Supermarkets could limit food prices from going up by capping groceries like bread and milk amid growing cost-of-living fears, despite UK inflation falling to its lowest level for more than a year. The drop in energy prices has offset skyrocketing fuel costs due to the Iran war.
Government Proposal to Cap Prices
Chancellor Rachel Reeves and the Treasury are said to have asked major supermarkets to cap the prices of milk, bread and eggs. In exchange, supermarkets would be offered incentives, including relaxing packaging policies and delaying potentially costly changes to healthy food rules, according to the Financial Times.
Impact on Households
An average household might have to dish out an extra £200 on its food bill by the end of the year, according to the latest prediction by the Food and Drink Federation.
However, the retail industry has called on the government to steer clear of '1970s style price controls.' Helen Dickinson, chief executive of the British Retail Consortium (BRC), 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 continued: '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.' Dickinson argued that the UK has the most affordable groceries in Western Europe because of competition between supermarkets.
Treasury Assurances for Farmers
The Treasury is said to have asked supermarkets to guarantee that British farmers would not lose income from any price caps, the FT reports.
Cost-of-Living Support Package
Reeves is expected to reveal a cost-of-living support package this week to help keep costs down for families, the Treasury said. Chancellor Rachel Reeves stated: 'The war in Iran is not our war but one we will need to respond to, and the decisions I took in the Budget last year have kept inflation down as we deal with global instability. We have the right economic plan, and to change course now would risk our economic stability and leave working people worse off. We have already taken £117 off energy bills, frozen rail fares, and lifted the two-child limit, and over today and tomorrow I'll set out the next phase of how we will support UK households.'
UK Inflation Update
The latest Consumer Price Index, which measures the average change in prices paid by consumers over time, fell to 2.8% in April. This is down from 3.3% in March, and the lowest level since March last year. The drop took analysts by surprise as the expected drop was 3%. One of the biggest drivers was the energy price cap for households using electricity and gas, which kicked in from April. But the respite could be short-lived as inflation is set to surge back up because of the Iran war and the blockade of the Strait of Hormuz continuing to hamper fuel prices.
