§ I now proceed with my other proposals. In our statement of policy published last October we undertook to review the subsidies and other methods of paying out the public's money so that those in the greatest need get the most benefit. This review has been carried out. In that same statement of policy we pointed out how our economy was being distorted by large food subsidies to all and sundry, irrespective of their need. We said that we should like to simplify the immensely complicated system operating at present and substitute for it methods which supplement the personal incomes of those most hit by living costs, whether by family allowances or differential rates of taxation.
§ I should on some grounds have liked to have postponed any action about the food subsidies until we had had more time to grapple with the severe economic problems of the time. But the very intensity of our situation makes it essential to lighten the burden on the economy to bring back the sense of reality to which I have referred.
Hon. Members are probably familiar with the history of these subsidies. During the war, they were of modest amount and served a clearly defined and measurable objectively, namely, to hold the cost of living index practically steady. After the war, the amount necessary to meet this objective rose rapidly. Moreover, the objective itself became unattainable when the scope of the index was revised and a substantial number of items of expenditure were included. There were variations which could not be controlled by subsidy. My predecessors, therefore, were faced with the necessity of introducing the principle of restricting the food subsidies each year to specified ceilings. In his 1949 Budget, Sir Stafford Cripps spoke of a prospective rise of
subsidies from £485 million to £568 million, and said:
That just cannot go on. We must call a halt … Prices have got out of all relationship with realities.—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2085.]
And that is exactly what I say today. I do not think we can justify any longer our present level of expenditure on subsidising food. We subsidise everyone, whether in need of help or not. In our statement of policy we said that we subsidised Cabinet Ministers. I was not sure when this was written that I would appear in this capacity or in the position in which I now find myself. We subsidise the staple foods not only when they are consumed in the ordinary forms, but when they are ingredients in expensive luxuries.
§ We must try to direct our assistance to the places where it is really needed. Besides, this heavy expenditure contributes to the need for a high level of taxation, so high as to leave no room for manoeuvre when we want to make any change. Harder working and higher earning by those who could contribute to the extra production are discouraged in present circumstances.
§ The subsidies mean—I repeat again the words of Sir Stafford Cripps—"prices out of all relationship with realities." The subsidies conceal from the consumer the real cost of what we have to pay in exports for the foods we import. As a result people tend to spend a large part of their incomes on the non-essentials of life.
§ Part of the object of this Budget is to restore a sense of reality to our personal as well as our national accounts. I am not proposing any increase in taxes on tobacco or liquor, partly for the reason that these are now at such a height that the law of diminishing returns may show signs of beginning to operate. So I must leave it to the individual so to arrange his or her own personal budget to meet the extra costs involved by this national Budget. If they insist on smoking I shall get the revenue; if not, they will have more to spend on food.
§ Before I put my actual proposals to the Committee, I must remind hon. Members that the subsidy figure in the estimates I have already described is £410 million. As was the experience of my predecessors, some price increases would be necessary to bring the subsidies down 1298 to this figure. There have been and are in prospect some rises in the cost of imported foods not yet covered, and also we must take account of the current annual review of the prices of home produced foods. Naturally, while the negotiations on the latter are in progress, I cannot give a precise figure, but something of the order of £50 million may be required for the whole of these uncovered matters.
§ Now for my actual proposals. It is now proposed to make such increases of prices as may prove necessary to bring the food subsidy figure down to a rate of £250 million a year. This will be the new ceiling when the increases of prices are in full operation. I must warn the Committee that a wide range of increases will be necessary, and in the course of making them we shall try to eliminate altogether the subsidy on some foods, thus securing a measure of simplification. The price of the 1¾ lb. loaf will be increased by 1½d. from 16th March and there will be an increase from the same date of 1¼d. per lb. of flour.
§ As a result of reducing the subsidy the price of meat will be increased by an average of 4d. a lb. at an early date. The reduction of 1d. a quart in the price of milk which was due to be made seasonally at the end of March will not now be made and there will be a seasonal increase of 1d. a quart later in the year. The price of tea will be put up to a level which will eliminate subsidy altogether but this will not come into force until the summer.
Perhaps the Committee will allow me to go on with my statement?
Increases of prices of other subsidised foods will be made over the next few months. They will be announced in due course by my right hon. and gallant Friend the Minister of Food and will extend to fats, cheese, butter, sugar, bacon and eggs. No change will be made in the arrangement for subsidised school milk, and cheap or free milk for nursing mothers and young children.
It is impossible to calculate exactly what the total effect of all these changes will be. This is the main sacrifice for which this Budget calls, and I should, therefore, like to be as clear as possible 1299 and to put my figures high rather than low. This extra cost may well average out at about 1s. 6d. per week per head of population.
I now turn to the other side of the operation, by which it is the Government's wish and my particular desire to help those whose needs are greatest.