INDEX OF RETAIL PRICES (Hansard, 13 March 1956)

§ 81. Wing Commander BULLUS
To ask the Minister of Labour if he will now make a statement on the new cost-of-living index.

§ The Minister of Labour and National Service (Mr. Iain Macleod)
With your permission, Mr. Speaker, and that of the House, I will answer Question No. 81.
Yes, Sir. The Cost of Living Advisory Committee has submitted its Report, and it recommends the termination of the present Interim Index of Retail Prices and the immediate introduction of a new Index of Retail Prices. The Committee's main recommendations are:
First, the new index should show monthly changes in the level of retail 226 prices compared with January, 1956, taken as equal to 100.
Secondly, the weights for the new Index should be based on the pattern of expenditure revealed by the 1953–54 household expenditure inquiry. A full report on this inquiry will be published later.
Thirdly, the budgets supplied by all classes of households should be used with the exception of those from households, the head of which had a recorded gross income in 1953 of £20 a week or more; and those from households in which at least three-quarters of the total income was derived from National Insurance retirement or similar pensions and/or National Assistance paid in supplementation or instead of such pensions.
The Government accept the Committee's recommendations and the new Index will be introduced immediately. The first Index figure on the new basis will show the level of prices at 14th February compared with the level at 17th January, 1956, and will be published later this month. In order to show the movement of prices since 1947, we propose also to publish a figure linking the all-items figure of the new Index to the existing Interim Index of Retail Prices.
Copies of the Committee's Report are now available to hon. Members in the Vote Office.

§ Wing Commander Bullus
While thanking my right hon. Friend for that reply and congratulating him on his work, may I ask whether this statement means that in future there will be two sets of figures published monthly in relation to the index? When all the details are available, does this mean that there will be further indices of the groups excluded from the cost-of-living index?

§ Mr. Macleod
Two figures will be published. That is necessary because, otherwise, it would look as if we had reduced the cost of living by over 50 points in one month. As to the excluded groups, we propose to publish the pattern of their expenditure when the full Report is available, towards the end of this year, but we do not propose to have more than one official Index of Retail Prices, because in the view of the Government that would cause confusion.

§ Mr. G. Brown
I am sure we all join with the Minister in congratulating the 227 Advisory Committee on the work it has done. Does the right hon. Gentleman realise that the last part of his answer to his hon. and gallant Friend on the effect of the weighting of the new index certainly means that food will play a smaller part? In that sense it will make it much less useful in computing the cost of living for retired persons, for those on National Assistance, on pensions, and so forth. If the right hon. Gentleman makes that index available to the National Assistance Board, and not to the public at large, he will be hiding from the general public something which they ought to know. Whatever has been the position it, the past about these index figures and whatever has been made worse by this Government, will the right hon. Gentleman reconsider this question now?

§ Mr. Macleod
No, Sir. That is not the position. These two groups have always been excluded. They were excluded from the 1937–38 inquiry and from the indices that followed that inquiry. It was the view of the Socialist Government, in 1951, that this system should be followed and to have only one index published. We accepted that. It was also the view of the Socialist Government at that time that the pattern of expenditure should be made available. That is what we are going to do.
The right hon. Member for Belper (Mr. G. Brown) made the fair point that the expenditure patterns of the excluded groups differ substantially. Indeed, that is why they are excluded. The two patterns will be available to the National Assistance Board. It therefore follows that any recommendations the Board may make to the Government in regard to scales of assistance will be based on much more accurate information than in the past.

§ Mr. Brown
While the right hon.' Gentleman is right in saying that in 1951 the Board had the information, we were not arranging financial policies so that, in fact, the main weight of the attack fell on the price of food. The fact that this Government have changed that means that those people are worse off than they were then. To make the pattern available to the N.A.B. is not so valid as it was then. Ought we not now to know what the index figures, owing to the change in the cost-of-living, are, so that 228 we may know the position of those people who are now being so much harder hit than they were under the Labour Government?

§ Mr. Macleod
Without going into the politics of the matter, I may say that the right hon. Member knows perfectly well that prices have never risen so much as they did in 1951 when an earlier Report of the Advisory Committee came out. It was with that in mind—indeed, it is specifically mentioned in the White Paper—that the Advisory Committee at that time made the recommendation. If I may, I will quote a line or two from its Report: We think there would be real danger of confusion if two or more official monthly indices were published. We are unanimous, therefore, in recommending that only one official index of retail prices should be published monthly. We have considered the problem, as our predecessors did, and have come to precisely the same conclusion. The Index of Retail Prices is a matter of very great importance, quite apart from what we can call political arguments in this House. It plays a very big part in industrial wage negotiations. It would be most confusing to have more than one official index, but it is right that the pattern of expenditure should be made available, and that we are going to do.

§ Mr. J. Griffiths
Does the right hon. Gentleman recall that the Phillips Committee, which his Government set up to investigate many other problems, called attention to the fact that there was no reliable index of cost of living at that time, the index was not reliable in deciding questions of insurance and assistance? It urged that there should be one specially for that purpose. Do I gather that that has been considered by the Government and rejected?

§ Mr. Macleod
No, that is not the position. I have acknowledged that the pattern of expenditure of this group is markedly different from those households covered by the index, but that will become plain when the pattern of expenditure is made available towards the end of the year. We could not publish it in full, but it will be available in particular to the National Assistance Board when the Board makes recommendations to the Government.

§ Mr. G. Brown
Is it not a fact that people will seek to work out their own figures from the pattern if it is published? Would it not be more sensible for the Government to publish the figures? As there have been no discussions with industry about the Report—I make no complaint of that—will the right hon. Gentleman at least have some discussions with the Trades Union Congress, because there is very strong feeling on this matter?

§ Mr. Macleod
I shall always be willing to take into account particularly the views of the House on a matter like this. The Government have considered this matter and I do not think that the decision is different from that of 1951; we have come to precisely the same view as did our predecessors. All the facts of the pattern will be available to the National Assistance Board. That, I believe, is bound to lead to a more satisfactory position than that of the past.

§ Mr. Wade
Arising from an earlier reply made by the right hon. Gentleman, may I ask whether he has considered the effect of the introduction of a new index on wages which are based on the cost-of-living index? Could he say what will be the immediate effect on wages when the change-over takes place?

§ Mr. Macleod
There will be no immediate effect. It will be for industry itself to readjust wage agreements to the new figures. That is one of the main reasons why we must have two sets of figures, and why we shall have to continue them not only until the new series is established, but until all those wage agreements are revised.

Mr. Lee
Will the right hon. Gentleman agree that the greatest criticism of 230 the old index was the weighting, which became dated when food subsidies and things of that sort were altered? Will he see that if and when that sort of action takes place we can have an immediate meeting of the Advisory Committee, to study the effect of the weighting on the various items in the index?

§ Mr. Macleod
Obviously, this index will be more satisfactory than in the past because it will be more up-to-date and based on the pattern of expenditure in 1953–54 as against the one in 1950, which was a projection of 1937–38. As to the future, it is the intention to have a small-scale continuing inquiry which, without being anything like on the scale of the 1953–54 inquiry, will enable us to check the weighting position.

§ Mr. D. Griffiths
Is the right hon. Gentleman aware that it is futile for him to attempt to use the Labour Government as an alibi when the majority of trade unionists and Members now on the Opposition benches who were then on the Government benches disagreed entirely with the Front Bench of the Labour Government on the question of cost-of-living index?