The Press SATURDAY, AUGUST 4, 1951. Mr Nash and Subsidies

Press, Volume LXXXVII, Issue 26491, 4 August 1951, Page 6

The Press SATURDAY, AUGUST 4, 1951. Mr Nash and Subsidies

! Early in the General Election cam- ' paign Mr Nash should amplify and -explain statements about subsidies made at a meeting at Lower Hutt ■last Wednesday. Mr Nash himself j is reported as having said: “ We will | “ certainly restore subsidies ”. Mr ,H. E. Combs was more specific. He said that subsidies would be restored |to bring prices back to their “pre- | “ Black Friday level ” —this meaning, presumably, subsidising prices down -to the level existing before Mr ! Holland pruned subsidies. If this is [the Labour Party’s intention, some important questions are raised. .When Mr Holland pruned subsidies last year they were running at a sum exceeding £17,000,000 a year. IMr Holland pruned them to a sum estimated to be £5,500,000 in a full year. Since then, subsidies have risen again, largely because of the Government’s undertaking on January 31 of this year to subsidise to hold retail prices of butter, milk, bread and flour at “ existing levels ”. The level subsidies are running at now is not known; a sum of £ 13,000,000 has been mentioned and probably is not far astray. Thus, when a return of prices to the “ pre-Black Friday level ” is contemplated, and when wool and railway freight subsidies are excluded from the calculation, a subsidy bill of at least £20,000,000 must also be contemplated. It would be much more if Mr Combs’s requirements were filled, because Mr Holland’s pruning of the year’s subsidy bill included abolition of a £1,230,000 subsidy on tea and £2,250,000 on coal. Both subsidies would be higher now if used to restore prices to “ pre-Black “ Friday level ” —tea because of higher world prices and shipping freights, and coal because of higher freight rates (consequent upon the removal of a £2,350,000 subsidy) and the passing of higher wage bills into coal production and handling costs. It would be reasonable, therefore, to say that a subsidy bill of at least £25,000,000 a year would be needed to meet the requirements stated broadly by Mr Nash and in more specific terms by Mr Combs. But to be conaiatent Mr Nash could not contemplate a subsidy bill of this size. In 1947 he made a net reduction in the yearly subsidy bill of some £ 8,500,000; and when doing so he said that but for his adjustments subsidies would have risen to £ 19,600,000. “ Subsidies of this “magnitude”, said Mr Nash, “are a “ severe strain on the public ‘ finances Mr Nash may have in mind a way out of the dilemma. When it granted the 15 per cent, increase in wages, the Arbitration Court had taken the removal of subsidies into account and, indeed, had gone further. “In arriving at “ the quantum of increase ”, said the Court, “ we have taken into account “ the rise which is bound to take “ place in the consumers’ price index “ as a secondary result of the order itself If Mr Nash contemplates action that would upset all the calculations on which the Arbitration Court arrived at its 15 per cent, wage increase, does he also contemplate relieving the “severe strain on “ the public finances ” that would be caused by a subsidy bill o f mo re than the “magnitude” he admitted to be dangerous* If so, he could have only one course open to him. He would have to ask the Court to review its quantum of wage increase and lower it in keeping with the restoration of subsidies. If Mr Nash has in mind compensating for a higher subsidy bill by action which among other effects, would lower the public service wages bill, then there is every reason for him to say «o. It would clear him of a seem, ing financial rashness that is not in keeping with his 1947 prudence about subsidies.