CAB129-45 — Page 62

62

Page 62

The following are brief comments on the proposed individual

increases: "

(a) MEAT. This is included primarily because it will help to bring home to the public the additional outlay which we must make if we are to get increased supplies involving substantially higher procurement costs,

(b) TEA. The Minister of Food would like to eliminate the subsidy on tea, for which there is no specific nutritional justification and the continuance of which is anomalous now that he has no longer direct con- trol over purchase prices. But to remove the subsidy in one operation would involve a substantial increase in retail prices. We therefore propose that there should be two price increases during 1951/52, one in May and the other in September. This will leave a relatively small subsidy remaining on which action could, if thought appropriate, be taken in 1952/53.

The question of exempting old age pensioners from the price increase has been examined but the conclusion has had to be reached that any such scheme would be administratively impracticable.

(c) BREAD AND FLOUR. Bread is unrationed and involves dollar imports of wheat and flour: the prices of these commodities are high and are not likely to fall: and the retail price of bread has increased only 30% since before the war. The proposed increases would reduce the baking subsidy by 3s. O a sack of flour used for bread-making, with consequential administrative advantage: and would moreover serve to counteract any temptation to feed bread and flour to livestock arising from the increased prices of feeding stuffs.

(d) SUGAR. An increase in the domestic price of id a lb. would mean that the Ministry of Food would still make a small loss on sales for domestic consumption but would make a substantial profit overall. This may lead to representations from manufacturers, since it will no longer be possible to claim that the profit made on the sales of sugar to them is needed to offset a substantial loss on sales of domestic sugar.

(e) FATS. The proposed increases in the prices of butter and margarine will mean that the differential between these two commodities will become 1s. 4d instead of ls. 2d as at present. It is thought, however, that even with a price of 2s. 6d butter supplies will be fully taken up and that there will not be any great swing of demand to margarine,

The prices of margarine and cooking fat sold to trade users have already been raised because of increased costs and the proposed price increases will restore the relationship between trade user prices and domestic prices to the old 1950/51 level.

6.

MILK. There is a difference of opinion between us as to the desirability of including in our proposals a recommendation that the retail price of milk should be raised during eight months of the year (1st July 28th February) by 1d a quart.

The Chancellor of the Exchequer considers that a small increase in the retail price of milk in the eight-month period when there is nagebemfo8urplus milk supplies would be jusRed6o of587%£

-2-

63