HIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT)
SECRET
C.P.(51) 79
15TH MARCH, 1951
CABINET
COPY NO.
31
RETAIL PRICES OF SUBSIDISED FOODSTUFFS
Memorandum by the Chancellor of the Exchequer and the Minister of Food
As was foreshadowed in E.P,C.(51) 4, both imported and home produced food is going to cost substantially more in the coming financial year. We are facing something like a world-wide inflation of prices, and although our long-term contracts have insulated us to some degree from the full effects of this inflation in the current financial year, higher prices will have to be paid in 1951/52 if we are to maintain the necessary volume of imports to this country. As regards home produced food- stuffs, the negotiations with the National Farmers' Union are still pro- ceeding but it is probable that the outcome will be that something of the order of £30 millions will have to be added to the prices paid to farmers for their products in the coming financial year,
2,
In the light of the foregoing factors it is now estimated that if present retail prices of subsidised foodstuffs remained unchanged the total subsidy in 1951/52 would be £517.6 millions.
The main reasons for the increase of this estimate above the earlier figure of £470 millions given in E.P.C.(51) 4 are the inclusion of provision to cover the anticipated increased costs of meat as a result of a settlement with the Argentine and Uruguay, when achieved, and an element of £21 millions in respect of a continuing subsidy on animal feedingstuffs as a result of higher prices now ruling which cannot be passed on to the farmers without also increasing the price of home-grown feedingstuffs and wheat. This would lead to increases in the price of other farm produce, so as to maintain the pattern of production we want, and all these increases would inflate farm incomes unnecessarily.
3.
On the basis of a subsidy total of £517.6 millions and on the assumption of a 1951/52 subsidy ceiling of £410 millions it will be necessary to secure savings amounting to £107.6 millions by means of retail price increases. We have considered what these increases should be on a balance of all the various factors involved, political, nutritional, the effect on the Interim Index and so on and put forward the recommen- dations suramarised in the appendix, (There is a division of opinion between us on one item - milk which is shown at the foot of the table.
Further reference is made to this in paragraph 6.)
4.
It is of course possible to devise a number of permutations and combinations of retail price increases which would yield a total of a Proximate 58107 millions in 1951/52. We have no fetit ofsessary, however, to lengthen this paper by trying to set out a number of variants of the foregoing proposals,
- 1 -
5.