HIGHER PRICE LEVEL

Dominion, Volume 25, Issue 248, 15 July 1932, Page 9

HIGHER PRICE LEVEL

Chancellor’s Statement POLICY OF BRITAIN ' Money Not Only Factor DIFFICULTIES AND RISKS li. In reply to Sir Robert Horne's speech (published yesterday) on the Finance Bill in the House of Commons, a speech in which Sir Robert proposed measures to raise the price level, the Chancellor of the Exchequer, Mr. Neville Chamberlain, stated the Government’s policy. . After complimenting Sir Robert Horne on his constructive suggestions, Mr. Chamberlain said he agreed that so long as prices were so low that they would not cover even the overhead costs? there were bound to be losses in trade which must reflect themselves in a decline in revenue. The Macmillan Committee, appointed by the Labour Government, pointed to the level of prices as the crucial point which had to be passed before we could expect a reversal of the present distressing conditions in the world. Of course, that report was made before we went off the gold standard, and in speaking of prices the Macmillan Committee was referring not to sterling prices as opposed to gold but to the prevailing world prices which were for some time gold prices. He did not think they could Ignore the course of world prices as expressed in terms of gold. They had to consider what was the effect of the movement of gold prices on the movement of sterling prices at home. If wholesale prices in this country had moved In proportion to the reduction in the value of the pound they would have risen in the proportion of 4 to 3, that was by 33 1-3 per cent. As a matter of fact, they had not risen to anything like that amount. They h:nl only risen about 4 or 5 per cent., and. whereas they would have expected •<- tail prices to rise to the same extent wholesale prices, that was to say by something like 8 or 10 per cent., th? v had not only not risen but had actually fallen since the pound left the gold level Concerted Action Necessary. Why was It that wholesale prices in this country had failed to respond to the movement of the value of sterling? It was partly because we did not buy all our imports from countries which were on the gold standard. <A very considerable proportion of our imports came from countries which were either on sterling, or at any rate were not linked to gold. But it was very largely because gold prices had fallen. The dollar to-day, with which we now compared our pound, was worth about 10 percent, less than the dollar with which, we compared our pound last September.

The conclusion he drew from that was that we were not in water-tight compartments. The suggestion had been made that there should be another conference to deal with this question. It must be recognised that it was quite impossible for the representatives of this country to engage In another conference at this time. They had enough conferences already (laughter), but in any event he did not think that a conference was necessarily the only way of dealing with this question. After all, the tendency of events in the United States appeared to Indicate that over there they were endeavouring to do exactly what Sir Robert Horne desired—namely, to increase the currency and to raise prices in America. While they did not know how far they were likely to be successful, yet the very fact that they were working In the same direction as Sir Robert Horne had suggested showed that they might be moving along parallel lines. They might achieve a common object, even if they did not meet round a table to discuss the matter. Even If they could not control gold prices they might help themselves if they exercised some control over sterling prices. Government's Policy.

In order that there might be no mistake, he would say that the Government desired to see a rise in wholesale prices in this country and, although not to the same extent, a rise in retail prices, because it was clear that if industry by a. rise in the wholesale prices could once more regain confidence, then we would get back to the condition that business men would be ready to take advantage of cheap and abundant money and when we might expect to see business expand and employment increased.

There were several factors which might affect wholesale prices. First, there was the tariff itself, which must be subject to what happened to gold prices elsewhere; then there was the exchange value of the pound, which had now’ been nearly steady for some time and which the Government did not desire to see rising higher, and there was the provision of cheap and abundant supplies of money. For some time the Bank rate had been at a comparatively low level. Although Sir Robert Horne desired to see it going even lower, he (Mr. Chamberlain) doubted whether that would bring about any lowering in the rate charge for overdrafts. But he sawno reason why. in the absence of any serious disturbances iu other countries with which we had close commercial relations, there should not be for some time a continuance of the present situation in which money was both cheap and plentiful, and, that being so, he did not take a pessimistic view of the future. Prosperity On the Way. He thought that, even though he could not take so sanguine a view as Sir Robert Horne as to the immediate effects of those various factors, nevertheless, by degrees by the aid of the tariff which was coming into force, we should see confidence coming back and a return to prosperity at least on the way. If he was not more precise in his statements; if he did not express in more specific terms the objective to which he had referred, it was because there was always the possibility of unforeseen factors arising. Nothing could be more dangerous or more injurious than that businessmen should see a statement of a specific objective by the Government and make their plans on that and. then, afterward perhaps, find that owing to circumstances which had not been fully specified, it had not been possible to obtain that objective at the time that had been anticipated. [Mr. Winston Churchill’s contribution to the dehate will be published tomorrow.!

The death has occurred of Mr. Alexander Gerald Ralston, K.C., formerly acting judge of the New South Wales Supreme Court, in his 72nd year.