The UK government is working with supermarkets to voluntarily cap the price of basic food items in an effort to ease the cost of living squeeze, but insists it is not considering imposing price caps.
With food and drink prices rising at the fastest pace in more than 40 years and no let-up in sight, the Treasury and supermarkets have been discussing a possible voluntary scheme for maximum prices for certain goods. These would be likely to include essentials such as bread and milk.
Suggestions that “price caps” would be introduced prompted some commentators to claim that Britain would be returning to 1970s-style price controls, but government insiders insisted that any scheme would be voluntary.
Asked about the proposals on the BBC’s Sunday with Laura Kuenssberg programme, the health secretary, Steve Barclay, said: “My understanding is the government is working constructively with supermarkets as to how we address the very real concerns around food inflation and the cost of living, and doing so in a way that is also very mindful to the impact on suppliers.”
The plan would appear to be similar to an agreement reached recently between the French government and the country’s food retailers to set the “lowest possible price” on a number of everyday products for an initial three months. Under the agreement, announced in March, retailers could select which items this applied to, and these are marked with a special logo.
It is understood that at a recent meeting between the chancellor, Jeremy Hunt, and supermarket chains, which an official called “a brainstorming session”, one idea floated was for a scheme that UK supermarkets could opt into.
The Sunday Telegraph – which first reported that a potential plan had been discussed – quoted a Treasury source as saying that food price inflation “is much more resilient and difficult to get rid of than we anticipated”.
However, officials say the government has no plans to cap the price of food, and that any resulting scheme would not be mandatory. They say this was about talking to retailers about what could be done to keep prices as low as possible.
“The government is not considering imposing price caps. Any scheme to help bring down food prices for consumers would be voluntary and at retailers’ discretion,” a government spokesperson said.
“We know the pressure households are under with rising costs and while inflation is coming down, food prices remain stubbornly high. That’s why the prime minister and the chancellor have been meeting with the food sector to see what more can be done.
“We continue to support households through our £94bn package, worth £3,300 on average per household this year and last.”
While figures last week revealed that UK inflation, as measured by the consumer prices index, fell to 8.7% last month, food and non-alcoholic drink prices jumped by 19% in the 12 months to April, the highest level in western Europe.
Leading retailers and manufacturers such as Sainsbury’s and Unilever have insisted that they are protecting shoppers from inflation, amid accusations that some companies are profiteering from the cost of living crisis.
Andrew Opie, director of food and sustainability at the British Retail Consortium, said of the reported plans: “This will not make a jot of difference to prices.”
He added that high food prices “are a direct result of the soaring cost of energy, transport and labour, as well as higher prices paid to food manufacturers and farmers. Yet despite this, the fiercely competitive grocery market in the UK has helped to keep British food among the most affordable of all the large European economies.”
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Opie said UK supermarkets had always run on very slim margins, and that retailers were continuing to invest in lower prices for the future, and were expanding their affordable food ranges and locking the price of many essentials.
He added that the government should focus on cutting regulation to help retailers keep prices as low as possible.
Tony Yates, an economist and former Bank of England adviser, said the government should increase benefits and “let the market do its thing”, saying price caps would harm already struggling food distribution. “You can’t hide when a nation gets poorer, but that is what they are trying to do,” he wrote on Twitter.
Yates added that voluntary price caps would create uncertainty in the market, as to whether retailers would take part. “Rich shoppers get the benefit too when they don’t need it,” he pointed out.
The rightwing thinktank the Institute of Economic Affairs said caps on food prices “are at best a pointless gimmick and, at worst, harmful to the very people they are supposed to help”.
While supermarkets might be willing to make some basic foods “loss leaders” to win some positive publicity, it added, “they may also compensate for price controls by reducing quantity or quality, and by raising prices for ‘uncapped’ goods”.
Barclay acknowledged that small, family-run businesses would themselves be under “significant pressure”, and stressed that the plans were “not about any element of compulsion”.
Jonathan Ashworth, the shadow work and pensions secretary, said the plans as reported were “extraordinary”. He told the Sunday with Laura Kuenssberg programme: “Rishi Sunak is now like a sort of latter-day Edward Heath with price controls.”
