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29 March 2022updated 30 Mar 2022 1:29pm

From the NS archive: What is the cost of living?

12 April 1919: An official report into working-class household expenditure draws all the wrong conclusions.

By New Statesman

In the aftermath of the First World War, the economic position at home was precarious. Food and housing stock were in short supply, and war deaths and injuries meant a reduced workforce. Some of these effects were supposed to be measured by the Sumner Committee report into the cost of living, with special reference to working-class families. In this piece in the “New Statesman”, the correspondent went through the report and concluded that the terms on which its assumptions and calculations were based made it nigh on worthless. Rather than interpreting “the cost of living” as referring to an increase in buying like for like over a certain period, the committee understood it as meaning “the increase in actual expenditure” between 1914 and 1918. So, since “practically nobody is buying food, clothing, etc, in the same quantities as he did before the war”, the committee unsurprisingly found that the cost of living had barely risen at all.

The Report of the Sumner Committee on the Rise in the Cost of Living to the Working Classes (Cd. 8980) slid very quietly into the world last November, and apart from one or two summaries published in the Times and elsewhere, its conclusions attracted little or no attention. Now, however, the case is altering; the railwaymen’s last pre-Armistice agreement and the Government’s offer of a shilling a day to the miners “to meet the increased cost of living” have suggested to a number of people that an automatic way out of wage troubles might be found in an agreement whereby wages should go up or down according as the price of certain necessary articles rises or falls.

As a final remedy for industrial unrest this suggestion is not likely to be of much use, for it leaves out of account the determination on the part of large sections of the workers to secure an absolute improvement in their standard of life; but as a method of adjusting and making elastic wage-agreements which have actually been reached there is more to be said for it.

It is the more unfortunate, therefore, that Lord Sumner’s Committee produced a Report which – even allowing for the fact that the terms of reference given were impossible, and such as no Committee containing representatives of Labour should ever have accepted – is of very doubtful value. The Government will presumably accept the figure reached by this Committee (a rise of 80 per cent in the cost of living by last October) as authoritative; indeed, it has already used it against the Ministry of Labour’s monthly figure in refusing to the unfortunate class of public pensioners any addition to the inadequate sum which they are at present receiving. It is therefore all the more incumbent upon those interested to understand exactly the means by which the Committee arrived at their conclusions.

The most astounding fact about the whole Report is the meaning attached to the phrase “Cost of Living”. This term has been usually understood to refer to a standard of life which was at any rate relatively fixed; so that if the miner’s cost of living had doubled during the war, this meant that it cost the miner just twice as much to buy what he normally bought before the war. The Committee, however, interpreted the term as meaning “the increase in actual expenditure under certain necessary heads” which had taken place between 1914 and 1918. Therefore, as practically nobody is buying food, clothing, etc, in the same quantities as he did before the war, the Committee found little difficulty in proving that, although prices might have risen by as much as 120 per cent, the “cost of living”, owing to decreased purchasing, had not risen anything like so much. This is a strange argument, and leads to strange conclusions.

Suppose that it were possible for a family to keep alive while buying half as much as it did in 1914, and that its patriotic fervour led it to take this course. We should then find that if prices had in the meantime doubled, the cost of living for that particular family would have remained stationary, while if they had not risen so much, the cost of living would even have gone down. Such a conclusion needs only to be stated for its absurdity to be apparent. On these lines it could be argued that the real persons to blame for the rise in the cost of living were the Trade Unions themselves, who so inconsiderately succeeded in obtaining war increases for their members, thus inciting them not to keep their actual expenditure down to its prewar level.

It is true that the Committee, recognising this fact, made an effort to meet it by inserting a number of calculations to prove that the calorific value of the food consumed in 1918 was only slightly less than in 1914. Assuming the accuracy of the calculation, it does not carry us much further. A certain quantity of bacon may have been equivalent in nutritive value to a certain quantity of meat in 1914; but any housewife could have given the Committee much valuable information about the nutritive value of bacon during the greater part of 1918. The remark of an indignant railway porter on the question of feeding Germany is illuminating: “What I says is, if we’ve got to feed ʼem, give ʼem the bacon and poison ʼem!” And whatever might be true of food, the “nutritive” value (or valuelessness) of war-time shoe-leather and war-time soap hardly admits of dispute.

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The truth is that for estimating the rise in the cost of living the actual figures of increased prices (as given in the Labour Gazette) still afford the only safe basis. For any calculation which seeks to base itself upon changes in consumption must not merely take into account the nutritive value of the new budget, but must also consider whether it provides the same pleasure and variety of consumption as the old one. People may banish eggs from their breakfast table because tenpenny eggs are ruinous and controlled eggs unobtainable, and so on through a whole list of foods; but it is not to be assumed that a diet so restricted affords as much pleasure and variety to these patriotic consumers as their former morning meal. How these changes are to be calculated in percentages has not yet been suggested, and the value of any such calculation is more than doubtful; but until a satisfactory basis is found, it seems safest to adhere to the old method of registering the rise in retail prices.

At all events, if an investigation of the war-time expenditure of the working classes is interesting (and it probably is), let us by all means have one; but do not let us call the results the Rise in the Cost of Living.

With regard to items other than food, the available material was much less copious; and though the deductions drawn are by no means satisfactory, the resultant errors are of less importance. One or two points, however, may be mentioned as particularly glaring instances. The budgets on which the 1918 figures were based were compiled in June, and therefore showed only a summer consumption of fuel. This did not, however, disturb the Committee, who reflected that owing to the introduction of rationing this winter’s coal budget would only equal last summer’s. But clearly, either the working class burn an equal amount of coal both in summer and winter, a very uncomfortable state of things, or they went short last winter, and their standard of life was reduced. Here, again, “rise in cost of living” seems to equal “reduction in standard of life.”

The case of housing is unfortunate. The Report mentions that a number of working-class families – a considerable number, in fact – have had to move their homes owing to war conditions, and have thus missed the benefits of the Rent Restriction Act. It then adds that there is no utility in trying to include these cases in an average. This may be true; but an average which is arrived at by simply omitting these cases seems to have even less utility – particularly in a Report based on actual expenditure.

The two final assumptions of the Committee, that all members of the working class invariably travel by workmen’s trains and so have had no increase in fares, and that an addition of a halfpenny per mile to tram fares is a “negligible” increase, are amusing as a revelation of the middle-class mind. The second part of the Report; that dealing with “compensating factors which may have arisen other than increase, in wages,” should never have been written at all. It pretends to no statistical value, and as it stands seems more calculated to prejudice the mind of the public and the employers against workers who ask for an increase in wage, than to serve any other purpose. The compensating factor, however, will soon be non-existent, and Part II is therefore of little importance.

Overtime, which is not so much a compensating factor as an expenditure of vital capital for which the worker will have to pay in the end, is fast disappearing; the slow grinding of the mills of the Education Act may in the long run reduce the contributions made by wage-earning children, and the absence of unemployment is an absence no longer. (It is not stated, by the way, whether the 1914 budgets allowed for unemployment of the principal wage-earner; we are inclined to suspect that the IOU family simply went short.) We are left with allotments and the provision of overalls for factory workers, not very large compensating factors.

The faults of the Report, it will be seen, are fairly patent to anyone who takes the trouble to analyse it. But the majority of the public have neither leisure nor inclination for going through long documents. The fact that has stuck in the public mind is 80 per cent; the explanation of the Committee that by “rise in the cost of living” they mean “increase in actual expenditure” has been forgotten. In view of the extraordinarily delicate industrial situation and the strong suspicion obtaining in the minds of many workers that the ruling classes are only awaiting an opportunity to cheat them, it is more than a pity that so misleading a document ever saw the light; and the workers are very unlikely, and would be very unwise, to accept the conclusions of the Report as a basis for the settlement of wage applications. 

Read more from the NS archive here, and sign up to the weekly “From the archive” newsletter here. A selection of pieces spanning the New Statesman’s history has recently been published as “Statesmanship” (Weidenfeld & Nicolson).

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