Subsidies (Hansard, 15 July 1977)

§ Mr. Hattersley:

As my right hon. Friend the Chancellor of the Exchequer has announced today, the Government have decided to increase substantially the sums available for food subsidies. At the same time we have reviewed our priorities.

In view of the importance of milk to most family households we have decided that there should be no further increase in the retail price before the end of 1977. The cost of the milk subsidy paid in most of the United Kingdom through the guarantee arrangements will now be equivalent to about 1p per pint over the year as a whole. The subsidy paid separately in the Scilly Islands and certain Scottish islands will accordingly be increased from ½p to 1p per pint from 17th July.

The bread and cheese subsidies have a lower priority. We have decided to end them with effect from Sunday 17th July, 271W in accordance with our original timetable. The bread subsidy is equivalent to about 1 p per large loaf and the cheese subsidy is about 3p per lb. at the retail level. The maximum price orders for bread and cheese will be retained for the time being. That for cheese relates only to subsidised cheese, but is needed to cover stocks in the distributive chain. We are consulting interested parties about the operation of the Bread Prices Order and will keep it in its present form until those consultations are complete, subject only to the changes in the statutory maximum prices made necessary by the removal of subsidy and by price increases which the bakers have notified to the Price Commission.

The original provision for subsidy expenditure in 1977–78 was £43.4 million. The increased expenditure on milk and the reintroduction of the butter subsidy in May now mean that provision must be made for £220.5 million, an increase of £177.1 million. This will make a signi-cant contribution to an early deceleration of the inflation rate, which has for some time been expected to take place in the autumn.