Abstract

This paper examines the function of UK’s Cost of Living Index during the 1940s as the government’s ‘instrument of stabilisation.’ The stabilisation policy was aimed at keeping price inflation down by subsidising the price of goods that comprised the index and thereby tempering the demands for wage increases. Although historiography has emphasised the role of socialist ideology and fiscal management for the persistence of post-war austerity this paper explores a more prosaic explanation. I will argue that the government faced an ‘austerity trilemma’ whereby removal of subsidies would have been impossible without a significant rise in the price index. The narrative reconstructed from government documents reveals how officials engaged in several ‘scenario-building’ efforts to sequence the timing in which subsidies could be withdrawn with least economic and political disruptions. The price index served as a key rhetorical instrument to balance economic necessities (reducing government expenditure) with the political acceptability of withdrwaing subsidies on some commodities but not others.