Supermarkets hit back over pressure to cap price of milk, bread and eggs

In response to government ministers calling for supermarkets to reduce costs for consumers, industry leaders have firmly stated that they will not agree to voluntary price caps on essential items such as eggs, bread, and milk.

Sources within multiple supermarkets have communicated to the BBC that the government has encouraged them to voluntarily freeze the prices of critical groceries, claiming this would be in exchange for regulatory easing.

On Wednesday, Treasury Secretary Dam Tomlinson confirmed that discussions with the supermarket sector have occurred, addressing potential measures to assist consumers facing rising costs of living.

While he clarified that a mandatory price cap would not be enforced, the notion of a voluntary scheme was dismissed as "nonsense" by Lord Rose, the former chairman of Ocado and a member of the Conservative Party.

The BBC has learned that the Treasury proposed a price freeze on select products as part of discussions to relax packaging rules and delay changes related to healthy food policies.

This proposal, which was first highlighted by the Financial Times, follows a pledge from the Scottish National Party (SNP) to introduce a mandatory price cap in Scotland, contrasting with the voluntary nature suggested in Westminster.

Tomlinson stated on BBC Radio 4's Today programme that there are currently no intentions for the government in Westminster to impose a mandatory food price cap.

When pressed about the possibility of a voluntary price agreement, Tomlinson noted the impact of the Iran conflict and public anxiety regarding inflation.

“It is appropriate for the government to explore all available options—both through policy initiatives and collaboration with industry stakeholders—to assist households with the cost of living,” he asserted.

Recent inflation data indicates that the annual increase in food prices reached 3% in April, surpassing the overall inflation rate of 2.8%.

Some industry experts caution that food price increases could approach 10% by the close of the year.

'Idiotic' idea

The idea of a voluntary price freeze has sparked outrage among significant figures in the retail industry.

Lord Rose criticized the proposal during the Today programme, stating, “This entire concept is nonsensical and will not succeed.”

He emphasized that such measures resemble state control, labeling them as “idiotic” and potentially perilous, asserting that they would likely fail to achieve desired outcomes.

This sentiment was echoed by the British Retail Consortium (BRC), representing supermarket interests, which criticized the idea as reminiscent of "1970s style price controls" that would compel retailers to sell goods below cost.

Helen Dickinson, the BRC's chief executive, remarked, “Instead of implementing price controls reminiscent of the 1970s, the government should concentrate on reducing the public policy costs that are driving up food prices.”

She noted that fierce competition among supermarkets ensures the UK has some of the most affordable grocery prices in Western Europe.

One retailer conveyed to the BBC, “The government should eliminate other tax burdens, which would subsequently lead to lower prices.”

Another retailer pointed out that government initiatives, including increases in the national living wage and employers' national insurance contributions, have exacerbated costs within food supply chains.

Additionally, rising prices have been attributed to a substantial increase in fertiliser and animal feed costs following the US-Israel conflict with Iran, which has hindered transport through the crucial Strait of Hormuz.

Tougher rules around price gouging

This dispute regarding grocery price caps coincides with the Chancellor's announcement of new measures aimed at empowering the consumer protection watchdog to address issues of price gouging more effectively.

The Competition and Markets Authority (CMA) will now have the authority to “name and shame” companies that adjust their profit margins in response to economic crises.

Furthermore, the CMA will gain concentrated investigatory powers to swiftly identify businesses exploiting adverse circumstances.

Chancellor Rachel Reeves articulated on Wednesday, “When global occurrences inflate costs, working families feel the consequences first."

“I will not tolerate any entity profiting from crises at the expense of hardworking citizens."