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War Economy
The Price Tribunal
The Price Tribunal
The more comprehensive stabilisation plan did not alter the constitution of the Price Tribunal, though it required very close page 303 co-operation between the Tribunal and the Stabilisation Commission. The Price Tribunal still worked under the regulations which had been in operation since the outbreak of war, but its hand was strengthened by new regulations, gazetted at the same time as the Stabilisation Regulations, which tightened the control over profiteering and provided more stringent penalties for offences and for black marketing. In administering price control, the Tribunal was guided by the following principles laid down by the Government:1
| (a) |
Price increases could be approved only to the extent of actual additional costs. |
| (b) |
Such increases could be applied only to those particular goods which had incurred the extra costs. |
| (c) |
Where the margin of gross profit formerly made on similar goods appeared to be too high, or where the general position of the trader made it possible, some or all of the extra costs should be absorbed by the trader. |
In implementing these principles, the emphasis in the early war years had been on the individual trader or manufacturer. Each application for increased prices had been considered on its merits, and the fact that other manufacturers producing similar goods were allowed to charge higher prices was not admissible as a reason for granting increases. The undesirable effects which this policy had on efficiency2 were soon realised, and an attempt was made to replace price control on the basis of costs plus usual margins, by industry ceiling price control.
Price control by fixing ceilings for an industry had the advantage of giving a direct inducement to greater output to the more efficient units. The competitive element was therefore to some extent restored under shortage conditions. However, ceilings common to all the firms in an industry could be applied only to goods which were fairly standardised.
Some revealing references to the influence of the new regulations on the Price Tribunal were made in an address by its President, Mr Justice Hunter3: ‘I should add here that under the Economic Stabilisation Emergency Regulations of 15th December 1942, the prices of a wide range of commodities were stabilised. In dealing with the Tribunal's recommendations concerning such commodities, the Minister acts after consultation with the Stabilisation Commission.’
1 There is an alternative formulation of these principles on p. 279.
2 Because low-cost firms would be forced to sell at lower prices than high-cost firms; and all would be able to sell their total output when goods were scarce.
3 In a public lecture on ‘The Work and Practice of the Price Tribunal‘, at Victoria University College (later Victoria University of Wellington) on 11 April 1946. Copy on Department of Statistics file 100/20/43.
By way of illustration, Mr Justice Hunter said:
‘Again the Tribunal may have to deal with an application, say from the butchers' industry to increase the prices of meat. That is a stabilised line. It is Government policy that the price of meat to the public may not be increased. The Tribunal will hear the applicants and examine their accounts, and, if it is of the opinion that an increase in prices is justified and necessary, it will recommend accordingly to the Stabilisation Commission which, if it agrees, will probably recommend the Government to grant a subsidy to the butchers. No increases of any moment have occurred in the retail price of meat since September 1939 and the butchers' increases in costs have been dealt with by way of subsidy and at present the butchers are receiving a subsidy of 2/4d. for every pound's worth of coupons.’1
It has been observed that prices of 110 items were stabilised from December 1942. The Wartime Prices Index contained 238 items. Stabilisation was extended to virtually all of these items. Summarising the wartime operations of the Price Tribunal, Mr Justice Hunter said:
‘Now what is the result of all this? As you have seen, no one has been permitted to raise the price of goods or services or combinations of goods and services above the September 1939 price without the approval of the Tribunal. When approval of any increase has been granted, it has been confined to additional costs incurred. About 500 Price Orders have been issued fixing ceiling prices which may be charged by any trader. Most of them are Dominion-wide. About 80% of money received by a grocer is for Price Order lines. They cover apples and pears and the basic vegetables (silver beet, cabbage, swedes, parsnips, carrots, pumpkins, and squash, onions and potatoes), which being perishable, we were assured could not possibly be dealt with by Price Order.2 Price Order No. 1, dealing with second-hand sacks, prices of which were soaring owing to war conditions, was issued on 22nd February, 1940. Since then, this form of control has been greatly developed and some Orders cover hundreds of lines, e.g., all the products of a clothing factory.’
Then, after commenting on the stability of the Wartime Prices Index he said, ‘No increases in any of the items covered by this latter index are permitted without the approval of the Stabilisation Commission.’
1 The coupons were for rationing purposes. Meat was rationed from March 1944.
2 Variations in supply and quality were major problems. The principal new feature of price control in 1943 was the fixation of maximum retail prices for many kinds of vegetables, apples, pears, and certain other fruits; these maxima made full allowance for seasonal variations. (Author's footnote.)