CAB129-78 — Page 176

8.

CONSUMER SUBSIDIES

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Page 176

The estimates for the bread subsidy assume the present price for wheat, no increase in baking and distribution costs, and no increase in the retail price of bread. Those for milk assume no increase in distribution costs beyond that now under negotiation, no increase in retail prices, no increase in the price guaranteed to farmers, and no change in the level of production and consumption.

The tobacco concession to old-age pensioners is a remission of duty, and has the effect of reducing the revenue from the tobacco duty.

The estimate takes account of the expected increase in the number of old-age pensioners, and makes allowance for a continuing increase in the proportion of smokers among them.

9.

MISCELLANEOUS SERVICES

The principal assumptions under this heading are, first, that by 1960-61 the Government will have introduced the legal advice service and legal aid in criminal proceedings, and second, that the number of disabled persons employed by Remploy will rise from 6,000 this year to 7,000 in 1960-61 (a matter which is still under discussion).

10.

NATIONAL INSURANCE AND INDUSTRIAL INJURIES

In making these forecast estimates of expenditure from the National Insurance and Industrial Injuries Funds the Government Actuary has assumed that the average number unemployed will be 300,000 (in recent months, about 200,000) and that current sickness experience will continue throughout the five-year period. The forecasts of total expenditure from both Funds in 1960-61, showing an increase of £131 millions over the current year (of which £78 millions would fall on Votes), are much lower than previous forecasts mainly for the reason that these were based on a 4 per cent rate of unemployment and higher sickness experience; if the 4 per cent rate were used, the expenditure from the Funds in 1960-61 would be £ 56 millions higher, at £866 millions. The main reason for the heavy increase in expenditure on insurance benefits is the growth in the number of retirement pensioners, which accounts for £106 millions out of the increase in expenditure of £131 millions. In particular, large numbers of people who were brought into insurance for the first time at a late age in 1948 will qualify for pension in 1958, ie, on completion of 10 years in insurance.

These forecasts make no provision for adjustments or increases in National Insurance or Industrial Injuries benefit which, at some time during the period under review, may result from revisions of the Scheme, e.g. because of recommendations of the National Insurance Advisory Committee, or from increases in the cost of living.

11.

CONCLUSION

The probable increase of expenditure in the next five years, on the basis of present policy and on the assumptions made, will be about £337 millions, or nearly 17 per cent. The increase is fairly evenly spread over the period; for the first year, 1956-57, it will be £95 millions.

Further increases in costs and prices would of course lead to a much Pragad iefel expenditure, but such increases affect Bags 17deef of the Budget. Even a small increase in unemployment above 300,000 would

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