THE INDEX FIGURE.
[To THE EDITOR. OF THE " SPECTATOR.")
Sin,—There has been correspondence in your columns on the Index Figure and Post-Bellum Family Budgets mainly with reference to people of the middle class. My family expendi- ture (exclusive of Income Tax) is about £1,000 a year. We keep accurate accounts. Our expenditure for two years after the war, including all items except Income Tax, is only very slightly greater than that of two years before the war. Taking only those particular items which form the basis of the Index Figure—(1) Food, (2) Rent, (3) Clothing, (4) Fuel and Light, and (5) " Other Items "—our expenditure is about 15 per cent. to 20 per cent. greater than it was before the war. We endeavour, as a duty, to economize : we have sufficient of all essential items, but less of those which are not essential. If everything was on the pre-war standard we should certainly spend more, but, even then, less than that indicated by the Board of Trade Index Figure. The reason of this is not far to seek. In the Labour Gazette of March, 1920, the method of calculation of the Index Figure is explained in detail. Briefly, the Figure indicates "the average increase in the cost of maintaining the pre-war standard of living of the working classes." It contemplates only the five items mentioned above and takes no cognizance of other items which appear in the middle-class Budget, such as service, education, doctors, charities, presents, entertainments, &c. These latter items depend, more or less, on the will and not only on the necessity of the family. They have also increased much less in price than the five essential items: in our case the total of these five is less than half the total outlay. In the working class budget " Food " alone represents three-fifths of the total expenditure.
The truth is that the lower the standard of living the higher must be the percentage to be added to the income to compensate for inoreased prices. It will be found, for instance, that the cost of maintenance of prisoners in local prisons has increased in a higher percentage than the Index Figure of the Board of Trade would indicate as suitable to working class families. The fact that the Index Figure must vary with the standard of living is not realized by many people: and I doubt, Sir, if you quite appreciate the point. In the Spectator of January 22nd you speak of " Civil servants whose salaries have mounted as the Board of Trade's estimate of retail prices rose." This con- veys the impression that the salaries have increased at the same percentage as the Index Figure. This is not the case. The method of determining those salaries is defined on p. 663 of the Labour Gazette of Decembers 1920. It will be found that the higher the salary is the smaller is the percentage of increase to it. Thus, with an Index Figure of 160, the salary of a man on:—
£100 a year has increased by 160 per cent. £200 a year has increased by 114 per cent. £500 a year has increased by 78 per cent. £1,000 a year has increased by 67 per cent.
My own experience leads me to think that while the man on £100 is adequately compensated the man on £1,000 obtains an excessive allowance. He should, if he practises the economy which all in authority inculcate, be content with 20 or 30 per cent. on his initial salary.—I am, Sir, &c., &mow/.
[The method by which the percentage of increase, in the form of a bonus, grows less in proportion to the amount of the salary has been explained more than once in the Spectator. —ED. Spectator.]
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