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(i) the very high cost of the milk subsidies (now over £100 millions), (ii) the low effect of any price increase on the Index and (iii) the desira- bility of reintroducing the concept of a seasonal retail price for milk. The size of the milk subsidy in relation to total food subsidies (about a quarter), is becoming embarrassing; the difficulty about reducing it springs partly from lack of information about the effect of retail price increases on consumption: a modest increase in price would help to assess the effect of any further adjustments which circumstances may necessitate in later years.

The Minister of Food is opposed to this proposal on the grounds that an increase in milk prices will tend to diminish the consumption of milk by the section of the population most in need of it. Moreover, there would be some reason to fear that such a decline in consumption would continue even in the period of the year when milk prices were reduced in the seasonal flush period, and this would accentuate the difficulty of disposing of flush supplies. Despite the overall increase there is still a marked difference in milk consumption as between people at various income levels, For these reasons, the Minister would prefer to find the total saving necessary without recourse to any increase in the retail price of milk.

7.

If, however, it were decided that the retail price of milk should be increased in accordance with the Chancellor's suggestion, the Minister of Food would propose that this should replace the proposed increase of 1d a lb. in the retail price of domestic sugar.

8.

We have given a good deal of thought to the question of when the proposed price increases should be announced. Our conclusion is that

it would be preferable to announce the increases as far as possible at different dates rather than to make one comprehensive statement related to the Budget. This would enable us, where appropriate, to link the price increases with increased costs of procurement.

We propose that the announcement of the increase in the price of meat should be linked with the announcement of the settlement with the Argentine, when this is achieved, although the increase in price cannot be brought into effect until some six weeks later.

In the case of tea the first increase of 4d per lb. must take effect from the 20th May, which is the beginning of the Ministry of Food 16-week permit period for tea rationing purposes. But as the tea auctions are re-opening on the 16th April it is desirable to give the trade the maximum possible advance notice of the price increase since this will involve them in a good deal of preliminary work. Accordingly we decided that in the special circumstances the announcement of this par- ticular price increase must precede consideration of this memorandum, and an announcement about the increase was made on the 14th March.

So far as the other food price increases are concerned, we propose that these should be announced and put into effect so as to con- form most conveniently with the trade requirements of the Ministry of Food.

Page 63 15th March, 1951.

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H.G. M.W.

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