Bread Subsidy – Rent Restrictions

«The Economist», 26 febbraio 1921, pp. 472-473

Rome, February 20

The lengthy debate on the bread subsidy is drawing to its end. Tuesday next, February 22nd, the last sections of the Bill will pass the Lower House, and then the Bill will be dealt with immediately in the Upper Chamber, so that the Bill will probably become law before March. On the basis of the sections already voted, and which cannot be modified by remaining sections, the bread subsidy is not abolished, but only greatly limited in its bad effects on the State budget. From April 1, 1921, the State will sell cereals to local consortiums, which are the intermediary agents between the State and the bread-sellers, on the basis of the internal price which the State pays for the same cereals to producers. The difference between the present and the future situation is, in short, as follows: at present the State buys home-produced wheat at about 130 lire per metric quintal, and will pay about 160 lire from August 1, 1921, and sells the very same wheat at 60 lire to local consortiums. In addition, as the home-produced wheat is not sufficient, the Government is buying some 35 million quintals of foreign wheat at a price from 300 lire in past months and about 220 lire at present, which is sold at the same ridiculous price of 60 lire to local consortiums.

In future the selling price to consortiums will not be fixed, but will be variable and always equal to the price at which the State buys the wheat or other cereals from home producers, about 130 lire from April 1^st to August 1, 1921, and 160 lire from August 1^st onwards. The loss to the State Exchequer will be greatly reduced, and will be equal only to the difference between 160 lire and the buying price of the 35 million quintals of imported foreign wheat. If the foreign price should remain at 220 lire per quintal, the loss will be about 2,000 million lire instead of 6,000 million lire, as at present, and the loss will even disappear if foreign exchange should improve.

If the American dollar should decline from 28 lire to 18 lire or 20 lire, the price of foreign wheat would also be reduced by a third and the bread subsidy will disappear. This is the hope of the Government, and surely the disappearance of this huge State loss will tend towards improving foreign exchanges, if other counter-balancing influences do not interfere.

The Socialist obstructionism has had, however, an important effect: the bread is to be sold at a mean price sufficient to cover the price paid to internal cereal producers, but all bread is not to be sold at the same price. There will be two shapes of loaf: a big and a little loaf. The big loaf will be sold at a lower rate than the little loaf, and the weighted mean of the two prices will cover the cost of the internal produced wheat. This will be a somewhat complicated affair, which will be even more complicated by the fact that the relations between two prices will vary in every city and town and village, so that the profit obtained in the locality where the use of the little loaf predominates may cover the loss suffered in the localities where the population favours the big loaf. The members for Southern constituencies have been appeased only with this complicated arrangement.

The passing of the Bill is surely a great step in the right direction; but we must hope that an improvement of foreign exchanges will permit the last vestiges of governmental interference to be abolished.

While the House of Deputies is occupied in the bread subsidy question, the Senate is debating the problem of rent restriction. During the war various legal enactments have interfered in Italy, as in all other countries, with the freedom of fixing house rents. The State originally prohibited all increase of rents until two months after the peace. But as the legal day of the peace was an uncertain date, and was not fixed until the middle of 1920, a royal decree of April 18,1920, introduced new regulations. Houses or parts of houses were divided into four classes: 1) Houses of an annual rent higher than 6,000 lire at Rome and 4,000 lire in other great cities of over 200,000 inhabitants, &c; 2) rents from 3,000 lire to 6,000 lire at Rome, and from 2,400 lire to 4,000 lire in other cities; 3) rents from 1,500 lire to 3,000 lire at Rome and from 1,000 lire to 2,400 lire in other cities; and 4) all lower rented houses. Rises of 40, 25, 15, and 10 per cent, on the rent level at April 18,1920, were respectively allowed for the four classes for the period from November 1,1920, to June 30,1921. At July 1, 1921, the first class was to be freed from regulation. For the second and third class the date of freedom was July 1,1922, and for the fourth class July 1,1923. When the royal decree was laid on the table of the Senate house occupiers protested against the freedom of house proprietors of raising rents ordinately after the named dates. They urged that new houses were not built, and that the cost of building was fivefold that of pre-war times; that the rents, when made free, will rise so much that great discontent will spread all over Italy. The Bill as amended by the Senate has therefore fixed July 1,1924, as the uniform date for giving complete freedom to all classes of houses, excepting houses rented for industrial, commercial, and professional purposes. The proprietors will be compensated for the prolongation of the period of restriction as regards premises used for industrial, commercial, or professional purposes; rents, instead of at July 1, 1921, will be made free at July 1, 1922; and for the intervening year tribunals will be set up in every locality to fix the just rent between proprietor and occupier. New houses built after March 28,1919, are not subject to any rent restriction. This is an inducement to build new houses.