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War Economy
Initial Wartime Steps to Stabilise Prices
Initial Wartime Steps to Stabilise Prices
At the outbreak of war, an attempt was made to stabilise prices of all goods and services. Regulations made on 1 September 1939 provided that prices then ruling were not to be exceeded without a specific authorisation from the Minister of Industries and Commerce.2 These new and more comprehensive price stabilisation regulations also made provisions against hoarding.
The necessity for exceptions to be authorised by the Minister of Industries and Commerce soon made administration of the regulations too cumbersome. In December 1939 the Minister's powers were delegated to the Price Tribunal,3 with a stipulation that applications to increase prices should be dealt with in accordance with government policy, which was:
| (a) |
Replacement costs should not be allowed. That is, rises in prices taking place after stocks were purchased were ignored, even though traders would have to replenish stocks at the higher prices.4 |
| (b) |
Prices might be increased to the extent of increased costs, or less if the margin of profit was high enough to absorb all or part of the increase. |
The effect of the second stipulation was to allow increased costs to be added to prices, but not any profit margin on the increased costs. Actually a provision was soon made to allow for exceptions in cases of hardship, but this new provision was used only sparingly. The rule against replacement costs was also modified in some cases, usually by taking an average of costs of old and new stocks.
As well as considering applications to increase prices, the Price Tribunal was required to survey prices being charged for goods and services, to issue Price Orders, and to consider complaints from the public and reports from its inspectors. In appropriate cases it could initiate proceedings in the courts.
In spite of the apparent rigidity of this attempt at stabilisation, prices continued to rise. By the March quarter of 1940 they were nearly 2 per cent above September 1939 and still rising. A contributing influence was the rapid upward movement in the cost of imported goods.1
2 The Price Stabilisation Emergency Regulations, issued following a Proclamation of Emergency under the Public Safety Conservation Act 1932.
3 By the Control of Prices Emergency Regulations, which changed the name of the Tribunal from the Price Investigation Tribunal to the Price Tribunal.
4 It was argued that to allow replacement costs would give traders windfall profits, which was not justified unless there were likely to be later price reductions. There is an alternative statement of these principles on p. 303.
1 In this six months prices of imported items in the Wholesale Prices Index increased by 10·8 per cent.