Rishi Sunak calls on supermarkets to limit the price of staple products

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The UK government is drawing up plans for supermarkets to voluntarily cap the price of staples in an effort to ease the burden of soaring food costs on consumers.

Health secretary Steve Barclay confirmed on Sunday that ministers were in talks with retailers about how to “address the real concerns” many households have about food inflation and the cost of living.

Speaking to the BBC Sunday with Laura Kuenssberg programme, he stressed that the proposals “did not involve any element of constraint” and that the government was “working constructively” with the supermarkets.

The idea that supermarkets are instigating voluntary price controls on essential foods stemmed from a meeting between Chief Treasury Secretary John Glen and retail representatives earlier this month amid government alarm over inflation rampant of food.

Prime Minister Rishi Sunak also spoke to farmers and other food producers about supply chain issues, while Chancellor Jeremy Hunt said held talks with food manufacturers in the last two weeks. Sunak is expected to make public comments on the state of the economy during a regional visit on Wednesday.

Official data for April showed that the annual rate of inflation for food and soft drinks it remained stubbornly high at 19.1 percent. Food has now overtaken fuel as the main driver of the UK’s high inflation.

The Resolution Foundation think tank calculates that annual food bills for the average household will be £1,000 above their pre-pandemic level by July, hitting the poorest households hard, because they spend a larger percentage of their budget on food.

But economists have scorned the idea of ​​combating this phenomenon through voluntary price controls, arguing that it would be better to increase social benefits for the poorest households and rely on competition to lower prices.

Barclay acknowledged that many suppliers were small, family-owned businesses that were facing “significant pressure” from rising prices. The government will monitor the impact of his plans and aim to “protect” vulnerable suppliers, she said.

Jonathan Ashworth, Labor secretary for work and pensions, derided the proposals as “extraordinary”, telling the BBC: “Rishi Sunak is now like a sort of latter-day Edward Heath with price controls.” In the 1970s Heath, then prime minister, introduced price controls in an attempt to curb inflation.

While Ashworth acknowledged the nation faced an “inflation problem,” he said it was the result of the failure of consecutive Conservative administrations to invest in sustainable energy and improve labor supply.

A government official said there were no plans to forcefully limit the price of the food, telling the Financial Times: “The key thing is that any scheme would be voluntary and that retailers would have to accept.”

The official added: “We recognize that retailers are operating on low margins. But we are acutely aware of the cost of living people feel squeezed. So we’re talking to retailers about what can be done to keep prices as low as possible.”

Under the proposals, first reported by The Sunday Telegraph newspaper, supermarkets could agree to limit prices for essential products such as bread and milk, as well as own-brand products over which they have ultimate control.

The scheme could mirror a deal the French government agreed with major supermarkets in March, under which retailers were asked to make their own choice about which food items to go into lockdowns and price cuts.

Economists were skeptical on Sunday. Tony Yates, an independent economist and associate at the Resolution Foundation, said the price caps would increase pressure on the food distribution sector and not help reduce overall inflation, while making the cap voluntary would introduce uncertainty about the extent of compliance.

“You can’t hide when a nation gets poorer, but that’s what they’re trying to do,” he said on Twitter.

Julian Jessop, a former chief economist at the Institute for Free Market Economic Affairs, said supermarkets may be willing to view some staple items as loss leaders, but may cut corners on quality or raise prices on others items to compensate. They could also “top price” rather than cut prices once costs are allowed to fall.

The Bank of England does not believe that so-called greed has played a major role in driving UK food inflation. Its latest monetary policy report found that, if anything, profit margins had been squeezed along the food supply chain. But he said food price inflation would be slow to ease, as producers often bought inputs on fixed-term contracts and were tied to high costs.