Food Subsidies (Hansard, 20 December 1976)

§ 18. Mr. Madden
asked the Secretary of State for Prices and Consumer Protection what foodstuffs are at present covered by food subsidies; and if he will make a statement about future arrangements.

§ Mr. Hattersley
The foods currently subsidised are milk, butter, cheese, bread and flour. As announced last week, the butter subsidy will be abolished, the cheese subsidy will be reduced on 28th December and the remaining subsidies will be phased out over the coming months.

§ Mr. Madden
Will my right hon. Friend say what representations he has received to date from the TUC about accelerating the phasing out of food subsidies? Will he also say what will be the effect on the RPI of the phasing out of such subsidies, particularly in respect of elderly people, bearing in mind that the fundamental shortcomings of the CAP are having a distinctly adverse effect on such people who, as a result of that policy, face mounting food bills?

§ Mr. Hattersley
I have had no direct meetings with the TUC, although in its statement last Wednesday it showed a 19 general understanding of the Government's overall economic position. The statement said that the TUC would regret the phasing out of food subsidies. I knew that and I understood it well. At a time when there needed to be substantial reductions in public expenditure, I took the view that there were many other candidates for cuts which I could justify much less easily than I could reduce in subsidy terms.
I took that decision for two reasons. The first was that subsidies made only a marginal effect on the RPI, and I think that they now stand at about 0.4 per cent. [HON. MEMBERS: "Hear, hear."] As Opposition Members who are now cheering will remember, that is not what subsidies were supposed to do. They were supposed to protect certain sections of the population about whom my hon. Friend the Member for Sowerby (Mr. Madden), if not hon. Gentlemen opposite, is anxious. They were supposed to protect those sections in the early months of the Government's life when benefits were low. Over the last two and a half years food prices have risen by 60 per cent. and pensions 90 per cent. Therefore—

§ Mr. Speaker
Order. Christmas comes at the end of this week, and there is no sense in the right hon. Gentleman giving such long answers.

§ Mr. Marten
On the subject of food and drink, and slightly switching the subject, will the right hon. Gentleman explain why the commodity of coffee is being referred to the Price Commission? Is he aware that 90 per cent. of the cost of manufacturing instant coffee relates to coffee beans, purchased on world markets? Will the inquiry have more to do with retail margins? I have one coffee manufacturer in my constituency, and I would only add that I certainly do not want any more unemployment in my area.

§ Mr. Hattersley
The inquiry will be into all the reasons for the increase and it will take place because consumers have shown great concern on this issue. One of my duties is to demonstrate why prices are going up as well as to demonstrate sometimes that they should not.