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53.
The cost-of-living of 11 sections will not have fallen by 10. Se families y consume little or none of the particular commodities which have fallen in price and therefore their cost-of-living will have gone down by less than 10 .. The converse applies to a rise in the retail price index. Moreover, in practice most families change their patterns of expenditure somewhat when particular prices rise or fall. If some prices rise, they tend to buy less of those commodities and more of substitutes which have not risen so much in price. On the other hand, if the prices of some "necessaries" fall, they may be able to afford to buy more than before of some semi-luxuries, although the prices of the latter may not have fallen. There is also the general point that stability of money incomes is desirable; it is a nuisance to have one's pay constantly varying up or down. Again, the present allowances are admittedly inadequate to restore pre-war standards of living to most public servants, so that it might be considered unfair to reduce allowances by the full extent of any fall in the cost-of-living. We therefore felt that no changes in allowances should be made unless a significant change had occurred in the retail price index or in other relevant factors. We felt justified in laying this down as a principle, leaving the Revising Committee to decide whether a given change is or is not "significant. In the same way, we felt that, other things being equal, the change in the allowances should not fully reflect the change in the retail price index. For example, the allowances of many public servants in Malaya represent about half their basic pay.
Suppose the price index were to show a fall of 10%. a strict arithmetical interpretation their allowances should be reduced by 30% in order to reduce their total remuneration by exactly 10. We felt this would be much too drastic and that the changes made, either upwards or downwards, should be less than those indicated by a strict arithmetical calculation. Again, the details of what should be done would of course be left to the Revising Committee, but we felt justified in laying down the principles expressed in points 7 and 8.
Point 9:
1
On
I thought that March 1948 would be a convenient base date for Malaya. It is the date when the Committee on Cost-of-Living Allowances drafted its Report, and it is sufficiently recent to enable data for that month to be obtained for incorporation in our proposed new Retail Prices Index. However, if Your Excellency objects for any reason I think Hong Kong would be quite willing to adopt a different. base date.
Point 10:
The Revising Committee from Malaya will have to look at housing allowances separately and therefore, in the interests of co-ordination, it was agreed that Hong Kong should show its index of rents separately in order to keep in line with Malaya. Another reason for this is that it is difficult to get reliable data on rents actually paid. 6.
If these recommendations are adopted, a general index of retail prices will have to be prepared for Malaya, going back to March of this year, on the same general lines as the retail price index which already exists for Hong Kong. I have discussed this question with Mr.Garling and he thinks that it would be possible to prepare such an index. personal view is that any changes made in allowances should apply
My equally both to the Federation of Malaya and to Singapore. This would seem to imply a single index for the two territories. But there may be objections, based mainly on misunderstandings of the nature and purpose of the index, if Singapore price-movements are used as a guide for changes in Federation allowances or if Federation price-movements are used as a guide for changes in Singapore allowances. It may be, therefore, that on political grounds two retail price indexes should be prepared although I feel that any revision should apply equally to both territories. In that event, my view is that both should have the same "weighting" and that the Federation index should be based on Kuala Lumpur prices.
7.
If Your Excellency agrees with these ten points and H.E. the