The Treasury has reportedly asked supermarkets to limit food prices, which could see the prices of essential groceries such as eggs, bread and milk capped.
In return, the government could offer supermarkets “incentives”, which could include easing packaging policies and delay potentially costly changes to healthy food rules, according to the Financial Times.
The proposals come shortly after the Scottish National Party (SNP) announced their intention to introduce a similar policy in Scotland last month.
It also follows new measures announced by Rachel Reeves allowing the Competition and Markets Authority (CMA) to “name and shame” firms who have changed their margins in response to the US-Iran war and the economic shock across the globe.
A government minister denied conversations had taken place with supermarkets on Wednesday, while the Treasury reiterated it wished to “help keep costs down for families”.
What are price controls?
Price controls are restrictions set in place and enforced by governments on the prices that can be charged for goods and services.
It is intended to maintain the affordability of everyday items even during shortages and to slow inflation.
According to the Financial Times, the Treasury asked supermarkets for guarantees that British farmers would not lose income from price caps.
The government has also recommended supermarkets reinvest the savings from the regulation changes to freeze grocery prices, it added.
Why is this being considered?
The rate of food price rises is currently 3 per cent - while the overall rate of inflation stood at 2.8 per cent in April.
Some industry groups have also warned that the rate of food price rises could hit nearly 10 per cent by the end of 2026.
Price rises within the food supply chains are said to have been caused by rises in the national living wage and employers’ national insurance contributions, as well as a surge in fertiliser and animal feed prices due to the Iran war.
The foreign secretary on Tuesday told an aid summit of the risk of “sleepwalking into a global food crisis” as a result of Iran’s blockade of the Strait of Hormuz.
Chancellor Rachel Reeves is to set out measures to help households with the cost of living on Thursday.
How would this work?
The UK government has not implemented mandatory prices caps on supermarket food for decades, and were last used during the Edward Heath administration in the 1970s.
They have been introduced in certain EU countries more recently however, with former Hungarian prime minister Viktor Orban announcing measures last year.
His government introduced a 10 per cent cap on profit margins for 30 essential food items, including milk, meat, eggs, sour cream, cooking oil, flour and sugar.
The measures were in place between March and May, due to the “unwarranted and exorbitant” price hikes within the country.
While it provided short-term relief on specific staples, economists warned it ultimately failed to cure underlying inflation.
What have supermarkets said?
Helen Dickinson, the chief executive of the BRC, the leading trade association for retailers, said: “Rather than introduce 1970s style price controls and trying to force retailers to sell goods at a loss, the government must focus on how it will reduce the public policy costs which are pushing up food prices in the first place.”
She added: “The challenge facing retailers is a combination of higher energy and commodity costs resulting from the Middle East conflict, and the soaring cost of the Government’s domestic policies.”
“The UK has the most affordable grocery prices in Western Europe thanks to the fierce competition between supermarkets,” she also said.
What has the government said?
A minister has rejected reports that the government has urged supermarkets to voluntarily cap the prices of essential groceries.
Treasury minister Dan Tomlinson told Sky News “this isn’t something we’re looking at” when asked if there had been conversations with supermarkets about bringing in price caps.
He said: “You have to talk to the supermarkets about that.
“The Government is not looking at doing this.
“Instead, what we’re doing is looking across the economy at what are the different ways that we can help households.”
