at his best. He had the idea that the Tories fought the election on class warfare. It was the very opposite. Socialism, the parent of Communism, depends upon class warfare and class hatred. We ourselves do not preach that. If he thinks he can dismiss the middle class as now having been obliterated by the coming of the age of Socialism he is wrong. The middle classes are a great invention of the English people; I say "English" deliberately, I do not want Scottish Members to get excited—
§ Mr. Baxter
After Europe had long had the cavalier and the peasant with nothing between them, the English invented the middle classes. They were a great invention and I, coming from the outer Empire, look upon this with tremendous admiration. Let hon. Members consider the middle classes carefully. From the middle classes this country draws its leadership—
§ Mr. Baxter
The leader of the Opposition is descended on one side from a famous Duke and, on the other, from a clever American family, so he is at one and the same time upper class and middle class. From the middle classes come our leaders of science, of education, of banking, of law, our doctors. It was from the homes of the middle classes—
§ Mr. Somerville Hastings (Barking) rose—
§ Mr. Speaker
Order. All this is very interesting, but we are discussing the cost-of-living index—not the English middle classes.
§ Mr. Baxter
Mr. Speaker, I was coming to that. First, I wanted to remind hon. Gentlemen opposite what this country owes to the middle classes, and then to end my remarks with what is happening to them. In my constituency I know at first hand what those who live on pensions are going through. School teachers, and so on, are being paid badly and are having a dreadful time, and when Government supporters try to explain away the suffering by this cost-of-living index, I say it badly needs an honest and courageous approach. I apologise, Mr. Speaker, for wandering from that, but in the contemplation of the great achievement of the English race I am apt sometimes to forget the strict course by which I always intend to follow your advice.
§ 3.17 p.m.
§ Mr. W. T. Williams (Hammersmith, South)
After burrowing through the underworld of Fleet Street to be led to "The Beaver," perhaps the hon. Member for Southgate (Mr. Baxter) will permit me to return to the subject of the debate. 763 It has been said that it is an essential principle of logic that if you start with the same premises you reach the same conclusions. That is never true in this House because today, as so often before, I find myself in agreement with the principles from which the Members of the Opposition start. Yet, when it comes to applying those principles in practical detail, I find myself, as indeed many of us on these benches do, reaching very different conclusions. I do not agree with my hon. Friend the Member for Manchester, Ardwick (Mr. L. M. Lever) that all is well with the Interim Index of Retail Prices. I think it has now ceased to be a good workable instrument, and I approve the suggestion that attention should be devoted to the limitations of that index as a measure of changes in the cost of living.
Further, I would suggest that the Government, having accepted that principle, should be congratulated upon having promised to try to discover an adequate measurement of the changes in the cost of living standards in this country. On the other hand, it has become quite clear, during the debate, that those of us who speak from this side of the House and those who have spoken from the other mean very different things, both in our criticism of the present index and in our desire to create a new one by under-taking study and activity to discover on what good principles the new index is to be built.
The hon. Member for Dorset, West (Mr. Digby), who moved the Motion, suggested that it was not his intention to be unduly controversial and that he hoped his speech would lead the House to agree upon the necessity for some inquiry. Then he proceeded courteously, but none the less pointedly—and those who spoke after him followed exactly the same pattern—to suggest that the present index was completely corrupt, which, in effect, means that the Government have for the last three years, anyway, and possibly for the last six years, been tinkering with the thermometer of the national economy.
§ Mr. Williams
It is true that at the beginning of his speech the hon. Member said he regarded the index as fairly accurate. He then went on to give ten ways, to which the greater part of his speech was devoted, in which the index was distorting the economy and resulting in a completely false picture of the state of the nation's resources. The hon. Member suggested, for instance, that the economy was distorted because the inclusion of subsidies, rationing, and the choice of items contained in the index as it now exists, completely misled the people. Subsidies, he said, kept the index down. If one is really looking for controversy, surely he is here "sticking out his neck." If it is true that subsidies keep the index down, it is also true that they do so by keeping down the cost of living also. It is important that at a time like this—
§ Mr. Digby
I am sorry to have to interrupt again. If the hon. Member will read my speech in the OFFICIAL REPORT he will see exactly what I said. He must be thinking of my remarks on rationing. I said that the effect of rationing, judging by the figures supplied by the Advisory Committee, was to keep the retail price index down.
§ Mr. Williams
I took a note at the time of what the hon. Member said. He also said, with regard to rationing, that if there were no rationing, since food has gone up more than other things in the index, the index figure would be considerably higher. He certainly suggested —I am not presuming to suppose that he did more than that—in relation to food subsidies, that one of the effects of the food subsidies upon the cost-of-living index was that that index was kept low by means of food subsidies, the costs of which were afterwards collected from other sources.
§ Mr. Digby indicated dissent.
§ Mr. Williams
The hon. Member then went on to say that the choice of items was very selective, that it was almost entirely restricted to the utility range, that it omitted a very large part of the purchasing of the people, and that it succeeded in distorting the real contribution which the Government were making to what he regarded as their essential 765 business, not of keeping down the index, but of keeping down the cost of living. He suggested that the choice of items succeeded in doing that by ignoring very largely the cost of the Purchase Tax.
I suggest that the effect of this kind of speech, which was followed over and over again by other speakers, is to create the very lack of confidence which those hon. Members are now asserting exists already. It is an old policy of propaganda that if you want to persuade the people of something, you keep on telling them about it until, in the end, they will say that there cannot be any smoke without fire. In those circumstances, it is very desirable that some kind of perspective should be brought back into this attack upon the existing index of retail prices.
If the index is accepted, as I believe the majority of people do accept it, as little more than a rough and ready gauge of working class incomes, it will be, or at least until now has been, successful in the main purpose for which it was intended; and it is, and ought to be, regarded as an honest attempt made by the Government to give a rough, and not a distorted, view of the economy of the nation in relation to prices and wages.
On the other hand, when we turn to an inquiry, or a demand for an inquiry, upon the sort of retail price index we would like to see established in place of the existing one, those on this side of the House feel it right to stress the fact that we believe it ought still to be based upon what has been called, and is adequate for the purpose, a roughly typically working-class budget. The fact that it does not make provision for the middle class is possibly some weakness, but it has to be remembered that the level upon which the most immediate effect of any change in any kind of retail index is felt is invariably the level of the poorest paid of the people.
It is still true that, in spite of the restrictions and increased limitations upon the middle classes, which we admit are there, the middle classes can take up the slack in any change in the cost of living much more easily, although not completely easily, than can the people who stay on the very lowest level. If we are anxious to get a rough and ready guide by which changes in the cost of living shall be related to wages and 766 incomes, and if we need some kind of index to provide us with the evidence by which that can be done, the most effective and most valuable point at which that can be maintained is at the level of working class wages. If we were to insist —as has been insisted by hon. Members opposite—upon a careful inquiry at all levels and an attempt to create a series of indexes which would be satisfactory for all levels and all incomes, the only effect of so overloading the index we were attempting to create would be that it would succeed in blowing its own fuses.
What is important, and ought constantly to be insisted upon, is the importance of a lower income price index. When an inquiry is undertaken I would urge those instituting the inquiry that it should still be, at least in its widest application and most intensive form, on that level, because there is still the area of the greatest need. In particular, I suggest that it is of the utmost importance that the inquiry—faced with the problems with which the Government are faced—should concern itself especially with a section of the community that has been too much disregarded by all Governments—pensioners and those on National Assistance Board scales.
It is these people who, even now, are most seriously suffering from the refusal of public authority to increase pensions and increase National Assistance scales until there is some real rise in the retail price index. Because these are the people who most keenly feel even a change of one point a careful examination of their standards would result in a new kind of index that would be of the greatest benefit at the point at which that benefit can most be felt.
§ 3.30 p.m.
§ The Parliamentary Secretary to the Ministry of Labour (Mr. Frederick Lee)
I believe that the House as a whole will agree that the hon. Member for Dorset, West (Mr. Digby), as he goes back into the fastness of the Whips' Office, can at least console himself with the thought that he has provoked a most interesting debate in which, in many instances, the points of view expressed have cut completely across party lines. It has been a debate which should prove quite enlightening in relation to certain views which have been expressed in the Press. One of the most remarkable features of 767 the debate has been that an appreciable percentage of hon. Members who have spoken have given it as their opinion that the time is not ripe for a permanent index of a new type to be formulated. I take a great interest in that view because it is a point of view which I have not seen expressed in any of the journals which have decided to discuss this issue with their readers.
The hon. Member for Dorset, West, asked me one or two points which I will try to answer. He asked me the date upon which the Committee ceased to sit. I understand that the Committee's last meetings were in March and May, 1947. It is natural that the hon. Gentleman should claim that because of the appearance of his Motion on the Order Paper the Ministry of Labour immediately went into a flat spin, and decided to answer the Question of my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) to the effect that we would call the committee together again and ask them whether, in their opinion, the time was now opportune to consider a new survey.
I thought that the hon. Member for Louth (Mr. Osborne) rather torpedoed the hon. Member's claim because he proceeded to read out a number of Questions which he had addressed to my right hon. Friend in the course of the last two or three years on this matter of the Retail Prices Index. He pointed out that the Ministry of Labour had been strongly opposed to the whole conception of a new index, and said that we had now reached a period, in fact the only period since 1947, when we should not consider this very proposal. Far be it from me to wish to widen any small gaps there might be in the party opposite; I do not consider that to be among my duties; but it is most remarkable than we should find the hon. Member for Louth, who for certain reasons is always well worth hearing, whether he dilates upon the economics of Punch and Judy or discusses matters concerning the Retail Prices Index, should now take it upon himself to tell us that this is the exact moment when we should do everything in our power to resist the attempt of his hon. Friend the Member for Dorset, West to get us to consider an alteration in the present index.
768 I did not like the suggestion which the hon. Member, and several other hon. Gentlemen, made in the course of their speeches that the Government were in some way attempting to keep down the index figure. If I took down aright the hon. Gentleman's words, he said he suspected that the Government were concerned to keep down the index figure as distinct from the real cost of living. Nothing could be further from the truth than that. We appreciate full well, as every speaker on both sides of the House has said, that the results of negotiations in industry—the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) instanced arbitration tribunals —are in large measure determined by the cost-of-living index.
It would be most foolish for anybody to try to give a distorted picture of the rise or fall in the cost of living in order, as it were, to cheat people who may be making applications for increases in their standards of living. It would be most short-sighted. Had the Government pursued that policy, we could not possibly have had the relative peace in industry that we have seen during the period while the Retail Prices Index has been in operation. The hon. Member, while saying that, went on to tell me that the Ministry should do everything possible to restore confidence in the index. We will do that, and I hope that he will join us in some little degree by refraining from making suggestions of that kind.
The question whether the time is opportune has been the principal issue in this debate. Several hon. Gentlemen have mentioned the origin of the present index. I suggest to the hon. Member for Louth, who has been courteous enough to tell me he could not stay to hear my reply, that it would have been unreal to try to get the basis of a permanent index at any period since the end of the war. We have had inevitable short—not necessarily actual shortages as against provisions before the war—but shortages brought about in many instances by the vastly increased redistribution of the national income, which has enabled working people to demand their fair share of the good things available on a far wider scale than ever before. In a number of ways one could show that, had we tried to take a new basis for a permanent index, that basis itself would have been completely obsolete in less 769 than the time taken to put it into operation.
I could not agree with many of the points made in describing the present Index of Retail Prices. I agree that there has been public criticism of the index, but I do not know of any country in which a price index is compiled where similar complaints are not made. We can all understand why that is so. It is obvious that the pattern of the spending of the average family income as revealed by an analysis taken at any given moment will tend to change after a period of time. As the House knows, my right hon. Friend is already taking steps to call together the Cost of Living Advisory Committee to advise him whether the time is now opportune to justify the holding of a new full-scale budget inquiry.
A number of hon. Gentlemen suggested that there should be some sort of impartial inquiry to see whether the index functions correctly or not. The hon. Member for Kingston-upon-Thames made that point. That of itself presupposes that the people who compile the index are not independent. That is untrue. The constitution of the Committee is based on a type of representation which guarantees impartiality.
§ Mr. Boyd-Carpenter
I hope that I cast no slight on the impartiality of this distinguished Committee. I made a suggestion, which was also made by the hon. Member for Edmonton (Mr. Albu), that this matter ought to be outside the hands of his Department and in the hands of a separate body.
§ Mr. Lee
I do not think that is the point I was discussing. I agree that the hon. Gentleman said that, but I was referring to that part of his speech in which he seemed to imply that there should be an annual review by some outside, impartial body. I took it that he meant some impartial body independent of the Committee itself and not independent of the Ministry. If I am mistaken, I am sorry. This body is itself completely independent and impartial. Perhaps I may explain its composition It is composed of representatives of employers' organisations, trade unions, the Co-operative Movement, retail distributive trades, Women's Institutes and, in addition, statisticians and economists. Although I am not yet in a position to 770 announce the inevitable changes which will take place in the personnel of the Committee, nevertheless I can say that the same organisations have again been approached and that the Committee will have broadly the same type of representation as when last it met.
The official cost-of-living index figure published for 17th June, 1947, was the last of a series which started early in the 1914–18 war and was based on a survey made in 1904 of the household budgets of some 2,000 working-class families. I do not want to become too far involved in party controversy, but I must point out that the survey which took place in 1904 was still the basis of a permanent Retail Prices Index in 1947. During that period the parties who were in power and in the position to alter it, could have done a little more rather than wait until the comparatively short period which has elapsed since 1947 and then make complaints that the present index is already out of date.
The old index was known for some time to be based on information which was out of date. It failed to take into account changes which had taken place since 1914 in the standard of living of working-class families and the proportions of their spending on food as distinct from spending on clothing or household goods. In August, 1946, the Cost-of-Living Advisory Committee was appointed, and here I would reply in particular to my hon. Friend the Member for Bermondsey (Mr Mellish), who asked me what were its terms of reference. It was appointed in 1946 to advise the Minister of Labour and National Service on the basis of the official cost-of-living index figure and on matters connected therewith. The immediate question on which the Committee were asked to advise was whether any revision of the basis of the figure was practicable or desirable in the then existing conditions and, if so, the revision which might be made.
As the House is aware, the Committee advised that the cost-of-living index should be terminated and that, as a purely temporary measure pending the results of further study and examination, a new interim index should be instituted to show future monthly changes in the level of retail prices weighted according to the pattern of consumption as revealed by the inquiry into working-class expenditure 771 made by the Ministry of Labour in 1937–38.
In the course of that inquiry, which covered the whole country, details were obtained at quarterly intervals from October, 1937, to July, 1938, of the family budgets of over 10,000 working-class households where the total income was usually not more than £250 per annum. Incidentally, about 1,500 agricultural homes were taken into consideration in that survey. After consultation with the British Employers' Confederation and the General Council of the T.U.C., the Government decided to accept the recommendations.
Several hon. Members have talked of trying in some way to link the old index with the present index, but I think I should make it quite clear that it is not possible to link the two because the basis of the present index is radically different from that of the old index. It is not possible to carry the present index back to 1938 because the information available on relative price changes, though sufficient to provide, for weighting purposes, estimates of the proportions in which the various sections and groups entered into the total cost of items at the base date of June, 1947, was not sufficient to compare the actual cost in 1937–38 with the base date of June, 1947, and hence to give an index of price changes since pre-war. Though the present index contains many more items than the old one did, several hon. Members have seemed to imply that there was not a sufficiently wide inquiry, and that the index does not cover a sufficient number of essential articles. I hope to show that that, in fact, is very far from being true.
§ Mr. Lee
I fail to see what good purpose it would serve. I have just said that the basis upon which that index was compiled was an inquiry in 1904, when the hon. Member and I were not born; so I do suggest that to try, as it were, to breathe life again into a corpse that perished so long ago would not be of very great value to the British people as a whole. I am afraid I do not see what purpose such a venture would really serve.
772 To measure the average monthly change in the general level of retail prices it is quite impracticable, and, I suggest, also unnecessary, to inquire each month concerning the prices of thousands of items on which money could possibly be spent. All countries which compile these indexes have to select a number of representative items for inquiry. In this country the index covers foodstuffs, household goods, a large number of articles such as clothing, coal, gas, electricity, other fuels, and a large list of typical household goods such as furniture, perambulators, sewing machines, radio sets, gas and electric fires, soft furnishings, and so on, and kitchen utensils such as soap, soda, cleaning materials, brushes, brooms, as well as saucepans, kettles, crockery. The index also includes fares, the prices of bicycles, and on the recreational side it includes cinema prices, football matches, tennis rackets, and digging forks for those with gardens, and other items such as toilet goods of various kinds, hairdressing, reading material, and drink and tobacco. I shall have a word to say so far as drink is concerned before I sit down.
In the period since 1937–38, family expenditure has been rather distorted by the war and by post-war shortages, and by rationing, and up to the present conditions have not been suitable for making any large-scale inquiry into family expenditure. My hon. Friend the Member for Hillsborough (Mr. Darling) dealt with that in his maiden speech, and I should like to congratulate him upon an extremely fine maiden speech to which many of us had looked forward. I am sure we shall all look forward to his next speech. In his speech today I thought he made that point extremely well. I suggest that, in the circumstances, these items on which inquiry has been made are, generally speaking, those which accounted for the greater part of the typical family expenditure in the prewar period, and which, taken in combination, may be expected to reflect changes in family expenditure as a whole.
§ Mr. Daines
I do not know whether my hon. Friend heard my speech, but I called attention to the fact that, of the goods which are rationed, the pre-war supplies bought by a family—I forget the exact figures—were something like 5 lbs. in the case of sugar, and 2 lbs. of butter, and a dozen eggs. Is it not quite obvious 773 that if those proportions are taken, then the whole of the weighting becomes distorted?
§ Mr. Lee
I am not disagreeing that there has been a change in the pattern of spending, or on the question of what it is physically possible to spend money on. I am not arguing that in the least. I do not think the Committee would claim the weights allocated when they started their job would necessarily correspond with the present family expenditure. I think it would be very stupid of me to try to say that, in fact, they would.
In this connection it should be mentioned that in some groups of similar items, prices tend to move together, so that the price movement for one or two selected items provides a satisfactory guide to the price movement of a group taken as a whole. In any average household, a rise of, say, 50 per cent. in the price of food is obviously more important than a rise of 50 per cent. in the price of soap, and when price changes for separate items are combined into a single figure, it is obviously necessary to give greater weight to food than to soap. Therefore, in the Retail Price Index, all the different articles or groups are given their weight according to their relative importance. The weight assigned to food is 348 out of a total of 1,000 for all items, while the weight for soap is only eight.
The relative weights were based on figures derived from the budget inquiry, but as the Retail Price Index started in 1947, and prices had changed between 1937–38 and 1947, the figures were adjusted to take account of the broad change in price levels over that period. It is recognised that when it is possible to make a large-scale inquiry into family expenditure, the expenditure will no doubt differ in a number of ways compared with the pre-war inquiry and that weights of a post-war inquiry would differ from those in the present index. No one can say what the exact effect would be upon the index of using a new series of weights of this kind. The index figure might be a little higher or a little lower, but I think it is probable that the effect would not be considerable. Weights are undoubtedly important, but I suggest that it is much more important to have reliable information about the actual prices of the various items covered.
774 My hon. Friend the Member for Sheffield, Park (Mr. Mulley) gave us a very interesting example of averages and of the way in which they could be used. It reminded be of a book I read by Mark Twain in which he introduced a man who was trying to find out how to live a long life. By a process of analysis, he determined that the way to live a long life was to ride on railway trains as long as one could and to avoid going to bed, because so few people died in railway trains and so many died in bed. We can get to that stage if we take this process far enough.
In the eight main expenditure groups, the weights actually used are as follow: food 348, drink and tobacco 217, clothing 97, rent and rates 88, services 79, household durable goods 71, fuel and light 65, and miscellaneous goods 35. The most important factor in an index of prices is accuracy in the data collected regarding actual price changes, and accordingly very careful attention is given to this in the index. Prices are collected from a large number of shops in 200 different representative areas of the country. In the case of food, the local officer of the Ministry of Labour in these areas goes each month to five different retailers in his area. They are typical of the traders from whom most households make their purchases. He finds out the exact price at which each article is being sold.
In the case of some foods, the Ministry gets information direct from the manufacturers, not only about prices, but also about any substantial alterations in the quality of their products. Prices of clothing are obtained by correspondence direct with shopkeepers, and there is a selected group of nearly 1,000 businesses, including the Co-operative Societies, which are consulted in these inquiries.
Had I further time, I should have liked to have shown how we collate this great mass of detail and get it into a final figure. I believe that, because of some of the things that have been said and written, there is a feeling in the country that this weighting process has something very mysterious about it, but the fact is that it is in no way mysterious; the weights are used to try to indicate how on a given basket of goods which was bought in 1947. The price has risen since that period.
775 I said that I would add one word about beer. As a result of the changes in the Customs and Excise Duty which operated from 19th April, 1950, the brewers were able to provide greater strength of beer without a corresponding increase in price. In accordance with the recommendations of the technical committee of 1947, adjustments to take account of this increase in quality were made. The effect was to lower the index for beer prices, and for drink and tobacco as a whole the index fell by a little more than 3 per cent., from 107½ to 104. That has had the effect of making the items index .75 point less than it would have been. It has been suggested that the index itself was reduced by two or three points, but that was not so. It was the group item which was reduced by that amount.
Reference has been made to the difference in the wholesale price index as against retail prices. In the non-food items, the wholesale price index covers mostly raw materials. The Retail Price Index takes account of those items which depend also upon domestic costs. The retail price index also covers expenditure on such items as travel and entertainment services. A combination of those types of expenditure is based upon the pre-war spending habits of wage-earning families and therefore gives heavy weight to the prices of essentials which are controlled and subsidised. The import price index is based upon the total imports. The wholesale price index is based on total imports and domestically-produced goods.
There are, of course, other items which could be weighed in this question of the keeping down of retail prices. One of the most considerable items is the long-term purchase arrangements which the Government have been making at a time when rises were taking place in cost of imports in general, and which have served us so very well indeed by helping to keep the cost of living stable.
§ Mr. Lee
As the hon. Gentleman knows, the Ministry and my right hon. Friend have agreed to call the Committee 776 together again to examine whether the conditions obtaining now are appropriate for a new survey. We have written to the various organisations from which the members of the Committee come to know whether or not they have new nominations to put to us. As soon as we have collated that information, the Committee will meet and give us the benefit of their advice whether we should now proceed to compile a new index. I believe that it will be shown that, although we are not wedded to the 1937–38 basis, it is the best possible basis we could have had in the past period, that it reflects broadly the rise in the cost of living which has taken place, and that the efforts of the Government to keep the cost of living stable have been most beneficial to the people.
§ Question put, and agreed to.
That this House believes an adequate measurement of changes in the cost of living to be most important and urges the Government to collect the necessary information to provide a more up to date index of retail prices.