RETAIL PRICE SUBSIDIES

Press, Volume LXXXIX, Issue 27010, 9 April 1953, Page 8

RETAIL PRICE SUBSIDIES

EFFECT ON ECONOMY OF N.Z.

MONEY RELEASED FOR SPENDING

‘lf it be a good welfare principle that people should be aided according to basic needs, there is no case for subsidies which fail to discriminate between the sharp variations in different New Zealand homes, in personal incomes and personal living costs.” says the writer of the latest economic bulletin issued by the Canterbury Chamber of Commerce. The: bulletin deals with the payment of subsidies on certain classes of food and clothing, and suggests that the tendency of such payments is to release to many people money for spending. upon non-essential commodities. “Though the principle of paying subsidies for certain specific purposes was well established before the war, the policy of subsidising retail prices for certain essential food and clothing belongs to the economic emergency of war-time inflation,” says the writer. “This policy has now hardened into a permanent form in post-war budgets. “In recent years, the tendency has been to reduce the number of commodities or services subsidised, and there have been two occasions—l 947 and 1950—0 n which reductions were made. Both of these reductions were recognitions of the fact that the emergency policy of war-time stabilisation had become tangled up with the long-term principle of social welfare, and both—the first by the Labour Government and the second by the National Government—were attempts to disentangle temporary expedient from permanent principle, “What has made the divorce difficult has been the close connexion between the level of wages and the level of retail prices, and the tendency for e X® ry £ lSe , in . retail P ri ces to ‘trigger off a fresh demand for compensation in higher' wages. In fact, the continuance of subsidies is the price exacted from any government for restraint m wage claims.

“Kind of Tribute” In so far as the preservation of subsidies is essential to the welfare of the lower-income groups, the bargain between lower income groups a uF the .Government is not unreasonable, and any revision of policy should not leave these groups any worse off,” the article says. “But the continuance of present food and clothing subsidy payments has tended to become a kind of tribute exacted by all wageclaims 3 f ° r nOt pressing further wage

No-one seems ever to have shown any reason why it should become a matter of fixed principle that those who consume butter should pay onethird less than the market price, or that the retail price for milk should be about 3Jd a quart below the approved price Nor does there seem to he any clear analysis of which groups have an income so low that certain foodstuffs need to be subsidised. Doubtless there are such groups, and one might expect to find them composed of pensioners and of some categories of workers with a number of dependents. .. “, If *? e ? good welfare principle that people should be aided according to basic ne eds, there is no case for subsidies which fail to discriminate beNaT.T’VK®! Sf !? r S variati .ons in different New Zealand homes, in personal incomes and personal living costs,” savs art J cl JL The ‘teen-ager’ in an office at £5 a week or better, or the factory worker beginning at comparable rates has no need of aid to pay her ‘?£ ead and butter or Si since they do receive such aid, like anyone else, the net effect is to release income which, when spent, increases an already high level of consumption. s c

Consumer’s Right It is not suggested that the right of the consumer to spend his income as h? t cl ?° os ® s should be infringed, only that it should be his income and not that of someone else provided by wav of a subsidised article,” the writer says Income which is consumed is not saved, and since the consideration in New Zealand for some tune to come will be the need for savings to finance economic develont Public and private, every tendency to unnecessary consumption veTop S me a S inS ‘

, “?Y er “ le last 15 F ear s, New Zealand farm producers have, in profitable ♦E ri< ? s .J or fo° da tuffs, realised 5 „J ruth r oi } he dlctum that the day of cheap food is over. New Zealand consumers of these same foodstuffs however have been unwilling to face’ helfsf !hS° me ( aSts ’ E ! nd nourish the belief that a system which taxes Peter and Paul to subsidise Paul and Peter fare made a marked advance in wel“The belief that we can ‘beat the Ind 2 i J aVe 2 Ur s “bsidi S ed cake and eat it too, dies hard, but all around us in overcrowded schools in insufficient housing and unserviced housing areas, and generally in a vast of . capital works, are the signs that the system’ is beating us—and beating us hollow because we have lost sight of what welfare is and accepted too narrow a definition of it. Es-

pecially have we thought of it in terms ing Ga^Ing ra^ler in terms of liv- „.“ It may be argued that the removal Sl= S n?i Sldle *?. of ltself is Poetically im£X” le li, thougl ; desirable economically, the article says. “But a dual policy of increased cash benefits to those In genuine need, and the diversion of the tax revenues (perhaps £10,000,000) thus released to the urgent necessities of the day might well B? d a Pmce within a ‘new deal’ for the welfare State.”