21b Loaf Would Be 4d Dearer

Press, Volume CIII, Issue 30367, 17 February 1964, Page 13

21b Loaf Would Be 4d Dearer

(New Zealand Press Association) WELLINGTON, February 16. The retail price of a 21b loaf would rise from 7fd to lljd if the flour subsidy was abolished, says the report of the Committee of Inquiry into the Wheat, Flour and Bread Industries. The committee, which recommends the abolition of the subsidy, says the rise in the price of bread would mean that consumers would pay an extra £1 12s 4d a head a year or 7|d a week.

The report says that most of those who expressed any opinion to the committee on the subsidy were opposed to it. The general reason given was that much bread, because of its extreme cheapness, was wasted. The report says that many who appeared before the committee agreed that the reduction in waste brought about by a higher price would largely offset the increased cost to the consumer. Two witnesses suggested that an adjustment to family allowances and pensions might be made to offset any increased cost. Some claimed that preoccupation with the subsidy and the provision of cheap flour dominated official-think-ing to the detriment of flour quality and variety. One large baking firm saw the subsidy system as the only present-day justification for the continuation of controls over milling and baking.

Cost Of Subsidy Between 1950 and 1962, the cost to the taxpayer of the flour subsidy rose from £2,347,000 to £5.005,000 and from £13.56 to £22.48 a ton. “The sharp rise in subsidy cost over tonnage clearly indicates the effect of meeting increased prices to growers and increased costs of millers and bakers while holding flour and bread prices,” says the report. "As one organisation pointed out, a continuation of this policy will result eventually in bakers receiving their flour free and ultimately in their being paid to use it.” . The committee was told that the removal of the subsidy would have but slight effect on the consumers’ price index. It would result in an increase of 8.3924 points, 6.454 pointe at which would be due .to dearer bread.

For the quarter ended March 31, 1962, the consumers’ price index was 1197 points so that an increase of 8.39 points, after removal of flour subsidy, would amount to less than three-quarters of 1 per cent.

Without the subsidy, individual spending each week on bread would be Is 9Jd, a minor figure, the committee considered, compared with the 9s 6d spent on meat and fish, 4s 7}d on tobacco and cigarettes, 5s 8d on alcohol, 3s 2d on drinks and sweets, and 2s 3£d on milk. Some Merit “There is undoubtedly some merit in the statements that cheap, subsidised bread encourages waste,” says the report. “To what extent removal of subsidy would correct this is difficult to answer. “Of more concern, however, is the all-pervading influence of subsidy through the whole fabric of the wheat, flour, and bread industries. Scarcely any move can be conceived, whether it concerns wheat-variety differentials, distribution and handling, quotas, flour and bread quality, or pricing, which does not ultimately resolve itself into cost, with the element of subsidy immediately appearing.

“It could be claimed that the psychological aspect of subsidy acts as a deterrent to the growing of wheat by farmers, not only because of the use of the word itself but also by the continued remarks, well publicised by the press,, of the costs involved in the transport of wheat from the South to the North Island.

“The arguments in favour of removal of subsidies appear few and simple and overwhelming. They were introduced primarily as a part of war-time stabilisation policy, and the events which brought about their introduction have long passed. “The part played by bread in the New Zealand diet, although important, is small in comparison with other consumer expenditure and. in terms of today’s living standards its continued subsidisation cannot be justified. . “Against removal of subsidies is the possibly strong political repercussions which such action might arouseAllied to this is the fact that their long-continued existence has resulted in their being incorporated in a cost and price . structure to which considerable adjustments would require to b% made if they were to be eliminated.” Courses Open Courses open to the Government were:— Complete elimination, which appealed to the committee as being the most desirable course. Elimination of the subsidy except on price-controlled bread, and bakers to be charged the full unsubsidised price of flour, but to claim back either monthly or quarterly on a basis of bread sold. This would enable the effect of the subsidy to be largely removed from the earlier manufacturing and distributing processes, and it would also facilitate the complete withdrawal of the subsidy by stages. Confine the subsidy to a national loaf of defined wright and nutritional standard, with bakers claiming reimbursement on a basis of sales. This would be similar to the former national loaf in Britain and would facilitate withdrawal of the subsidy later.

Keep the subsidy on flour for breads, biscuits, Government departments, pastrycooks and cake kitchens and for home use, but all other flour for manufacturing to bear the full price. The committee did not favour this. It would remove the anomaly of subsidised flour bring used for dog biscuits and adhesives, but it would be difficult to enforce and would achieve little in the reduction of the cost of the subsidy. (Earlier Report, Page 12).