Personal Finance

Food prices could be CAPPED for essentials like bread and milk under new plans for supermarkets

Supermarkets could be asked to cap food prices for basic items in a bid to stop spiralling inflation.

The Treasury is looking at ways to bring grocery prices down as food inflation hit 19.1% in the year to April.

Overall inflation dropped to 8.7% last month, but soaring food prices kept it from hitting forecast lower levels. This in turn sparked warnings that interest rates may peak higher than originally predicted.

Treasury staff are working with supermarkets on a scheme similar to that in France where retailers charge the lowest possible amount for essential items such as bread, milk and spreads.

In France, participating supermarkets picked their own items that would have price freezes or reductions, with the majority being their own brands which were easier to control.

The country's finance minister Bruno Le Maire said he expected the measures to cost retailers "several hundred million euros" when he announced the plans in March. He branded April-June the "anti-inflationary" quarter, as the France’s food inflation hit 14.5% in February.

In the UK, any plans would be voluntary rather than forced.

Critics claim the move wouldn't be fair on smaller, independent traders who, unable to offer the same discounts, could lose custom to supermarkets.

Andrew Opie, director of food and sustainability at the British Retail Consortium, said it would not make "a jot of difference" because supermarkets already run on slim margins.

NimbleFins research shows the average UK household now spends about 16% of their budgets on food.

Last week Chancellor Jeremy Hunt met with food manufacturers and the Competition Markets Authority, warning supermarkets he "stands ready" to introduce pricing rules to bring costs down.

Bring inflation down even if it means recession

Mr Hunt also said he would rather interest rates increase and the UK go into a recession than see inflation continue to soar.

When Sky News asked if he agreed with such a move, Mr Hunt replied: "Yes, because in the end inflation is a source of instability.

"If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.

"I have to do something else, which is to make sure the decisions that I take as Chancellor, very difficult decisions to balance the books so that the markets, the world, can see that Britain is a country that pays its way - all these things mean that monetary policy at the Bank of England (and) fiscal policy by the Chancellor are aligned."

He added: "It is not a trade-off between tackling inflation and recession.

"In the end, the only path to sustainable growth is to bring down inflation."

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Helen Barnett

Helen is a journalist, editor and copywriter with 15 years' experience writing across print and digital publications. She previously edited the Daily Express website and has won awards as a reporter. Read more here.


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