Ministers claim they are working with supermarkets to voluntarily cap prices on basic foods to ease cost-of-living pressure in the UK, but are not considering imposing price caps.
With food and beverage prices rising at their fastest pace in more than 40 years and with no signs of a break in sight, the Treasury Department and supermarkets have been discussing possible voluntary plans for maximum prices for certain commodities. This will most likely include necessities like bread and milk.
The proposal that a price cap would be introduced has led some commentators to argue that the UK will return to 1970s-style price controls, but government insiders insisted that any plan would be voluntary.
Health Minister Steve Barclay said of the proposal for the BBC Sunday with Laura Kuenssberg program: And we do so in a way that is very mindful of our impact on our suppliers.
The plan appears similar to an agreement recently reached between the French government and food retailers to set the lowest possible prices for many everyday items in the first three months. Under the agreement announced last March, retailers will be able to select items covered by the agreement, which will be marked with a special logo.
It is understood that the idea of a plan for UK supermarket options emerged during a recent meeting between Prime Minister Jeremy Hunt and the supermarket chain, which an official called a brainstorming session.
The Sunday Telegraph, which first reported that a potential plan had been discussed, cited Treasury sources as saying food price inflation was far more resilient and difficult to eliminate than we had anticipated.
But officials said the government has no plans to cap food prices and, as a result, none of the plans will be mandatory. They said it was talking to retailers about what they could do to keep prices as low as possible.
A government spokesman said: “The government is not considering price caps.” Any initiatives to help lower food prices for consumers are voluntary and at the retailer’s discretion.
We know that rising costs are straining households and that food prices remain high while inflation is low. That’s why the prime minister and minister held a meeting with the food sector to see what more could be done.
We continue to support households this year and last with 94 billion packages, an average of 3,300 per household.
Last week’s figures showed that UK inflation, measured by the consumer price index, fell to 8.7 per cent last month, but food and non-alcoholic beverage prices rose 19 per cent over the past 12 months, the highest level in Western Europe through April.
Major retailers and manufacturers such as Sainsburys and Unilever have claimed they are protecting shoppers from inflation amid accusations that some companies are profiting from the cost-of-living crisis.
Andrew Opie, head of food and sustainability for the British Retail Consortium, said of the reported plans: This won’t make much of a difference in price.
He added that high food prices are a direct result of skyrocketing energy, transportation and labor costs, as well as higher prices being paid to food manufacturers and farmers. Nonetheless, Britain’s fierce grocery market has helped keep British food the cheapest of all of Europe’s great economies.
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Opie said UK supermarkets have always operated on very tight margins and retailers are continuing to invest in lower prices for the future, expanding their range of affordable foods and locking in prices for many essentials.
He added that the government should focus on easing regulations to help retailers keep prices as low as possible.
Economist and former Bank of England adviser Tony Yates said the government should increase benefits and let the market do its job, and price caps would hurt already-struggling food distribution. You can’t hide when the country gets poorer, but that’s what they’re trying to do, he wrote on Twitter.
Yates added that voluntary price caps would create uncertainty in the market about whether retailers would participate. Wealthy shoppers also benefit when they don’t need it, he noted.
The Institute for Economic Research, a right-wing think-tank, said that food price caps are at best a pointless gimmick and, at worst, harmful to those who should be helping them.
Supermarkets may be willing to create some basic food loss leaders to garner positive publicity, but they may also compensate for price controls by reducing quantity or quality and raising prices on unrestricted merchandise, he added.
Barclay acknowledged that the small, family-run business itself is under considerable pressure, and stressed that the plan was not about coercion.
Shadow Works and Pensions Secretary Jonathan Ashworth said the reported plan was extraordinary. He spoke on Sunday with the Laura Kuenssberg program. Rishi Sunak is now kind of like the late Edward Heath with price controls.
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