PRICE RISES IN BRITAIN

Press, Volume LXXXVI, Issue 26263, 7 November 1950, Page 7

PRICE RISES IN BRITAIN

“Lower Consumption Or Higher Costs”

(Spacial Corropondent N.2.P.A.) (Rec. 8 p.m.) LONDON, Nov. 6. Discussing the problem of prices, the “Economist" says that the British! Government has no alternative to paying higher rates for food if it wants to maintain supplies.

The “Bconomist" lists three factors which it says have been at work during the last 12 months in producing a sharp rise in prices. They,are the devaluation of sterling, the record level of economic activity in the United States up to June, and the more alarming boom caused by Korea. "Devaluation immediately raised the sterling prices of raw materials and foodstuffs bought from the dollar countries.” says the “Economist." "It also raised sterling prices of raw materials sold to the United States by sterling area companies. It left largely unchanged the prices of those goods mainly foodstuffs) produced In the sterling area but sold almost entirely to Britain.

“The impact of the first phase ot the American boom made itself felt very roon after devaluation. Business activity in the United States recovered in the second half of 1949 and dollar prices of moat commodities began to rise from November onwards—a rise which in turn gave a further boost to sterling prices of internationally traded commodities.

“At the very moment when it seemed that this advance of prices might be reaching its peak, war broke out in Korea. Commercial stocks in the United States at the end of June were low and manufacturers rushed to build them up. Stockpile purchases were immediately expanded and a new rearmament programme introduced. "Scramble For Materials"

“The scramble for materials, with Governments outrunning industry, produced the third phase of the rise in prices—and the sharpest." The “Economiat” goes on to say that throughout the 12 months the British Government has been concerned to limit the interim index of retail prices. After devaluation the Ministry of Food showed the strongest opposition to any suggestion by foreign suppliers that prices should be raised. “At the annual prices reviews . during the summer British negotiators offered no advance on the previous season’s orlces to the dismay of suppliers bound by contracts. “A wholly different policy, however, has been pursued for raw materials, many of which have been purchased privately. “But to limit the rise in the Index of retail prices manufacturers were exhorted to keep theiri own selling prices unchanged. This." says the “Economist." “has resulted in the terms of trade moving aganist Britain. The' Government has been successful in keeping the retail trade Index stable bub this advantage' has involved certain costs for the community. A stable index has geted as a useful piece of machinery for limiting the cost of food subsidies to £410.000,000 a year.

“To abandon the policy of limiting subsidies at a time when the rearmament programme has to be financed

would be folly.” says the journal, "but stabilised subsidies, a stable cost of living, and rising world prices are incdmpatible with a stable level of consumption.

“The Government has no alternative to paying higher prices for its food purchases if it wants to maintain supplies. If it pays more, retail prices must go up or the bill for subsidies must be increased. There are signs that this predicament is realised. If the British public wants to be spared a higher ebst of living it must suffer instead a lower level of consumption."