CO129-602-4 Cost of living allowance 27-3-1948 - 11-12-1948 — Page 54

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5.

6.

7.

8.

9.

10.

For possible quarterly variations different percentage changes for different categories would be inadvisable, and therefore type budgets, which would reveal different percentage variations, could not be used. One index figure must be used as the yard stick covering the principal items bought by all sections of the public service.

Stability of total money incomes was desirable, and therefore the cost-of-living allowance should not be changed unless there were an appreciable variation in the index.

As the Retail Price Index is not the only factor, and as the effect of changes in the cost-of-living is offset to some extent as people vary their patterns of expenditure when particular prices change, the principle should be that the changes, upwards or downwards, should not fully reflect the change in the cost-of-living.

A Retail Price Index of 100 for March, 1948, for this purpose should be taken as the base on which to vary the high cost-of-living allowances.

A separate index for Hong Kong should be calculated for rents.

Points 1 and 2:

We agreed upon these to conform to the wishes of the Secretary of State. Hong Kong would have preferred a six-monthly rather than a quarterly review and October 1st is rather an early date, both for Hong Kong and ourselves, by which to prepare the ground for the first revision, although the meeting felt that it could be done.

Points 3 and 4:

I said that in Malaya we might perhaps decide on a Committee of five, one official and one unofficial from each territory, with a Chairman. I thought we should probably agree on point 4.

Point 5:

I thought that this point was important for Malaya. For example, a severe slump in rubber at some future time might make some reductions in allowances imperative although the cost-of-living had not fallen.

Point 6:

The meeting felt that it would be undesirable for a change to be made in the allowances of one section without making the same percentage change in the allowances of all sections. For example, we felt that it would be undesirable if, following a fall in the free market price of rice, the allowances of Asians were reduced while those of Europeans remained unchanged. It followed that the Revising Committee should be guided by a single general index of retail prices covering the principal items bought by all sections, and should not take into account differences in the extent to which the cost-of-living of one section had changed relatively to that of another.

Points 7 and 8:

These conclusions follow from point 6. Suppose that the retail price index which is used as a guide shows a fall of, say, 10%.