Food Subsidies (Hansard, 8 March 1976)

§ 3. Mr. Kenneth Lewis
asked the Secretary of State for Prices and Consumer Protection what the effect will be on the cost of living of the phasing out of food subsidies as envisaged by the Government's cutback in subsidies during 1976–77, 1977–78 and afterwards.

§ 15. Mr. Marten
asked the Secretary of State for Prices and Consumer Protection if she will make a statement on the effect of the forthcoming reduction in subsidies on the price of the main food items.

§ 18. Mr. Tim Renton
asked the Secretary of State for Prices and Consumer Protection on which foods she proposes to reduce food subsidies in 1976–77; and whether she will make a statement.

§ Mrs. Shirley Williams
I estimate that subsidy reductions could increase the RPI by about 0.3 per cent. by the end of the financial year 1976–77, but it is impossible to be precise about the figure or to give reliable forecasts for future years. Apart from the butter subsidy, which is to be reviewed in the light of the price settlement in Brussels, we have no plans at present for reducing any subsidies before July 1976.

§ Mr. Lewis
Is the Secretary of State aware that the Chancellor of the Exchequer recently pointed out what we have been saying for a long time—that many people on low-wage incomes are taxed whereas those with similar incomes from national assistance are not taxed? Would it not be better to cut back on these subsidies now and to reduce taxa- 12 tion on low incomes so that people may spend their money in their own way than to wait until 1976, 1977 or 1978 to do it?

§ Mrs. Shirley Williams
The hon. Gentleman does not appreciate that the greatest proportion of the benefit from subsidies goes to those who do not normally pay taxation—namely, old-age pensioners whose only income is the pension. Therefore, the figure is a proportionate improvement of four to one for old-age pensioners getting nothing but the State pension compared with the family on average income. It is only because the Government believe that they are winning the battle against inflation and that the level of inflation and food prices will be much lower later in the year and next year that it is possible to contemplate phasing out subsidies.

§ Mr. Buchan
Does my right hon. Friend agree that as a result of the weekend decision in Brussels there will be a sharp increase in prices not only of dairy produce, but of meat? In that situation, does she agree that, far from cutting food subsidies, she should use her strength to maintain them and, indeed, to increase them, especially in the interests of the lower income groups?

§ Mrs. Shirley Williams
My hon. Friend will appreciate that part of his question is for my right hon. Friend the Chancellor of the Exchequer. I have already indicated that we shall be reviewing subsidies in the light of the settlements affecting butter and cheese.

§ Mr. Marten
I should like to put the same question in a different way in the hope that the Minister will answer it. How can she possibly condone the cutting out of subsidies, which I think is right, with the present price review in Brussels, which will put up the prices of many major foods at a time when, on the Common Market's own admission, most major foods are cheaper outside than inside the EEC? Is it not her job to protect the consumer?

§ Mrs. Shirley Williams
The hon. Gentleman finds himself on the horns of a dilemma. If he believes, as I do, that my job is to protect the consumer, he should have consistently supported me earlier on food subsidies, but he has not done so.

§ Mr. Raphael Tuck
May I urge my right hon. Friend when she reviews subsidies to do her best to convince the Government that if they take off the subsidies prices will rise, that there will be a spate of wage demands, and that the country will be in a much worse state than it is at present?

§ Mrs. Shirley Williams
I thank my hon. Friend for that question. I should point out that as long ago as November 1974, in reply to a Question in the House, I made it clear that the purpose of food subsidies was to deal with a temporary rapid increase in food prices and that the Government did not take the view that subsidies were necessarily a permanent feature of society.