Barclay: Plans for price caps on food staples have ‘no element of compulsion’

Downing Street is understood to be drawing up proposals that would seek to get retailers charging the lowest possible amount for some basic products like bread and milk.

The opt-in scheme, modelled on a similar agreement in France, would allow supermarkets to select which items they would cap, the Sunday Telegraph reported.

It could mark the biggest intervention on pricing since controls introduced by Edward Heath in the 1970s, the paper reported – though No 10 stressed any scheme would be voluntary.

Asked about the proposals on the BBC’s Sunday With Laura Kuenssberg programme, 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.”

Mr Barclay acknowledged small family-run businesses would themselves be under “significant pressure” and stressed that the plans were “not about any element of compulsion”.

A No 10 source said the proposal is at “drawing board stage” but would not involve Government-imposed price controls.

It comes after Chancellor Jeremy Hunt backed interest rate hikes – even if they risk of plunging the UK into recession – in order to combat soaring inflation.

Although down from 10.1% in March, the Consumer Prices Index of inflation remains stubbornly high at 8.7% in April, while experts have warned that alarmingly expensive food is set to overtake energy bills as the “epicentre” of the cost-of-living crisis.

Food prices are expected to keep rising, having already increased by 19.1% in the year to March, placing additional pressure on families.

Andrew Opie, director of food & sustainability at the British Retail Consortium, said: “This will not make a jot of difference to prices.

“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.

“Supermarkets have always run on very slim margins, especially when compared with other parts of the food supply chain, but profits have fallen significantly in the last year.

“Even so, retailers continue to invest heavily in lower prices for the future, expanding their affordable food ranges, locking the price of many essentials, and raising pay for staff.

“As commodity prices drop, many of the costs keeping inflation high are now arising from the muddle of new regulation coming from Government.

“Rather than recreating 1970s-style price controls, the Government should focus on cutting red tape so that resources can be directed to keeping prices as low as possible.”

Right-wing think tank the Institute of Economic Affairs (IEA) branded the move a “pointless gimmick” at best and a “harmful” measure at worst.

IEA economics fellow Julian Jessop said: “It is not even certain that the prices of capped goods would end up lower than if there were no cap.

“Supermarkets may simply price to the cap, and not cut prices further even if falling costs allowed it. Strong competition should prevent this, but it would incentivise supermarkets to cut their prices anyway, making price controls pointless.

“The Government will hope that this is enough to show that it is ‘doing something’ about food inflation but it could just encourage calls for more intervention, including making the caps legally mandated as with the energy price cap, and extending to other sectors like housing in the form of rent controls.”